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Saturday, 04 May 2013 06:39

s&p downgrade, lesson learned?

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s&p downgrade, lesson learned? 

the s&p ratings services (and their colleagues) famously bungled ratings on housing and financial institutions. the financial system nearly collapsed as a result. the agencies were rightly challenged for lack of foresight and accused of blatant conflict of interest.  s&p and other raters played a central role in causing the financial crisis and the bailouts. to their credit, s&p has since learned to take bad balance sheets seriously and partially redeemed its credibility by making good on its warnings about the u.s. credit rating. the s&p could downgrade further within 6-24 months (1/3 chance), according to john chambers, managing director. without systemic changes, other agencies may follow suit.

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various disgruntled parties attacked the s&p action. in many cases the complainers are the same who railed against the lenient math that lulled the public into a major financial mess. s&p and other rating services will not be caught with their pants down again and will retaliate against pressure to overlook questionable numbers. professional obstinacy will serve to deter future attacks and consolidate the influence of raters to wield greater power. money and power are an intoxicating mix…

the us used to be the biggest creditor nation. i remember american leaders lecturing other countries for reckless spending, irresponsible practices and rampant corruption. now we are on the receiving end of such lectures from the former objects of our criticism. 

sign me up for a 5 minutes webinar to review the balance sheet of the usa!

as treasuries hold, we are reminded of a comment by simpson-bowles debt commission co-chair– erskine bowles: the u.s. economy is the healthiest horse in the glue factory. the real concern is not default (per treasury performance so far), but global debt and slowing economies.  worse yet, alan greenspan noted on sunday’s this week that the current forecasts are based on numbers not being achieved. if the foregoing is true, actual results may be worse.

with 1 in 7 households on food stamps and less than half of americans paying taxes, the balance sheets will be challenging for a while. as the economy thirsts for liquidity, corporate trillions sit onshore and offshore – waiting for the right bait to enter markets.

sign me up for a 5 minutes webinar to review the balance sheet of the usa!

clearly there are no obvious trading or investment strategies implied in the foregoing observations. extreme caution makes sense.  only serious traders with a keen understanding of risk should consider speculation in these markets. 

sign up for a 5 minute overview of the u.s. balance sheet, popularly referred to as the debt clock  hard numbers will make sense of the inane political chatter and give us a better handle of our economy and our future prospects.

sign me up for a 5 minutes webinar to review the balance sheet of the usa!

Read 1596 times Last modified on Thursday, 01 August 2013 10:31

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  • adrian muller has conducted seminars for the chicago board of trade, including a key series in 1999 which cautioned about a top in the equity markets (see his article “top experts and statistics on the dow”). adrian muller has appeared on cable tv financial programs with analysis on the futures markets and equity market directional forecasts. he has been quoted in barron's, the wall street journal, and futures magazine.

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