• 3 days Banking Stocks Could Be Set For Another Bumper Year
  • 4 days Crypto Mining Migration Continues As Bans Line Up
  • 5 days The Meme Stock Craze Could Lose Out to Crypto
  • 8 days Banking Sector Booming As Stock Market Lags
  • 9 days Has Bitcoin Stopped Bleeding? Some Analysts Seem To Think So
  • 9 days Amazon ‘Competitor’ Charged With Crypto Fraud Scheme
  • 10 days As Competition Heats Up, Cable TV Mega-Merger Revived
  • 11 days China’s Road To Tech Independence
  • 16 days 3 Major Bearish Catalysts For The U.S. Economy In 2022
  • 18 days VR Industry Boomed During Holiday Season
  • 18 days 3 Global eCommerce Brands Have Overtaken Amazon
  • 19 days Another Banner Year for Billionaires
  • 24 days Top 3 Predictions For Bitcoin In The New Year
  • 25 days China Moves To Tighten Rules For Companies Looking To List Abroad
  • 26 days Fake Reviews Go All The Way To The Top
  • 32 days Airlines Want The Government To Ditch Emergency Testing For Covid-19
  • 33 days The Service Robot Industry Is Booming
  • 38 days The 3 Biggest Market Risks In 2022
  • 41 days Fintech Valuations Have Grown Red-Hot
  • 47 days DIDI Delisting Is A Worrying Sign For Investors Holding Chinese Stocks
Robert Prechter

Robert Prechter

Robert Prechter, Jr., is a social theorist and market analyst. He is president of Elliott Wave International, a forecasting firm servicing institutional and private investors…

Contact Author

  1. Home
  2. Markets
  3. Other

Individual Investors Have Jumped Into Another Fire

The following article is an excerpt from Robert Prechter's Elliott Wave Theorist.

First they bought into the "stocks for the long run" case and got killed. Then they jumped on the commodity bandwagon and got killed. Many investors are buying back into these very same markets, but others are running to what they perceive as safe "yields" in the municipal bond market. So far this year, individual investors have "poured a record $55 billion" (Bloomberg, 11/12) into muni bond funds, with the pace running $2b. per week in August and September; many other investors are buying munis outright. These must be the people who tell us that they can't live without "yield" and also cannot imagine their city, county or state government going bust. But as Conquer the Crash warned and as The Elliott Wave Theorist has reiterated, the muni bond market is heading for disaster.

Municipalities have borrowed more than they can repay, they have pension liabilities that they cannot meet (up to a trillion dollars' worth, according to Moody's), and tax receipts are falling. The only reason that states haven't failed yet is the so-called "stimulus package," which took money from savers, investors and taxpayers -- thereby impoverishing the people who live in the various states -- and gave it to state governments to spend so they would not have to cease their profligate spending. But political pressures will eventually cut off this gravy train. In the 2010-2017 period, the muni bond market will become awash in defaults. The leap in optimism since March, which has shown up in every financial market, has fueled a retreat in muni bond yields to their lowest level since 1967 and narrowed the spread between muni bond yields and Treasuries.

This rush to buy municipal bonds is occurring right on the cusp of a dramatic decline in their values. While many individuals are loading up right at the peak so they can participate in the next major market disaster, smarter investors, such as insurance companies Allstate and Guardian Life, are getting out. Subscribers to our services, we trust, own not a single municipal IOU. Our recommendation for investors is 100 percent safety, and such a program does not include muni bonds. If you are a recent subscriber, please read the second half of Conquer the Crash as a manual on how to get your finances safe.

Get Your FREE 8-Lesson "Conquer the Crash Collection" Now! You'll get valuable lessons on what to do with your pension plan, what to do if you run a business, how to handle calling in loans and paying off debt and so much more. Learn more and get your free 8 lessons here.

 

Back to homepage

Leave a comment

Leave a comment