Larry, if you want to keep track of Bob's bond recommendations as well, he recommended purchase of the California General Obligations on numerous occasions. I don't know when he first recommended them, but based on the inordinate amount of e-mail I received from my subscribers today, I imagine there are many Trekkies around the world anxious to hear what Bob Brinker has to say about yesterday's downgrade of California's credit rating by Standard & Poor's to a worst-in-the-nation "BBB." I did some research, and pulled out Bob's discussion and recommendations of California State General Obligations, and how he has responded to the ever slowly degradation of the state's debt. Here are excerpts from my newsletter over the last two years where Bob addressed his recommendation of California General Obligations. Check it out:
Excerpt from my newsletter dated May 6, 2001
Brinker Comment: Bob said he was comfortable with purchasing high quality municipal bonds within the state of California that are backed by the full faith and credit of the State of California. Bob added that he doesn't expect to see a default in General Obligations in the State of California, despite the utility crises and the problems with PG&E.
Editorial Comment (EC): I am glad Bob answered my question from last week about his view on the credit worthiness of California General Obligations. Incidentally, if you are a Californian, and you have questions about your taxes, your starting point on the net should be the California Tax Information Center Homepage which you can access at this link:
http://www.taxes.ca.gov/
December 7-8, 2002
CALIFORNIA BONDS
Caller: This caller is in a high tax bracket and is interested in California state bonds, but is concerned about the amount of debt that California has on its books. Bob said if you want tax-free income, you can definitely consider quality California bonds. Bob noted that General Obligations for the State of California are investment grade bonds and generally carry an "A" rating. They could be downgraded to BAA, but they would still be investment grade if they were. Bob doesn't see any reason right now to think that California will default on its general obligations. Bob also suggested that the caller try to purchase new issues where the seller pays the commission.
EC: Bob has maintained his bullish view of California State General Obligation bonds for a very long time. As Bob noted, the ideal way to purchase general obligations is to work with a broker from a brokerage house that is part of the syndicate underwriting the bond offering. If you can't buy them on the initial offering, you would then have to purchase them on the secondary market where you would have to pay a commission and might not get such a good price due to the spread between the bid and the ask price.
March 29-30, 2003
MUNICIPAL BONDS/GENERAL OBLIGATIONS
Brinker Comment: Bob reiterated one of his long-standing recommendations for a bond portfolio -- General Obligations issued by a particular state. Bob said he likes investing in state General Obligations because they have a great track record. The only state general obligation that Bob would not invest in are the bonds issued by the State of Louisiana.
EC: Over the past few years, Bob has steadfastly recommended general obligations issued by the State of California. When those bonds do well, Bob has bragged on that recommendation. In the wake of the energy crises in California, Bob stood by his recommendation noting that California bonds had only suffered a slight downgrade in credit rating. If Bob is going to single out Louisiana as the one state he would not purchase general obligations from, he might want to check the latest ratings from the major credit rating companies. As of February, 2003, Fitch, Moody's and S&P rated both California bonds and Louisiana bonds with the same ratings (A, A2 and A, respectively). These are lower than most of the other states which are rated. This link brings you to a list that compares California's bond ratings to all other State General Obligation Bond Ratings:
http://www.treasurer.ca.gov/ratings/current.htm
April 26-27, 2003
Caller: How safe are General Obligations (GO) of the State of California with 7-10 year maturities? Bob first noted that you aren't going much of a yield on them. 10-year treasuries are yielding less than 4%, and you will only get a little better on yield on the GOs. In terms of their safety, Bob thinks they have shown there resilience through the various crises California has faced. Bob said he follows them closely since he owns them. Bob bragged a bit pointing out that the ones he purchased are yielding 5.25% to 5.75%. In Bob's opinion, they have been outstanding performers. As an "A" rated credit, Bob said he would not be losing any sleep over them.
EC: I guess Bob will have to modify his opinion on the State of Louisiana's General Obligations which Bob previously said he wouldn't own. Louisiana and California now have the dubious distinction of being two states that have an "A" rating by Standard & Poor's versus AA and AAA ratings for most other states.
June14-15, 2003
CALIFORNIA BONDS
Caller: California is offering some general obligation bonds next week which are only rated "A" by the credit rating agencies. Are they still safe to buy? Bob noted that an "A" rating means they are investment grade bonds. Bob added hat California General Obligations have done very nicely. The municipal bond fund that invests in California bonds of longer dated maturities has returned 31% over the past three years. The intermediate maturities have returned around 27%. People are always trashing the great state of California, but their municipal bond holders have had tremendous returns in recent years. Bob noted that as an investment, General Obligations of the State of California are a "reasonable investment" as part of a diversified portfolio." As a point of clarification, Bob said he is not referring to the tobacco bonds which he wouldn't touch with a ten foot pole.
EC: One of my subscribers named Bob (not "The" Bob) e-mailed me this week to update me on his research into California municipal bond funds which he has put on his web site. Bob is a long term Trekkie, and I think you will find it worthwhile to bookmark his website. This link brings you to his research on the closed-end California municipal bond fund:
http://www.geocities.com/bob90245/current.html
July 5-6, 2003
California General Obligations
In response to one very nervous caller this weekend, Bob pointed out that California General Obligations are very liquid and the caller could sell them if owning them was keeping her up at night, but that she would probably face some hefty tax consequences. Bob added that he is going to continue to hold his investment in California General Obligations as they have been very good to him, and because he does not believe California will declare bankruptcy and default on those bonds, despite the daily talk in California of fiscal crises. Bob also added that he isn't worried because he owns the California GOs as part of a diversified bond portfolio -- something he had never emphasized before, and he probably brought up to hedge against being wrong.
EC: I suspect that Bob may have received a lot of nervous inquiries in view of the news that Moody's and Standard & Poor's are considering a possible further downgrade of their ratings of California debt. See article at the attached link:
http://tinyurl.com/g3z6
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- David Korn
Editor of David Korn's Stock Market Commentary, Interpretation of Moneytalk (Bob Brinker Host), Financial Education, Helpful Links, Guest Editorials and Special Alert E-mail Service.
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