California is facing a $24 billion budget gap with no obvious way to close it. You may not live in CA, but the budget cuts in CA and its Govt's inability to pay its own employees is a warning bell for all those California "bond" holders like you.
A "bond" is something Govt's issue to raise money for infrastructure projects. So its essentially an IOU from the Govt where the U is literally you the investor in mutual funds. If the CA Govt does not feel the need to pay its employees because of the budget cuts, it certainly will default on the IOUs it has doled out to the average Joe investor. California defaulting on its $59 billion in outstanding general obligation bonds is unavoidable.
To the average Joe investor this means check your mutual fund portfolio and make sure you are not heavily invested in CA govt bonds through local municipal bond funds or national funds that invest heavily in CA. Unfortunately, CA is the highest issuer of tax exempt bonds, so its popularity is high and it is probably sitting right there in your portfolio about to go bust.
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