ALERT BREAKING: Moodys places US credit rating on "Negative Outlook", 1st time since 1917

[Little-Acorn]

Well, well. Looks like the major credit-rating firms say we didn't fix the right problem.

They've actually been saying that for quite a while. We just didn't listen.

Tell me again, what this vaunted Budget Deal has accomplished?

-------------------------------

http://www.bloomberg.com/news/2011-...ngrade-on-debt-economic-slowdown-concern.html

U.S. Faces First Downgrade on Debt, Slowdown: Moody’s

by John Detrixhe - Aug 2, 2011 2:57 PM PT

Moody’s Investors Service said the U.S. credit rating may be downgraded for the first time on concern that fiscal discipline may ease, further debt reduction measures won’t be adopted and the economy may weaken.

The U.S., rated Aaa since 1917, was placed on negative outlook, New York-based Moody’s said in a statement today as it confirmed the rating. Moody’s warned on July 29 a negative outlook was “more likely” as lawmakers reduced the size of spending cuts being negotiated to win approval on a plan to lift the nation’s borrowing limit.

JPMorgan Chase & Co. estimated that a downgrade would raise the nation’s borrowing costs by $100 billion a year. It could also hurt the rest of the U.S. economy by increasing the cost of mortgages, auto loans and other types of lending tied to the interest rates paid on Treasuries.

“A downgrade is a sign that Congress is failing to address a real fiscal issue,” Guy LeBas, chief fixed-income strategist at Janney Montgomery Scott LLC in Philadelphia, said in an interview before the announcement.

Standard & Poor’s put the U.S. government on notice on April 18 that it risks losing its AAA rating unless lawmakers agree on a plan by 2013 to reduce budget deficits and the national debt. Fitch Ratings said today the U.S. is under a review as the nation’s debt burden increases at a pace that isn’t consistent with an AAA sovereign credit rating.

An increase in Treasury yields of 50 basis points would reduce U.S. economic growth by about 0.4 percentage points, JPMorgan said in a report, citing Federal Reserve research and data.

S&P had indicated that anything less than $4 trillion in cuts would jeopardize the U.S.’s AAA rating.


(Full text of the article can be read at the above URL)

 

[Sleeping Cobra]

The guy who bet $1 Billion (Soros?) is going to be super rich.

 

[fairbanksb]

That should make it an interesting night on the Asian and European markets. Standard & Poor's and Fitch should follow shortly.

 

[rodeorector]

We've been had, folks. That lousy "compromise" hasn't even begun to bite yet. The dismantling of America is right on schedule. Change you can believe in.

 

[ontheright]

The guy who bet $1 Billion (Soros?) is going to be super rich.

Do you realize Soros owns 11 tonnes of gold? can you imagine !?!?!?!? He dumped a bunch in the 1st Q $800m if I remember correctly but still owns 11M tonnes.

 

[Moggy]

Little-Acorn.."Tell me again, what this vaunted Budget Deal has accomplished?"

The Debt Deal has accomplished the death of the Constitution by creating an illegal Super Congress...it has accomplished the means by which they can rid the planet of all U.S. elders...it has accomplished the eventual homelessness of all elders who are mortgage-free as they lose their homes due to inability to pay their taxes as their social security benefits are down-sized and then eliminated.

Had enough yet, folks?

 

[howdeedoodee]

How can any right minded person see positive in the mess we have at the moment.

 

[mbabulldog]

the markets knew this was coming, as they always do. DJ closed at the lows, with volume.

It's going to be a bloodbath at the opening tomorrow.

Watching the PM's VERY closely right now...

 

[Hfcomms]

Moody's is being very generous. Looking at our balance sheet we should receive an immediate downgrade of several notches to the lowest investment grade security that there is and any more foolishness on Washington's part it our debt should be right up with the junk bonds as all we can do now is print paper which is worth well, paper.

 

[Little-Acorn]

http://www.foxnews.com/story/0,2933,553880,00.html

"We are five days away from fundamentally transforming the United States of America..." - Barack Obama, Oct. 30, 2008

Whaddaya know. He was telling the truth!

 

[kozanne]

the markets knew this was coming, as they always do. DJ closed at the lows, with volume.

It's going to be a bloodbath at the opening tomorrow.

Watching the PM's VERY closely right now...

Yup. It's not looking too good right now at all.

 

[Awaredays]

What does this really mean. I understand the implications. But what does tomorrow hold?

 

[Ponce]

Tomorrow will hold pain and sorrow..........no way to stop the train coming at you at 235 mph.

 

[kozanne]

Is that 235 how much the Dow will drop tomorrow?

Man, my IRA is taking a pounding right now. Gotta get it out of there.

 

[Seeker]

But folks, they saved us from default!

 

[FarOut]

What does this really mean. I understand the implications. But what does tomorrow hold?

