Peter Schiff: Federal Reserve Could Bail Out Municipal Bond Market (MUB)

Peter Schiff (Euro Pacific Capital) thinks the Federal Reserve will bail out the municipal bond market. He argued with Don Luskin on the Kudlow Report on 12/23/2010 (video after the jump). Before the debate they showed a clip with Warren Buffett giving his view on munis in June 2009: "How would I rate the States and major municipalities. I mean if the Government will step in to help them they're triple A. If the Federal Government won't step in to help them, who knows what they are. I don't know how I would rate those myself now, in other words because it's a bet on how the Government will act over time". I embedded the full CSPAN video here.

Schiff thinks Meredith Whitney is sugar coating the upcoming muni-geddon. I could see the Fed backstopping muni obligations. If so, gold will probably like that no? And $TYX. PIMCO's Bill Gross actually sees a few muni-bond bargains based on yield spreads. So, what are the chances that $MUB tests the 2008 low?

Hat tip Investment News