S&P slashed the U.S. AAA rating to AA+ Friday.
Standard & Poor’s cut the U.S. credit rating from its vaunted AAA status Friday night, surprising those (including me) who didn’t think the ratings agency would put itself out on a limb and tell the world that Uncle Sam no longer has bulletproof credit.
The ratings agency cited political risks and a rising debt burden in making its call, at the close of a week that saw global markets rocked by U.S. growth worries and concern that European leaders have lost control of the region’s debt crisis.
In the report explaining why S&P cut America’s AAA rating, to AA+, the agency explained why the downgrade came, but noted that it views “the U.S. federal government’s other economic, external, and monetary credit attributes, which form the basis for the sovereign rating, as broadly unchanged.”
Earlier Friday, Seth Setrakian of First New York Securities told Forbes that the threatening S&P downgrade was an overhang on the market, but hardly a cause for panic. “The market would be better off if they just downgraded [the U.S. rating],” Setrakian said Friday afternoon.
Setrakian’s point is the market’s view on U.S. debt – the 10-year Treasury yield was at 2.57% Friday despite the concern about a downgrade – is that Uncle Sam will be able to repay the money it borrows. That repayment may come in devalued dollars, but it will come, so worry over the matter is academic.
He predicted that any stock selloff tied to an S&P downgrade would be short-lived, and create more of an opportunity to snap up beaten-down names.
“The damage done on individual names is much more violent than in the broader market,” Setrakian said shortly after Friday’s close. “Look at J&J, Ingersoll-Rand, Delta Air Lines – industry bellwethers” that fell more than the broader market.
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Massive deficits aren’t ideal; but much better than hurting the dedicated Public Servants; the poor; the students; and the elderly dependent on Government. The Treasury can print unlimited number of dollars. Ratings downgrade won’t stop anyone from being paid because the debt ceiling can be lifted. The Republicans just want to make the poor sacrifice while the rich get off without paying their fair share. It’s a no-brainer. The Tea Party Republicans, are a disgrace and need to be defeated next election.
you live in Marin County, CA?
Because politicians are unable to create an economic restructuring plan acceptable to ratings agencies, our debt holders and the business community they should let the agencies, debt holders and business community write the plan.
@ Forbes: “S&P cuts US debt”? You probably meant “S&P cut the US’ CREDIT RATING”. Just a SLIGHT difference.. Typo? :)
NOt really. They cut the rating on US debt; in short US debt rating cut, or US debt cut. Everyone knows what it means.
As we all know, this is merely a “keep the USD as low as possible” game. I think the US will start noting louder voices from Japan, Switzerland, EU, etc, because of american unfair devaluation of its currency. Surprisingly, the US keep complaining about China currency manipulation. I prefer not to put an adjective on that behaviour. Nevertheless…. I bet 10 to 1 that USD opening will be higher, and we won’t see a downside gap! ;-)
(just remember that Italy’s debt/GDP ratio is bigger than that in the US!!!, we were not born yesterday, Mr. McGray-Hill books maker) :)
The Fed cares. No doubt. Notice the emergency meeting this weekend. If they DONT care, everyone who holds UST will make them care sooner rather than later.
Oooh.. S&P downgraded the USA!! Now Moody’s is thinking about following suit? Are these the same S&P and Moody’s that completely missed the ’09 collapse of the entire financial sector? Rating crappy CDOs Triple A until the eleventh hour? Maybe the Treasury Dept. should shop ratings like the big banks do.
I see on CNBC this morning that people are moving their money out of the stock market as it drops in response to the ratings drop. What are the safe havens they are parking their money in? A popular choice is USTs. How does that make any sense?