The question I've been talking about for a while is when will the "knee" come? The "knee" is the sudden downturn in the charts (and upturn in gold/silver) that signals that a majority of investors believe that US debt won't be repaid (or will be paid with worthless currency). When this happens there will be a big domino effect, possibly within days; stocks will crash, bonds (including Treasuries) will crash, foreign governments will dump the dollar. Within weeks imports will become wildly expensive (including oil) and since the US imports most everything prices will skyrocket. At that point I expect emergency government measures which will only makes things worse.

Some folks see the downgrading of US debt as the "knee".

 

[blackjeep]

Well, well. Looks like the major credit-rating firms say we didn't fix the right problem.

They've actually been saying that for quite a while. We just didn't listen.

Tell me again, what this vaunted Budget Deal has accomplished?

-------------------------------

http://www.bloomberg.com/news/2011-...ngrade-on-debt-economic-slowdown-concern.html

U.S. Faces First Downgrade on Debt, Slowdown: Moody’s

by John Detrixhe - Aug 2, 2011 2:57 PM PT

Moody’s Investors Service said the U.S. credit rating may be downgraded for the first time on concern that fiscal discipline may ease, further debt reduction measures won’t be adopted and the economy may weaken.

The U.S., rated Aaa since 1917, was placed on negative outlook, New York-based Moody’s said in a statement today as it confirmed the rating. Moody’s warned on July 29 a negative outlook was “more likely” as lawmakers reduced the size of spending cuts being negotiated to win approval on a plan to lift the nation’s borrowing limit.

JPMorgan Chase & Co. estimated that a downgrade would raise the nation’s borrowing costs by $100 billion a year. It could also hurt the rest of the U.S. economy by increasing the cost of mortgages, auto loans and other types of lending tied to the interest rates paid on Treasuries.

“A downgrade is a sign that Congress is failing to address a real fiscal issue,” Guy LeBas, chief fixed-income strategist at Janney Montgomery Scott LLC in Philadelphia, said in an interview before the announcement.

Standard & Poor’s put the U.S. government on notice on April 18 that it risks losing its AAA rating unless lawmakers agree on a plan by 2013 to reduce budget deficits and the national debt. Fitch Ratings said today the U.S. is under a review as the nation’s debt burden increases at a pace that isn’t consistent with an AAA sovereign credit rating.

An increase in Treasury yields of 50 basis points would reduce U.S. economic growth by about 0.4 percentage points, JPMorgan said in a report, citing Federal Reserve research and data.

S&P had indicated that anything less than $4 trillion in cuts would jeopardize the U.S.’s AAA rating.


(Full text of the article can be read at the above URL)

Although the title of the thread seems to state otherwise, it doesn't look like this has happened yet.

 

[FREEBIRD]

Here's the whole article---lots of maybe's and could's...


Moody’s, Fitch Affirm U.S. Ratings While Warning of Downgrades

By John Detrixhe - Aug 2, 2011 6:23 PM CT


Aug. 3 (Bloomberg) -- Bret Barker, a portfolio manager at Los Angeles-based TCW Group Inc., talks about the implications of raising the U.S. debt limit for the country's credit rating and Treasuries.


Moody’s Investors Service and Fitch Ratings affirmed their AAA credit ratings for the U.S. while warning that the ratings could be downgraded if lawmakers fail to enact debt reduction measures and the economy weakens.
The rating outlook is now negative, Moody’s said in a statement yesterday after President Barack Obama signed into law a plan to lift the nation’s borrowing limit and cut spending.

The debt-limit compromise “is a positive step toward reducing the future path of the deficit and the debt levels,” Steven Hess, senior credit officer at Moody’s in New York, said in a telephone interview yesterday. “We do think more needs to be done to ensure a reduction in the debt to GDP ratio, for example, going forward.”
A ratings cut would raise the specter that the wrangling between Obama and Republican lawmakers over spending cuts and taxes will harm American prestige and the global financial system. JPMorgan Chase & Co. estimated that a downgrade would raise the nation’s borrowing costs by $100 billion a year. It could also hurt the rest of the U.S. economy by increasing the cost of mortgages, auto loans and other types of lending tied to the interest rates paid on Treasuries.

“A downgrade is a sign that Congress is failing to address a real fiscal issue,” Guy LeBas, chief fixed-income strategist at Janney Montgomery Scott LLC in Philadelphia, said in an interview before the announcements.

‘Tough Choices’
A decision on the rating may be made within two years, or “considerably sooner,” according to Moody’s Hess. For Fitch, while the rating may be cut in the medium term, its risks in the near-term “are not high,” David Riley said in an interview.
Fitch expects to complete the ratings review by the end of August. The U.S. must confront “tough choices on tax and spending against a weak economic backdrop if the budget deficit and government debt is to be cut,” Fitch said in a statement.

