The losses came after Obama administration officials spent the weekend trying to discredit Standard & Poor’s, with Treasury Secretary Timothy Geithner saying Sunday that the agency’s officials had shown “terrible judgment” and “a stunning lack of knowledge” in approving the downgrade.I can think of better ways to spend the weekend.
["The losses" refer to the continued stock market meltdown, losing 500 points on Friday, and another 400 points Monday. Numbers rounded and are dynamic.]
Why does anyone care about the S&P ratings? Didn't they prove during the housing crisis that their AAA rating was meaningless?
ReplyDeleteIn fact, there've been studies on the S&P that show, if you invested in countries with a BB rating, you'd actually be better off than if you had invested in the S&P's AA rated countries.
On top of that, if anyone is bitching because the market is down, ask them if they were aware that there was risk involved.
When I checked one-hour back spot gold was within a few dollars of spot platinum. In terms of scarcity and practical application value platinum has gold beat by a long shot. In 2008, gold was something like $1200 and platinum was something like $2100.
ReplyDeleteThe Minnesota "Goldrange" contains gold and platinum (more than Afghanistan, the other new source). No progress in developing either. Afghanistan has the Taliban but Minnesota has environmentalists.
At noon on cnbc.com
GOLD 1714.80
PLATINUM 1720.90
I haven't looked, but oil has plummeted another $6, and is down to $80.
ReplyDeleteThis spells the end of the wind and solar industries. Wind and solar can't compete with oil without subsidies and mandates even when oil is at $100; at $80 wind and solar projects are dead.
I assume price of coal is also dropping precipitously.
With regard to first comment above about S&P, I agree completely.
ReplyDeleteI think everyone agrees that S&P was concerned about "process" and not the risk that the US couldn't pay bills.
What folks disagree on is this: who was responsible for the "process"?
An inconvenient truth is that the only person who spoke officially to the public on nationwide television to a nationwide audience during this period was the president. He said that he could not guarantee that social security checks would go on time. In my mind, that's the bottom line that the S&P was looking at: here they were, hearing that the President of the United States could not guarantee that US obligations might not be met. What more does a rating agency need to know?
No one else in the political food chain said that to a nationwide office in a nationwide televised speech aired on all major networks simultaneously.
The tipping point is easily identifiable.
A bond rating agency needs to know that they are rating BONDS.
ReplyDeleteAlso speaker Boehner said he got 98% of what he wanted and he knew S &P wanted 4T debt reduction to avoid a downgrade. I guess the rating downgrade and subsequent market response was the 2% that Boehner didn't want.
I seem to remember some conservatives (not leadership but a group that the leadership was bowing) to say that default was not a big deal. Maybe s & p didn't pick up on that thread as they not once but twice saw Boehner walk away from 4t in reduction because he feared the more conservative block in his party.
I don't follow the point of the comment but referencing politicians so low on the food chain (US House) seems irrelevant. Even the Senate is pretty low in the food chain when you have the president, not once, not twice, but at least three times, get on national television to address a national audience on all major networks simultaneously and say he could not guarantee social security checks would go out on time.
ReplyDeleteIf I was the CEO of a rating agency, and watching the president say that in real-time, my first reaction would be, "OMG, did he really say that? The president can't guarantee that the government would pay its obligations? Did I just hear that?"
For heaven's sake, an executive order to keep the presses running would have been one option, and there's no way Congress would have voted against him or the executive order. Even if illegal/unconstitutional in eyes of some, no one would have acted on it.
But the S&P, much maligned/criticized for missing the housing debacle, didn't want to be caught again, saying the US is AAA when the president says "officially" that he cannot guarantee that social security checks will go out on time.
No one else said that in a nationally publicized speech to a national audience on all major networks simultaneously.
Wti. 81
ReplyDeleteNat gas 3.95
If these prices settle in, then shale producers could be in for some earnings forecast adjustments. Getting close to break even. Good news for consumers tho :). Also makes for interesting hedging situation. If you are producer, how much production do you lock in at lower prices. Remember, hedging is a double edge sword.
Of course earnings forecast adjustments should be expected.
