Gyroscopic Investing

"Defy" I believe is the wrong word here; what they seem to be saying is that states will be keeping their pristine credit rating even as the federal government does not.

https://finance.yahoo.com/news/us-state ... 15923.html

Does that really make a lot of sense, that the states could be more reliable at returning nominal dollars when they can't print and the feds can?

Xan wrote: ↑Mon May 19, 2025 10:14 am "Defy" I believe is the wrong word here; what they seem to be saying is that states will be keeping their pristine credit rating even as the federal government does not.

https://finance.yahoo.com/news/us-state ... 15923.html

Does that really make a lot of sense, that the states could be more reliable at returning nominal dollars when they can't print and the feds can?

It does because I think that all of them have to balance their budgets. Therefore, no unrestrained spending.

Also, I believe that defaults on municipal bonds are rare.

The threat of New York City around 1975 is now 50 years ago.

yankees60 wrote: ↑Mon May 19, 2025 1:46 pm

Xan wrote: ↑Mon May 19, 2025 10:14 am "Defy" I believe is the wrong word here; what they seem to be saying is that states will be keeping their pristine credit rating even as the federal government does not.

https://finance.yahoo.com/news/us-state ... 15923.html

Does that really make a lot of sense, that the states could be more reliable at returning nominal dollars when they can't print and the feds can?

It does because I think that all of them have to balance their budgets. Therefore, no unrestrained spending.

Also, I believe that defaults on municipal bonds are rare.

The threat of New York City around 1975 is now 50 years ago.

Surely such defaults are a lot more common than defaults on loans given by currency issuers denominated in the currency they issue.

Xan wrote: ↑Mon May 19, 2025 10:14 am Does that really make a lot of sense, that the states could be more reliable at returning nominal dollars when they can't print and the feds can?

I bought some short-term munis in an ETF, it's the iShares IBM* (* is a wildcard) family of ETFs. Choose your maturity. I'm keeping the term short, 1-2 years, so IBMF, IBMG, IBMH. These ETFs have ~1000 bonds in them, and are liquid (unlike bonds, where you may be a poor bid).

In a taxable account, if you're in the 22% tax bracket, the after-tax yield is OK. for me, the point is not to max out the yield... the point is to not depend on the Federal Govt 100% for your fixed income.

Xan wrote: ↑Mon May 19, 2025 2:40 pm

yankees60 wrote: ↑Mon May 19, 2025 1:46 pm

Xan wrote: ↑Mon May 19, 2025 10:14 am "Defy" I believe is the wrong word here; what they seem to be saying is that states will be keeping their pristine credit rating even as the federal government does not.

https://finance.yahoo.com/news/us-state ... 15923.html

Does that really make a lot of sense, that the states could be more reliable at returning nominal dollars when they can't print and the feds can?

It does because I think that all of them have to balance their budgets. Therefore, no unrestrained spending.

Also, I believe that defaults on municipal bonds are rare.

The threat of New York City around 1975 is now 50 years ago.

Surely such defaults are a lot more common than defaults on loans given by currency issuers denominated in the currency they issue.

What you say makes sense but it seems that a municipal default is quite rare?

yankees60 wrote: ↑Tue May 20, 2025 8:52 amWhat you say makes sense but it seems that a municipal default is quite rare?

Perhaps, but a default of an entity like the United States government has never happened. It might be impossible in theory.

I should clarify that the United States have defaulted before, but not when using a system of fiat currency.

Am I correct that the rating agencies are only looking at the possibility of nominal default? Even if they took into account inflation due to printing, then surely the state/municipal bonds, being denominated in the same currency, could be no better.