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

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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