Writing on Wall for Other Cities: Allegretti

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July 19 (Bloomberg) -- Municipal Market Advisors' Tom Doe and Manhattan Institute's Michael Allegretti discuss Detroit's bankruptcy with Trish Regan on Bloomberg Television's "Street Smart." (Source: Bloomberg)

Michael, is this a sign of what is to come?

Are there more cities vulnerable to this?

I think there are public workers waking up this morning and saying what have my unions done to me?

They should be marching into their union offices to ask how to make these deals.

We saw it in stockton, we see it today in detroit.

The writing is on the walls for cities and states.

Did they get all of the opportunity, assuming this works out as they like, to restructure these deals?

They will have to be restructured.

Everyone is going to take a haircut.

If you are anticipating a retirement stipend you may not get it?

Realistically i was speaking with the police lieutenant, he says money does not grow on trees.

That is the truth.

There is only so much money to go around.

What is the path forward right now for detroit?

It is just a long path of negotiation and we have only -- as your lead-in -- there have been only eight and dances of bankruptcy in the past -- eight instances of bankruptcy in the past five years.

It is $5 billion of a $3.7 trillion market.

We do not have a lot of examples of how bankruptcy goes in the municipal market.

There are going to be a lot of ups and downs and has speculation to what the result will be.

It is unfortunate that this headline has occurred just as the municipal bond market has sustained one of its worst performance periods over the last 30 years.

As investors have been leaving bonds and going to stocks or cash, this headline has unnerved a lot of investors.

Today municipal yields have risen in contrast to a declining yield environment in the treasury markets area what do you mean -- treasury markets.

What you think it means for investors?

Do you think they will be moving out of muniz?

Do you think this could have a domino effect?

I do not believe you are going to see the contagion that the groups he will be the course of action that other municipalities will take in order to solve their pension problems.

I think that is a misnomer because the bankruptcy has a long legacy of creating higher costs of debt.

You need borrowing to build infrastructures.

For some of the other services -- the other thing with bankruptcy as it is going to drive businesses away from a city.

One of the concerns about detroit is that many of the retirees, 30% to 40% of pension years live in detroit.

While it may certainly be appropriate, i do not know how appropriate the pension benefits have been, the idea is that bankruptcy does not turn an economy around.

Maybe this gives them the opportunity to do some

This text has been automatically generated. It may not be 100% accurate.

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