“Although the agreement is a good first step in adjusting the fiscal challenges that the U.S. faces, it is just a first step,” Riley, Fitch’s London-based head of sovereign ratings, said in a telephone interview yesterday. “Does it mean that the AAA rating is completely secure of the medium term? No.”

The ratio of general government debt, including state and local governments, to gross domestic product is projected to climb to 100 percent in 2012, the most of any country with an AAA ranking, Fitch said in April.

Standard & Poor’s put the U.S. government on notice on April 18 that it risks losing its AAA rating unless lawmakers agree on a plan by 2013 to reduce budget deficits and the national debt. S&P indicated last week that anything less than $4 trillion in cuts would jeopardize the U.S.’s AAA rating.

Debt-Limit Compromise
An increase in Treasury yields of 50 basis points would reduce U.S. economic growth by about 0.4 percentage points, JPMorgan said in a report, citing Federal Reserve research and data.

Obama signed the debt-limit compromise on the day the Treasury had warned the nation’s borrowing authority would expire, ending a months-long debate that reinforced partisan divisions over federal spending.
The Senate voted 74-26 for the measure, which raises the nation’s debt ceiling until 2013 and threatens automatic spending cuts to enforce $2.4 trillion in spending reductions over the next 10 years. The House passed the plan Aug. 1.
“While the combination of the congressional committee process and automatic triggers provides a mechanism to induce fiscal discipline, this framework is untested,” Moody’s said in the statement. Moody’s said its baseline scenario assumes that fiscal discipline is maintained in 2012.

Debt-to-GDP
“Further measures will likely be required to ensure that the long-run fiscal trajectory remains compatible with a Aaa rating,” Moody’s said. The credit rater expects a stabilization of the federal government’s debt-to-gross domestic product ratio not too far above its projected 2012 level of 73 percent by the middle of the decade, followed by a decline.

Recent downward revisions of economic growth rates and the very low growth rate recorded in the first half of 2011 call into question the strength of potential growth in the next year or two, Moody’s said. Moody’s, which has rated the U.S. Aaa since 1917, put the U.S. under review for a downgrade on July 13 for the first time since 1996.

Still, U.S. bonds and the dollar have signaled increased demand for the assets of the world’s largest economy even as the prospects of losing the AAA rating rose as the debt talks extended to the deadline when the Treasury said it would exhaust its ability to borrow.

Yields Decline
Treasury yields average about 0.70 percentage point less than the rest of the world’s sovereign debt markets, Bank of America Merrill Lynch indexes show. The difference has expanded from 0.15 percentage point in January.

Investors from China to the U.K. are lending money to the U.S. government for a decade at the lowest rates of the year. For many of them, there are few alternatives outside the U.S., no matter what its credit rating.
Treasury 10-year yields fell to as low as 2.60 percent yesterday in New York, the least since November. The dollar represents 60.7 percent of the world’s currency reserves, compared with the 26.6 percent for the euro, which has the next biggest portion, according to the International Monetary Fund in Washington.

“Regardless of the rating, Treasuries are going to be seen as the safe haven,” said Matthew Freund, a senior vice president at USAA Investment Management Co. in San Antonio, where he helps oversee about $50 billion in mutual fund assets. “The U.S. remains one of the strongest, most dynamic economies in the world.”

-------------------

Not saying this article denotes good news, it doesn't, but it's not quite running-around-with one's-hair-on-fire, either.

 

[Little-Acorn]

Although the title of the thread seems to state otherwise, it doesn't look like this has happened yet.

If you carefully ignore the first sentence of the second paragraph, then yes, it doesn't "look" like it.

And your point is....??

 

[bbkaren]

If you carefully ignore the first sentence of the second paragraph, then yes, it doesn't "look" like it.

And your point is....??

"negative outlook" is not a ratings downgrade. in fact the title says that the AAA rating was in fact "affirmed" by both agencies. The title above is misleading. I can't see in the article where anything has taken place for the first time since 1917. it just says that we've been AAA rated since 1917; nothing about that has changed.

 

[Countrymouse]

Little-Acorn.."Tell me again, what this vaunted Budget Deal has accomplished?"

The Debt Deal has accomplished the death of the Constitution by creating an illegal Super Congress...

Had enough yet, folks?

AMEN!!

And WHY is there not a new THREAD dedicated to JUST THIS??!!??

To me, THIS is the TRUE debacle / danger / crisis of the moment.

Our Constitution has just been murdered......and we're worried about a BUDGET???

 

[Adino]

Told ya.

"Credit event".

Let the $250 trillion CDS avalanche begin.

Anyone placing bets China nets enough to make Soros look like a millionare?

ETA: after re-reading Freebird's post and bbkaren's post I have to agree this is not a down grading and therefore not necessarily a credit event.

