As explained below, Egan-Jones was the first agency to downgrade the US credit rating. A few days
later Standard & Poors followed and downgraded the credit rating to AA+, with a negative watch
(1/3 probability of further downgrade.) That additional downgrade may follow if there are no
fiscal improvement. According to
Portfolio.com downgrade fears hunt world markets on august 8. 2011.
Moody's this morning restated the possibility it could join Standard & Poor's in lowering its
rating of U.S. debt. The S&P decision has already sparked concern and market reaction around the
Paradoxically as it may sound to a layman, the demand for US bonds (debt) has not declined because
The alternative government bonds are no better. US government bonds are still relatively safe.
Because the risk of a double dip in the stock market has increased and then bonds are regarded
as a better investment objects than stocks.
Decreased global interest level during a double dip that is reflected in increased bond prices
So what are the problems for the US economy? First and foremost the inability to grow and create
jobs and the fiscal situation with a growing debt and fiscal deficits. In addition policy makers
don't have the instruments to deal with the first issues. So the USA has to get its fiscal house in
order before Standard & Poors put USA credit rating on a positive watch and finally return to
a AAA credit rating.
One heading on Cnn august 8 2011 before the markets open is also "Downgrading the downgrade".
Standard & Poors track record has been terrible according to the well known economist
But that is not the main issue he says, hinting at the problems the political polarization creates
for timely and transparent decisions.
Moody's said it expects the economy will improve and additional measures to reduce the budget
deficit will be in place by 2013. The rating agency said this is why it reiterated its AAA rating
for U.S. debt on Aug. 2, when the Senate agreed on a 10-year plan to reduce the deficit by more
than $2 trillion.
But Moody's said that its negative outlook, which it also assigned on Aug. 2, was due to
political squabbling in Washington -- the biggest potential threat to the bond rating.
The populist tea party have entered the American House of Representatives. Now a famous
republican David Stockman,
a former director of the Office of Management and Budget under President Ronald Reagan cools their hot
tea. During the last half year from the summer of 2010 to the end of the year he has warned against
both the repuplican and the democrates fiscal policy:
IF there were such a thing as Chapter 11 for politicians, the Republican push to extend the unaffordable
Bush tax cuts would amount to a bankruptcy filing. The nations public debt if honestly reckoned to
include municipal bonds and the $7 trillion of new deficits baked into the cake through 2015 will
soon reach $18 trillion. Thats a Greece-scale 120 percent of gross domestic product, and fairly screams
out for austerity and sacrifice. It is therefore unseemly for the Senate minority leader,
Mitch McConnell, to insist that the nations wealthiest taxpayers be spared even a
three-percentage-point rate increase.
It is well known that financial time series are asymmetric. In plain English that means that downturns are
more dramatic than upturns. Compare downturns to mountains in Himalaya and upturns to Norwegian
mountains and you understand what we mean. Even it there is not much information on this site at present,
your visit to the site can be profitable, eg. if you download our Excel spread sheet.
This spreadsheet with Norwegian text should be easy to understand and modify.
In that spreadsheet we have computed a lot of indicators that are used by traders.
Among them you find our proprietary percentilebands. So download the spreadsheet here:
If you invest in a company for dividends, in a sense you buy a part / share of the company. You become
an owner of the company and those employed in the company work for you. You invested to get a positive
rate on your investment (ROI). If you invest in a company because you think the company is
undervalued and you assume that the price of its shares will increase, you bet on a price increase.
Traders typically do this. Unless they trade exotic products or short the stock, their aim is to
buy cheap and sell dear. By this definition trading is speculation. In other words, you calculate your
odds and trade if the odds are on your side.
Video (Part 1): Prechter On Market Rally
(Note: This interview was originally recorded on September 20, 2010)
In the video below, Robert Prechter talks to Yahoo! Finance Tech Ticker host Aaron Task and Henry Blodget about extreme readings in various indicators that confirm his bear-market forecast.