S&P Cuts US Credit Rating For First Time In Modern History

[dqueue]

That S&P guy I've seen interviewed has a bad tell. He's lying whenever he mentions what "bad" shape the USA is in. At times it's almost comical, he starts blinking uncontrollably. Maybe later I'll be able to find some video showing this, right now I'm out in the middle of nowhere with almost zero reception.

So, if it's an orchestrated downgrade to effect some kind of change, is there any significance to the closing percentages for the Dow and S&P 500 today? Dow down 5.55% and S&P 500 down 6.66%. A wink and a nod to... whom or what exactly?

[Wombaticus Rex]

dqueue, I was quite brutally surprised to find out you were right, WTFology. I guess that's another overt signal indicating the extent of HFT-leveraged, Fed-coordinated market control now.

[Saurian Tail]

Well how about that ... unbelievable.

[eyeno]

Who 'made $10bn on 10/1 bet that U.S. credit rating would be downgraded'?

Unknown investor or hedge fund 'made $850million bet'
Bet in futures market reportedly done at odds of 10/1
George Soros made similar bet on currency in 1992
But source says he wasn't involved in rumoured trade

By Mark Duell

Last updated at 12:08 AM on 9th August 2011

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A mystery investor or hedge fund reportedly made a bet of almost $1billion at odds of 10/1 last month that the U.S. would lose its AAA credit rating.

Now questions are being asked of whether the trader had inside information before placing the $850million bet in the futures market, or if the bet happened at all.

There were mounting rumours that investor George Soros, 80, famously known as ‘the man who broke the Bank of England’, could be involved.

He made more than $1billion on currency speculation when the British pound left the Exchange Rate Mechanism on Black Wednesday in 1992.

But a source with knowledge of the firm said Soros was not involved in the rumoured trade and questioned whether in fact there had been such a trade at all.

The latest bet was made on July 21 on trades of 5,370 ten-year Treasury futures and 3,100 Treasury bond futures, reported ETF Daily News.

Now the investor's gamble seems to have paid off after Standard and Poor’s issued a credit rating downgrade from AAA to AA+ last Friday.

Whoever it is stands to earn a 1,000 per cent return on their money, with the expectation that interest rates will be going up after the downgrade.

The link has been made to Mr Soros in part because he has been tied to President Obama’s administration since 2008, reported The Examiner.

He also recently stopped managing money for outside investors, meaning he is under less scrutiny from the Securities and Exchange Commision

But the mystery bet could easily have been made by another trader with similar resources, despite Mr Soros’s links with the Obama administration.

The bet also raises questions of whether President Obama and Treasury Secretary Timothy Geithner knew that a downgrade was on the cards.

Mr Geithner said in April there was ‘no risk’ of a downgrade - but the government now appears annoyed, not surprised, by last week’s decision.

He has since slammed S&P for showing 'terrible judgment' in their decision and a 'stunning lack of knowledge' of U.S. fiscal budget maths.

http://www.dailymail.co.uk/news/article ... grade.html

[temp-monitor]

It appears that the McGraw fam­ily (Standard & Poor's is a subsidiary of McGraw-Hill) are very, VERY old & close friends with the BUSH family:

http://www.thenation.com/print/article/ ... ween-lines

Read­ing Between the Lines
Stephen Met­calf
This arti­cle appeared in the Jan­u­ary 28, 2002 edi­tion of The Nation.

“...Both stan­dard­ized test­ing and text­book pub­lish­ing are dom­i­nated by the so-called Big Three–McGraw-Hill, Houghton-Mifflin and Har­court General–all iden­ti­fied as “Bush stocks” by Wall Street ana­lysts in the wake of the 2000 election.

