Aug 8th, 2011
How did we get here? Reich has an analogy:
"Imagine your house is burning. You call the fire department but your call isn’t answered because every fire fighter in town is debating whether there will be enough water to fight fires over the next ten years, even though water is plentiful right now. (Yes, there’s a long-term problem.) One faction won’t even allow the fire trucks out of the garage unless everyone agrees to cut water use. An agency that rates fire departments has just issued a downgrade, causing everyone to hoard water."
Showing posts with label S and P. Show all posts
Showing posts with label S and P. Show all posts
Monday, August 8, 2011
Another Black Monday? ctd...
Aug 8th, 2011
Well... we've been following the international signs (HERE, HERE and HERE) since 3am CST. If this turns out not to be a Black Monday... it's gonna be really lucky.
From AP:
"The Dow Jones industrial average fell 151 points in morning trading, or 1.3 percent, to 11,300. The S&P 500 index fell 19 points, or 1.6 percent, to 1,180. The Nasdaq composite index fell 51 points, or 2 percent, to 2,481."
The NY market has been open for 54 minutes. Ironically, in spite of all the hand-wringing the over the dollar, sales of T-bills continue to make gains. (BTW, I know Dagong Global is a ridiculous tool of the Yuan's artificial propagandists... save the angry e-mails)
Just remember... there is only one safe investment in this world.
Well... we've been following the international signs (HERE, HERE and HERE) since 3am CST. If this turns out not to be a Black Monday... it's gonna be really lucky.
From AP:
"The Dow Jones industrial average fell 151 points in morning trading, or 1.3 percent, to 11,300. The S&P 500 index fell 19 points, or 1.6 percent, to 1,180. The Nasdaq composite index fell 51 points, or 2 percent, to 2,481."
The NY market has been open for 54 minutes. Ironically, in spite of all the hand-wringing the over the dollar, sales of T-bills continue to make gains. (BTW, I know Dagong Global is a ridiculous tool of the Yuan's artificial propagandists... save the angry e-mails)
Just remember... there is only one safe investment in this world.
Another Black Monday? ctd...
Aug 8th, 2011
Agence France-Presse sure thinks so:
"In a sign of the possible trouble to come, the Israeli market fell some six per cent Sunday and Gulf markets tumbled on opening although they later trimmed some losses as investors reacted to Standard & Poor's unprecedented cut in the U.S. rating to AA+ from the top notch triple-A.
"Until the stock markets open tomorrow the extent of earthquake caused by the downgrade of the U.S. debt rating will not be known," said Spain's El Pais daily newspaper. "But everything points to a black Monday, which may intensify the attacks on the euro."
Agence France-Presse sure thinks so:
"In a sign of the possible trouble to come, the Israeli market fell some six per cent Sunday and Gulf markets tumbled on opening although they later trimmed some losses as investors reacted to Standard & Poor's unprecedented cut in the U.S. rating to AA+ from the top notch triple-A.
"Until the stock markets open tomorrow the extent of earthquake caused by the downgrade of the U.S. debt rating will not be known," said Spain's El Pais daily newspaper. "But everything points to a black Monday, which may intensify the attacks on the euro."
Another Black Monday? ctd...
Aug 8th, 2011
Not necessarily... but it's going to be a volatile day. AP is reporting that the Asian drops were actually expected to be worse and shines a light on some countervailing forces that might lessen the blows. With just over 4 hours to go before the opening bell in NY, its a nail-biter.
Via AP:
"Most European markets rose and Spain and Italy's borrowing costs dipped to more manageable levels on Monday after the European Central Bank said it would buy the two countries' bonds in order to help them avoid devastating defaults.
Asian markets traded lower but their retreat was not as bad as many had feared over the weekend after a downgrade of U.S. debt. Japan's Nikkei 225 stock average closed 2.2 percent lower at 9,097.56."
Not necessarily... but it's going to be a volatile day. AP is reporting that the Asian drops were actually expected to be worse and shines a light on some countervailing forces that might lessen the blows. With just over 4 hours to go before the opening bell in NY, its a nail-biter.
Via AP:
"Most European markets rose and Spain and Italy's borrowing costs dipped to more manageable levels on Monday after the European Central Bank said it would buy the two countries' bonds in order to help them avoid devastating defaults.
Asian markets traded lower but their retreat was not as bad as many had feared over the weekend after a downgrade of U.S. debt. Japan's Nikkei 225 stock average closed 2.2 percent lower at 9,097.56."
Another Black Monday?
August 8th, 2011
Following Friday's dramatic S&P downgrade of the United States' credit rating,
the virtues of which I'll get into later today, it appears that Asian markets are reacting badly. Again, I think everyone who wants to participate in the discussion ought to read the entire actual S&P statement before continuing to trade in competing analyses.
