The unexpected, and why it might be worrisome, regardless of the politics of today’s protests (and I think parts of Wisconsin’s controversy are separate from controlling costs) —
For muni investors, there are two reasons to worry.
The first is that nobody had Wisconsin on its list of big states to worry about going into the new year. That’s not to say Wisconsin is going to blow up, but it does suggest that things can and do come out of nowhere all the time. You know, black swans and stuff.
The other reason it’s worrisome is that it shows just how far the Democratic party will go to the mat for public employee unions, and how hard it might be to cut costs. A bull case for munis has centered on the idea that there’s plenty of room to cut expenses, before having to default on debt. But if this debate is ripping apart a state like Wisconsin, then it should make you question that assumption.
Via The 2 Reasons Muni Investors Should Be Terrified By What’s Going On In Wisconsin – Yahoo! Finance.