Can Michael Jackson Save California’s Muni Bond ETFs?

California’s economy is in a state of turmoil, but between attractive yields on the state’s muni bond exchange traded funds (ETFs), as well as the recent passing of the King of Pop, Michael Jackson, could the economy have enough going for it to help it bounce back?

Before we get into how Michael Jackson could help, Joel Kotkin for Forbes poses the question: “Who Killed California’s Economy?” He’s rounded up a list of five possible suspects. Whodunnit?

1. Arnold Schwarzenegger: The Terminator has lacked any consistency or authenticity, going from tough governor to ultra-green terminator to anti-liberal interest guy. Over the course of this identity crisis, high -tech jobs have left the state, while there have been huge setbacks in the construction, manufacturing, warehousing and agricultural sectors.
2. Public Sector: Fat pensions and unlimited political power leave many in California who don’t care about the economic environment. California’s 356,000 workers and their unions, who make up the best-organized, best-funded and most powerful interest group in the state, think this way. Is this labor aristocracy part of what has killed the spirit.
3. Environment: California’s environmental activists once did an enviable job protecting coasts and mountains, expanding public lands and working to improve water and air resources. In California today, everyone who makes a buck in the private sector-from developers and manufacturers to energy producers and farmers-cringes in fear of draconian regulations in the name of protecting the environment.
4. Business Community: Some members of the business elite, such as those in Hollywood and Silicon Valley, tend to be too self-referential and complacent to care about the bigger issues. Others have either given up or are afraid to oppose the dominant forces of the environmental activists and the public sector.
5. Californians: For those of us still here, the ones paying the bills and getting nothing in return, we must be very cautious about handing more power to the state’s leaders. Much of the middle class has left the state and it will take more than structural reforms to turn around the fundamental economic drivers of the state.

As for Michael Jackson, the tourism factor may turn out to be a huge boost for California’s economy. Neverland Ranch could still be a tourist destination, even though for the time being visitors can only peer from the outside in. Michael Jackson will be buried in the Hollywood Hills, temporarily, his family says. People will flock to visit this internationally famous pop icon for years to come. This leaves us with a crazy scenario for California’s economy and what drives it: His death means a world where even Michael Jackson impersonators could experience fame and riches, says Mike Schuster for Minyanville.

• PowerShares Insured California Muni Bond (PWZ): up 6.9% year-to-date; yields 4.61%

• SPDR Barclays Capital California Muni Bond (CXA): up 2.8% year-to-date; yields 4.16%

• iShares S&P California Municipal Bond (CMF): up 1.1% year-to-date; yields 3.63%

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Comment by Kat

2009-07-09 09:53:08

You missed a few very important points. If you look at the costs associated with state employee salary and pensions, when compared to the costs associated with social services, you will see where the money drain is located. I personally know several people, including legal and illegal immigrants who are on the “public dole”. They regularly visit the emergency room and pay nothing. They make money and are paid in cash so they can avoid paying taxes and losing benefits. My neighbor has had a child every 4 years to ensure her benefits continue. These people are proud of their ability to get something for nothing. California has been a magnet for these types of individuals. Yes, there are those who truly need assistance, and we should help them, but we need to stop giving away the bank to those who do not want to work, or are here illegally, and are cheating the system. I might also mention that the biggest financial drain is California’s education system, which does not work. The state has thrown money at it for years and the schools use the funds in ways that do not benefit the students. Our children are not excelling and allocating more money has had no affect. I have first hand knowledge of the waste and it is appalling. One last point. You imply that state employees do not care about the economics of the state. What a foolish statement to make. Everyone who lives in this state cares about it. Life is more than a paycheck.

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