LABJ FORUM

Investing in Golden State

California once sported the highest bond rating possible AAA. Now, knocked down to a BBB by ratings service Standard & Poor’s, the state’s debt obligations are rated just two notches above junk status. But with light at the end of the budget tunnel, there is a chance some of that pressure might be relieved, making California once again an appealing place in which to invest. So the Business Journal asks:

Would you buy a California bond?

Paul Hudson

President and CEO

Broadway Federal Bank

I believe in the strength of California’s economy. The fiscal situation will get worked out. I would probably seek a higher price for a California bond than, for example, a Colorado bond because of the state’s situation, but I would definitely buy a state bond.

Mitchel Moore

Executive Director

Heart of Los Angeles Youth

Yes, I would. I think things can only get better. I have been thinking about it this past week and have consulted my accountant. I believe in supporting the state. I don’t know that I would put a lot of money into investing but I think that bonds may be the way to go.

William Jennings

Professor of Finance

California State University, Northridge

Yes, I would be willing to buy a California general obligation bond. I think California is going to start doing better, now that we have a budget. I think bonds would be a reasonable buy today.

Norman Levine

Managing Partner

Greenberg Glusker Fields Claman

Machtinger & Kinsella LLP

Sure, I would buy one. I believe we have a budget now and although we have a lot of problems, I think the economy is strong. We’ll get through the recall process and work out our problems. I don’t see the state defaulting on its bonds.

Linda Tisherman

President

Staff Support Inc.

I’m not buying anything right now. My general feeling in the staffing industry is that we’ll be the first to see a recovery, and we are seeing people hiring full time. So we’re bouncing back. But I’m very upset about the whole situation about the economy and the budget.

Patricia Hughes

Professor of Accounting

Anderson School at UCLA

No I wouldn’t. The falling ratings mean that the bonds are being valued at close to bankruptcy. The probability that the state will repay the bonds is quite low. I’m a conservative investor, so I would be quite hesitant to do so now. If you have better alternatives, why invest in something that has a high likelihood of default?

Christine Sisley

Executive Director

Fletcher Jones Foundation

I own a lot of them and I don’t plan on making any changes. I have faith in them but I don’t plan on buying any more.