Little Esopus, NY is a town of 9,500 on the Hudson River about 60 miles south of Albany. A handful of years ago, Esopus planned some public works and issued a municipal bond to pay for it. The town borrowed $170,000 and has been paying 4.5% interest, by all accounts with little difficulty, as the ratings agencies consider them a good credit.

But a year ago it seemed that storm clouds loomed for Esopus, or at least for its bondholders. On the well-known TV news show "60 Minutes," market analyst Meredith Whitney predicted a trillion-dollar wave of municipal defaults spurring an economic crisis and social unrest. According to Meredith, towns like Esopus would be unable to pay their bills. A year later, it hasn't quite worked out that way. The US economy ended 2011 in better shape than it started. More people are working; businesses are reporting higher earnings and paying higher dividends. Overall, municipal defaults were down 60% in 2011. Hardly a "wave."

Meanwhile, the little town of Esopus kept making its payments, on time and in full. Apparently someone forgot to tell them to default. Meredith Whitney had her 15 minutes. I remember getting a text from one of our advisors who was watching Ms. Whitney make her "60 Minutes" predictions. My response was "Who's Meredith Whitney?" That view hasn't changed.



(This article contains the current opinions of the author but not necessarily those of Brighton Securities Corp. The author's opinions are subject to change without notice. This blog post is for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. References to specific securities and their issuers are for illustrative purposes only and are not intended and should not be interpreted as recommendations to purchase or sell such securities).