From Craig's List - LA:
But why sell your gold if you can sell the California IOU itself? Wherever there is an instrument with an expected payout, there will be a market. Here is another one from Craig's list:
In fact the guys from SecondMarket are getting in on the game. If SecondMarket can accumulate a portfolio of IOUs, they can auction it off to investors for a quick return. They specialize in auctioning off illiquid assets, but in this case will need significant volume to make IOU auction worth while. The discount may only be a few percent, so the fees for SecondMarket will be tight. They usually take a 5-10% commission on their auctions.
Here is what the return will look like, assuming California will pay on time (Oct. 2nd with 3.75% annualized interest):
But it remains to be seen if the state will have the resources to pay on the IOUs by October. The IOUs also subordinate the existing CA bonds. Not good news for the CA muni market.