Ayear and a half ago, Meredith Whitney appeared on 60 Minutes and boldly declared that massive municipal bond defaults were forthcoming. She said the day of reckoning was imminent, with $160 billion of federal stimulus spending ending and states having to cut funding to municipalities. Since Whitney had been right in predicting the collapse of the housing market, while the likes of Standard & Poor's and Moody's missed the mark, her forecast was linked to a wave of selling.

But this time she missed badly. According to BlackRock, there were 119 municipal default filings last year totaling $6.1 billion, compared with 169 filings totaling $5 billion, in 2010. As investors flocked back to muni bonds and their performance soared, Whitney's credibility dropped. Indeed, by the end of 2011, renowned Princeton economics professor Burton Malkiel wrote an op-ed piece in The Wall Street Journal titled "The Bond Buyers Dilemma," in which he recommended municipal bonds over U.S. Treasuries.

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