Friday, August 3, 2012

America's Spain: California - Broke Cities

America's Spain: California - "Broke Cities The bankrupt city of San Bernardino offers munibond investors another look - a more localized snapshot of financial incompetence. Because of accounting mistakes, city officials believed they had more money than was actually on hand. In fiscal year 2010-11, they mis-reported a balance of $1.7 million, when it was actually just $410,293. And the following fiscal year, the reported balance was $2 million, when it was really minus $1.18 million. Despite these serious flaws, politicians and credit analysts continue to laud munibonds for their "historically low default rates." And like sacrificial lambs, the dumb money is listening. Asset flows into munibond mutual funds through the first six months of 2012 is on pace to match or surpass the record years of 2009-10. Highly populated cities with large deficits like Cincinnati, Detroit, and Los Angeles look poised to follow San Bernardino's lead to financial oblivion."

Financial Oblivion Here We Come!


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