Last fall, Meredith Whitney made a prediction. Perhaps you remember it? It was part of a report called “Tragedy of the Commons,” wherein the analyst said that there would be “hundreds of billions of dollars’ worth” of municipal-bond defaults a’ coming. While some agreed with her, a vocal contingent did not. Charlie Gasparino, for instance, said that in his infinite wisdom, Whitney’s call suggested she “had been lobotomized.” Now, after several months and dozens of calls to the cops to request they remove Chaz, standing on her lawn yelling “Show me your books, Whitney!”, does MW stand by her analysis? You bet your ass she does and you what to know another thing? She welcomes the haters.

“There’s nothing controversial about that call, if you look at the numbers,” she said today, later adding: “This municipal issue, you can criticize me for anything you want, I’m numb to it, because I have more conviction on this than I’ve had on any single thing in my career.”

[Bloomberg]

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A look back at our would-be lineup predictions flyer for Coachella 2011. We were prettttyyyyy, prettyyyyyy, prettyyyyyy, pretty close with our predictions. Now let’s breakdown the official Coachella performers and take a look at which acts we guessed right and the ones we missed. More»

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Don’t freak out though, it’s not a big deal. Uncle D says this is nothing to worry about.

Jamie Dimon said some municipalities will need to renegotiate their debt and a hundred may not “make it.” “I wouldn’t panic about what I’m about to say,” Dimon, 55, said today at a U.S. Chamber of Commerce event in Washington. “You’re going to see some municipalities not make it. I don’t think it’s going to shatter America, I just think it’s a part of the credit cycle.”

Meredith Whitney’s prediction was around 50 to a 100 defaults, though she seemed to be of the mind it was more of a MAYDAY! situation.

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Bill Gross suggests marking it down on your calendar– as D-Day, The Sequel.

What I would point out is that Treasury yields are perhaps 150 basis points or 1½% too low when viewed on a historical context and when compared with expected nominal GDP growth of 5%. This conclusion can be validated with numerous examples: (1) 10-year Treasury yields, while volatile, typically mimic nominal GDP growth and by that standard are 150 basis points too low, (2) real 5-year Treasury interest rates over a century’s time have averaged 1½% and now rest at a negative 0.15%! (3) Fed funds policy rates for the past 40 years have averaged 75 basis points less than nominal GDP and now rest at 475 basis points under that historical waterline.

As a counter, one would argue (and I would partially agree) that the U.S. and indeed developed global economies must keep yields artificially low for some time if post Lehman healing is to take place. But that of course is the point. By eliminating QE II, the Fed would be ripping a Band-Aid off a partially healed scab. Ouch! 25 basis point policy rates for an “extended period of time” may not be enough to entice arbitrage Treasury buyers, nor bond fund asset allocators to reenter a Treasury market at today’s artificially low yields. Yields may have to go higher, maybe even much higher to attract buying interest.

Investors should view June 30th, 2011 not as political historians view November 11th, 1918 (Armistice Day – a day of reconciliation and healing) but more like June 6th, 1944 (D-Day – a day fraught with hope for victory, but fueled with immediate uncertainty and fear as to what would happen in the short term). Bond yields and stock prices are resting on an artificial foundation of QE II credit that may or may not lead to a successful private market handoff and stability in currency and financial markets. 15% gratuities may lie ahead, but more than likely there is a negative two-bit or even eight-bit tip lying on the investment table. Like I did 45 years ago, PIMCO’s not sticking around to see the waitress’s reaction.

Two-Bits, Four-Bits, Six-Bits, A Dollar [PIMCO]

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Don’t worry about the strategy- the name is the hardest part and we don’t have a lot of time.

Thomas Strauss, chief executive of Ramius, the alternative investment unit of brokerage firm Cowen Group expects “significant” growth in the hedge-fund business in the next three to five years as institutions like U.S. public pensions search for returns that are less correlated with other markets. ”I wouldn’t be at all surprised if the industry doubled in size,” Strauss added in an interview with MarketWatch.

New Hedge Funds Raised More In 2010 [MW]

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Pack your bags, Timbo. It’s been real. In other good-for-Vickles news, analyst are predicting that Citi will post profits of of a whole nickel per share tomorrow, in which case you can probably expect something like this to go down in the C-suite in about 18 hours.

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Mr. Vikram is just one good quarter away from all this.

Back in January, Prince Alwaleed informed Vikram Pandit that after “two years of leeway from shareholders,” 2010 is the year the Citi CEO must deliver. To that end, from here on out, the Prince said, Uncle Vik’s ass will ridden like Zorro, no if/ands/or buts about it. Alwaleed doesn’t typically enjoy getting so harsh on his li’l fella, but the tone was necessary. And so far, he’s pretty pretty pretty pleased with how things are going.

“I think Citi is on the right track and the improvement is already reflected in the share price,” Alwaleed told reporters today…”The good days of Citi are yet to come, they are coming,” Alwaleed said. Asked whether 2010 would be a profitable year for the bank, he said: “I should hope so, yes.”

Saudi Alwaleed says happy with Citigroup stake [Reuters]

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Lawyers for everyone’s favorite practical jokester, Raj Rajaratnam, and his beauty queen gal-pal, Danielle Chiesi, have requested separate trials for their clients, on the grounds that “allegations of seven distinct conspiracies to commit securities fraud failed to show they could be connected at trial.” The argument they made in request for severance of the other trial, this one brought by the SEC, was that jurors would be “confused as to which evidence pertained to which conspiracy count and, in turn, which defendant.” It should be noted that none of this changes how Chiesi feels about Raja (in February she said that she considers him a good friend and that it is “an honor and a privilege” to stand next to him in court) or her predictions re: potential time in the big house (“There is not even a chance we will do one day in jail,” Chiesi said). In other news, this is apparently how DC’s looking these days.

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