ReplyDeleteI will probably write a stand-alone post on this, but two points.
First: this kills the alternative energy projects. Wind and solar cannot compete with coal, nat gas, or oil, without subsidies and federal mandates even when oil is at $100. At $80, wind and solar is dead. The price of gasoline will fall precipitously, and that will make even the Volt look less appealing.
Second: the only thing I honestly cannot figure out is this. It is all agreed that President Obama is the most socialist president we have had. The question is whether things are working out as he envisioned. Remember, the president hung out with Bill Ayers during that time when he (the president) was coming of age. Bill Ayers co-founded the Weather Underground, a self-described communist revolutionary group. If what we are seeing is the equivalent to what President Reagan did to force the implosion of the Soviet Union, this is very, very scary. The question is whether Bill Ayers and Barack Obama are on the same sheet of music with regard to what is now going on in the United States. If so, it explains much.
Perhaps a stand-alone posting on this is in order.
Well the simple fact is that the politicians low on the food chain led us to the brink of default on a subject (raising the debt ceiling so we can pay bills that have previously been obligated). Michelle Bachman is on record that we should never raise the debt ceiling. Law is that govt can't borrow more than authorized by congress that is what the debt ceiling is. It is uncharted territory for executive to act without congress approval. And remember there would have been 40b per month shortfall. The president was stating the obvious.
ReplyDeleteAnd for the last 6 mo, speaker Boehner has been led around by the nose by the house reps "low on the food chain". Very ineffective performance by the speaker. He couldn't deliver his caucus for the 4t and went on until the last minute to craft the 2t.
It's hard to be much clearer: Michelle Bachman (sic) is so low on the food chain, most folks would not recognize the name. People do not even spell her name correctly (reference comment above).
ReplyDeleteMs Bachman (sic) may be on record on a lot of things, but she did not go on national television three times with a speech to the nation, televised in prime time by all major networks simultaneously, to tell us the government is broke.
Certainly the S&P is not listening to Ms Bachman (sic) or the House Speaker. Can you imagine the S&P listening to the former speaker? One cannot.
The fact of the matter is the S&P doesn't listen to the House Speaker or to a Bachman (sic). The S&P clearly heard the President of the United States say that he couldn't guarantee that his government would pay its obligations. (And that makes me wonder if Bill Ayers and Barack Obama remain on the same sheet of music. Bill Ayers must be enjoying this, just as millions of Reagan supporters enjoyed watching the former Soviet Union implode.)
That's where the buck stops. If the president officially announces the government's ability to pay its obligations is at risk, it does not matter what, or why, or who to blame. The rating agencies have no choice.
So, we are probably talking past each other. You put a lot of this on Bachman (sic), House Speaker, and others. I don't. They are truly irrelevant. The Senate majority leader might be more relevant, but not much. We can discuss until the oil trucks come home who is responsible for leading us to the brink, but it was the president who said he cannot guarantee that the government's obligations could be met.
"Res ipsa loquitur."
CNBC.com close:
ReplyDeleteGOLD 1722.70
PLATINUM 1720.00
Again, gold is mostly used for money or bling. (I was at my dentist last week. He said they don't use gold for crowns, bridges or caps anymore unless you really want to pay the premium.)
Speaking of Obama's "pal" Bill Ayers, several years ago I read about the Cloward-Piven strategy of orchestrated crisis to bring about socialism in the USA. I made a one page domain name on it a couple of years ago http://cloward-piven.com/ If you want a hyperlink click on my name.
Congresswoman Michele Bachmann is from Minnesota, where I have lived my entire life so it is hard to be objective about her influence (I still misspell her last name BTW).
ReplyDeleteThat said, I have to agree with Bruce that she was not a significant influence on the S&P decision. This is consistent with her stance on debt for years. It's would basically take S&P saying "OMG! Bachmann is closing in on the Iowa straw poll and will become president!". We are far from that.
To the degree I can understand the charts the market interest rates on T bills one year and longer actually went down today, meaning that the demand for them went up.
We danced in the street when the USSR imploded due to an orchestrated crisis.
