Regime changes are fun: last year it was California that the "smart money" was betting on for secession, earthquakes, default and a wholesale apocalypse. Over the past 3 months, attention has shifted to California's much smaller cousin in Europe - Greece, whose CDS, having been dormant during most of the credit crisis, has recently overtaken California by a substantial amount. Yet what in Greece's staggering budget deficit and untenable debt load was unknown 6 months ago that is known today? Absolutely nothing, as none of the recent developments should be construed as "news", yet with everyone talking about it, CDS traders are more than happy to capitalize on the hoopla and crush the bulls. The point here being that if traders think Greek default risk is material, how should the world's 7th largest economy feel? Yes, they legalized grass, but somehow we doubt that is a viable model to bridge the gap from here to insolvency. And with the Massachusetts referendum now shutting the door on any future bailouts, those of states most certainly included, we wonder: shouldn't the entity with the $10 billion deficit be trading just a little wider of little old Greece? California CDS have been on a tear, and after hitting a low of 160 bps, are now back to 273. Their high was 400 in the depths of the post-Lehman shitstorm. And while the Federal picture since then has improved only thanks to the Fed's wanton destruction of the middle class, for states it has only been an increasingly bumpy downhill ride.

With both Greece and California now pariahs in their respective contexts, we fully expect that California will retain its rightful place, somewhere decidedly wider than the Aegean country.