Something to think about: The typical muni investor owns munis for the tax advantage, not because they’re amazing investments, typically.
Now people are dumping their munis because of the steady drumbeat over STATE BANKRUPTCIES and DEFAULT and CALIFORNIA BEING THE NEW GREECE.
And more and more, it seems, non tax-oriented investors are talking about huge opportunities with rich yields in the muni market.
So while muni bond outflows, and prices tank, it certainly seems plausible that the only real effect of all of this is that mum & pop will get shaken out, sell cheap, and the more cunning investor will snap up the chance to buy fat yield.
Meanwhile, the big muni ETF is having a great week