Noted analyst Meredith Whitney is back in the news with a prediction that local governments are nearing a financial “inflection point” that could result in them not honoring their debt obligations.
In late 2010, she was out with a controversial call on “60 Minutes” that the muni bond market would suffer massive defaults.
That forecast hasn’t panned out, although it did trigger a short-term shock in muni bonds and ETFs that invest in the sector. [Meredith Whitney Sticks to Her Guns]
Muni bond ETFs have trended higher the past few months despite San Bernardino recently becoming the third municipality in California to file for bankruptcy. [Muni Bond ETFs Yawn at Latest Bankruptcy]
In a CNBC appearance this week, Whitney forecast more financial stress ahead for local governments.
“You haven’t seen state and local governments cut to the degree they have,” she said. “Now you reach a point where it’s an inflection point: At what cost am I going to honor my pension obligations?”