The True US Credit Rating should be closer to Junk Bond status

jetstream23 · 08-09-2011, 12:55 PM

And the administration argues that the US deserves a AAA credit rating??? We should be BBB- in my opinion.

[url]http://www.cnbc.com/id/44073854[/url]

[QUOTE][B][SIZE="5"]US Closer to 'Junk Bond' Status Than Triple-A: Bove[/SIZE][/B]
Published: Tuesday, 9 Aug 2011 | 10:45 AM ET Text Size
By: Jeff Cox
CNBC.com Staff Writer

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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 in favor of the new Double-A plus, Bove said the US balance sheet and the burdensome national debt tell a clear story.

[B]"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."[/B]

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, 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."[/QUOTE]

jetstream23 · 08-09-2011, 12:57 PM

For your reference....

[IMG]http://img846.imageshack.us/img846/8863/ratings.jpg[/IMG]

Jetdawgg · 08-09-2011, 01:21 PM

A government can always raise taxes, so it has to be rated different than a corporation

chiefst2000 · 08-09-2011, 01:25 PM

We can also just print all the cash we need to pay any debts we have. Comes with a heavy price though.

jetstream23 · 08-09-2011, 01:29 PM

[QUOTE=Jetdawgg;4097240]A government can always raise taxes, so it has to be rated different than a corporation[/QUOTE]

[QUOTE=chiefst2000;4097250]We can also just print all the cash we need to pay any debts we have. Comes with a heavy price though.[/QUOTE]

Of course, but both of those have to be factored into the analysis. For example, the government decides to dramatically raise taxes - Now I do a projection of growth, revenue, etc. over the next 10 years and it doesn't solve the problem because I've likely taxed the economy back into a recession and actually reduced revenue because of the lower growth.

Jetdawgg · 08-09-2011, 01:34 PM

Yes, that may all be true but the debt is gone

parafly · 08-09-2011, 02:49 PM

Completely disagree.

A U.S. Treasury bond investment is basically as secure as it gets. The downgrade was made due to politics, not economics.

Winstonbiggs · 08-09-2011, 03:06 PM

[QUOTE=parafly;4097381]Completely disagree.

A U.S. Treasury bond investment is basically as secure as it gets. The downgrade was made due to politics, not economics.[/QUOTE]

If the debt continues to be monitized that's hardly secure. Holding fixed income in a currency that's going down in value isn't secure at all.

While S&P looks like their downgrade was somewhat political US debt has been downgraded by other agencies and deservedly so.

bitonti · 08-09-2011, 03:19 PM

[QUOTE=chiefst2000;4097250]We can also just print all the cash we need to pay any debts we have. Comes with a heavy price though.[/QUOTE]

there is 10x the amount of dollars in computer forum than in cash form.

in general people don't understand the money supply or the credit rating.

the gov't can print money and have a negligible impact on inflation

cr726 · 08-09-2011, 03:20 PM

[QUOTE=Winstonbiggs;4097425]If the debt continues to be monitized that's hardly secure. Holding fixed income in a currency that's going down in value isn't secure at all.

While S&P looks like their downgrade was somewhat political US debt has been downgraded by other agencies and deservedly so.[/QUOTE]

How can anyone take any of this stuff seriously, these companies work for the people they are rating. Met a guy who does this stuff for a living his company was bought by a big time firm and their people were called in everytime something the company felt was "not in their best interest" was released.

It's a giant shell game and this is what happens when people are relying on moving fictional sh#t for a living.

jetstream23 · 08-09-2011, 03:52 PM

[QUOTE=cr726;4097452]How can anyone take any of this stuff seriously, these companies work for the people they are rating. Met a guy who does this stuff for a living his company was bought by a big time firm and their people were called in everytime something the company felt was "not in their best interest" was released.

[B]It's a giant shell game and this is what happens when people are relying on moving fictional sh#t for a living.[/B][/QUOTE]

What does this mean?

Are you saying we should go back to a barter economy?

Winstonbiggs · 08-09-2011, 04:17 PM

[QUOTE=cr726;4097452]How can anyone take any of this stuff seriously, these companies work for the people they are rating. Met a guy who does this stuff for a living his company was bought by a big time firm and their people were called in everytime something the company felt was "not in their best interest" was released.

It's a giant shell game and this is what happens when people are relying on moving fictional sh#t for a living.[/QUOTE]

How can anyone buy US debt at negative real interest rates when we are monitizing the debt and there will be no shortage of US debt going on the market for years?

The answer is lots of people think the economy is going to get worse. The money will stay in banks so inflation won't get out of hand and 2.4% Interest in a deflating economy will look good at some point.

