Brokerage recommends scrapping state bonds.Dump California state bonds, investors are warned in a recent 18-page report issued by Sanford C. Bernstein & Co. Inc., a New York-based brokerage house. The State of California, long ranked among the strongest of all public sector credits, faces critical demographic, economic and political challenges that have eroded its credit-worthiness, and should prompt a downgrading downgrading A reduction in the quality rating of a security issue, generally a bond. A downgrading may occur for various reasons including a period of losses, or increased debt service required by restructuring a firm's capital to include more debt and less of state bonds to AA from AAA AAA: see American Automobile Association. (Triple A) A common single-cell battery used in a myriad of electronic devices of all variety. Like its double A (AA) cousin, it provides 1.5 volts of DC power. When used in series, the voltage is multiplied. , said Bernstein. Huge immigration immigration, entrance of a person (an alien) into a new country for the purpose of establishing permanent residence. Motives for immigration, like those for migration generally, are often economic, although religious or political factors may be very important. in the 1980s -- 6.1 million people -- has placed large demand on the state's infrastructure and schools, noted Bernstein. Meanwhile, the economy is wobbly wob·bly adj. wob·bli·er, wob·bli·est Tending to wobble; unsteady. wob  bli·ness n. and the state budget is struggling to remain balanced. The economy will remain crippled by the state's famous high housing costs, suggested Bernstein, meaning that new tax revenues will be crimped crimped said of grain that has been passed through corrugated rollers after previous exposure to moist heat so that the grain is fractured but there is a minimum of dust. . Too, the state has been a heavy borrower from 1985 to 1990, leveraging up faster than other states. Whereas in 1985 state debt per capita [Latin, By the heads or polls.] A term used in the Descent and Distribution of the estate of one who dies without a will. It means to share and share alike according to the number of individuals. was 51 percent of the national median, in 1990 it was 86 percent, said Bernstein. By 1992, Californians, per capita, will owe more on state bonds than residents of others states, on average, predicted Bernstein. But certain state tax laws, such as propositions 13, 98 and 111, prevent tax increases, so reliance on borrowing may continue, said Bernstein. Summed up Bernstein, "In light of the foregoing credit assessment, we believe it is prudent to reduce one's exposure to the State of California and related credits." |
|
||||||||||||||||||
Printer friendly
Cite/link
Email
Feedback
Reader Opinion