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Title: Will S&P Downgrade Be Another Y2K Scare?
Source: Naked Capitalism
URL Source: http://www.nakedcapitalism.com/2011 ... rade-be-another-y2k-scare.html
Published: Aug 6, 2011
Author: Yves Smith
Post Date: 2011-08-06 09:49:29 by lucysmom
Keywords: Chicken Little, Obama Did It, Pot, Kettle
Views: 41540
Comments: 76

It isn’t yet clear what the impact of the S&P downgrade of the US to AA+ will have. There are good reasons to believe, despite the media hyperventilating, that it won’t add up to much, and may perversely hit wobbly stock markets more than Treasury yields.

But there is a much bigger issue, namely S&P’s highly questionable conduct, the lack of any analytical process behind this ratings action, and the political implications.

Will the S&P Downgrade Have Much Immediate Impact?

Although I run the risk of being proven wrong, there are lots of reasons to think that the reaction in the Treasury market to the news will be underwhelming. We might see some reactions Monday as some investors who managed to be blindsided and aren’t happy with the downgrade exit but conversely, I know of investors who see any price softening as a buying opportunity.

Treasury yields fell 50 basis points last week despite the risk of a downgrade being very well telegraphed. S&P had asked for $4 trillion in deficit reductions (it tried disavowing that number) and made it clear it was going off to brood and might take action. And this market response took place with S&P leaking like a sieve.

Click for Full Text!


Poster Comment:

What was the S&Ps role in the mortgage crisis?

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Begin Trace Mode for Comment # 26.

#1. To: Badeye, A K A Stone, hondo68, Fred Mertz, Godwinson, go65, war, no gnu taxes, Skip Intro, ferret mike, jwpegler, brian s, mcgowanjm, Capitalist Eric, Mininggold (#0)

A country that controls its currency can always satisfy the IOUs it creates. The risk is inflation, not default. But ratings agencies assess credit ratings, not interest rate risk.

lucysmom  posted on  2011-08-06   9:55:55 ET  Reply   Untrace   Trace   Private Reply  


#2. To: lucysmom (#1)

The risk is inflation, not default. But ratings agencies assess credit ratings, not interest rate risk.

Inflation is over.

From Nixon's Gold Default to May 2005....that was inflation.

It's Deflation now, as everyone goes to cash...;}

mcgowanjm  posted on  2011-08-06   10:51:03 ET  Reply   Untrace   Trace   Private Reply  


#3. To: All (#2) (Edited)

Think $100 per acre for Prime Farmland.

mcgowanjm  posted on  2011-08-06   10:51:21 ET  Reply   Untrace   Trace   Private Reply  


#13. To: mcgowanjm (#3)

Think $100 per acre for Prime Farmland

Let me know when that happens. I'll shut down my business and become a farmer.

A K A Stone  posted on  2011-08-06   15:00:15 ET  Reply   Untrace   Trace   Private Reply  


#18. To: A K A Stone (#13)

Let me know when that happens.

Fuck.

When that happens, I'll be elsewhere enjoying life.

Good Luck to you. You and the others who believe that the Wealthy Top 50 000 have your best interests in mind.

And by all means keep your faith. That your god will realize that we're more than yeast.... cause I don't see the difference...;}

mcgowanjm  posted on  2011-08-06   22:35:35 ET  Reply   Untrace   Trace   Private Reply  


#24. To: mcgowanjm (#18)

who believe that the Wealthy Top 50 000 have your best interests in mind.

Who told you that I think that?

Haven't you heard that it is harder for a rich man to enter the kingdom of Heaven then for a camel to pass through the eye of the needle. (Which was/is a narrow passage that you would have to unload your camel to pass through.

A K A Stone  posted on  2011-08-06   23:02:03 ET  Reply   Untrace   Trace   Private Reply  


#26. To: A K A Stone (#24)

You have a camel?

Fred Mertz  posted on  2011-08-06   23:04:02 ET  Reply   Untrace   Trace   Private Reply  


Replies to Comment # 26.

#28. To: Fred Mertz (#26)

You have a camel?

No. Why you horny?

A K A Stone  posted on  2011-08-06 23:06:08 ET  Reply   Untrace   Trace   Private Reply  


End Trace Mode for Comment # 26.

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