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View Diary: Market Humiliates S&P — Rejects Downgrade (266 comments)

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  •  S&P just said (13+ / 0-)

    T-bill are less safe than before AND that there are safer instruments.

    Your comment makes no sense to me. Are you arguing that the yield would be even lower?

    I'd say your comment is inaccurate.

    •  Two separate items (1+ / 0-)
      Recommended by:
      erush1345

      You have both the downgrading AND the turmoil in the markets.  Obviously, the downgrading would tend to lower the value of the T bills, though only a little (it was only one of three houses and a one stelp downgrade).  However, market turmoil tends to drive investment into safe havens (including T bills, gold, and other such safe havens).  Clearly, the turmoil factor is outweighing the downgrading factor, which makes perfect sense given the size of the two factors right now.

      But that doesn't change the fact that this downgrade is genuinely hurtful to the US.  

      "How did you go bankrupt?" "Two ways. Gradually, then suddenly." - Ernest Hemingway, The Sun Also Rises.

      by weasel on Mon Aug 08, 2011 at 08:39:45 AM PDT

      [ Parent ]

    •  Where do you go when everything is shit? (2+ / 0-)
      Recommended by:
      weasel, steve04

      Gold and T-Bills seems be the answer still.

      •  The fact that gold is up massively (4+ / 0-)
        Recommended by:
        ilex, erush1345, steve04, neroden

        shows that turmoil is the factor driving market investment just now.  

        "How did you go bankrupt?" "Two ways. Gradually, then suddenly." - Ernest Hemingway, The Sun Also Rises.

        by weasel on Mon Aug 08, 2011 at 08:44:58 AM PDT

        [ Parent ]

      •  How about AAA inverstments? (2+ / 0-)
        Recommended by:
        Mets102, vcmvo2
        •  They're all going up. (1+ / 0-)
          Recommended by:
          steve04

          Marketwatch summarized it about as tersely as possible:

          U.S. stocks sink so safe havens soar

          "How did you go bankrupt?" "Two ways. Gradually, then suddenly." - Ernest Hemingway, The Sun Also Rises.

          by weasel on Mon Aug 08, 2011 at 09:12:24 AM PDT

          [ Parent ]

          •  But not faster than (4+ / 0-)

            US' "downgraded" debt.

            •  Why would you expect them to? (1+ / 0-)
              Recommended by:
              erush1345

              US debt is still definitely a safe haven.  It is not the ONLY safe haven, and never has been.  Pretty much all safe havens are rising, as you would expect in a market like this.  You keep acting like S&P rate US bonds as junk.  Of course, nothing like that has happened.

              Look, I understand the frustration with S&P's overtly political move.  But I just don't undestand why people stick their heads in the sand and refuse to acknowledge the real harm that this move does.  When has clapping louder ever worked as a strategy, financial or political?  

              "How did you go bankrupt?" "Two ways. Gradually, then suddenly." - Ernest Hemingway, The Sun Also Rises.

              by weasel on Mon Aug 08, 2011 at 09:23:49 AM PDT

              [ Parent ]

              •  So you accept that (9+ / 0-)

                the S&P sovereign debt ratings are meaningless?

                Good for you.

                •  What an absurd statement. (2+ / 0-)
                  Recommended by:
                  erush1345, steve04

                  How do you get from "overtly political move" to "meaningless", other than by fantasy?  The fact that something is political does not make it meaningless.  You should know that by now.

                  "How did you go bankrupt?" "Two ways. Gradually, then suddenly." - Ernest Hemingway, The Sun Also Rises.

                  by weasel on Mon Aug 08, 2011 at 09:39:34 AM PDT

                  [ Parent ]

                  •  I meant in terms of (4+ / 0-)

                    an analysis of creditworthiness.

                    I guess more precision is required when conversing with you.

                    •  Precision does help, especially since (0+ / 0-)

                      just a moment ago we were talking about market reaction.  As for the bond houses credit analyses, I've never had much use for them, for sovereign debt or any other category.  But the market does indeed take them into account, which was the thing you were just arguing did not happen (because other factors are weighing heavily on the market today).

                      If you are going to switch topics again in an attempt to declare victory, please let me know.  

                      "How did you go bankrupt?" "Two ways. Gradually, then suddenly." - Ernest Hemingway, The Sun Also Rises.

                      by weasel on Mon Aug 08, 2011 at 10:20:33 AM PDT

                      [ Parent ]

                      •  BOND market reaction (2+ / 0-)
                        Recommended by:
                        Mets102, neroden

                        S&P rated US debt. Far as I know, US does not have equities.

                        •  Silly (0+ / 0-)

                          No one, as you well know, has said or implied that the US sells equities.  However, the market for debt (bonds) and equities (stocks) are not separate.  People and institutions invest in both.  And in times of turmoil (e.g. now), people move money generally from equity to debt.

                          So that's twice you've tried and failed to switch topics in order to dig yourself out of a hole.  What will attempt number 3 involve?  

                          "How did you go bankrupt?" "Two ways. Gradually, then suddenly." - Ernest Hemingway, The Sun Also Rises.

                          by weasel on Mon Aug 08, 2011 at 11:41:31 AM PDT

                          [ Parent ]

                          •  Um (1+ / 0-)

                            they react to one another, but they are separate.

                            You'll excuse me for wondering WTF you are talking about.

                            I have been right all during this discussion. And before.

                            I think you are not making much sense.