“While crit­ics of the Bush Administration’s energy poli­cies have pointed repeat­edly to its inti­macy with the oil and gas industry–specifically the now-imploding Enron–few edu­ca­tion crit­ics have noted the Administration’s cozy rela­tion­ship with McGraw-Hill. At its heart lies the three-generation social min­gling between the McGraw and Bush fam­i­lies. The McGraws are old Bush friends, dat­ing back to the 1930s, when Joseph and Per­me­lia Pryor Reed began to estab­lish Jupiter Island, a bar­rier island off the coast of Florida, as a haven for the North­east wealthy. The island’s orig­i­nal ros­ter of socialite vaca­tion­ers reads like a who’s who of Amer­i­can indus­try, finance and gov­ern­ment: the Meads, the Mel­lons, the Paysons, the Whit­neys, the Lovetts, the Harrimans–and Prescott Bush and James McGraw Jr. The gen­er­a­tions of the two fam­i­lies par­al­lel each other closely in age: the patri­archs Prescott and James Jr., son George and nephew Harold Jr., and grand­son George W. and grand­nephew Harold III, who now runs the fam­ily pub­lish­ing empire.

“The amount of cross-pollination and mutual admi­ra­tion between the Admin­is­tra­tion and that empire is strik­ing: Harold McGraw Jr. sits on the national grant advi­sory and found­ing board of the Bar­bara Bush Foun­da­tion for Fam­ily Lit­er­acy. McGraw in turn received the high­est lit­er­acy award from Pres­i­dent Bush in the early 1990s, for his con­tri­bu­tions to the cause of lit­er­acy. The McGraw Foun­da­tion awarded cur­rent Bush Edu­ca­tion Sec­re­tary Rod Paige its high­est educator’s award while Paige was Houston’s school chief; Paige, in turn, was the keynote speaker at McGraw-Hill’s “gov­ern­ment ini­tia­tives” con­fer­ence last spring. Harold McGraw III was selected as a mem­ber of Pres­i­dent George W. Bush’s tran­si­tion advi­sory team, along with McGraw-Hill board mem­ber Edward Rust Jr., the CEO of State Farm and an active mem­ber of the Busi­ness Round­table on edu­ca­tional issues. An ex-chief of staff for Bar­bara Bush is return­ing to work for Laura Bush in the White House–after a stint with McGraw-Hill as a media rela­tions exec­u­tive. John Negro­ponte left his posi­tion as McGraw-Hill’s exec­u­tive vice pres­i­dent for global mar­kets to become Bush’s ambas­sador to the United Nations...”

http://www.bloomberg.com/news/2011–08-08/s-p-seen-surrendering-to-tea-party-at-expense-of-u-s-taxpayer.html

S&P Seen Yield­ing to Tea Party at Expense of Taxpayer

“Clearly the rat­ings down­grade was a ‘polit­i­cal deci­sion’ in the sense that the pol­i­tics explained the tim­ing of this, because the num­bers have been irrefutable for a decade,” said Robert Litan, vice pres­i­dent for research and pol­icy at the Kauff­man Foun­da­tion in Kansas City, Mis­souri. “It gives an enor­mous amount of ammu­ni­tion to the Tea Party. They said the deal didn’t go far enough and they’ll say ‘see.’”

[Brentos]

More to come:
'Asian markets tumble after share sell-off in the US'
http://www.bbc.co.uk/news/business-14454406

[2012 Countdown]

I don't want to say anything, but the shiny just hit $1754/oz.

[barracuda]

Dow and S&P futures are in overnight waterfall. Bernanke is supposed to speak tomorrow afternoon, perhaps to promise QE3. Did anyone see Obama's speech today around 1:00 when he was trotted out by his handlers to take the blame for the latest market crash? Pure fear and disorientation wrapped in a veneer of cliches of American exceptionalism. He kept looking out of the corner of his eye as if he was afraid someone might ask a question or throw a shoe.

[2012 Countdown]

Futures Rout Accelerates: Emergency Fed Announcement Possible
Submitted by Tyler Durden on 08/08/2011 22:32 -0400

The last time we had a modestly comparable collapse in overnight trading, a certain futures trader from SocGen whose gimmickry had been uncovered, caused the Fed to lower its Fed Funds rate in an emergency meeting first thing in the morning. Which is why we wonder, should the ongoing rout accelerate, to an extent driven by the decimation in the Korean Kospi, down -9.5% at last check, but also due to increasing worries the Fed may not announce QE3 tomorrow (or if it does, it will be OT2-like and won't have any actual LSAP component to it), whether Bernanke will be forced to have an emergency address with market in the morning, around 7 am, in order to prevent what is shaping up to be a market collapse of epic proportions. And certainly not helping matters is either Chinese inflation coming in hotter than expected, (see prior post), nor the fact that in the People's Daily, PBoC advisor Xia Bin said that China doesn't rule out "normal market operations" to promotes is own interested when necessary amid the US debt turmoil. "China should set up an overseas investment committee to accelerate the strategic use of foreign exchange, Xia said, according to the report. This committee should organize storage of strategic materials, Xia said, according to the report. The country should allow and encourage companies to purchase foreign exchanges with the yuan, the report said, cited Xia as saying." Wait a minute, you may ask, how does that work without China floating the Yuan? The answer: precisely. So while we wonder just what punitive measures China will take to make sure America behaves, here are the futures. We will update this chart if anything insane occurs.

