could it really be nobody’s fault? presentation to the municipal bond club of baltimore michael...
TRANSCRIPT
Could it Really be Nobody’s Fault?
Presentation to the Municipal Bond Club of BaltimoreMichael Stanton, Publisher
September 24, 2009
2
If It’s Nobody’s Fault, What Went Wrong?
• A Series of Unfortunate (Rational) Events• Blame the Greedy Bond Insurers?• Blame Alan Greenspan?• Blame Bill Gates?
3
• A Series of Unfortunate (Rational) Events• Blame the Greedy Bond Insurers?
• Rating criteria put them in a box• Blame Alan Greenspan?
• Extremely low interest rates brought unforeseen stresses
If It’s Nobody’s Fault, What Went Wrong?
4
• Blame Bill Gates?• Computing revolution unleashed 25
years of growing confidence in quantitative modeling
“We were the trend”-- George Winston, Tom Clancy’s Debt of Honor
If It’s Nobody’s Fault, What Went Wrong?
5
Re-Adjusting to VolatilityYoY Change in New-Issue Volume, 1989-Present
Source: Thomson Reuters
-50%-40%
-30%-20%
-10%0%
10%20%
30%
40%50%
6
Deals Get BiggerAverage Municipal New-Issue Size, 2000-Present
$0
$5
$10
$15
$20
$25
$30
$35
$40
2000 2002 2004 2006 2008
Source: Thomson Reuters
7
Muni-Treasury RatiosBB20 vs. 10-Year Treasury
0%
50%
100%
150%
200%
250%
8
The Emergence of BABsTaxable Municipal Issuance, 1999-Present
$0
$10
$20
$30
$40
$50
1999 2001 2003 2005 2007 2009
Source: Thomson Reuters
9
0%
20%
40%
60%
80%
100%
1999
2001
2003
2005
2007
2009
(YTD
)
Insured Penetration
Source: Thomson Reuters
10
Q1 2007
Aaa
Aa
A
Ba
Q4 2008
Aaa
Aa
A
Baa
Who Can Access the Markets?
Source: Moody’s , Thomson Reuters
11
2009 YTD
Aaa
Aa
A
Baa
Who Can Access the Markets?
Source: Moody’s , Thomson Reuters
12
Where Insurance Stands Today • Assured Guaranty / FSA
• Berkshire Hathaway Assurance Corp.
• MIAC
• National Public Finance Guarantee
• Everspan
• National League of Cities Mutual Insurer
13
America Embraces BondsBond Election Results, 1990-2008
Source: Thomson Reuters
0
10
20
30
40
50
60
70
80
90
100
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008
0
10
20
30
40
50
60
70
80
90
100
Total Debt Approved
Approval Percentage
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Questions and Predictions• What’s DC’s next move?
• Extend BABs / How to pay for them?• Tax-Credit Bonds
• Regulatory overhaul• Mandatory exchange-trading / central clearing for
derivatives?• Rating agency reforms
• Changing the “issuer pays” model• Dropping NRSRO status• Mandating a single scale for munis and others
• FA regulation
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Questions and Predictions• What will the dealer landscape look like?
• Consolidation trend vs. “TBTF”• How do munis rank?
• Is municipal disclosure a problem, and how will it change?
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Information Outlook• The Bond Buyer
• Circulation is stable• No shortage of news!
• Online is preferred method of delivery• Always seeking commentary, suggestions,
recommendations for new services / tools
Contact Info: Michael Stanton, PublisherOne State Street Plaza, 26th Floor
New York, NY 10004
212-803-6552