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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: 41469
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 # 76.

#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  


#4. To: All (#3)

And then $50.

mcgowanjm  posted on  2011-08-06   10:51:50 ET  Reply   Untrace   Trace   Private Reply  


#5. To: mcgowanjm (#4)

Think $100 per acre for Prime Farmland.

And then $50.

I suppose that translates into a 50% cut in food prices as well.

Thunderbird  posted on  2011-08-06   11:00:44 ET  Reply   Untrace   Trace   Private Reply  


#6. To: Thunderbird (#5)

I suppose that translates into a 50% cut in food prices as well.

Remember gasoline for a $1?

It'll be a $ again.

Except that the avg yearly salary will be $7500.

And you'll be growing your own food, btw....;}

mcgowanjm  posted on  2011-08-06   11:03:42 ET  Reply   Untrace   Trace   Private Reply  


#7. To: mcgowanjm (#6)

And you'll be growing your own food, btw....;}

Why?

Why should deflation remove the capitalist impulse to provide for oneself by providing for others?

Thunderbird  posted on  2011-08-06   11:29:08 ET  Reply   Untrace   Trace   Private Reply  


#22. To: Thunderbird (#7)

Why should deflation remove the capitalist impulse to provide for oneself by providing for others?

It takes money.

Will you have it? Not credit. And definitely No Debt. Actual Linen Dead Presidents. Or you're a slave.

And the Capitalist 'Impulse' is to Oligarchy/Monopoly/ Kleptocracy/Plutarchy....the Top 50 000 owning the Top 60%.

mcgowanjm  posted on  2011-08-06   22:48:29 ET  Reply   Untrace   Trace   Private Reply  


#33. To: mcgowanjm (#22)

It takes money.

No kidding McGoo...why do you assume no one besides yourself has any?

Thunderbird  posted on  2011-08-07   10:58:57 ET  Reply   Untrace   Trace   Private Reply  


#37. To: Thunderbird (#33)

It takes money.

No kidding McGoo...why do you assume no one besides yourself has any?

Yeah Shitbird weighs in.

Don't call me names....just sayin...;}

Becuase it's NOT an Assumption.

The Bottom 90% are tapped out!

What part of Since Nixon & 1974 and then Reagan Stagnant wages, $1.5 Quadrillion in Debt derivatives are you NOT getting?

8D

mcgowanjm  posted on  2011-08-08   9:44:45 ET  Reply   Untrace   Trace   Private Reply  


#38. To: mcgowanjm, Thunderbird (#37)

Yeah Shitbird weighs in.

Don't tell me yukon has himself another screen name?

Guess it's obvious by the juvenile posting style.

Bill D Berger  posted on  2011-08-08   10:15:06 ET  Reply   Untrace   Trace   Private Reply  


#42. To: Bill D Berger (#38)

Hey Bill, go fuck yourself.

Thunderbird  posted on  2011-08-08   12:02:02 ET  Reply   Untrace   Trace   Private Reply  


#43. To: Thunderbird, Bill D Berger (#42)

Bill D Berger: Don't tell me yukon has himself another screen name? Guess it's obvious by the juvenile posting style.

Thunderbird: Hey Bill, go fuck yourself.

Nothing like proving his point.

Capitalist Eric  posted on  2011-08-08   12:57:16 ET  Reply   Untrace   Trace   Private Reply  


#45. To: Capitalist Eric (#43)

right all along

spoken like a true reaganaut.

you'll get first dibs in helll.....;}

in order to ask csars what to do.

that's the problem.

Another complexity interface to work thru.

The messages aren't getting thru.

On the periphery of Empire where they realy count now.

London could get ugly. You're on you're own....;}

mcgowanjm  posted on  2011-08-08   18:13:42 ET  Reply   Untrace   Trace   Private Reply  


#47. To: mcgowanjm (#45)

spoken like a true reaganaut.

you'll get first dibs in helll.....;}

in order to ask csars what to do.

that's the problem.

Another complexity interface to work thru.

The messages aren't getting thru.

On the periphery of Empire where they realy count now.

London could get ugly. You're on you're own....;}

Ummmmmmmmmm....

Ok.

Seriously....

PUT.... DOWN.... THE... BONG...

Capitalist Eric  posted on  2011-08-08   19:15:40 ET  Reply   Untrace   Trace   Private Reply  


#49. To: Capitalist Eric (#47)

PUT.... DOWN.... THE... BONG...

