Wednesday, January 13, 2010

HOT: S & P Downgrades California

S&P has downgraded State of California debt to A- from A.

This will make raising money for the state significantly more expensive, and is likely to force some funds that can only hold A paper or better to sell California debt.


  1. Gee, allowing 5,000,000 ILLEGAL ALIENS to tap public education, medical services, and welfare programs sure worked out didn't...the state dumb enough to have done that is going Belly Up!

  2. Anon,

    Apparently their illegal status is what causes this state expenditure to be sustainable vs. not sustainable?

    Try again.

  3. Let the bargin hunting on Cal munis begin!

  4. Mike,

    What's a good deal on a worthless pile of trash? Think I can demand a tax rebate as payment for the pile of toilet paper-bonds I might want to buy?

  5. Taylor,

    Unlimited tax GO's are garanteed by taxes. Revenue bonds on essential services would be nearly suicidal to default on--they'll pay one way or the other.

    Deep down they'll protect their credit rating to going to junk by doing what they should have been doing all along--cutting spending.

  6. Hi Mike,

    Are you saying that state governments never will default?

  7. Taylor,

    No. The thought of burning their bridges with the credit market will cause them to ultimately pay.

    Look, just like the Sep/Oct 2008 (and onward) there was 'blood on the streets', there were a lot of bargains. I once saw a Goldman Sachs bond that yielded 17.5% because of the panic.

  8. Mike,

    So I assume you extend the same logic to the US federal government?

  9. Taylor,

    No. The yields are too puny for the counterfeiting they do. :)