Reuters.com – The difference between S&P and Moody’s Amidst all the downgrade talk, one crucial point has been largely missing: there’s a very good reason why it was S&P, and not Moody’s, which downgraded the US. It’s this: the two companies don’t measure the same thing with their credit ratings. An S&P ratings seeks to… Continue reading The Difference Between The Ratings Agencies
Comment What is the common thread between the U.S. downgrade and the sovereign debt problems in Europe? See the following two charts of the United states to illustrate. They show the broadest measures of debt available from the Federal Reserve’s Flow-of-Funds report (the data is current through Q1-2011. Q2 data will be released in September).… Continue reading What Is The Bigger Issue With The Markets?
Comment The chart below shows a 5 minute bar chart of the Dow Jones September futures contract back to Friday, the last 4 days. By this measure the market has declined 1,145 points, or 9.92%, since the stronger-than-expected payroll report on Friday (doesn’t that seem like a lifetime ago?). While people in the U.S. were… Continue reading While You Were Sleeping …
The Financial Times – A precipitate, wrong and dangerous decision The downgrade by Standard & Poor’s of US sovereign debt, from triple A to double A plus, was precipitate, wrong and dangerous. At best, S&P showed a stunning ignorance and disregard for the potential consequences on a fragile global financial system. The rating agency chose… Continue reading Differing Opinions On The Downgrade
These comments were posted yesterday (August 8 ) at 11:20 AM CT Comment Until about 2003 the rating agencies employed the concept of the “sovereign ceiling.” Simply put, this meant a rating in a country (providence, muni, structured note, corporate) cannot be above the country’s sovereign rating. This concept was done away with when the… Continue reading The Sovereign Ceiling
<Click on chart for larger image> MarketBeat (WSJ Blog) – You Want Trading Volumes? You Got It. Time was, people used to complain about a lack of stock trading volumes. “Nobody’s trading,” went the common refrain. It was a catch-all explanation for why stock rallies didn’t count, why stock declines were irrelevant, why stocks were… Continue reading Volume
Bloomberg.com – Fed May Strengthen Stimulus Pledge Federal Reserve officials may strengthen their commitment to record monetary stimulus as soon as today after a faltering economic recovery and a U.S. credit- rating cut provoked a rout in global stocks. By a 52 percent to 48 percent margin, respondents in a Bloomberg News survey said the… Continue reading Is QE3 Coming?
The Financial Times – Lex: US exorbitant privilege How valuable is the exorbitant privilege? The ratings downgrade of US sovereign debt has not erased the dollar’s special position – as the numeraire of international transactions, the currency of choice for storing trade surpluses and the instinctive home for money in troubled times. But it is… Continue reading The Dollar As The World’s Reserve Currency
<Click on chart for larger image> The Wall Street Journal – China’s Debt Addiction The Chinese government and its media outlets are using Standard & Poor’s U.S. credit downgrade to give Washington a tongue lashing for its “debt addiction.” And it’s no surprise that Beijing would take the chance to score points domestically and rebuke… Continue reading Chinese Holdings Of U.S. Debt
<Click on chart for larger image> The Wall Street Journal – Trichet Defends ECB Strategy The purchases of Italian and Spanish government bonds don’t represent a shift in strategy for the European Central Bank, but are aimed at helping the transmission of monetary policy, its President Jean-Claude Trichet said Tuesday. Mr. Trichet said these measures… Continue reading Europe
The Wall Street Journal – Why This Crisis Differs From the 2008 Version To borrow a phrase often used to rationalize investment bubbles, this time is different, and the bankers, investors and corporate executives who look at today’s problems through the prism of 2008 risk misjudging the issues confronting the global economy. There are three… Continue reading Is This 2008 All Over Again?