                          •  Armando, I think you're a fish out o water on this (0+ / 0-)

                            US sovereign debt was downgraded from AAA to AA+.  It still qualifies as a safe haven.  The effect of this downgrade on banks and corporations that borrow will be at least as significant as it is on US debt, so stocks are affected more.  That produces lots of stock sellers and lots of "safe haven" buyers.  They're buying gold, US debt, and of course that of other countries.  Norway, Switzerland, Sweden, and a handful of other first-world countries have higher debt ratings, but they all qualify as "safe havens" along with the USA.

                            The general meaning of our credit rating opinions is summarized below.
                            ‘AAA’—Extremely strong capacity to meet financial commitments. Highest Rating.
                            ‘AA’—Very strong capacity to meet financial commitments.
                            ‘A’—Strong capacity to meet financial commitments, but somewhat susceptible to adverse economic conditions and changes in circumstances.
                            ‘BBB’—Adequate capacity to meet financial commitments, but more subject to adverse economic conditions.
                            ‘BBB-‘—Considered lowest investment grade by market participants.
                            ‘BB+’—Considered highest speculative grade by market participants.
                            ‘BB’—Less vulnerable in the near-term but faces major ongoing uncertainties to adverse business, financial and economic conditions.
                            ‘B’—More vulnerable to adverse business, financial and economic conditions but currently has the capacity to meet financial commitments.
                            ‘CCC’—Currently vulnerable and dependent on favorable business, financial and economic conditions to meet financial commitments.
                            ‘CC’—Currently highly vulnerable.
                            ‘C’—Currently highly vulnerable obligations and other defined circumstances.
                            ‘D’—Payment default on financial commitments.

                            http://www.standardandpoors.com/...

                            No on Prop 8::Sometimes I get to hitch a ride on the Democratic Bus--they let me stand on the back bumper.

                            by steve04 on Mon Aug 08, 2011 at 12:50:21 PM PDT

                            [ Parent ]

                          •  Right (1+ / 0-)

                            S&P got it just right.

                            You are full of it sir.

                          •  Room for shades of grey? (0+ / 0-)

                            I did not say S&P got it just right.  I said that S&P's rating still includes the US debt in the group of investment-grade securities.  And it's right up there near the top.  It just isn't the very tip-top, since other countries with good economies and functional governments are relatively more reliable.  In that respect, I think the S&P is probably about right to rate US debt a tiny notch lower than that of a few other countries.

                            According to this (Sept 2010) wiki article, in order, Norway, Switzerland, Sweden, Denmark, Finland, Luxembourg, Canada, Netherlands, Hong Kong, and Australia make up the top 10 highest rated sovereigns.  We don't spend much time talking about them, because they are relatively puny.
                            http://en.wikipedia.org/...

                            No on Prop 8::Sometimes I get to hitch a ride on the Democratic Bus--they let me stand on the back bumper.

                            by steve04 on Mon Aug 08, 2011 at 01:03:39 PM PDT

                            [ Parent ]

                          •  France (0+ / 0-)

                            is what?

                            Sorry, you're arguments are not convincing.

                            S&P is rightly being jeered today

                          •  HLMGTFY (0+ / 0-)

                            Honestly, I am surprised you don't know France's rating if you've been arguing with such ferocity and so many absolute statements. France is rated AAA.

                            http://en.wikipedia.org/...

                            Japan is AA-, two notches below the USA's new AA+ rating.  Japan has a lot of good things going for it, but it does have a lot of debt and a weak economy.

                            Kuwait is an AA.  Off the top of my head, I'd guess Kuwait doesn't get AAA because it's between Saudi Arabia and Iraq.  They certainly aren't short of cash, but their physical location is risky.

                            South Korea is several notches lower, at A.  Again, I suspect that's a physical location risk thing rather than a purely financial risk rating.

                            New Zealand is AA+, like the USA.  I don't know why they aren't AAA, but they're an example of a first-world economy that isn't AAA.

                            Argentina, which defaulted several years ago, is rated a "B."  That's below the BB and BBB tiers, as well as the A, AA, and AAA tiers.

                            No on Prop 8::Sometimes I get to hitch a ride on the Democratic Bus--they let me stand on the back bumper.

                            by steve04 on Mon Aug 08, 2011 at 01:16:03 PM PDT

                            [ Parent ]

                          •  I did (0+ / 0-)

                            I'm surprised you did not recognize my sarcasm.

                            I am done with this discussion.

                          •  Ahh, I get it. (0+ / 0-)

                            France is the single anecdote, based on debt to GDP, that is being used to illustrate how universally wrong S&P is.  Perhaps France should also be AA+ rather than AAA.  I haven't made a study of it, but I do know that the S&P ratings are based on the complete picture, not just debt to GDP.  France has much better infrastructure.  Unemployment is very slightly worse than ours.

                            Italy has an A+ rating, a higher debt to GDP ratio, and Berlusconi in charge.

                            http://en.wikipedia.org/...

                            No on Prop 8::Sometimes I get to hitch a ride on the Democratic Bus--they let me stand on the back bumper.

                            by steve04 on Mon Aug 08, 2011 at 01:58:33 PM PDT

                            [ Parent ]

                          •  Maybe the US will sell equities next (0+ / 0-)

                            That sounds like a Republican "privatization" plan, as well as a Republican "ownership society" plan.  

                            Why should mere VOTERS control the US?  No, no, float the US on the stock market like the East India Company and let responsible private investors take over!

                            Read pp. 1-7 of Krugman's _The Great Unraveling_ (available from Google Books). NOW.

                            by neroden on Mon Aug 08, 2011 at 08:06:08 PM PDT

                            [ Parent ]

      •  There's always the investment banking firm (1+ / 0-)
        Recommended by:
        volleyboy1

        of Simmons, Sealy, Serta, Stearns & Foster.

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