http://www.zerohedge.com/news/futures-r ... t-possible

====

Futures Surge Overnight Following Accelerating Central Planning Takeover Of Global Capital Markets
Submitted by Tyler Durden on 08/09/2011 06:36 -0400

Anyone just waking up and noticing futures trading just barely below the closing print may get the impression that things are fine. They are not. Here is what has happened overnight as the global central planning cartel does everything in its power to prevent the global market rout, which has so far wiped out $7.8 trillion in market value around the world, from morphing into the catalyst that end the status quo. To wit: ECB resumes buying Italian and Spanish bonds (UniCredit says the bank is losing a “game of chicken” with lawmakers by not holding out for budget cuts and higher taxes, and may eventually need to print money), the G-20 is prepared to take joint measures to stem a global crisis, Brazilian Finance Minister Guido Mantega said. Greece’s securities regulator banned all short-selling on the Athens exchange for two months starting today. Taiwan’s government bought stocks yesterday and this morning through four funds it controls. South Korea’s regulator asked pension funds, brokerages and asset-management companies to step up efforts to stabilize the market. South Korea also bans short selling for three months starting August 10. And lastly, rumors of an emergency Fed announcement are ripe. So... after all this global cartel intervention, is it any wonder that futures staged a near vertical move up overnight?




http://www.zerohedge.com/news/futures-s ... al-markets

===

S&P Cuts AAA Rating On Thousands Of Municipal Bonds
Submitted by Tyler Durden on 08/09/2011 07:17 -0400

The much awaited cut by S&P of thousands of municipal bonds following its August 5 downgrade of the US has arrived. Per Bloomberg: "The rating company assigned AA+ scores to securities in the $2.9 trillion municipal bond market including school- construction bonds in Irving, Texas; debt backed by a federal lease in Miami; and a bond series for multifamily housing in Oceanside, California. Olayinka Fadahunsi, an S&P spokesman, said he couldn’t provide a dollar figure on the affected debt. “It’s expected, but nobody is happy about it,” Bud Byrnes, chief executive officer of Encino, California-based RH Investment Corp., said in a telephone interview. “No one that I know thinks it was justified to cut the U.S. bonds to AA+. Once that happened, you knew that any prerefunded bonds or escrowed bonds would be downgraded too. It’s a domino effect.”" Well, Bud, if you really have so few acquaintances, we suggest you go out more. There are some fun bars on Ventura: give us a call for the low down. As for people who do go out more, here's one: "Chris Mier, a managing director at Loop Capital Markets LLC in Chicago who follows the municipal bond market, said the downgrades made sense, given the federal rating cut. “In order to keep the system logical and coherent, there are going to be a lot of downgrades,” Mier said in a conference call with reporters and clients." Matt Fabian, a managing director of Concord, Massachusetts- based Municipal Market Advisors, a financial research company, said in a telephone interview that he expected “hundreds and hundreds of municipal downgrades,” which may hurt investor confidence. “Treasuries may be able to shake off a real impact from the downgrade,” he said. “Munis, I’m less sure about." That's ok, while nobody has any idea what is coming, that won't stop 99.9% of those on Comcast's financial comedy channel from opining anyway.

More:

The company said on July 21 that a U.S. downgrade based on a failure to come up with a “realistic and credible” plan to reduce the budget deficit would be the “least disruptive” scenario for municipal ratings. That’s because it would mean Congress avoided making significant cuts to the funding of municipal credits not directly linked to the federal government, S&P said.

Top-rated state and local governments wouldn’t automatically lose their top scores, the company said. It rates the general-obligation debt of nine states AAA. The country’s “decentralized governmental structure” calls for an independent review of state and local government credits, 3.9 percent of which have AAA ratings, S&P said in a report.

