Finally! California On Credit Watch

SP must have felt the heat. With talk on CNBC and blogs - about CA’s “ill” state of affairs, they had no alternative, but to put them on negative watch. ; I’ll be curious to see how their bonds have been performing.

As of yesterday ……Everything looked fine in Fantasy land. Many of the state yield curves, including CA are right in line. Now that the FED is saying they’re not going to finance CA it will be interesting to see what this does to the CA curve. These ratings and curves are meaningless. The markets are not transparent enough. How can CA be running out of money and their debt is priced inline with other AA credits. It’s bogus.

SP will not downgrade until they’re forced to. By that time it will be too late. Bonds will have already imploded. The problem with the rating system is that if SP does downgrade, then that could start the panic selling of the bonds. The state of CA has been pretty transparent about the fact that they’re running out of money. Arnold also went to the Feds to seek money - SP had no choice, now that it’s all over CNBC .

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