Friday, August 5, 2011

USA Downgraded by S&P to AA Credit Rating

Well folks, the chickens are coming home to roost:

"Updated, 8:27 p.m. ET] The credit rating agency Standard & Poor's announced Friday that it has downgraded the U.S. credit rating to AA+ from its top rank of AAA."

Quick Take:

I am kinda sick to my stomach because I closed about 70% of my short positions this morning at the lows.

This is a sad day and this week has been more proof as to why you can't believe anything that Wall St tells you.

The recovery/Green shoots/bull market hoopla was nothing but a complete sham manufactured by government spending.  I have been saying it ever since the lows in 2009 and I took a lot of heat for it. 

It was easy to see if you covered your ears and didn't listen to the BS that was being thrown to you by Wall St on an hourly basis on CNBC.

Get ready for I wild shit show on Monday.  The unintended consequences here are numerous because our debt is no longer AAA which means many will be forced to sell it due to various covenants.

Money markets are a prime example.  They can not own any thing that's not AAA.  The question now becomes where in the hell do they go with these massive amounts of cash if they can't sit in treasuries.  FRN's perhaps?  Does the dollar rally then or does it crash due to the downgrade?

I have no idea how this plays out folks but please be careful.  Don't end up like many of the bulltards who have been drinking the recovery koolaid since 2009. 

Do stocks now rally because treasuries are no longer safe?

I plan on sitting mainly in cash and seeing how this plays out before I make more trades.  The only shorts I kept on were DB based on the Euro mess which I failed to even get to tonight.

Let's hope we don't see total chaos in the markets next week.  Hold your breath and just pray that no one panics.


6 comments:

CT-Hilltopper said...

I was just watching some of the government shills on MSNBC talking about what a nothingburger this is.

Rachel maddow and Chris matthews really need to rot in hell. Fox News isn't better.

They can all rot.

Jeff said...

CT

Nice to hear from u!

I heard Gasparino on Fox biz is calling for a 300 point sell off on Monday.

Both parties are a complete failure on this issue so I am not surprised too see both sides acting defensive.

Our political system is a complete FAILURE! I hope they realize this was a wake up call. If they fail to act we are screwed.

Anonymous said...

This is the start of the wake up call as to the direction of the US economy and the policy missteps which in turn will cripple the world economy. I hope I'm wrong but this could be a replay of the 1930's the bad thing is the US is no longer an emerging economy like it was back then. The US had better start producing things and selling them to other countries not our own citizens, the citizens need to pay down debt and save just like the government!

Jeff said...

Well said anon!!!

Monday could be a bloodbath. We have the downgrade and Germany telling Italy to go pound sand on a bailout.

We could see historic type trading next week similiar to 2008.

Volatility should be frickin crazy.

getyourselfconnected said...

Volatility is going to be nuts but prices cant fall too much more or there is going to be a rush to the exits like you cannot believe. FED is up on Tuesday so that should be a give away some sort.

Jeff said...

Get

I think we got a ways to go on the downside.

We were overbought for months. Greenspan was even saying we could see a long wave of selling as we deleverage.

Been doing a lot of research on this downgrade. The similarities between us and Japan is stunning. Working on a post around this.

We are due for a bounce but I think the trend is clearly lower.