ejhickey

State Budget Gaps and Investment Implications

Good article and much more realistic than the one I just read on CNN Money which minimized the risk of investing in California Munis. I also just read an article on the Daily Kos (liberal) which speculated about the billions of dollars that could be saved if California did not have to pay interest on its debt.

There is much more risk for invstors in State and local debt than investors perceive. As soon as someone says "Default can't happen" the caution flag should go out.

Time for California Muni Bond Investors to Take a Stand

I wonder if the following scenario is possible.

California defaults on it's General Obligation bonds. Then the Federal Government decides to do a bailout for California and a reorganization of their finances. as part of this process, the decision is made to change the priority of the bondholders. Another possibility is the Feds decide to cancel all of the state's bonds and offers the holders 50 cents on the dollar. After the Chrysler Bankruptcy, I believe something like this might happen in regards to California Muni Bonds