From ABC:
"Tokyo's Nikkei stock market opened down 1.4 percent and then made slight gains, but Japan's finance minister reportedly said the country has not lost faith in the dollar or U.S. Treasury bonds even after the U.S. credit rating was downgraded for the first time in history.
The news in other Asian markets was not so promising. Hong Kong's Hang Seng fell 4 percent to 20,100.20 and South Korea's Kospi slipped 6.7 percent to 1,814.100.
Australia's S&P/ASX-200 index lost almost 2 percent in early trading and indexes in New Zealand fell more than 3 percent.
The mixed reports likely won't do much to quell growing concerns that Standard & Poor's downgrade of the U.S. credit rating from AAA to AA+could rock global financial markets."
the virtues of which I'll get into later today, it appears that Asian markets are reacting badly. Again, I think everyone who wants to participate in the discussion ought to read the entire actual S&P statement before continuing to trade in competing analyses.
From ABC:
"Tokyo's Nikkei stock market opened down 1.4 percent and then made slight gains, but Japan's finance minister reportedly said the country has not lost faith in the dollar or U.S. Treasury bonds even after the U.S. credit rating was downgraded for the first time in history.
The news in other Asian markets was not so promising. Hong Kong's Hang Seng fell 4 percent to 20,100.20 and South Korea's Kospi slipped 6.7 percent to 1,814.100.
Australia's S&P/ASX-200 index lost almost 2 percent in early trading and indexes in New Zealand fell more than 3 percent.
The mixed reports likely won't do much to quell growing concerns that Standard & Poor's downgrade of the U.S. credit rating from AAA to AA+could rock global financial markets."
Video via RT:
Monday, April 18, 2011
Consequences, Ctd...
April 18th, 2011
A number of readers responded to my piece on today's S&P warning. Most agreed that the Friday afternoon vote in the U.S. House on Rep Paul Ryan's (R-WI) Path To Poverty was a primary factor. Many were correct in taking me to task for neglecting to mention the very dangerous game-playing by Republicans with regard to raising the debt limit ceiling leading up to the vote and continuing through the weekend. Some noted dryly that the Ryan plan itself would require raising it to well over $19 trillion from it's current level of $14.3 trillion. This does seem to render the rabid opposition to an increase by so many of the Path's supporters absurd. Particularly that of Rep. Ryan.
More than a few also thought it was a terrible omission on my part to look at Friday's vote as the last straw without the context of these revelations...
From Politico 4/13/2011:
"House Speaker John Boehner (R-Ohio) has had conversations with top Wall Street executives, asking how close Congress could push to the debt limit deadline without sending interests rates soaring and causing stock prices to go lower, people familiar with the matter said."
A number of readers responded to my piece on today's S&P warning. Most agreed that the Friday afternoon vote in the U.S. House on Rep Paul Ryan's (R-WI) Path To Poverty was a primary factor. Many were correct in taking me to task for neglecting to mention the very dangerous game-playing by Republicans with regard to raising the debt limit ceiling leading up to the vote and continuing through the weekend. Some noted dryly that the Ryan plan itself would require raising it to well over $19 trillion from it's current level of $14.3 trillion. This does seem to render the rabid opposition to an increase by so many of the Path's supporters absurd. Particularly that of Rep. Ryan.
More than a few also thought it was a terrible omission on my part to look at Friday's vote as the last straw without the context of these revelations...
From Politico 4/13/2011:
"House Speaker John Boehner (R-Ohio) has had conversations with top Wall Street executives, asking how close Congress could push to the debt limit deadline without sending interests rates soaring and causing stock prices to go lower, people familiar with the matter said."
Speaker Boehner seems to have implied it's all a game. There are few examples of just how un-serious the GOP is that come close to this. However, one reader brought this gem from Investors Business Daily to my attention; The House GOP seems not to have reconciled the fact that Ryan's plan would be illegal under the equally fabulist Balanced Budget Amendment recently passed by their Senate counterparts.
Our national adventure in decline continues...
The First Consequence Of The Ryan Plan
April 18th, 2011
You can read our critique of the Ryan plan's tax proposals HERE and defense position HERE
ADDITION: My readers made great points after I posted this. Some of them have been included HERE
From the Fiscal Times 4/15/2011:
This congress is unfortunately in the hands of radicals. To hell with a real discussion. They wanted Ryan's neo-Randian visions brought to the floor immediately. By the end of the day's business on Friday and on a strictly party line vote in the U.S. House of Representatives, the Republican majority passed the Ryan Plan with only 4 of their members joining a unanimous Democratic opposition. Indeed, a political paper riddled with numerical flights of fancy, riven with extreme ideology and with policies that would transform the entire citizen/government relationship in America was put to a formal vote less than 2 weeks after it was unveiled.
