NEW YORK (Fortune) — Known for his early warnings on Bear Stearns and Lehman Brothers, analyst Martin Weiss of Weiss Research is now sounding the alarm about state of California municipal bonds.
In a new report, Weiss has some rather blunt advice for California muni investors: “Sell all California paper now!” His reasoning? California is facing a $24 billion budget gap with no obvious way to close it.
The state has appealed to Washington for a federal bailout, but it got a cool response from the Obama Administration. The next step is draconian cuts in state services and payroll, but Weiss says that will only deepen the “depression” in California, where the unemployment rate is 11.5%, by further cutting into tax revenue.
Asked to put odds on California defaulting on its $59 billion in outstanding general obligation bonds, Weiss doesn’t hedge. “It’s unavoidable,” he tells Fortune.
Click here to read the full article …