ReplyDeleteI truly wonder about the Bill Ayers angle. A $10 bet that we soon see a story along this line linked at the Drudge Report.
Thank you for your support re: Michelle Bachmann.
ReplyDeleteThe biggest problem Obama/S&P now have is this: if the administration blames the messenger ad nauseum until we get out AAA rating back, the question will be is whether "we" deserve the AAA rating, or whether S&P bowed to political pressure.
The president said he always ignored the markets when making political decisions (or something to that effect). Hmmm, I wonder.
I now recall that Bachmann voted against the 2008 bailout. She also voted against "cash for clunkers" and was very vocal about that. Same person, same political philosophy but now the national media is noticing her.
ReplyDeleteI saw some stories tonight on Standards and Poors. They did miss Enron but Enron "cooked the books" with "price to point accounting" This might work for a basic utility but Enron was "playing the ponies". At work we had the same auditors(Arthur Anderson?) that Enron had.
I S&P also missed the 2008 sub-prime mortgage meltdown. Technically, these were insured (at least in theory) and they had three years of very low losses due to the housing price increases. Basically it met the rating criteria but the bond raters could have done the equivalent of an "intervention".
Big errors like Enron and the sub-prime happen when things are done "under the radar" or not noticed. Two quick examples. The Minneapolis 35W bridge that fell four years ago had half inch gusset plates rather than one and a half inch thick plates. The second example is the Citicorp Building in New York City. An architectural student was doing a term paper on it and concluded that it could fall over in a hurricane. The original architect was contacted and they concluded that the student was right. There was a stealth reinforcement project designed and implemented before any hurricane level winds occurred.
All of these were "under the radar". Nothing is more "above the radar" than US federal debt. There was no credible plan to reduce the deficit and pay down the debt. I can understand why S&P did the downgrade.
I think the president would gain stature/credibility if he said that whether one agrees with the S&P, it is what it is, and now "we" have to deal with it and prove to the S&P and the world that "we" are indeed worthy of AAA rating.
ReplyDeleteNot long ago, he told Americans we had "to eat our peas." Here, the S&P is essentially telling the federal government the same thing -- it needs to "eat their peas," and what do we get in response: whining. Very unbecoming of a president.
A story on Congresswoman Michele Bachmann just went "viral". The National Organisation of Woman /NOW criticized the Newsweek article that tried to trash Bachmann. On one level this is one of those "like duhh!!" epiphanies like when in the 1970's the feminists decreed that rape was not an acceptable political action even if you are a Black Panther! (Eldridge Cleaver, "Blood in my eye".)
ReplyDeleteBeing from Minnesota Bachmann has been in our local public eye for a decade or so. Local "lefties" have consistently tried to trash Bachmann and it just made her stronger. It has been great sport commenting that our local "democratic males" have "serious issues" with women.
The somewhat belated response from NOW seems well reasoned. They say that they agree with Bachmann on almost every issue and will work tirelessly to defeat her but they cited the Gloria Stienam (sp) criteria of would they apply the same standard to a man?
Anyway Michelle Bachmann tends to be "overbooked" like a lot of politicians but she is a strong proponent of domestic drilling. I'm not sure she fully comprehends "Bakken". If I sit down face with someone who is not fighting it I can give a good "Bakken primer" in under one-hour.
A lot of people could do it better than I could and have more resources for visuals and research. They would need to know their biases (typically an investment focus) A powerpoint presentation and some graphic charts could be useful for the Bachmann "primer" and they could be a lead-up to Bachmann appearances.
This could be a great opportunity for public education on "Bakken".
I have no direct investments in "Bakken". I retired in 1987, a year before the "crash" and did a lot of CNBC monitoring for media people I had previously dealt with (basically they Tivo-ed the entire workday and I had an email list while I would send notice of (interesting things with my "two cents" and an exact EST time-stamp). Low pay but interesting. I put all my investments in the lowest risk fixed income vehicles. Almost embarrassing that my principle was intact but my interest income was down a bit.
I am still a bit "gun shy" about investing but I find the Bakken fascinating. That is why I follow it.