You can read our critique of the Ryan plan's tax proposals HERE and defense position HERE
ADDITION: My readers made great points after I posted this. Some of them have been included HERE
It's not just our Nobel winners like Paul Krugman and Joseph Stiglitz who are appalled by the supposedly "serious" Path To Poverty. Many on the right who actually study numbers for a living such as former Reagan OMB Director David Stockman, arch-conservative economist and former George W. Bush advisor Douglas Holtz-Eakin as well as Libertarian Tyler Cowen have pointed to its major flaws. The Economist went so far as to call Ryan a liar.
So it was with interest that I watched very little comment from either Moody's or Standard & Poor's regarding the much ballyhooed pamphlet. It seemed clear that the organizations were waiting for a response from the President and the Democrats. Along with the rest of us, they got one last week. S&P stayed largely mum but Moody's liked what they heard:
From Bloomberg 4/13/2011:
"President Barack Obama’s plan to cut $4 trillion in cumulative deficits within 12 years may be a “positive” for the nation’s credit quality and mark a reversal in the budget debate, according to Moody’s Investors Service."
"Cindy Stroller and Mimi Barker, spokeswomen in New York for Fitch Ratings and Standard & Poor’s, respectively, said the firms couldn’t immediately comment."
"President Barack Obama’s plan to cut $4 trillion in cumulative deficits within 12 years may be a “positive” for the nation’s credit quality and mark a reversal in the budget debate, according to Moody’s Investors Service."
"Cindy Stroller and Mimi Barker, spokeswomen in New York for Fitch Ratings and Standard & Poor’s, respectively, said the firms couldn’t immediately comment."
The following day, Moody's made some damning observations of the Ryan Plan.
"Economist Mark Zandi, chief economist of Moody’s Analytics, forecast on Thursday that Ryan’s plan would eliminate 1.7 million jobs in its first two years, with 900,000 jobs lost next year. Other economists were equally dismissive."
The real debate was set to begin in sober and deliberative earnest. Or at least it should have been.
Today, in what I believe is a direct consequence of this partisan gamesmanship, S&P made an announcement:
From Bloomberg 4/18/2011:
"Standard & Poor’s put a "negative" outlook on the long-term AAA credit rating of the U.S., citing a "material risk" the nation’s leaders will fail to deal with rising budget deficits and debt. "We believe there is a material risk that U.S. policy makers might not reach an agreement on how to address medium-and long-term budgetary challenges by 2013," New York-based S&P said today in a report. "If an agreement is not reached and meaningful implementation does not begin by then, this would in our view render the U.S. fiscal profile meaningfully weaker than that of peer ‘AAA’ sovereigns."
The cost to protect against a default by the government and the nation’s banks jumped and stocks declined after the New York-based firm’s statement, which assigns a one-in-three chance that it will lower the U.S. rating in the next two years. The Standard & Poor's 500 Index tumbled 1.6 percent to 1,298.67 at 12:34 p.m. in New York."
"Standard & Poor’s put a "negative" outlook on the long-term AAA credit rating of the U.S., citing a "material risk" the nation’s leaders will fail to deal with rising budget deficits and debt. "We believe there is a material risk that U.S. policy makers might not reach an agreement on how to address medium-and long-term budgetary challenges by 2013," New York-based S&P said today in a report. "If an agreement is not reached and meaningful implementation does not begin by then, this would in our view render the U.S. fiscal profile meaningfully weaker than that of peer ‘AAA’ sovereigns."
The cost to protect against a default by the government and the nation’s banks jumped and stocks declined after the New York-based firm’s statement, which assigns a one-in-three chance that it will lower the U.S. rating in the next two years. The Standard & Poor's 500 Index tumbled 1.6 percent to 1,298.67 at 12:34 p.m. in New York."
We have been broadsided by the economic equivalent of Scientologists. Just 2 weeks of this particular partisan drive has further damaged our already teetering recovery. Just think what they can do with another 20 months.
Friday, January 14, 2011
The Real Reason We Risk Our Rating
Jan 14th, 2011
There is increasingly bad news on the horizon regarding the United States' AAA financial rating. Any number of factors are included in yesterday evening's WSJ piece on the chances that S&P and Moody's may be forced to lower that rating.
This would be, to put it delicately, a disaster of epic proportions. The problem with the piece is that it doesn't actually provide much context for the primary reason both institutions brought this up last year. It also relegates the most important factor to the 16th paragraph.
"...measures of the U.S. debt burden include federal debt to revenue, estimated to average 397% of gross domestic product until 2020. The ratio of interest to revenue, meanwhile, is expected to rise to 17.6% by 2020, nearly double last year's level. These are "quite high for an Aaa-rated country," Moody's said in its report."
REVENUE. Say it with me. "Revenue." Got it? What's glaringly missing here is the fact that Moody's and S&P affirmed in December that the rating might have to lowered due to extension of the "W Tax Cuts."
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