There's growing chaos in the "auction-rate" market. All the big securities firms borrow on municipal bonds to provide higher-than-normal returns than you can get on money market funds. Since many individuals were using this as a money market substitute (brokers typically get paid 25 basis points on these securities), their sudden illiquidity is a big problem.

The New York Times reports:

The failures also indicate that talk of rescuing municipal bond insurance companies, like Ambac and MBIA, has not reassured investors. Auctions continue to fail, even at absurdly high yields, if the principal guarantee of repayment is an insurance policy.

As evidence of the chaos in the market, among Tuesday's auctions were two virtually identical securities (differing only in the original underwriter) that produced wildly different rates: one 7.98 percent, the other 5 percent.

I'm confused as to why the firms will not buy these securities back. I can only assume that they're out of capital.

What does this mean for us? Due to continuing problems with these securities, the shift out of value and into growth should accelerate.