But will add the comment the wishey washy criteria by Moody's for downgrading tells me there is division about whether down grading is needed and the finger still seems to be on the down grade trigger.

 

[Sleeping Cobra]

What does this really mean. I understand the implications. But what does tomorrow hold?

The United States becoming a 3rd World Nation.

 

[Matilda]

This would increase our borrowing costs by $100 billion per year. Hmmm, exactly the same amount that they claim they'll be cutting. Bravo ! Bravo !

What a bunch of worthless morons. They should all be put in jail.

 

[Lilbitsnana]

Told ya.

"Credit event".

Let the $250 trillion CDS avalanche begin.

Anyone placing bets China nets enough to make Soros look like a millionare?

ETA: after re-reading Freebird's post and bbkaren's post I have to agree this is not a down grading and therefore not necessarily a credit event.

But will add the comment the wishey washy criteria by Moody's for downgrading tells me there is division about whether down grading is needed and the finger still seems to be on the down grade trigger.

I saw on TOL that the Chinese credit rating agency Dagong Global downgraded us again to an "A".

Does that make any difference in the scheme of things?

 

[mbabulldog]

PM's and overnight Treasury yields haven't moved much; I think at this particular point in time its a non-event.

IMHO, all this means is the the mountain we're sliding down just leveled a bit, before we go over the precipice.

 

[Sleeping Cobra]

This would increase our borrowing costs by $100 billion per year. Hmmm, exactly the same amount that they claim they'll be cutting. Bravo ! Bravo !

What a bunch of worthless morons. They should all be put in jail.

Executed

 

[ainitfunny]

"That can't be good."

 

[momof23goats]

The United States becoming a 3rd World Nation.

becoming? I think we are almost there! prices are sky high, no work, say, isn't that what the illegals were saying that is why they left Mexico???hummmmmmmmmmmmmmmmmmm

 

[rodeorector]

I am even seeing the effects of this disastrous economy in Tyler unaffected by such trivialities Texas. Bidnesses are closing, restaurants are sitting empty, houses for sale forever, a plethora of new "for rent" signs, and cars with "for sale" signs. This is beginning to look pretty scarey. I mean my favorite three restaurants are now gone.

 

[Adino]

I saw on TOL that the Chinese credit rating agency Dagong Global downgraded us again to an "A".

Does that make any difference in the scheme of things?

It is sad but true, but the Chinese rating agency is being more honest about our situation. They had down graded us to AA in the last 6 months. Yesterday after the agreement details got out they down graded again to A+. Because it is a Chinese entity we can be sure Dagong is giving us the pulse of the Chinese communist .gov.

The Chinese have stopped buying USTreasury instruments and have been very quietly divesting themselves of them for some time. They have been using USTreasury instruments to purchase real assets or rights to real assets around the world (heavy emphasis in Africa and the ME) so their dumping hadn't been making huge waves and initiating a massive sell off globally.

That might switch to outright $ dumping. I can't say I blame them.

However, most if not all of the Credit Default Swaps that have been written to bet that the USA will be downgraded will have have language that stipulate a credit event if Moody's, S & P, and Fitch (the so called respectable credit rating agencies) down grades us.

Dagong down grading puts pressure on the above agencies and brings more scrutiny on their ratings -- something they are sensitive to after being exposed for lying with the secondary mortgage securities ratings.

I think all 3 ratings agencies are on the fence because they know we should be downgraded but know what happens if they tell the truth. From the credit rating agency perspective they are damned if they do downgrade and damned if they don't.

That means politics will take over. By the same great folks in DC that brought us the most recent fiasco.

There is a lot of uncertainty in the markets, lots of info gaps. As more rotten deals are uncovered in what passed in DC this week I expect massive market down turns and pm spikes.

 

[minkykat]

Well, the markets opened up! It's up 10 something! Whoo-woo...that's change I can believe in!!
(kiddin')

Ah, we all know that at least today, the "plunge protection team" will be hard at work keeping the market propped up for a sucker's rally.

Oops! Sorry, only up by 5 now!

 

[minkykat]

Whoopsie! Now it's down...

 

[Firebird]

The United States becoming a 3rd World Nation.

Becoming???? I think we are there....................

 

[Aardaerimus]

The United States becoming a 3rd World Nation.

We've been a 3rd world nation for some time now... We're just beginning to accept/acknowledge it. Our infrastructure is crumbling to dust, and still we cling to the same ideals and folly that brought us here.

We are an enormously gullible people, and the elite are wringing us like a sponge for as much as they possibly can get so they'll be sitting fat and happy as lords when it crashes down, and the masses of hungry fools will grovel and plead at their feet for scraps, in desperate submission.

 

[blueridge]

"...Congress is failing to address a real fiscal issue..."


Wonder why ANYone would think that???