There are a few researchers that catch my attention. One in particular is Meredith Whitney. Whitney is a courageous analyst who goes against the herd and makes prescient calls, calls that are foresighted and often correct. This morning, Whitney said that the federal stimulus money runs out this month. As a result, states and municipalities are at increased risk of municipal default. Since state spending accounts for over 10% of U.S. Gross Domestic Product (GDP), this month is a watershed for municipal debt.
Her observations are consistent with market action since May 1, 2011. Institutions are selling to raise cash to meet obligations. She also observed that the growing liability of pensions for states and municipalities is massive. As a result, state and local governments are now just deleveraging. (Her analysis runs parallel to and is consistent with The Great Bust by Dan Arnold.)
Anyway, Whitney is someone that I listen to. She makes sense.
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The futures action suggests the S&P 500 Index will trade below 1284 today. Futures are trading at 1280.
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