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.
- They do not pay the upfront brokerage fee/commission. (Individuals should check with their broker to learn about any other transaction or account maintenance fees.)
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 process.
- 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.