08-09-2011, 12:55 PM	#1
jetstream23 recovering from turf toe Jets Insider VIP Join Date: Dec 2005 Location: Phoenix, AZ (New Jets Stadium Section 246) Posts: 31,610	The True US Credit Rating should be closer to Junk Bond status And the administration argues that the US deserves a AAA credit rating??? We should be BBB- in my opinion. [url]http://www.cnbc.com/id/44073854[/url] [QUOTE][B][SIZE="5"]US Closer to 'Junk Bond' Status Than Triple-A: Bove[/SIZE][/B] Published: Tuesday, 9 Aug 2011 \| 10:45 AM ET Text Size By: Jeff Cox CNBC.com Staff Writer Twitter LinkedInMore Share 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 in favor of the new Double-A plus, Bove said the US balance sheet and the burdensome national debt tell a clear story. [B]"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."[/B] 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, 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."[/QUOTE]

08-09-2011, 12:57 PM	#2
jetstream23 recovering from turf toe Jets Insider VIP Join Date: Dec 2005 Location: Phoenix, AZ (New Jets Stadium Section 246) Posts: 31,610	For your reference.... [IMG]http://img846.imageshack.us/img846/8863/ratings.jpg[/IMG]

08-09-2011, 01:21 PM	#3
Jetdawgg All Pro Join Date: Aug 2004 Posts: 6,693	A government can always raise taxes, so it has to be rated different than a corporation

08-09-2011, 01:25 PM	#4
chiefst2000 Champion of Common Sense All Pro Join Date: Mar 2004 Posts: 5,838	We can also just print all the cash we need to pay any debts we have. Comes with a heavy price though.

08-09-2011, 01:29 PM	#5
jetstream23 recovering from turf toe Jets Insider VIP Join Date: Dec 2005 Location: Phoenix, AZ (New Jets Stadium Section 246) Posts: 31,610	[QUOTE=Jetdawgg;4097240]A government can always raise taxes, so it has to be rated different than a corporation[/QUOTE] [QUOTE=chiefst2000;4097250]We can also just print all the cash we need to pay any debts we have. Comes with a heavy price though.[/QUOTE] Of course, but both of those have to be factored into the analysis. For example, the government decides to dramatically raise taxes - Now I do a projection of growth, revenue, etc. over the next 10 years and it doesn't solve the problem because I've likely taxed the economy back into a recession and actually reduced revenue because of the lower growth.

08-09-2011, 01:34 PM	#6
Jetdawgg All Pro Join Date: Aug 2004 Posts: 6,693	Yes, that may all be true but the debt is gone

08-09-2011, 02:49 PM	#7
parafly so why side with anything? All Pro Join Date: Aug 2006 Location: Colorado Posts: 6,301	Completely disagree. A U.S. Treasury bond investment is basically as secure as it gets. The downgrade was made due to politics, not economics.

08-09-2011, 03:06 PM	#8
Winstonbiggs Jets Insider VIP Join Date: Aug 2005 Posts: 12,939	[QUOTE=parafly;4097381]Completely disagree. A U.S. Treasury bond investment is basically as secure as it gets. The downgrade was made due to politics, not economics.[/QUOTE] If the debt continues to be monitized that's hardly secure. Holding fixed income in a currency that's going down in value isn't secure at all. While S&P looks like their downgrade was somewhat political US debt has been downgraded by other agencies and deservedly so.

08-09-2011, 03:19 PM	#9
bitonti searching Hall Of Fame Join Date: Apr 2003 Location: Philly Posts: 38,786	[QUOTE=chiefst2000;4097250]We can also just print all the cash we need to pay any debts we have. Comes with a heavy price though.[/QUOTE] there is 10x the amount of dollars in computer forum than in cash form. in general people don't understand the money supply or the credit rating. the gov't can print money and have a negligible impact on inflation

08-09-2011, 03:20 PM	#10
cr726 Jets Insider VIP Join Date: Jan 2005 Posts: 13,327	[QUOTE=Winstonbiggs;4097425]If the debt continues to be monitized that's hardly secure. Holding fixed income in a currency that's going down in value isn't secure at all. While S&P looks like their downgrade was somewhat political US debt has been downgraded by other agencies and deservedly so.[/QUOTE] How can anyone take any of this stuff seriously, these companies work for the people they are rating. Met a guy who does this stuff for a living his company was bought by a big time firm and their people were called in everytime something the company felt was "not in their best interest" was released. It's a giant shell game and this is what happens when people are relying on moving fictional sh#t for a living.

08-09-2011, 03:52 PM	#11
jetstream23 recovering from turf toe Jets Insider VIP Join Date: Dec 2005 Location: Phoenix, AZ (New Jets Stadium Section 246) Posts: 31,610	[QUOTE=cr726;4097452]How can anyone take any of this stuff seriously, these companies work for the people they are rating. Met a guy who does this stuff for a living his company was bought by a big time firm and their people were called in everytime something the company felt was "not in their best interest" was released. [B]It's a giant shell game and this is what happens when people are relying on moving fictional sh#t for a living.[/B][/QUOTE] What does this mean? Are you saying we should go back to a barter economy?

08-09-2011, 04:17 PM	#12
Winstonbiggs Jets Insider VIP Join Date: Aug 2005 Posts: 12,939	[QUOTE=cr726;4097452]How can anyone take any of this stuff seriously, these companies work for the people they are rating. Met a guy who does this stuff for a living his company was bought by a big time firm and their people were called in everytime something the company felt was "not in their best interest" was released. It's a giant shell game and this is what happens when people are relying on moving fictional sh#t for a living.[/QUOTE] How can anyone buy US debt at negative real interest rates when we are monitizing the debt and there will be no shortage of US debt going on the market for years? The answer is lots of people think the economy is going to get worse. The money will stay in banks so inflation won't get out of hand and 2.4% Interest in a deflating economy will look good at some point.