Markets are taking a beating on this news. http://finance.yahoo.com/news/Insta...tml?x=0&sec=topStories&pos=main&asset=&ccode= NEW YORK (Reuters) - Standard & Poor's on Monday downgraded the outlook for the United States to negative, saying it believes there's a risk U.S. policymakers may not reach agreement on how to address the country's long-term fiscal pressures. KEY POINTS FROM S&P STATEMENT: * Because the U.S. has, relative to its 'AAA' peers, what we consider to be very large budget deficits and rising government indebtedness and the path to addressing these is not clear to us, we have revised our outlook on the long-term rating to negative from stable. COMMENTS: DAVID WATT, SENIOR CURRENCY STRATEGIST, RBC CAPITAL MARKETS, TORONTO "It's no longer Geithner out there indicating the risks of a U.S. default. The credit rating agencies are also doing the same, saying the debt situation in the United States should be under control. The whole issue of the deficit in the United States is the key focus and this just indicates the need for a longer-term solution in place. This should put the dollar under further pressure. Take note that the dollar is already at or near record lows Aagainst the major currencies." MOHAMED EL-ERIAN, CHIEF EXECUTIVE OFFICER AT PIMCO, WHICH OVERSEES $1.2 TRILLION IN ASSETS, TOLD REUTERS "This new warning, this time from S&P, highlights the need for the U.S. to take better control of its fiscal destiny if it is to avoid higher borrowing costs and maintain its central role at the core of the global economy. This also highlights the generalized deterioration in the standing of sovereign creditworthiness in advanced economies." PHIL FLYNN, ANALYST, PFGBEST RESEARCH, CHICAGO "This looks bearish for crude. The reason is that if the U.S. government doesn't come to a budget agreement and get their spending under control then we will be forced to raise interest rates to monetize our debt. Higher interest rates would slow the economy and demand for oil and would probably put pressure on the oil price. "Higher interest rates could also mean a higher dollar -- a stronger dollar can mean lower oil prices. "Before we jump the gun and get too excited, though, it is just an outlook. It comes at a good time. It seems that the budget talks have broken down, but hopefully this will be enough to get the politicians to come to an agreement and get our debt under control." JOHN KILDUFF, PARTNER AT AGAIN CAPITAL LLC IN NEW YORK "The U.S. debt situation got a reality check this morning from the move by S&P. Only precious metals will be seen as attractive in the aftermath of the outlook downgrade. The overall economic outlook becomes more opaque with this; equities and energies will be very much under pressure now." PAUL HARRIS, HEAD OF NATURAL RESOURCES RISK MANAGEMENT AT BANK OF IRELAND IN DUBLIN "The oil market has been focused on demand destruction over the past week rather than the geopolitical risks in North Africa and the Middle East and this should go some way to cementing that view. "This might cap the upside in oil prices for the moment as it's difficult to see prices pushing higher with traders refocusing on the problems in the world's largest economy. "While S&P's move isn't entirely unexpected, and might well be largely priced in for the dollar, it shifts the focus and the sentiment in the market again." TOM PORCELLI, U.S. ECONOMIST, RBC CAPITAL MARKETS, NEW YORK "What the agencies want to see is real steps taken to improve the situation. in the absence of that a downgrade is not far. "What then Obama administration has done in cutting the 2012 budget recently is to show that he is willing to engage. The ratings agencies have to take that as a positive, but they want to see more. "Our call is for the 10-year yield to go to 4 percent by the end of the year on inflation and growth alone. That does not even account for issues surrounding the debt. Today may be the first day that the bond market starts to price in these budget issues." JON NAJARIAN, FOUNDER, WEB INFORMATION SITE OPTIONMONSTER.COM, CHICAGO "Traders are surprised by it. The market doubled its losses. This was unexpected. It is deserved? Probably. It shows that that many are thinking that the Republicans and the President are not addressing the major problem, which is the spending. Obviously, you have to get your spending in line. I suspect that this is what the rest of the world is worried about." "In the options market, we will see a pretty rapid increase in volatility, in VIX, in S&P options, for definitely more than just a few minutes. It will be more like 24 hours. I suspect almost a 10 percent jump in VIX instantly and even 20 percent by today or tomorrow."
