In his March 26 column, Skelton complains that bond rating agencies are being unfair, and claims that California has essentially zero credit risk.
Not only has California never defaulted on a bond, state law won't allow it. Bond-holders are second in line for all state revenue after schools. They rank ahead of the state payroll, prisons, poor folks . . .
If there were actually a law that made default impossible, don't you think someone other than George Skelton would have heard of it? And wouldn't the zero-risk California bonds be trading at yields less than Treasuries due to their tax-free characteristics, rather than at a wide spread over Treasuries? Oh, that's right. The rating agencies have the entire bond market fooled, and Skelton is the only one who knows that California munis are massively mispriced. Skelton should quit his day job and start a hedge fund to take advantage of this huge arbitrage opportunity.
I wrote to Skelton to ask about this amazing law that no one else had heard of:
You state "Not only has California never defaulted on a bond, state law won't allow it."
What law is that?
His response, in its entirety:
State law.Oh, that explains it.
I've written to the Times readers' representative asking for a correction. I'm not holding my breath.
Thanks to Say Uncle for calling my attention to Skelton's whopper.