Raleigh, NC (PressExposure) January 27, 2012 -- Penny stock analyst Peter Leeds, of http://pennystocks.com, expects this situation to create some hard times for municipalities, with an increase in both strategic defaults and hard defaults. Municipalities typically get about 40% of their money from their parent states, but Peter Leeds expects that the number to be reduced this year, leaving many municipalities the victims in budgetary shortfalls. This may hurt most stocks and penny stock companies, but it will also give rise to some great penny stock investment opportunities.
According to Reuters, there are currently several municipalities and cities who have either filed for bankruptcy, or are on the edge of it.
Some of these include, but are not limited to Harrisburg, PA; Jefferson County, AL; Vellejo, CA; Central Falls, RI. The list continues to grow.
Penny stock analyst Peter Leeds states that more municipal bankruptcies are on the way, which will come with domestic austerity measures, localized defaults and credit-rating downgrades. "The states have run $100 billion budget shortfalls for several years in a row," explains Leeds, "and that is catching up with them. As they face their budgetary reckoning day, we'll be surrounded by penny stock investments that could do very well for penny stock traders."
The municipalities rely on 40% of their money from their parent states, and these payments are about to be reduced by the majority of states, most of whom are struggling to balance their budgets. In addition, 46 states have a year end in June, so as we approach that budget-balancing fiscal date, many will slash their payments to the municipalities. [Meredith Whitney Advisory Group]
What happens without government stimulus? The various states were recent beneficiaries of the multi-billion dollar Federal Stimulus Program, which saw government payments to them for as much as 30% of their total budgets, and now those payments are over. [CNBC]
"It will be an interesting time for the economy, and for penny stock investors," states Leeds. "There is always opportunity, even during the fiscal hardships which may spread across America, and these opportunities will be available for penny stock traders and penny stock investors. We're looking at penny stock companies that provide services which may help a municipality to reduce costs, or at penny stock service providers which improves revenues."
Some examples of compelling penny stock picks would be traffic signal and roadway logistic service providers, law enforcement ticket processing software, road maintenance consultants, and perhaps casino operators.
"Any products or services that could help a municipality save money or increase revenues will be in demand," Leeds explains. "These will be the penny stock companies that will really excel as the local economies look for some help."
Leeds cautions that penny stock investing and penny stock trading are not for everyone. To become a great penny stock investor, one must first become a great penny stock thinker. Use your head, and be cautious - only then will the odds in penny stocks be tipped in your favor.