California on Short Fuse

Don't limit your escape from paper to just CA munis.

A warning bell on California muni bonds
As sure as the sun will set on the Golden State, analyst Martin Weiss says California is going to default.

By Jon Birger, senior writer
Last Updated: June 25, 2009: 12:29 PM ET

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.

Read More Here: http://money.cnn.com/2009/06/25/pf/california_bonds_trouble.fortune/index.htm?postversion=2009062512