Is Meredith Whitney About to Look Really Smart?

Let's just say that I wouldn't want to be buying domestic municipal bonds at current levels if I lived in the United States and was seeking safety. Here's a 6 year weekly log-scale chart of the Nuveen Municipal Bond Price Return Index ETF ($NMUNP) thru Friday's close:



Corporate junk bonds are breaking down with the stock markets in the short-term but their charts look a whole lot healthier than municipal bonds. That tells you all you need to know about what the market thinks are the real junk bonds. Municipal bonds as an asset class are going to get killed in nominal terms. If the U.S. government steps in to rescue the nominal coupon payments for the larger municipalities, the holders of these bonds will get killed in inflation-adjusted terms. There's no way to win on these bonds (unique/specialized situations aside).

Cash under the mattress is safer than muni bonds right now in my opinion. U.S. federal government bonds are safer as well over the short to intermediate term. Of course, Gold is better than any of these options over the long term, but that's a well-told story around here...