Ghost-ridin' da bond market

June 19, 2009 10:31 AM

City of Oakland, California, municipal bonds. How can I buy them? Good/bad idea?

Will I be able to ride my scraper down to City Hall and purchase these, or will they be available only through brokerages? What will be the denominations?

I don't use a brokerage, and don't know much about bond investing, but I'd like to support my town with a little gouda. Good idea, or am I thizzin'? Any advice and/or experiences with local muni bonds are very welcome!

Thanks!

posted by Mountain Goatse to work & money (7 comments total)

I might consider being wary - at least on the State level, the agencies (Moody's, etc.) have been downgrading CA bonds, and there is apparently chances of default on municipal bonds.

I realize you may have considered this as your question is more "how do i?" rather than "should i?"....
posted by bunnycup at 10:37 AM on June 19, 2009

Just my opinion, but any California municipality or municipal project funded by revenue or taxes should be very carefully considered. Or take the short cut and consider them basically radioactive, regardless of insurance status.
Unless my screening has gone wrong, Oakland has more debt oustanding than New York City.
This site might be helpful to screen bonds and, if you like, buy them. But you'd better get a prospectus. If you don't understand bonds, you definitely won't understand municipal bonds. Make sure you know call, refunding and put features as appropriate.
I'd look into bonds from the East Bay Municipal Utilities District (ya gotta bathe and drink water), or perhaps East Bay Regional Parks (and they are nice as I remember them), but not a single California municipality. Your bonds won't default, but changes are good they'll lose a lot of value.
posted by nj_subgenius at 11:30 AM on June 19, 2009

Here is a link discussing some of the downgrades on California muni bonds.
posted by dfriedman at 11:31 AM on June 19, 2009

You should consider the tax base and revenue sources available to Oakland now and going forward, compared to other municipal bonds in CA. From that point of view, I'd be very wary of Oakland. Mind you, this is just a proxy, and analyzing bonds is never simple - if you went just by revenue and tax base, you'd think Orange County was just peachy, and we all know how that turned out - in other words, surprises are almost always negative, and you never have all the information.. that's why they pay a premium for risk. Still, if even the tax base and revenue sources are bad, then it's a good sign to avoid those bonds. I'd pass.
posted by VikingSword at 11:42 AM on June 19, 2009

Yikes. Unless you have the surname Milken, I'd avoid any CA based muni bonds.
posted by bz at 2:05 PM on June 19, 2009

Going by the text of your question, you should not invest in these bonds. There are probably other more effective ways you can support Oakland with your time and expertise.
posted by jeb at 5:31 PM on June 19, 2009

I've been poking around because this seemed interesting to me, too. I don't think I make nearly enough money to make it worthwhile, if this page about calculating whether or not muni bonds make sense is correct.
posted by oneirodynia at 9:33 PM on June 19, 2009