3. June 2009 by Dan Walkow, CFA, CMT.

California’s fiscal mess has begun to rattle municipal bond investors.

Market yields on the state’s outstanding general obligation bonds have jumped in the last week, reflecting falling prices for the securities as buyers have backed away.

California’s economic and political problems continue to rattle investors.

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3. June 2009 by Dan Walkow, CFA, CMT.

 Pimco Bond Czar in the June Letter—The current annual deficit of $1.5 trillion does not even address the “pig in the python,” baby boomer, demographic squeeze on resources that looms straight ahead. Private think tanks such as The Blackstone Group and even studies by government agencies, such as the Congressional Budget Office, promise that Federal spending for Social Security, Medicare, and Medicaid will collectively increase by 6% of GDP over the next 20 years, leading to even larger deficits unless taxes are increased proportionately. Collectively these three programs represent an approximate $40 trillion liability that will have to be paid. If not, you can add that present value figure to the current $10 trillion deficit and reach a 300% of GDP figure – a number that resembles Latin American economies such as Argentina and Brazil over the past century.

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