The S&P isn't a wall street per se its the rating agency, now what's a joke is these guys missing the boat on enron, junk bonds, and mortgage backed securities.
Nice populist response. This isn't Wall Street complaining. It is a ratings agency stating the major risks lie ahead if the government doesn't address massive amounts of deficit spending in the medium term. Remember, "Wall Street" isn't all financial companies that got bailed out by the govt.
I used a generic term intentionally because the point applies generically. Pointing out that S&P and Moody are rating agencies only makes the statement more true, so thanks for bolstering my argument.
Here is something to chew on. If the infighting continues and the congress fails to make any changes, then the Tax Cuts will expire and the deficit will practically fix itself.
That would not be what the CBO budget projections say. The projections below are what they project deficits to be for the next decade with the expiration of the Bush tax cuts. http://www.cbo.gov/ftpdocs/108xx/doc10871/Summary.shtml
If only. Don't most projections show that the Bush tax cuts wouldn't come close to closing this deficit?
If your only argument is word choice, I suspect this will be unproductive. They are "complaining" inasmuch as they are unhappy with fiscal policy that is not rectifying budget problems to the degree they feel is necessary. Accordingly, they downgrade to illustrate this angst. (I suppose you could assume they are ambivalent, but I highly doubt it - there is a ton of money involved.) Regardless, my argument remains unperturbed. Listening to the rating agencies (the b*stard sons of wall street interbreeding) suddenly pretend to be vigilant defenders of the investor is ****ing ridiculous. Biggest case of "do as I say, not as I do" ever...
I dunno I think you are just putting too much emotion/bias into this. Even though they have missed major things S&P is correct on this one. Just because they have been behind the curve many times before doesn't mean they have nothing to offer. They are just saying that the U.S. fiscal position is diverging from other AAA peer nations. We are projecting massive deficits for a decade and we have no real plan on how we are going to address these massive deficits. Do you disagree with that assessment of the situation?
Totally agree with that position. However, it's the height of irony to hear it from S&P after they colluded in a massive financial collapse by basically not rating anything via the facts and then got their mistakes fixed by...the federal government. Both of them (Moody and S&P) should have been laughed into bankruptcy/jail. Instead, now my stock takes another hit thanks to their newly discovered "factual" ratings. There certainly is some emotional context here, but there is definitely no bias. Bias implies an undeserved or preconceived distrust. All of this distrust is fully deserved and easily supported.
The financial elite through their cohorts in crime, the rating agencies are having a fit. They want their way. The financial elite want their tax breaks, want to do away with social security and then make one percent on the trillions that would be diverted from social security to individual retirment accounts. A good example of their plan for the retirement plans of tens of millions of Americans is the Federal Employees Thrift Plan which is held up as the way to go. It so happens Pete ? Pedersen the billionaire behind the "reform" i.e gradual elimination soc sec and who has invested millions in the movement to convince people that entitlements are the end of America, runs the financial company that makes millions off of managing the Thrift Plan. Who would have thunk? There is often a crass financial angle behind many of the policy decisions fed to small time conservatives and libertarians.
Financial "insider" nonsense. The ratings agency leaders should be in jail or at the very least paying billions back to the taxpayers after their extreme negligence in rating junk mortgages. Those were not just innocent mistakes they made.
There is nothing newly discovered about this change to credit watch negative. They have been saying they could do this for months now. Just curious, do you feel the same way about the SEC?
I'm not saying they were saints. They did destroy their reputation with careless ratings back in the housing bubble. They do still carry too much clout after everything that has gone on with them, but the points made are valid.
You misunderstand. Newly discovered as in "newly discovered duty, not "newly discovered facts" (I left out "system" on the last sentence of the first paragraph, in hindsight). I'm bored with the word games, so unless you have a particular factual or logical problem with my opinion, I'm done here. Yes, although not to the same extent necessarily.
if the rating agencies really weren't whores for wall street, the fed, and congress they would've already long ago downgraded the actual government debt to negative -- and not just the outlook
