Muni-bond prediction ends up a bust

Our friends at Wasmer Schroeder, a well-regarded bond management firm in Naples, reminded us that it's been one year since bank analyst Meredith Whitney made her prediction of doom for the municipal bond market.

Instead of the “hundreds of billions” of dollars of default that Whitney forecast, Wasmer Schroeder says payment defaults have totaled $2.1 billion since Whitney sounded the alarm on the “60 Minutes” television show. Most of these defaults were centered on remote, unrated corners of the muni-bond market, such as community development districts (we know about those in Florida) and nursing homes.

Whitney became famous for her bearish calls on banks as the financial crisis began, but she missed the mark on municipal bonds. The lesson here, of course, is to consider all sources before acting, especially when it comes to your long-term investments.