Municipal Bond Forum
California has tools to fight fiscal woes
Q
Considering California’s budget and economic issues, what is your opinion regarding a portfolio consisting primarily of California long-term general obligation Bonds? Hang on to them or sell?
A
James A. Klotz responds:
Although California continues to experience financial difficulties related to current economic conditions, the state possesses a broad and diverse economy that we believe will provide more than sufficient revenues to meet debt service on state-related obligations.
There are strong constitutional protections in place for general obligation bonds, and despite the state’s revenue shortfalls, we believe California continues to have the wherewithal to meet its obligations.
Naturally, we cannot predict the future, particularly in these unprecedented financially troubled times. The state, however, would use every resource available to avoid the cataclysmic consequences if California would fail to pay its bonds.
Despite the bad publicity, we would be buyers rather than sellers of California general obligation debt.
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This report is produced solely for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any securities or related financial instruments. This report is based on information obtained from sources believed to be reliable but no independent verification has been made, nor is its accuracy or completeness guaranteed.