Bill Lockyer Goes Direct To Retail Investors With The "Terrific" Opportunity To Front Run Institutional Investors In Cali Bonds
After recently pulling a $2 billion bond issue due to an internal Snafu (and, as the rumor goes, due to a material lack of institutional demand), California has been advertising (and, ironically, using Google contextual ads on Zero Hedge for just that purpose, possibly running on this very page) the very same bond issue, direct to retail investors, and making it seems like retail is getting a great deal by getting on the same (deserted) floor as institutions, and even frontrunning the major institutional investors (which incidentally would not touch these bonds with a 12 foot pole). While we sympathize with Bill Lockyer's problem of being the Treasurer of a default state, we are not very sure that going direct to retail is the best option (or, all that legal either). If anything, it underscores just how horrendous the fiscal situation in California is, and how anyone buying into this bond issue should be prepared that the next round just may not find enough greater fools to extend the perpetual refi Ponzi (forget about repayment at maturity).
From the buycaliforniabonds.com website:
Welcome. Thank you for visiting Buy California Bonds.
California bonds finance investments in our schools, roads, housing,
parks, levees, public facilities and other crucial infrastructure
projects. They also finance the research and development of stem cell
therapies to treat and cure diseases which ravage lives and families.
As Treasurer, I am responsible for managing all of the State’s bond
sales. I want to make it easy for individuals to make these investments
– and pay the same price as large institutional investors. This website
will show you how to buy infrastructure bonds, lease-revenue bonds to
build State-government buildings, bonds to fund stem cell research, as
well as shorter-term notes that help the State manage its cash flow.
The bulk of these bonds will help finance infrastructure projects.
California voters have approved the issuance of more than $65 billion
of bonds to improve and build new schools, roads, housing, parks and
levees. Over the next few years, the State will be selling these bonds
to raise the money to build these projects.
By investing in these bonds, you will help turn the projects you
approved at the polls into reality – adding to our quality of life and
the vibrancy of our economy.
On this website, you will learn more about California bonds and
notes, and about how to become an investor. Please visit us again soon.
This site will be updated regularly to feature upcoming bond sales,
with information specific to the types of bonds being offered.
We would warn investors to be very cautious (there is a reason institutional investors have no interest) if they wish to invest in this bond issue.
Here is the spin from Lockyer that is expected to incite people to invest in Cali's $2 billion issue:
Individual investors enjoy advantages when they buy bonds or notes during the early order period
- Individual investors get to place their orders before institutional investors, such as mutual funds or insurance companies.
- They earn the same investment return as institutional investors who buy the same bonds or notes.
do not pay the upfront brokerage fee/commission. (Individuals should
check with their broker to learn about any other transaction or account
To buy bonds or notes, follow these simple steps:
Step 1 – Have a brokerage account
- You must have an account with one of the brokerage firms
participating in the bond or note sale. Bonds and notes cannot be
purchased directly from the State. If you do not have an account at one
of the participating firms, you may open one and purchase bonds or
notes during the early order period. (If you have a brokerage account,
go to Step 2.)
- Investors are encouraged to begin the New
Account process well in advance of the sale. Depending on the
brokerage, internal new account procedures may take some time to
- Each firm has its own requirements for opening an
account. The State does not endorse any particular brokerage firm.
Additionally, the State does not guarantee that any one of these firms
will open an account for an investor.
Step 2 - Learn about the bonds or notes
- Bonds or notes can only be offered through an Official
Statement. Download and read the Preliminary Official Statement to
learn about the bonds or notes, including their security, maturity
dates, the types of projects they finance and other information you may
find important to help you make an informed investment decision. This
website is not an offer to sell any bonds or notes.
- Find out the credit ratings California bonds or notes have received.
Step 3 - Place your order
- Contact the broker with whom you have an account, either
online or by phone, to get more information about how to buy bonds or
notes during the early order period.
(Seriously, between Ally, JPM, Citi, DB and now Cali, how many other websites bash their advertisers as regularly as ZH. A new head of biz dev may be needed soon).
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