USA credit rating

[Purron]

Moody's confirms US Aaa Rating, assigns negative outlook

How do you think this will impact our investments? The confirmation of the AAA rating is a relief, but the negative outlook is troublesome. Guess we'll see how Wall Street reacts tomorrow. Just feeling uncomfortable about all this.

[Packman]

The nosediving markets sure seems like 2008 all over again. I remember back in 2008 being paralyzed since I didn't want to sell at a low point so I held on. Will have to do the same now, but being ER'd now versus w*rking back then sure makes a difference.

[REWahoo]

Quote:

Originally Posted by Packman ... but being ER'd now versus w*rking back then sure makes a difference.

Yep. I think it's one of those things you have to experience to truly understand.

[haha]

Quote:

Originally Posted by Purron Moody's confirms US Aaa Rating, assigns negative outlook How do you think this will impact our investments? The confirmation of the AAA rating is a relief, but the negative outlook is troublesome. Guess we'll see how Wall Street reacts tomorrow. Just feeling uncomfortable about all this.

I think it will make our investments warm and toasty, unless unless of course there comes a cold spell.

[bbbamI]

....sigh.... Maybe this should be my profile pic.

[Purron]

In the past, I looked at stuff like this as a "market adjustment" and/or "blue light special". Not ready to put on a tin foil hat but recent events have caused me to consider hunkering down. This just feels different. Kinda like unchartered territory where I'm uncertain how it'll all play out. The biggie to me is the "negative outlook" assigned by Moody's. They know more about how to read the crystal ball than me for sure. Not sure we can look back to past events and gain insight on how this will evolve.

For now, I'm holding tight. Not buying, selling or anything. Just have this feeling that whatever I do (or don't do) will be the wrong thing.

[REWahoo]

Quote:

Originally Posted by Purron In the past, I looked at stuff like this as a "market adjustment" and/or "blue light special". Not ready to put on a tin foil hat but recent events have caused me to consider hunkering down. This just feels different. Kinda like unchartered territory where I'm uncertain how it'll all play out. The biggie to me is the "negative outlook" assigned by Moody's. Not a mystery why many folks may also feel negative about the future. Not sure we can look back to past events and gain insight on how this will evolve. For now, I'm holding tight. Not buying, selling or anything. Just have this feeling that whatever I do (or don't do) will be the wrong thing.

So you're saying "This time is different."

Maybe so, maybe not. Only time will tell...

[Purron]

Quote:

Originally Posted by REWahoo So you're saying "This time is different." Maybe so, maybe not. Only time will tell...

Not sure. Do you think this time is different?

[REWahoo]

Quote:

Originally Posted by Purron Not sure. Do you think this time is different?

I don't have a clue...

[Purron]

Quote:

Originally Posted by REWahoo I don't have a clue...

That makes two of us.

[samclem]

A talking head on the radio yesterday (NPR-Marketplace??) was opining that what the rating agencies said about US bonds might not be so important. His opinion: The big buyers (e.g.China, large financial firms) have their own analysts who will make independent judgements about such things. After all, it's not like Moody's etc. covered themselves in glory during the years prior to the RE bubble/financial crisis.

[W2R]

Quote:

Originally Posted by Packman The nosediving markets sure seems like 2008 all over again. I remember back in 2008 being paralyzed since I didn't want to sell at a low point so I held on. Will have to do the same now, but being ER'd now versus w*rking back then sure makes a difference.

Quote:

Originally Posted by REWahoo Yep. I think it's one of those things you have to experience to truly understand.

Oddly, I feel more confident should we have another big drop this time (even though I retired in late 2009). I think my confidence arises from the experience of having survived 2008-2009 successfully, and how much worse could it get?

Or maybe I am just odd.

Quote:

Originally Posted by Purron Not sure. Do you think this time is different?

No, remember LAST time was different (2008).

[devans0]

I actually DO have a crystal ball foresight and can positively guarantee the results. Care to subscribe to my newsletters?

My guess is: Irrational pessimism will override rational markets. Politicians haven't changed their spots. They did the minimum and kicked the can down the street. Demographics, stalled economics from tightening money, and fear will stagnate the market.

I am strapping on my seat belt and readying for a volatility ride. When employment picks up and/or consumer confidence rises will point to the ride being over.

[sheehs1]

Always the possibility of QE3...to put peoples mind at ease and rally the markets(cough). Until QE3 runs out..and we get to do this again....

[Peter]

Quote:

Originally Posted by Purron The biggie to me is the "negative outlook" assigned by Moody's. They know more about how to read the crystal ball than me for sure.

Hmmm, I guess their crystal ball must have been out of action for some reason, during the run-up to 2008.

[Purron]

Quote:

Originally Posted by Peter Hmmm, I guess their crystal ball must have been out of action for some reason, during the run-up to 2008.

Good point. My crystal ball was broken then too. Still feel pretty stupid but at least I've got company in my ignorance.

[brewer12345]

"Negative Outlook" in Moody's-speak means that they don't anticipate an immediate downgrade unless something really unexpected happens. Instead it means that they think things are not trending in the right direction and if things deteriorate too much they may have to revisit their decision not to downgrade the rating within a year or two. It does not typically portend an imminent downgrade of the issuer.

[jebmke]

In the fall of 2008 I had spine surgery. Coupled with complications, I was on drugs well into 2009. I'm tempted to round up those bottles of pills to get me through the next wave.

[eytonxav]

While the debt ceiling debate certainly exacerbated the situation, I suspect the market had already priced in that the ceiling would be raised and the real driver why the market has been moving down the past few weeks has been the growth #s being revised downward, plus the negative manufacturing report. As I have said before, this overall economy stinks and thats why I have been building up my cash position since April. I think there is an unemployment report coming out Friday, and if that's more negative than anticipated look out below, and while I hope I am wrong, a double dip may well be on its way.

[Gone4Good]

It's pretty clear we're no longer worthy of a 'Aaa' rating. Would you consider someone who strenuously debates whether or not to pay their bills a good credit risk? I don't. But that is the U.S. today. That we narrowly escaped is cold comfort because we've set a precedent that will happen again and again. I don't think it's safe to assume we'll always pull back from the brink. The probability of a U.S. default has skyrocketed because of recent political shenanigans.

If I were at Moody's I'd be arguing for a rating to reflect the following risks:

Probability of default "BB+" (Junk),
Recovery in Default "Aaa",
Weighted average Rating: "A"