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Moody's and S&P are going after California's credit rating, which will really hurt some bond investors and insurers. I told you so, and I told it to you over a year ago before anybody else did... From Reuters:

The ratings agency's decision to place California's general obligation debt on alert for such a dramatic possible downgrade stunned state officials.

"I cannot remember reading a ratings note that raised the specter of a multi-notch downgrade," said H.D. Palmer, a spokesman for Governor Arnold Schwarzenegger. "It's another clear warning from the financial markets that there will be substantial and costly consequences if the legislature does not send the governor a budget that he can sign."

Moody's in a statement cited California's expected massive shortfall for fiscal 2010 of more than 20 percent of its general fund budget and limited options for plugging it.

The state's current A2 credit rating is Moody's sixth-highest investment grade and makes California the lowest rated of the 50 states. The A2 rating is just five notches above speculative status and Moody's raised the potential for the rating to tumble toward "junk" status.

SAN FRANCISCO, June 19 (Reuters) - California, struggling to close a $24.3 billion budget gap, faces the prospect of a "multi-notch" downgrade in its credit rating if the state's legislature fails to act quickly to produce a budget, Moody's Investors Service warned on Friday.

And from Reggie's Historical Archives...

A primer for those not familiar with the muni market: The Municipal bond market and the securitization crisis
(Archived/Reggie Middleton's Boom Bust Blog/MyBlog)
... reason, the graphs refuse to show up on this post so here is a pdf version for the blogs registered users: Municipal Bond Market and the Securitization Crisis (242.88 kB 2008-05-14 18:09:27) ...
Wednesday, 14 May 2008
A Prescient prediction from over a year ago illustrating what is the reality for California, Alabama and a slew of municipalities today: The Municipal Bond Market and the Asset Securitization Crisis, pt 2
(Archived/Reggie Middleton's Boom Bust Blog/MyBlog) (should be read by whoever is not a muni expert - this newsbyte may be worth reading as well) Saturday, 24 May 2008
The alleged best of the best of the monoline insurers still has significant exposure to muni risk that was totally undiscounted just a year ago. In addition, big name brand investors went against me in opposing trades, again as in with WaMu and MBIA. Guess who was right??? I told you so...  Reggie Middleton on Assured Guaranty
(Archived/Reggie Middleton's Boom Bust Blog/MyBlog)
... Wilbur Ross, which is contingent upon maintenance of triple-A rating by the Company. o Stress on municipal bonds. Mounting fears of US recession led by weakening macro-economic fundamental...
Saturday, 22 March 2008

High level analysis available for everyone who wants to see what subscribers have access to: Assured Guaranty_Consolidated Assured Guaranty_Consolidated 2008-11-22 06:29:28 796.13 Kb

More monoline exposure: Download a "Window" into Ambac's Problems
(Archived/Reggie Middleton's Boom Bust Blog/MyBlog)

Two simple, but unflappable tenets that I follow when investing are: 1.)  Economic profit must be evident in order for the investment to be worthwhile. Economic profit exists when the re
Saturday, 05 January