Yield of Dreams

Was the Whitney Worry for Nothing?

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Whitney_MeredithMunicipal bond funds might be making a comeback, despite what Meredith Whitney thinks, Lipper said. During its second quarter investment outlook today, Lipper analysts said municipal bond fund flows have been up in two of the last three weeks after 29 consecutive weeks of outflows of about $49 billion. Lipper expects flows to munis to accelerate, especially given their positive performance over the last 12 weeks. Lipper research analyst Matthew Lemieux said:
I think a lot of the worry that Meredith Whitney had put out in the market, we really haven’t seen—the large amount of defaults that she mentioned falling on the market. So investors will start moving back into this group more consistently, especially if we continue to see the performance numbers moving in the same direction that they are.

Muni funds started to see negative outflows starting in November, when many said it was only a temporary phenomenon. In January, our own Stan Luxenberg wrote not to dump your muni bond funds.

Have muni bond funds taken a turn for the better? Over the last 12 weeks, returns have been about 4.3 percent, Lemieux said. Recently, everyone's been talking about why Whitney was wrong about the muni bond crisis. I think we can safely say she was overexaggerated...

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Casting a gimlet-eye on asset management issues.

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