# US will not Default but should be Downgraded, result is the same!



## notting (27 July 2011)

The US will not default because the will not let it despite the posturing.
However they should be downgraded and that is what will cause global turmoil.
Will the ratings agencies have the courage to pull the trigger to kick off GFC part 2?
That's basically the question.


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## Knobby22 (27 July 2011)

To me it looks a lot like posturing for dominance
I'm not sure either side will back down.


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## Tysonboss1 (27 July 2011)

notting said:


> The US will not default because the will not let it despite the posturing.
> However they should be downgraded and that is what will cause global turmoil.
> Will the ratings agencies have the courage to pull the trigger to kick off GFC part 2?
> That's basically the question.




So if they were down graded from "AAA" to "AA", what can you see happening.

It's not like there is heaps of other options out their for the big players to work in.


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## notting (27 July 2011)

US Confidence trashed, consumer hibernation, dept harder to maintain, legitimisation of arguments for alternate global benchmark valueing, further downgrades,loss of safe haven anywhere. 
Run for your lives. 
Something like that!


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## skc (27 July 2011)

Tysonboss1 said:


> So if they were down graded from "AAA" to "AA", what can you see happening.
> 
> It's not like there is heaps of other options out their for the big players to work in.




The direct effect of AA vs AAA isn't that much, there'd be a few instos etc that are mandated to hold AAA and can't hold anymore.

But the flow on effect is the scary part. If investors start to drive the rates up on the AA notes, US will be over the tipping point and the deficit will grow larger and larger due to rising interest payments. This can become self-perpetuating... and that will be really bad.


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## Tanaka (27 July 2011)

notting said:


> The US will not default because the will not let it despite the posturing.
> However they should be downgraded and that is what will cause global turmoil.
> Will the ratings agencies have the courage to pull the trigger to kick off GFC part 2?
> That's basically the question.




The rating agencies helped kick off the first GFC, so why not?

http://en.wikipedia.org/wiki/Credit_rating_agencies_and_the_subprime_crisis


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## Tysonboss1 (27 July 2011)

notting said:


> US Confidence trashed, consumer hibernation, dept harder to maintain, legitimisation of arguments for alternate global benchmark valueing, further downgrades,loss of safe haven anywhere.
> Run for your lives.
> Something like that!




I seriously doubt it.


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## wayneL (27 July 2011)

Tysonboss1 said:


> I seriously doubt it.




That's what people were saying pre-GFC1.


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## skc (27 July 2011)

wayneL said:


> That's what people were saying pre-GFC1.




I am seriously surprised by the amount of people who doesn't believe the worst can happen. I would accept it as being unlikely...but the tail risk is so large one has to be prepared for it.


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## Tysonboss1 (27 July 2011)

wayneL said:


> That's what people were saying pre-GFC1.




No,

People were saying and believeing that the world was about to end, everything was going to zero and sold out of their stock holdings at massive discounts to intrinsic value only to realise months later that the world wasn't ending and their rash sales were perhaps unwise.


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## notting (27 July 2011)

Alot of wise people were shorting AAA backed US house bundles and buying gold. Seems to be a bit of a gold theme at present in the big boys portfolios with the US housing still on its knees.


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## wayneL (27 July 2011)

Tysonboss1 said:


> No,
> 
> People were saying and believeing that the world was about to end, everything was going to zero and sold out of their stock holdings at massive discounts to intrinsic value only to realise months later that the world wasn't ending and their rash sales were perhaps unwise.




Only a few, and as I recall some were buying at massive discounts to 'intrinsic value' (whatever that is).

Most in the wider community were deer in the headlights.


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## wayneL (27 July 2011)

skc said:


> I am seriously surprised by the amount of people who doesn't believe the worst can happen. I would accept it as being unlikely...but the tail risk is so large one has to be prepared for it.




Yes.

Hope v. Hedge


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## Tysonboss1 (27 July 2011)

notting said:


> Alot of wise people were shorting AAA backed US house bundles and buying gold. Seems to be a bit of a gold theme at present in the big boys portfolios with the US housing still on its knees.




I would much rather own US property than gold, but hey thats just me, I prefer to buy things after the bubble has burst, not leading up to the POP.


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## notting (27 July 2011)

Stock markets where oversold once all hell broke loose.
But hell hasn't broken loose on sovereign debt yet and this is the big one.
Looking forward to it.
I agree, US property is a great buy at present especially if you are an Ausi.


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## skc (27 July 2011)

wayneL said:


> Yes.
> 
> Hope v. Hedge




I've put a couple of oppies on last night. Want to share ideas? PM me


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## Julia (27 July 2011)

Tysonboss1 said:


> No,
> 
> People were saying and believeing that the world was about to end, everything was going to zero and sold out of their stock holdings at massive discounts to intrinsic value only to realise months later that the world wasn't ending and their rash sales were perhaps unwise.



Or perhaps some people made good use of the opportunity to sell when the descent started, sit on cash for a while, then buy close to double the number of the same shares when the panic was largely over.


