Did Warren Buffett take the recent Federal Reserve warning on municipal bonds seriously?
Zero Hedge is reporting that Buffett has covered an $8.25 billion muni cds long risk (short CDS) position, which becomes profitable if muni bonds go up in value.
He has terminated the position 5 years early and has apparently lost a few hundred million by getting out of the position early.
As any Buffett follower knows, he is a long-term investor and rides out short-term bumps, if he is bailing with a few hundred million in losses, he is expecting trouble in the muni market.
As I have said before, there is absolutely no reason to own municipal bonds at this time.
I am very green with regards to Muni bonds. Where and how cold you buy municipal bonds? From any trader (schwab, ameritrade...?) I am not going to, but i have not even seen it being an option.
ReplyDeleteYou can buy them from your broker. They usually are anywhere from $10k to $100k per bond. They really don't work well unless you have a high tax rate since that is what provides some of the yield.
DeleteI love the idea of a derivative shorting a derivative. I remember when the old coot said these were weapons of mass financial destruction.
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