[Vision2020] And the Saga Continues

[Ted Moffett]

On Mon, Aug 8, 2011 at 10:28 PM, Paul Rumelhart <godshatter at yahoo.com>wrote:

I'm not an economist, and I wouldn't put it past the people in charge
not to do something really stupid in order to "fix" this.  I just feel
that this is a manufactured tragedy and it will go away as soon as there
is something else interesting and shiny in the news to focus on.
--------------------------
Manufactured tragedy?

Assuming the following analysis has any merit, which I heard on CNBC today,
the economic problems of the US government are all too real, though I think
the Tea Party, if I may call it that, response of spending cuts while
refusing revenue increases (just closing corporate tax loopholes could
generate revenue with no increases in income tax) is no more economically
wise than the allegedly tax and spend excesses of so called liberals.
 US Closer to 'Junk Bond' Status Than Triple-A: Bove

http://finance.yahoo.com/news/US-Closer-to-Junk-Bond-Status-cnbc-1137105289.html?x=0&sec=topStories&pos=8&asset=&ccode
=

On Tuesday August 9, 2011, 11:58 am EDT

The US credit rating would be even worse than its recent downgrade from
Standard & Poor's if the nation was judged as a private company, banking
analyst Dick Bove told CNBC Tuesday.

 Speaking amid the hotly contested debate over whether the US should have
lost its coveted triple-A
rating<http://us.lrd.yahoo.com/_ylt=ArDRpM7QuKRIROD1XheSHjLkba9_;_ylu=X3oDMTE2N3Q3YmI1BHBvcwMxBHNlYwNuZXdzYXJ0Ym9keQRzbGsDd2hldGhlcnRoZXVz/SIG=11jibeec9/EXP=1314138708/**http%3A//www.cnbc.com/id/44065072>in
favor of the new Double-A plus, Bove said the US balance sheet and the
burdensome national debt tell a clear story.

"You've got a company which is losing about $1.4 trillion this year,
probably will lose somewhere around a trillion dollars over the next couple
of years. It owes $14.4 trillion (and) over the next five years that will
get up to $20 trillion," the Rochdale Securities analyst said.

"So there's no likelihood whatsoever that this particular company is able to
pay down from its own resources the amount of debt that it has, nor is there
any likelihood that it's going to get rid of its deficit," he added. "If
that was a real company, of course, that would be a junk bond."

The S&P downgrade late Friday roiled financial markets, causing wild swings
in trading Friday as rumors of the move spread and then in part triggering a
more than 600-point selloff Monday in the Dow industrials.

While the market rebounded in early trading
Tuesday<http://us.lrd.yahoo.com/_ylt=AmZiYEzTYcMhV4y2ImwXQaDkba9_;_ylu=X3oDMTE2ZWNoZ2ltBHBvcwMyBHNlYwNuZXdzYXJ0Ym9keQRzbGsDdGhlbWFya2V0cmVi/SIG=11ju93nml/EXP=1314138708/**http%3A//www.cnbc.com/id/44073098>,
Bove said he would not be buying stocks that likely have more downward
pressure ahead.

"I still would expect to see a thousand-point down day at some point in this
market as people come to realize there has been a complete change in the
financial structure of the world," he said.

While he believes bank stocks are cheap he would not be buying amid what he
expects to be significant turmoil.

"We're building a reserve currency around a country which is bankrupt and
can't pay its debt. How can you in essence be aggressive and say, 'I know
where the bottom is, or I know how this is going to adjust'?" he said.

"We have people buying Treasury securities because they're worried about the
Treasury," he added. "We've got people selling banks stocks, taking the cash
and putting into the banks for safety. It doesn't make sense. What you're
seeing is this adjustment is occurring and people are not sure how to react
to this adjustment."

If Bove did decide to buy bank stocks, he said one of his targets would be
Bank of America
(NYSE:BAC<http://finance.yahoo.com/q;_ylt=Aga859uI62VU3Ijj3nGUTUnkba9_;_ylu=X3oDMTB0dHYzcTU1BHBvcwMzBHNlYwNuZXdzYXJ0Ym9keQRzbGsDYmFj?s=bac>-
News<http://finance.yahoo.com/q/h;_ylt=AvdsUZyS_4y1BzKSCXFesrzkba9_;_ylu=X3oDMTB1N2FvM2w0BHBvcwM0BHNlYwNuZXdzYXJ0Ym9keQRzbGsDbmV3cw--?s=bac>).
He called the sharp selloff in BofA stock on Monday "a little bit obscene."
The drop followed rumors that BofA might declare bankruptcy and preceded a
sharp rally in the stock Tuesday.

"This company is so far away from being in trouble or needing additional
capital that it's ridiculous," he said. "I think the market's going lower so
I'm not buying anything. The fact is, if I were to buy something I would be
buying Bank of America aggressively."

*---------------------------------------------*

*Vision2020 Post: Ted Moffett*

> Because it's never been so much ado about nothing before?
>
> The S&P credit downgrade is silly.  If you hold T-bills, you have
> absolutely nothing to worry about.  The U.S. has never failed to make
> it's interest payments, and it really can't default since it can just
> print the money it needs to pay you off since it's all denominated in
> U.S. dollars.
>
> The debt ceiling thing had nothing really to do with the trillions we
> have in debt.  It was about meeting our pre-budgeted allocations.  It's
> like a husband and wife agreeing on what to buy for the year but then
> remembering later that they had made a New Years pledge to not spend
> more than $X.  Normally, they would just decide to ignore that number,
> since they had already committed to their purchases together and had
> already put the purchases on their card, but, alas, they've been
> fighting lately so they made a big stink about it.
>
>  From what I've seen, this is different than the real financial troubles
> we had back in 2008, which we are still reeling from.  And since S&P
> didn't see that one coming (or pointedly looked the other way), I don't
> know why we even care what they rate our bonds as.
>
> I'm not an economist, and I wouldn't put it past the people in charge
> not to do something really stupid in order to "fix" this.  I just feel
> that this is a manufactured tragedy and it will go away as soon as there
> is something else interesting and shiny in the news to focus on.
>
> Time will tell, I guess.
>
> Paul
>
> On 08/08/2011 08:04 PM, mushroom at moscow.com wrote:
> >>     Paul Wrote: On the other hand, if I had the money I'd buy
> >>      lots of good, sound stocks that have fallen in value that someone
> >>      else has sold out of some hazy "fear of the financial situation"
> and
> >>      ride them  back up to where they were in a few weeks time when this
> >>      whole stock market hysteria blows over.
> > That's good news -- the "few weeks time" part. How come nobody else seems
> > to know this? How come recovery has never been that fast before?
> >
> > Don Coombs
> >
> >
> >
>
-------------- next part --------------
An HTML attachment was scrubbed...
URL: http://mailman.fsr.com/pipermail/vision2020/attachments/20110809/13903143/attachment.html