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California Municipal Bond Demand Is Surging
California’s economy just surpassed France’s in size. Say what you will about the state and some of its colorful residents, it’s successful because it recognizes talent and fosters an environment in which innovation and entrepreneurism can thrive.
Silicon Valley is seeing a boom right now, which has helped the state government generate budget surpluses. Debt is being paid down, and the state’s rainy-day savings account is growing. This has contributed to California enjoying its highest credit rating since the turn of the century, Bloomberg reports, and caused demand for its municipal debt to climb.
At the same time, California munis can be volatile because state revenue depends on wealthy taxpayers whose incomes are tied closely to the stock market. According to Bloomberg, the top 1 percent of earners paid half of the state’s income tax revenue in 2014.
It shouldn’t come as a surprise to anyone, then, that California has one of the highest Gini coefficients, a measure of economic inequality, in the nation. Although some might balk at this, I think it’s proof there are huge, life-changing opportunities in California, and in the U.S. in general, that can turn “regular folk” into billionaires almost overnight.
Speaking of which, check out our latest slideshow, “10 Living, Self-Made Billionaires.”
The iShares National Muni Bond ETF (NYSE:MUB) was unchanged in premarket trading Wednesday. Year-to-date, the largest ETF tied to municipal bonds has gained 0.97%, versus a 1.22% rise in the benchmark S&P 500 index during the same period.
MUB currently has an ETF Daily News SMART Grade of A (Strong Buy), and is ranked #1 of 33 ETFs in the Municipal Bonds ETFs category.
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The Small Business Optimism Index is compiled from a survey that is conducted each month by the National Federation of Independent Business (NFIB) of its members.
The Producer Price Index (PPI) measures prices received by producers at the first commercial sale. The index measures goods at three stages of production: finished, intermediate and crude. The Purchasing Manager’s Index is an indicator of the economic health of the manufacturing sector. The PMI index is based on five major indicators: new orders, inventory levels, production, supplier deliveries and the employment environment.
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About the Author: Frank Holmes
Frank Holmes is the CEO and chief investment officer of U.S. Global Investors. Mr. Holmes purchased a controlling interest in U.S. Global Investors in 1989 and became the firm’s chief investment officer in 1999. In 2006, Mr. Holmes was selected mining fund manager of the year by the Mining Journal, and in 2011 he was named a U.S. Metals and Mining “TopGun” by Brendan Wood International. He is also the co-author of The Goldwatcher: Demystifying Gold Investing. More than 30,000 subscribers follow his weekly commentary in the award-winning Investor Alert newsletter which is read in over 180 countries.
Under his guidance, the company’s mutual funds have received recognition from Lipper and Morningstar, two trusted independent financial authorities. In 2015, Mr. Holmes led the company into the exchange traded fund (ETF) business with the launch of the U.S. Global Jets ETF, which invests in the global airline sector.
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