GENERAL ADVISORY on California's Power Bonds
MunicipalBonds.Com Issues an ADVISORY on California's Power Bonds

MunicipalBonds.com today places a GENERAL ADVISORY on California's planned Power Bonds. MunicipalBonds.com takes this advisory action on behalf of individual investors.

The State of California is issuing Municipal Bonds through its California Department of Water to pay for electricity it bought for the State's investor-owned utilities. The bonds are generally referred to as the "Power Bonds."

MunicipalBonds.com places this ADVISORY on California's Power Bonds because the reality of the California secondary Municipal Bond markets is that there really isn't any market. There is no centralized exchange. Broker/dealers can bid or not bid on California Municipal Bonds at their discretion. Though they all might sell you a Power Bond, there is no rule requiring the many underwriters of the Power Bonds, led by JP Morgan, to later on buy it back from you (or provide investors with a bid) when, for whatever reason, someone changes from a "buy-and-hold" to a "buy-and-sell" investor.

This reality of California's secondary Municipal Bond markets needs to be disclosed in the Power Bond's debt prospectus. Investors should know this. "Price transparency" began in 1994. It should have already facilitated a distinct section within an Official Statement or at least be part of the OS's Risk Factors section.

Disclosure of secondary market realities is an important step toward the actualization of an efficient, fair and reasonable Municipal Bond market.

Manhandled at Roadshow!
MunicipalBonds.com attended one of the two California informational roadshows on the nationwide seven city tour. This tour was organized and controlled by the book running lead manager JP Morgan.

• I asked JP Morgan for the name of their California Municipal Bond trader. JP Morgan said they had many traders but refused to provide a name.
• I asked JP Morgan, more specifically, for the name of their odd-lot California trader. JP Morgan again refused an answer.
• I asked JP Morgan, even more specifically, if they had a California trader sitting here in California. JP Morgan said they did not currently have a California Municipal Bond trader here in California.

MunicipalBonds.com's concern is that the multi-billion dollar Power Bonds are the biggest Municipal Bond deal in California history, as well as the biggest to the Muni Markets. If now is not the proper time to currently have a California Municipal Bond trader here in California then when? How will JP Morgan support the Power Bonds? The same questions need to be asked of all the other managers of the Power Bonds.

• I asked Deputy Treasurer, Barbara Lloyd, to explain why the Treasurer chose for lead underwriter a firm that has no California trader? She did not answer and said this Roadshow was not the proper forum.

MunicipalBonds.com is not sure what the retail distribution and structure of JP Morgan is here in California? Are they primarily institutional? The same questions need to be asked regarding all the other managers. Also, what is the proper forum to ask questions if not a public roadshow?

• I asked Deputy Treasurer, Barbara Lloyd, to explain what a "bid agreement" is. She refused. Last June the State paid six major investment banks $15,000,000 to assure a bid side (a bid agreement) for the State's $7.5 billion Revenue Anticipation Warrants.

At this point, I was physically grabbed and ordered not ask any more questions.

My question to Deputy Treasurer Barbara Lloyd, if I were allowed, is to ask why there is nothing like a bid agreement on this deal. They cared about the bid side then - why not care about the secondary market bid side for California investors now?

12 Point Spreads in California Municipal Bond Secondary Markets
As demonstrated by recent MSRB issued data, there are such differences in daily secondary market spreads of California issues such that investors, especially individual investors, might find it difficult to make their investment money back if they ever wanted to or needed to resell their Power Bond(s). On a continual basis, California Municipal Bond markets are Red Flagged for having wide and potentially illegal market spreads.

Based on MSRB released trade and price data, a prime example can be found in California daily trade data for the trade date October 21, 2002. An issue of California St Ref-MBIA IBC 5% coupon maturing 2/01/12 had an offer side spread of 12.055 points. It is unclear why one investor purchased the bonds at 101.849 and another investor had to pay 113.904.

Regardless of credit worthiness, these CA bonds are showing they are not necessarily supported in a fair and reasonable way in the secondary markets. Regardless of how the State pitches the credit worthiness of the Power Bonds, there is no guarantee the markets will be fair or reasonable.

Note: State of California daily Municipal Bond market trading and pricing information can be publicly and freely seen at <http://MunicipalBonds.com.> Note: The Municipal Bond industry does not attach dealer identifiers to their trade data. This is unlike any other securities market. Dealer identifiers are restricted and kept proprietary.

Note: Credit, ratings and/or insurance are not a factor in this ADVISORY. Nor does this ADVISORY consider the political or moral questions surrounding the energy crisis or Power Bonds. MunicipalBonds.com places this ADVISORY on the Power Bonds based on the spreads found in secondary trading prices as demonstrated in the data issued by the MSRB.

Have You Been Treated Fairly?
For purchasers or sellers of Municipal Bonds, MunicipalBonds.com has joined forces with Milberg Weiss to offer a free internet evaluation of your transaction to help you determine whether you were given a fair price by your broker on your municipal bonds . This service is available at
<http://MunicipalBonds.com>

Contact:
MunicipalBonds.com is a public service information site dedicated to 1) publicizing and actualizing price transparency and fair pricing in the Municipal Bond markets, as well as 2) advocating and actualizing fair disclosure of Municipal Bond disclosure information--hopefully through development of the long called for "centralized database." On September 16, 2002, Kevin Olson of MunicipalBonds.com represented by Milberg Weiss Bershad Hynes & Lerach LLP announced the filing of a private attorney general lawsuit against the major Wall Street brokerages for unfair and unreasonable fees in the sale of Municipal Bonds. Defendants in the case are Goldman Sachs Group, Inc., Merrill Lynch & Co. (NYSE: MER), Salomon Smith Barney, Inc., UBS Paine Webber, Inc., Bear Stearns Companies, Inc. (NYSE: BSC), Morgan Stanley Dean Witter & Co., Prudential Securities, Inc. (NYSE: PRU), Charles Schwab & Co., Inc. (NYSE: SCH), U.S. Bancorp (NYSE:USB), and Bank of America Corporation (NYSE: BAC).

Contact: Kevin Olson
Company: MunicipalBonds.com
Phone: 415-922-7870
Email: <Kevin@MunicipalBonds.com>
URL: <http://MunicipalBonds.com>

Contact: Stan Mallison
Company: Milberg Weiss Bershad Hynes & Lerach
Phone: 415-288-4545
Email: <StanM@MWBHL.com>
URL: <http://www.Milberg.com>