The abysmal results of President Downgrade’s latest campaign speech. Of course, apologists will say that it would have dropped a thousand points if he hadn’t given the speech. Aren’t counterfactuals fun?
[Update a few minutes later]
Barack Obama’s horrifyingly bad speech. Only fifteen months to go.
Raaaaccciiiissstttt! It would have dropped 5000!
Or it had no effect at all. Investors are much like cattle, when they get spooked decide to stampede you just get out of the way.
As a side note it’s interesting that the yield for T-Bills went done instead of up, the opposite of what you would expect for a downgrade.
yield for T-Bills down
When contrary to expectations it’s a sign of dangerous waters ahead.
Are you disagreeing with S&P and claiming T-Bills are the safest investment when things go bad?
As a side note it’s interesting that the yield for T-Bills went done instead of up, the opposite of what you would expect for a downgrade.
Why? I’d look at the stock markets for long term signals rather than the Fed-manipulated T-bill markets.
No, I’m saying what I said. Some things are predictable, but when not, we can’t even predict the range of possibilities with any accuracy.
It’s like trying to predict using technical methods. It seems to work but there really isn’t any scientific basis for it. It just seems to work. But it’s not really predictive. So when it doesn’t they shrug and continue to use it.
Could they have predict WW1 after just one bullet? Yet, one bullet lead to all that followed. We wait to see.
Karl, I agree with Ken. I think the yields show that the printing presses are running overtime.
Well, Obama is about to go underwater on Intrade. He is at 50.2 precent and falling fast this past week.
No, if the printing presses were running the currency would be inflating and yields would be going up.
I will make it simple.
When yields on bonds go up its because more folks want to buy bonds then want to sell bonds. So they bid the price up dropping yields.
So yields dropping on T-Bills means that instead of selling them on the S&P downgrade folks are buying them. I guess they agree with Warren Buffett.
http://www.cnbc.com/id/44056326
[[[Warren Buffett says there’s no question that the United States’ debt is still AAA and that he’s not changing his mind about Treasurys based on Standard & Poor’s downgrade.
“If anything, it may change my opinion on S&P,” the legendary investor said. ]]]
“No, if the printing presses were running the currency would be inflating and yields would be going up.”
This is not true, as long as the Treasury/Fed can magically buy T-Bills without spending real money. They merely buy the bills until the price is whatever they feel is best. This is not a real market.
The question is, are there still new investors coming in?
The real question is “Why on Earth has anyone been buying T-Bills ever since FDIC insurance was instituted?!?!?” FDIC insurance means that a normal bank has the full backing of the USA, a higher interest rate, AND is unaffected by Obama deciding to default rather than follow constitutionally mandated payments… there is simply no way in which a T-Bill is better than an FDIC insured bank note!
Now, Obama will finally win the Nobel Prize for Economics!
What all the cool kids are wearing
Maybe the markets would have responded better if Obama did not call for more spending during the speech.
Maybe the markets would have responded better if Obama did not call for more spending during the speech.
Oh, that’s just crazy talk!
S&P said they’d downgrade the US unless they saw $4T of credible deficit reduction in the debt ceiling deal. I guess TPPOTUS (The Poker Player of the United States) thought they were bluffing. Raise your hand if you thought S&P would not pull the downgrade trigger after the deal that was agreed to, risking the loss of what little remaining credibility they have. I’m getting on the next plane to DC, and will pay or do whatever I have to do to to get inside the White House with a deck of cards to play dealer’s choice poker with TPPOTUS!
After the economics lesson, Obama shifted to the SEAL shootdown.
He said their helicopter “crashed”, not “was shot down”. And our troops “lost their lives”, not “were killed”. Words matter.
But Stephen, the Taliban are innocent until proven guilt. We don’t know for certain if it was really murder till they find the culprit and find him guilty in a court of law. =P
Whatever happened to “the buck stops here”?
Ed, he’d have to have earned a buck honestly at some point to know where one ought to stop. He hasn’t, so he doesn’t.
David,
With investors rate of return is key and over the long term it’s been higher with T-Bills. Plus what do you think the bank does with your savings? Most put a substantial percent into T-Bills, especially when doing loans is risky.
This is a continuation of the slide that began in July 21st after the “d” word was used with respect to Greece. The Lecturer-in-Chief is useless, to be sure, but the slide will (or must) continue until these absurd P/E ratios are abated.
“With investors rate of return is key and over the long term it’s been higher with T-Bills.”
Pretty sure that index funds perform better in the long term than T-bills. T-bills are considered “no risk” but it looks like that will change if the Democrats keep talking about inflating our way out.
We are in uncharted territory. People will do what they think is in their own self interest. Much of what Obama has done has had predictable results (not by the left who have made some really stupid predictions based on ideology rather than reality.) But now, things are not so predictable because nobody has ever taken their ideology as far as they have in this country.
We’re trying to look past a black hole. We shouldn’t be surprised to be surprised (it only looks like a paradox.)