Gyroscopic Investing

PULSE: U.S. loses triple-A credit rating from S&P

“Is Standard and Poor’s Manipulating US Debt Rating to Escape Liability for the Mortgage Crisis?”?

http://www.youtube.com/watch?v=moXbRNFZ ... ture=feedu
watch it explains

This downgrade is long overdue in my opinion. There was an article on cnbc a few hours ago...I can't find it now where the CBO said they sent a memo to s&p stating that they had miscalculated the debt to GDP ratio by a few trillion because of a mistake with the baseline spending projections. I had to laugh when I read that because it sounded so absurd. Who makes a mathematical mistake that is off by trillions? Only your government is capable of that!

doodle wrote:Who makes a mathematical mistake that is off by trillions? Only your government is capable of that!

You might want to actually read the article... the error was S&P's fault.

Treasury officials noticed a $2 trillion error in S&P's math that delayed an announcement for several hours
Source: Wall Street Journal

Of course, remember...

[quote=Deven Sharma, Inside Job, 56:37]S&P's ratings express our opinion. They do not speak to the market value for securities, the volatility of it's price, or its suitability as an investment.[/quote]

Oh, also, because we are a fiat currency we can always pay our bills. Oops, that's another thread 

So it was! thanks for correcting my error gumby. I couldn't find the article to double-check but I remember an error was made and I just figured it was the governments.

I heard the downgrade had more to do with the political outlook and the current intransigence in congress to address problems than with our ability to pay.

doodle wrote: So it was! thanks for correcting my error gumby. I couldn't find the article to double-check but I remember an error was made and I just figured it was the governments.

No, no. The government takes its spending very seriously.

doodle wrote: I heard the downgrade had more to do with the political outlook and the current intransigence in congress to address problems than with our ability to pay.

Yep. There's no check the government can't pay — as long as Congress is willing. Though, these days, Congress isn't willing to do very much.

The Big Picture

[quote= Barry Ritholtz]Here is the great irony: S&P (and the rest of the ratings agencies)  helped contribute in no small way to the overall economic crisis. The toadies rated junk securitized mortgage backed paper AAA because they were paid to do so by banks.

They are utterly corrupt, and should have received the corporate death penalty (ala Arthur Anderson).
[/quote]

This is going to be very interesting to see what happens (if anything). I am hopeful that it will be a wakeup call to congress that the time for action has arrived. There is so much we can do to stimulate the economy through fundamental changes to tax code, immigration policies, infrastructure spending, incentives for repatriation of overseas corporate earnings. etc. etc.

If these guys would only climb off their soap boxes and do something, this country has the ability to leave China in the dust. Hopefully Fitch and Moody's follow suit. The alarm is ringing, its time to wake up.

doodle wrote: This is going to be very interesting to see what happens (if anything). I am hopeful that it will be a wakeup call to congress that the time for action has arrived.

What does that even mean? Every member of Congress wants to act--they just can't agree on which action to take! That's the problem.

Some of them want to act by taxing more; some by taxing less. Some of them want to act by spending more; some by spending less. They're all actions. It's agreeing on which actions to take that gets everybody twisted up in knots.

That is where the word "compromise" is supposed to come in. The disapproval rating for congress last I heard was like 85%. They are going to have to compromise or they will be voted out. Currently the perception is that the right doesn't want to play nice. Our system was designed with compromise and checks and balances in mind. No one party is going to get 100 percent of what they want. Its time they come to terms with this.

I think that they could start by simplifying the tax code along the lines of the Erskin-Bowles commision suggestions. It also has relatively bi-partisan support.

doodle wrote: This is going to be very interesting to see what happens (if anything). I am hopeful that it will be a wakeup call to congress that the time for action has arrived.

I'll tell you what will happen--interest rates are going to fall even more, just like they did in Japan after Japan was downgraded.

This ratings agencies business is one of the dumber charades out there today.

If these guys would only climb off their soap boxes and do something, this country has the ability to leave China in the dust. Hopefully Fitch and Moody's follow suit. The alarm is ringing, its time to wake up.

The alarm has been ringing since about April of 2000.  People started waking up around 2008 when the effects from the earlier causes began manifesting themselves.

Deep down, I think everyone realizes that the policy response has been misguided and inadequate thus far.  What they don't want to admit, however, is that the window for meaningful mitigation of our problems may have already closed.

As for the politicians, a society cannot ask its politicians to be more enlightened than the general population.  That's one of the many problems our country is facing--we are living in a collective fantasyworld fueled by successes in the distant past, like the aging athlete trying to regain past glory.  Do you see any Andrew Jacksons or Dwight Eisenhowers anywhere on the horizon?  Neither do I.  We no longer have the type of society that generates this type of person.  What we have become is a nation of people who like silly low brow entertainment, gazing into small electronic devices and having our conceptions of reality shaped by fools on cable news channels.