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## notting (27 July 2011)

If only it where that easy!


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## notting (6 August 2011)

*S&P Downgrades US Debt*

OK so now the obvious has happened, has it been sell on the rumour buy the fact?
If US was a company it would carry a rating of C-. 
Not just because of it's present ability to pay existing debt, but when you take into account future bills coming it's a C-!
Woops I can't edit Debt in the title. 
Sorry, I am mildly retarded.


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## satanoperca (6 August 2011)

Well it is a start.



> Markets on edge as S&P downgrades US's coveted AAA credit rating




http://www.theaustralian.com.au/business/markets/markets-on-edge-as-sp-downgrades-uss-coveted-aaa-credit-rating/story-e6frg916-1226109648805

Ciao


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## Aussiejeff (6 August 2011)

It's April 1st, right? I must be dreaming....the impossible has been made possible! 

The US' credit rating downgraded for THE FIRST TIME SINCE 1917?? _That's 94 freakin' years folks!_ Not only that, but with a NEGATIVE outlook (meaning further downgrades are likely) at AA+?

Oh, the irony of it all.... downgraded by ONE OF THEIR OWN AGENCIES. I bet that wiped the smiles off those US Treasury fatcat's faces last night after the tiny "better unemployment figure" rally! LOL 

I'd be astonished if this didn't have a significant impact on investor sentiment come markets open on Monday. Every other financial institution that has been downgraded by the ratings agencies in recent times has suffered a significant  hit to the share price. Will Treasuries or bonds get hit? Or will the S&P 500 tank? 

Question is, will Moody's & Fitch ratings agencies have the guts to follow suit?

Will Obama declare a "War On Global Financial Terrorism" and arrest S&P perpetrators? 

So many Q's to be answered next week.

Bring it on.....

aj


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## Uncle Festivus (6 August 2011)

*Re: S&P Downgrades US Debt*



notting said:


> OK so now the obvious has happened, has it been sell on the rumour buy the fact?
> If US was a company it would carry a rating of C-.
> Not just because of it's present ability to pay existing debt, but when you take into account future bills coming it's a C-!
> Woops I can't edit Debt in the title.
> Sorry, I am mildly retarded.




Actually, I think they are officially rated I - for INSOLVENT.

I don't think the US Fed uses the term DEBT either - it's now called negative collateral?

Same for default - now called re-profiling?

Up till now it's _looked_ like it, it's _smelt_ like it, only now there is general agreement it _is_ **IT


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## notting (6 August 2011)

And of course then there's that little problem over there in Europe. Eurozone is bigger than US isn't it. I guess it all needs downgrading given it's basically worse! 
Hmmmmm tap tap. Tap. Whistle. Sigh. Look at the roof. Pfffffffffffffff. Sniff. Walking up the road dazing ahead in my night gown.................... Is that you Rene?


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## Aussiejeff (7 August 2011)

notting said:


> And of course then there's that little problem over there in Europe. Eurozone is bigger than US isn't it. I guess it all needs downgrading given it's basically worse!
> Hmmmmm tap tap. Tap. Whistle. Sigh. Look at the roof. Pfffffffffffffff. Sniff. Walking up the road dazing ahead in my night gown.................... Is that you Rene?




It's all so bad, we collectively want to bury our heads in the sand and make believe it IS just a bad dream.

Remember this from a long, long time ago - July 2011?



> From Reuters
> 
> Moody’s said it screened 49 junk-rated companies and a few investment-grade firms in China against 20 red flags, grouped into five categories: weak corporate governance, risky business models, fast-growth strategies, poor earnings quality and audit concerns.
> 
> ...




You have to ask, if 80% of businesses in China are rated at no better than junk, how in the hell can they be sovereign rated at Aa3? It all beggars belief. Let's not even go near the corrupt India commercial sector....


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## Aussiejeff (8 August 2011)

Well, no surprise really that the Asian markets tanked after this lot of Gee-whizz buffoons opened their gobs to say.... stuff-all.



> Group of Seven nations sought to head off a collapse in investor confidence after the U.S. sovereign- rating cut and a slump in Italian and Spanish debt intensified threats to the global economy.
> 
> G-7 finance ministers and central bank governors pledged in a statement to *“take all necessary measures to support financial stability and growth.”* Officials will inject liquidity and act against disorderly currency moves as needed, they said after a call late yesterday European time.
> 
> ...



http://www.bloomberg.com/news/2011-...y-measures-to-stabilze-economies-markets.html

What, exactly, does _"take all necessary measures"_ entail, pray tell?? This sort of fumbling, blowhard empty rhetoric at such a critical juncture in time seems just plain stoopid to me.


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## notting (8 August 2011)

Do you think that is why China's flag is red?


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## DB008 (10 August 2011)

Jim Rogers: Don't See How US Can Ever Pay Off Debts



> The U.S. doesn't deserve a AA-plus credit rating, much less triple-A, commodity bull and noted investor Jim Rogers told CNBC on Monday.





More on the link above...


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