Don’t Panic: The U.S. Credit Downgrade Changes Nothing

Aug 6, 2011, 3:38 pm EST
Don’t Panic: The U.S. Credit Downgrade Changes Nothing

After the S&P downgrade of U.S. debt, America now carries a rating of AA-plus instead of the coveted AAA rating on its Treasury bonds. Austria, Norway, Germany and Australia are no longer our peers ratings-wise – we are, instead, in the company of Japan, China, Spain, Taiwan and Slovenia.

Market watchers have suspected a downgrade was in the works for a while. Not to toot my own horn, but last week in my column about 5 ugly truths about the debt ceiling, one of my takeaways from the deal was that a U.S. credit downgrade was in the works regardless of the fact we avoided default. Looks like my prediction, and the prediction of other financial journalists who made the same call of a credit downgrade, was right.

But now that the inevitable has happened, what does it mean for the market and for individual investors? Read 

5 Ugly Truths About Life After the Debt Deal

Aug 4, 2011, 12:01 am EST
5 Ugly Truths About Life After the Debt Deal

Yesterday, the Senate approved legislation to raise the $14.3 trillion debt limit and immediately grant an additional $400 billion in government borrowing. Obama signed the bill just hours before the deadline where the Treasury said it would stop paying the bills.

There is no end to the commentary about the package, no shortage of debate about whether the deadline was truly the point where Uncle Sam’s change purse was empty and no end to the speculation over which party “won.”

What I’d like to focus on is life after this debt deal — specifically, five ugly truths about our legislators and our nation’s economy. Read 

Congress Is Killing Jobs — Not Creating Them

Aug 3, 2011, 9:32 am EST

As we digest the debt debacle, one important fact seems to be lost on most Americans — Congress has decided to overlook fixing unemployment in order to tackle spending. Unfortunately, that will only create more unemployment.

Why legislators allowed the conversation to change from job creation to debt busting is beyond me. Conspiracy theorists suggest it’s because the GOP has no interest in mending the economy, when a double-dip recession during primary season can energize Republican presidential campaigns. I’d like to believe that even the most stubborn legislators aren’t evil — just misinformed or incapable of viewing the big economic picture.

Whatever the motivations in Washington, the truth of the matter is that the biggest job destroyer in 2011 has been the government. This is not bluster or scare tactics, but an honest fact based on the respected analysis of outplacement firm Challenger, Gray & Christmas Inc. Read 

The U.S. Deserves to Have Its Credit Downgraded

Aug 2, 2011, 6:33 am EST

I’m not normally a bettin’ man, but while the Congress keeps arguing, I’m going to put money (figuratively anyway) on the fact that there will be: a hike to the debt ceiling by Tuesday’s Aug. 2 deadline, and a credit downgrade to AA from AAA on U.S. Treasury bonds.

Whether there will be anything accomplished in tackling the budget deficit is still up for grabs.

Frankly, if the ratings agencies don’t downgrade U.S. debt, it will be just another shocking example of their inability to really understand what’s happening in the world. They have already proved, during the mortgage securities mess, that they aren’t exactly the best analysts on the planet, by a long shot. In this case, we deserve to have our debt downgraded simply because of the inability of our policymakers to get a handle on the budget deficit. How can the U.S. continue to cling to a AAA rating? It can’t right now. Read 

Don’t Hit the Panic Button – Buy These 3 Investments Instead

Aug 2, 2011, 4:57 am EST
Don’t Hit the Panic Button – Buy These 3 Investments Instead

You can tell we’re getting very close to the final bottom of this three-month stock market pullback. What makes me so sure? Last week’s fizzle have unleashed swarms of doomsayers — and those dependable bottom-makers are strutting their stuff with quite a flourish right now.

My favorite headline yesterday, from a heavily trafficked financial Web site, wrapped the prevailing sentiment in one neat package. 5 TIPS TO SURVIVE THE COMING MARKET AXE MURDER, it screamed.

Is the author serious? If we were in October 2008, with the S&P down 42% year to date, I could understand such hysteria. But the market, as of Thursday night’s close, was still up 3.4% for the year — and down only 4.6% from its April 29 peak. Read 

Federal Reserve Readies for U.S. Debt Default

Jul 21, 2011, 10:22 am EST

Reports emerged last night that the Federal Reserve is actively preparing for a government debt default. With negotiations over the debt ceiling still going nowhere, it’s clear that Fed Chairman Ben Bernanke and his fellow central bankers don’t want to be caught without a plan.

There are just 12 days to go until the Aug. 2 deadline set by the Treasury, when the government will run out of money and stop paying some bills. And, barring a last-minute compromise, the U.S. will face at least a credit downgrade and at worst the label of outright default on its debts.

Yes, it has gotten this bad. And the Fed is preparing for the worst. Read 

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