Standard and Poor's downgraded the US credit rating from AAA. Well the US had it coming and S&P had threatened for a while. Even if we don't exactly love the rating agencies for their collusion in the last credit bubble, the appalling confrontation between the GOP and the Democrats only served to remind us all that the US must confront its fiscal demons. The downgrade came at the end of a terrible week for equities. If you had said at the start of the year the following was going to happen: major uprisings in the Middle East with 1.5m bpd of oil off the market, a major earthquake and nuclear disaster in Japan, multiple edge-of-the-cliff confrontations on debt in the Eurozone and the US political system going to the wire on the credit ceiling; well then you would have run for the hills as an equity investor. Although much of the US data looks daunting, many numbers point to no double-dip, in my opinion. You just don't get double-dips from here - low capacity utilisation, low unit labour costs, strong corporate cash flow, very low interest rates, huge pent-up demand. Hope I'm right! Friday's payrolls numbers were way better than expected with upward revisions in the prior two months. Just a reminder that forecasting that series each month is senseless. Not to worry, my profession makes a living out of it! S&P headquarters are located in the New York Financial District, on Water St, an area I just love walking in. The QSL is from WNEW New York, heard on AM 1130 Khz in Cape Town in 1972.
Saturday 6 August 2011
USA from Standard to Poor?
Standard and Poor's downgraded the US credit rating from AAA. Well the US had it coming and S&P had threatened for a while. Even if we don't exactly love the rating agencies for their collusion in the last credit bubble, the appalling confrontation between the GOP and the Democrats only served to remind us all that the US must confront its fiscal demons. The downgrade came at the end of a terrible week for equities. If you had said at the start of the year the following was going to happen: major uprisings in the Middle East with 1.5m bpd of oil off the market, a major earthquake and nuclear disaster in Japan, multiple edge-of-the-cliff confrontations on debt in the Eurozone and the US political system going to the wire on the credit ceiling; well then you would have run for the hills as an equity investor. Although much of the US data looks daunting, many numbers point to no double-dip, in my opinion. You just don't get double-dips from here - low capacity utilisation, low unit labour costs, strong corporate cash flow, very low interest rates, huge pent-up demand. Hope I'm right! Friday's payrolls numbers were way better than expected with upward revisions in the prior two months. Just a reminder that forecasting that series each month is senseless. Not to worry, my profession makes a living out of it! S&P headquarters are located in the New York Financial District, on Water St, an area I just love walking in. The QSL is from WNEW New York, heard on AM 1130 Khz in Cape Town in 1972.
Subscribe to:
Post Comments (Atom)
No comments:
Post a Comment