UP YOUR MEDS!!!!!

;}

you're the only one not on drugs!!!!

There's so much estrogen in America's waterways the fish are all turning female....LMFAO

How's your Plunge Protection Team doin'.

They still sending instructions?

Heard from'em lately?

Subsidy checks still arriving?

mcgowanjm  posted on  2011-08-09   9:12:22 ET  Reply   Untrace   Trace   Private Reply  


#68. To: mcgowanjm (#49)

you're the only one not on drugs!!!!

From the stupid stuff you post, I can see how you would think that.

Maybe you should take up basket-weaving, since your inability to acknowledge reality is- how shall we say- "limited..."

You're a friggin' LOON.

Capitalist Eric  posted on  2011-08-09   13:44:57 ET  Reply   Untrace   Trace   Private Reply  


#71. To: Capitalist Eric, All (#68)

Oligarchy Eric.

August 10, 2011

Jim Rogers

There Are Many Ways To Default There are many ways to default. You can put on exchange controls. There’s lots of way to default and America will certainly default. Whether there’s ever a day where America says we won’t pay our bills, probably not. They’re more likely to give you worthless money.

Jump, You Fuckers...;}

mcgowanjm  posted on  2011-08-10   9:42:26 ET  Reply   Untrace   Trace   Private Reply  


#72. To: mcgowanjm (#71)

Jump, You Fuckers...;}

You're not worthy of consideration. Frankly, you're just too indoctrinated, to hold a conversation. This, combined with your apparent proclivities to use mind-altering drugs, makes conversations with you a strictly one-way street.

Don't bother writing to me any more. I'll not waste my time on a socialist scum like you.

Capitalist Eric  posted on  2011-08-10   10:40:34 ET  Reply   Untrace   Trace   Private Reply  


#73. To: Capitalist Eric, All (#72) (Edited)

You're not worthy of consideration.

BUWAHAHAHAHAHAHA....8D

Then don't....Oligarch...

Like you can now ignore us....

SocGen going belly up....

Can you even type HFT? LMFAO

" Without going into detail at this time, we think we know one cause of the drop in liquidity. A certain HFT algorithm that we affectionately refer to as The Disruptor, will sell (or buy) enough contracts to cause a market disruption. At the same exact time, this algo softens up the market in ETFs such as SPY, IWM, QQQ, DIA and other market index symbols and options on these symbols. When the disruptor strikes, many professional arbitrageurs who had placed their bids and offers in the emini suddenly find themselves long or short, and when they go to hedge with ETFs or options, find that market soft and sloppy and get poor fills. Naturally, many of these arbitrageurs realize the strategy no longer works, so they no longer post their bids and offers in the emini. Other HFT algos teach the same lesson -- bids or offers resting in the book will only become liabilities to those who can't compete on speed.

In summary, HFT algos reduce the value of resting orders and increase the value of how fast orders can be placed and cancelled. This results in the illusion of liquidity. We can't understand why this is allowed to continue, because at the core, it is pure manipulation.

MANIPULATION is Capitalism? Who'd a thunk....;}

mcgowanjm  posted on  2011-08-10   10:56:37 ET  Reply   Untrace   Trace   Private Reply  


#74. To: All (#73)

Also:

In summary, HFT algos reduce the value of resting orders and increase the value of how fast orders can be placed and cancelled. This results in the illusion of liquidity. We can't understand why this is allowed to continue, because at the core, it is pure manipulation.

And, more importantly, it creates a vacuum....

Like breaking thru Resistance,

say, BAC @ 6.50...there's nothing below. Algos/HFT's have have their plugs pulled or they'll take it to ZERO.

mcgowanjm  posted on  2011-08-10   10:59:35 ET  Reply   Untrace   Trace   Private Reply  


#75. To: All (#74)

Party like it's 1775....8D

mcgowanjm  posted on  2011-08-10   10:59:57 ET  Reply   Untrace   Trace   Private Reply  


#76. To: All (#75)

Remember the Good Ole Days when All Soc Gen

had to worry about was Rogue Traders?

LMFAO. Bring 'em Down....Love in an Elevator!!!

mcgowanjm  posted on  2011-08-10   11:06:05 ET  Reply   Untrace   Trace   Private Reply  


Replies to Comment # 76.

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End Trace Mode for Comment # 76.

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