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what will happen Monday?
Old 08-06-2011, 07:56 AM   #1
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what will happen Monday?

I am surprised no one has started a thread about the downgrade yet. So here is a short one: does the market fall off a cliff or is this news already factored in?
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Old 08-06-2011, 08:07 AM   #2
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Some discussion here about the downgrade and what might happen Monday: USA credit rating
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Old 08-06-2011, 08:12 AM   #3
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Equities have been looking for a reason to go down, so I suspect they'll use this to sell off.

I don't think the S&P downgrade was factored in, but I also don't see how it really matters (other than as an embarrassment). S&P is just one opinion in the market, and not an always reliable one. The broader market, on the other hand, judges us every day and it has voted for 2.56% treasury yields.

From a 'market plumbing' perspective it matters because plenty of institutions can only hold Aaa paper. I suspect risk committees will be hard at work to amend the rules to allow U.S. Treasuries despite the downgrade. Prudent firms have done this already.

The impact will be greater for the handful of companies and municipalities that also have Aaa ratings. It's pretty standard practice for the rating agencies to put a 'Sovereign Ceiling' on it ratings - meaning a company can't be rated higher than the country in which it is domiciled. So I'd expect S&P to come out with a list of downgrades triggered by nothing other than the U.S. downgrade. I don't think those entities will recieve the same waiver from risk committiees as U.S. Treasuries will.
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Old 08-06-2011, 08:29 AM   #4
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Don't know. I think the market has known this was a possibility. Also think it was leaked as to it being a definite with an announcement on Friday night. My financial guy with Morgan Stanley...when asked this question last week by me...said he thought it wouldn't have much affect as it has been expected.
That said...I don't know that I agree with him. He also said...the DOW could go back to the 9500 level...as there is no manager that is going to put his clients thru another 2008/2009. So there could be selling. I moved some things to cash myself last week and have very little in actual stocks at this time. More of cash, fixed income and gold. I'd rather make money than watch it go down...and I have to sleep at night.
All said...overall I'm still down for the year. Not by much - only about 1.5% all due to the equities I was holding.
I read where the S&P might impose another notch down in 2 weeks...unless our government comes up with something out of that committee.
Still it is sort of silly that the credit rating agencies have any credibility...after what they did and how they rated those mortgage backed securities.

If there is a lot of selling...it will be because it will sink in ...that we are no where out of the woods. Fannie and Freddie need more money, large companies are laying off...etc.
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Old 08-06-2011, 09:19 AM   #5
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Don't know.
And I don't care (really)....
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Old 08-06-2011, 10:27 AM   #6
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I think that the downgrade is more or less priced in already. On July 14, S&P clearly stated what they needed to see to avoid a downgrade. As soon as the final congressional deal started to emerge last week-end, Bill Gross and others said that the deal was not comprehensive enough to stave a credit downgrade off (IIRC Gross said a credit downgrade was "unavoidable"). Rumors of a credit downgrade by S&P were also circulating all day yesterday on Wall Street. So I think it was no surprise to traders.

What will the market do on Monday? Who knows. Too many moving parts.
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Old 08-06-2011, 11:31 AM   #7
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I am surprised no one has started a thread about the downgrade yet. So here is a short one: does the market fall off a cliff or is this news already factored in?
Nervous Nellys will sell at the open. Treasuries will decline somewhat which will on balance help stocks.

The market whips up/down and closes slightly off.

I am QUITE CERTAIN about all this. You should definitely trade on my advice.



Disclaimer: I got last week's action COMPLETELY wrong. Misplaced my crystal ball but found it in the car trunk. I do not think the heat hurt it any.
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Old 08-06-2011, 01:23 PM   #8
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I sort of thought the market would drop further. But then I checked with my most reliable source of information, which actually was pretty hazy about what might happen.....

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Old 08-06-2011, 01:32 PM   #9
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Never mind Monday--

Quote:
Chief strategists at 13 banks from Barclays Plc to UBS AG see the benchmark measure of American equity surging 17 percent through Dec. 31, the average estimate in a Bloomberg survey. Their projection that the index will reach 1,401 hasn’t budged in four weeks, while mounting concern U.S. growth is slowing drove the S&P 500 down 11 percent since July 22, including yesterday’s 4.8 percent tumble.
http://www.businessweek.com/news/201...esting_related
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Old 08-06-2011, 02:23 PM   #10
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I would guess it will sell off early, but will rebound. As already said, the down grade is not unexpected.
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Old 08-06-2011, 02:27 PM   #11
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Old 08-06-2011, 02:37 PM   #12
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Magic Eight Ball says "Ask again later."

Hope that helps.
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Old 08-06-2011, 02:51 PM   #13
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I am surprised no one has started a thread about the downgrade yet. So here is a short one: does the market fall off a cliff or is this news already factored in?
This thread is like many other recent threads in that it asks an unanswerable question. How would one possibly know if something is or is not factored in? It may depend largely on the emotional effect of weather conditions on Monday morning in NYC.

Ha
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Old 08-06-2011, 02:52 PM   #14
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Or whether the Moon is made of Cheese.
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Old 08-06-2011, 03:25 PM   #15
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This thread is like many other recent threads in that it asks an unanswerable question. How would one possibly know if something is or is not factored in? It may depend largely on the emotional effect of weather conditions on Monday morning in NYC.

Ha
I think I may be one of the closest geographically to Wall St. Want me to hop on the Amtrak and go straighten everyone out?

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Old 08-06-2011, 03:30 PM   #16
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The sun will come up in the east and set in the west.
Oh yeah, like that's gonna happen!
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Old 08-06-2011, 03:36 PM   #17
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On a side note, I just found a three foot long Cottonmouth lounging by the front door inside my weekend house. Bad omen I guess.
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Old 08-06-2011, 04:33 PM   #18
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On a side note, I just found a three foot long Cottonmouth lounging by the front door inside my weekend house. Bad omen I guess.
This is vitally important Don. But now it is public knowledge.

BTW, my guess is the currency markets will be interesting to watch. A link here: North/Latin America Currencies: Exchange Rates & Values - Bloomberg
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Old 08-06-2011, 04:36 PM   #19
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On a side note, I just found a three foot long Cottonmouth lounging by the front door inside my weekend house. Bad omen I guess.
I think Mr. Market already factored that in
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Old 08-06-2011, 05:04 PM   #20
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I think I may be one of the closest geographically to Wall St. Want me to hop on the Amtrak and go straighten everyone out?

Yes, please do! Tell them that the market better be back up by Monday, because we can do without all this market drama.
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