State and municipal governments that depend less on the national government for revenue and that manage their own books well enough to weather declines in federal funding may retain AAA ratings, S&P said. The company didn’t name such states or municipal governments in the report.

Municipal issuance has fallen amid the U.S. debt-ceiling impasse. The slump and signs of a slowing economy helped drive tax-exempt yields to the lowest this year. Scheduled debt sales total about $2.8 billion this week, the slowest August week since 2003, according to data compiled by Bloomberg.

For the municipal market, “the key is supply and demand,” more than ratings downgrades, said Ed Reinoso, chief executive officer of Castleton Partners in New York, which manages about $250 million for individuals.

The S&P action itself “was almost cosmetic,” he said in a telephone interview. “It doesn’t seem to have much impact.”
Sure, just like the Fukushima explosion had no impact on the lift expectancy of those surrounding it back in March. Perhaps we should all check back with population in the immediate vicinity in a few years... And then do the same for debt issuers in the US.

http://www.zerohedge.com/news/sp-cuts-a ... ipal-bonds

[Elihu]

this guy's epigrams are epic imo. presented here for your amusement only. the rest of what he says, i don't really understand, just thought some of you might enjoy it.

Crash season for the stock market is August, September, and October, seasonally. ...

What could happen from here is some kind of rebound rally, followed by a real crash in the September-October timeframe. I consider the action of the past couple of weeks more of a blip down, a modest correction of a massive up move, rather than a crash.

.....view the absolutely horrific Dow monthly chart. The oscillators look like they are going over Niagara Falls in a barrel made out of toilet paper. In terms of time, the public can’t take much more agony. It’s been 11 years of horror since the markets topped out, and these price chasers can’t stand the pain any more. They want out, and they want out now!

The banksters stand there laughing, asking each other, “how little yield do you think we can pay these idiots on bonds, and they’ll still buy them in a frenzy?” The answer is found on a page in the “bizarre and surreal” handbook. The answer is that the public will accept a negative yield to escape the stock market gulag, and that’s exactly what they are being handed by the banksters, in real money terms.

The bottom line for the public is, “out of the gulag and into the blast furnace”. Incomprehensible pain is coming to these failed investors.

If you bought nothing into Dow 6500, you should not be playing bottom caller now. You will fail, and probably much worse than you can imagine.

Aug 9, 2011
Stewart Thomson
Graceland Updates

[Bruce Dazzling]

dqueue, I was quite brutally surprised to find out you were right, WTFology. I guess that's another overt signal indicating the extent of HFT-leveraged, Fed-coordinated market control now.

Reminds me of this:

Dow Sinks 777 Points As Bailout Plan Fails
Camilla Webster, 09.29.08
Forbes

The Dow spiraled down 777 points Monday after leaders in the House of Representatives failed to deliver the Republican votes many had expected to pass a financial bailout package. The measure was struck down by a vote of 228-205.

The Street went into a panicked sell-off. At the closing bell, the Dow Jones industrial average finished the day down over 6%, the Nasdaq dropped more than 9% and the S&P 500 lost nearly 8%...

[Stephen Morgan]

So, any idea that this downgrade would scare people from bonds to equities can probably be laid aside.

[beeline]

.

And the Fed's reponse is......nothing!


No change in interest rates
By Pan Pylas

ASSOCIATED PRESS

In a widely awaited decision, the Federal Reserve said this afternoon that there would be no change in interest rates.

The market reacted sharply, with the Dow moving from 91 points to the plus side to a level of 55 down. But only minutes later, reflecting Wall Street skittishness the last few days, the Dow was up 30.

In its statement released after today's meeting, the Fed acknowledged that economic growth in 2011, so far, had been slower than expected, with the jobless rate going up and household spending flattening out.

[2012 Countdown]

Some are saying $2500 by January.


btw, news headlines keep changing all day long. "Stocks Slide" to "Stock Rebound". It flips back and forth all day, citing the 'story' that justifies each. Instead of going with a reasonable story taking into account uncertainty, they go with an all this, or all that narrative.

[Saurian Tail]

The DOW has gone up 500 points in the last hour or so. The system is totally irrational.