MT,

What they don't want to admit, however, is that the window for meaningful mitigation of our problems may have already closed.

What are you implying by the above? What do you think the consequences of this are?

You seem to be negative on China, Europe, and the US. Does anywhere look good to you over the next 5 to 10 years?

doodle wrote: MT,

What they don't want to admit, however, is that the window for meaningful mitigation of our problems may have already closed.

What are you implying by the above? What do you think the consequences of this are?

You seem to be negative on China, Europe, and the US. Does anywhere look good to you over the next 5 to 10 years?

I am bullish on Mars.

As far as the crop of world leaders who helped create this mess, and who now seem wholly incapable of understanding the scope of the damage, much less the difficulty of actually solving any of the world's economic problems, I think "Simple Jack" could have done a better job.



If someone like Larry Summers asked me what the basic problem was, I would say: "well, to start with you're a pompous idiot."

This is definitely a large blemish on Obama's reputation. This happened under his watch and therefore he owns it. He is the one that refused to even face up to this issue as he kept spending like a drunken sailor (while printing trillions of additional dollars) and submitted a budget that was voted down 97-0 in the Senate this very year. We have not even seen the implications of Obamacare yet on our already precarious situation. He has never taken our financial woes seriously and he will pay a severe price for this next year....Just sayin!

Reub,

I think that is a very fair criticism of Obama (whether or not someone is an Obama fan).

I'm still not sure how we wound up with Tim Geithner as Secretary of the Treasury in the first place.

How does something like that happen? 

Now that we are here, though, shouldn't it just be automatic that the Secretary of the Treasury is immediately fired if the country's debt is downgraded?  One way or another, that person failed in his/her job of managing the country's finances.

If we were in China the Secretary of the Treasury would probably be on his way to a labor camp right now.

What an epic fail.

Any thoughts how the market will react Monday? is it going to be another Titanic? I'm kinda leaning that way..

Here is a list of the credit ratings of countries around the world (it has already been updated for the U.S. downgrade).

http://en.wikipedia.org/wiki/List_of_co ... dit_rating

It would be easy to make Geithner the sacrificial lamb. Eventually Obama has to bear the ultimate blame, though. Demagoguing the class warfare issue is not a fiscal policy.

mandynshane wrote: Any thoughts how the market will react Monday? is it going to be another Titanic? I'm kinda leaning that way..

Which market?

The bond market may get hit, but I don't know about stocks (they've already fallen a lot).

I predict gold will continue to do well.

Hard to say.  Lots of cross-currents.

Reub wrote: It would be easy to make Geithner the sacrificial lamb. Eventually Obama has to bear the ultimate blame, though. Demagoguing the class warfare issue is not a fiscal policy.

I'm not saying Geithner is the only one to blame, but I've never seen a guy more in-over-his-head than Geithner.

Did you see the clip of him guaranteeing that U.S. debt would not be downgraded a few days ago?  Crazy.

Obama can't fire himself, so I didn't even consider that.

It seems like something like this would warrant a change of some kind somewhere in the administration, though, because it seems obvious that their economic policy has not worked out as planned.

MediumTex wrote:

mandynshane wrote: Any thoughts how the market will react Monday? is it going to be another Titanic? I'm kinda leaning that way..

Which market?

The bond market may get hit, but I don't know about stocks (they've already fallen a lot).

I predict gold will continue to do well.

Hard to say.  Lots of cross-currents.

My bet for the very short term is that government bonds rally and stocks and gold take a hit.  

I'd bet that on Monday, LTT's will be up 1-2% and stocks are down 2-3%.  Gold will probably take a small hit (1-2%) too.   I know it doesn't make sense, but I think that's what will happen.

Just a guess. 

Reub wrote: This is definitely a large blemish on Obama's reputation. This happened under his watch and therefore he owns it. He is the one that refused to even face up to this issue as he kept spending like a drunken sailor (while printing trillions of additional dollars) and submitted a budget that was voted down 97-0 in the Senate this very year. We have not even seen the implications of Obamacare yet on our already precarious situation. He has never taken our financial woes seriously and he will pay a severe price for this next year....Just sayin!

I agree that he owns it, but everyone is to blame for this multi-trillion dollar situation. Nixon, Johnson...even Osama Bin Laden played an indirect role. All of those choices and events, years in the making, have led us to this moment...

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Sure there is blame to go around. But Obama has accelerated and exacerbated our out of control spending to levels never before seen. He earns the ultimate blame.