The soap opera that is PIMCO is making me nuts. Between the principal participants (Bill Gross and Mohammad El-Erian) acting like high school kids about their breakup and the financial press acting like 7th graders I am ready to scream. Who cares? If I see one more breathless host of a financial news show ask one more "expert" "What do you think about what he said about the other guy?" I might ban all TV's in the office. Why don't we just cut to the chase and schedule both men on Dr. Phil and let them drool all over themselves with endless talk about their feelings. Stop the madness and act like grown-ups. If I had any money with either of these guys I would seriously rethink it.
On another note; the municipal market has just undergone a brush with the law of unintended consequences thanks to the underwriters (Barclay's) who decided to restrict the recent 3.5 billion Puerto Rico financing to denominations of 100,000 or more. Combine this with a hot deal and you will find that most of the orders were from hedge funds and other short term investors looking for a quick buck, not a permanent investment. The bonds rose in price the next day but quickly fell to below issue because there were so many sellers. Currently the price for the bonds is about 4 points lower than a month ago and the larger buyers have no marketability. Individual investors have been the main stay of the Puerto Rico market for decades because of the state tax exemption but they will usually buy less than 100,000 at a time. Now the secondary market in Puerto Rico debt is frozen because of the overhang of the recent deal which large investors would sell but can't. Lesson to be learned is to be very careful when someone tries to dictate conditions which should be set by market forces rather than a well meaning idiot.