Markets post debt ceiling agreement

[superfrank]

In the recent past whenever this kind of news (bailouts etc.) has occurred markets have risen in anticipation of the deal and then sustained those rises (generally because people don't want to be short in case there is a chunky rally).

I think it's interesting that this time that has not happened - markets rose in anticipation (let's face it, the debt ceiling was always gonna be raised) but have since fallen back and look under pressure.

Interesting today that, even though the dollar has strengthened across the board, gold is making new highs yet again. Oil has weakened as expected.

I wonder if the fundamentals of the mess we're in are finally beginning to hit home with investors?

I expect further weakness followed by QE3 to prop it all up again - but this just kicks the can a bit further down the road. Sooner or later the problems will have to be faced.

[superfrank]

http://www.bloomberg.com/news/2011-08-0 ... ecord.html

Stocks slid, dragging the Standard & Poor’s 500 Index to its longest slump in almost three years, while Treasury yields fell to the lowest levels since November amid concern the economic recovery is in jeopardy. Gold rallied.

The S&P 500 fell for a seventh straight day, losing 1.7 percent to 1,264.71 at 3:21 p.m. in New York, below its lowest closing level since March 16. The Stoxx Europe 600 Index declined 1.9 percent to an 11-month low. Yields on 10-year notes sank 11 basis points to 2.64 percent and 30-year bond rates dropped below 4 percent. The Swiss franc advanced against all 16 major peers as 10-year Italian and Spanish bond yields touched euro-era records and gold set an all-time high of $1,653.80 an ounce.

Investors sought the safety of Treasuries, gold and the Swiss currency even as President Barack Obama signed a plan to raise the federal debt limit before a possible default. Attention has shifted to weakening economic data, including today’s 0.2 percent decrease in consumer spending, the slowest growth in personal incomes since November and a report yesterday showing American manufacturing sank to a two-year low.

Who the hell in their right mind would lend money to the US govt., that is purposefully destroying its own currency and 14.3 trillion in debt (not counting unfunded liabilities), at 2.64% pa over 10 years?!!! A: Idiots and the FED.

It's no wonder gold is sky rocketing again.

CHF is the only major currency backed by gold.

Get short of bonds on the blow off and prepare for QE3 (which again will fail). Bernanke will (should) resign in disgrace soon.

[Iron]

It's interesting to see that gold did quite well today...

Jeff

[Euler]

Chinese agency downgrades U.S. credit rating

http://www.cnn.com/2011/BUSINESS/08/02/ ... ?hpt=hp_t1

A dose of reality for the US, but no doubt China also suffers from politically motivated problems too!

[Iron]

I've never understood why the views of ratings agencies can have such an impact on the markets. You'd have thought any finance house worth its salt will come to its own in-house assessment of an instrument's soundness before investing large sums of money in it.

And surely using rating agencies is a bit like someone betting on a horse because the Racing Post tipped it. Whilst the guys at the RP may know their stuff, the tip is quickly incorporated into the market price, eliminating the value it gives you!

Jeff

Chinese agency downgrades U.S. credit rating

[payuppal]

Many institutions are constrained by legislation or by their own prospectus into buying investments graded above certain ratings.

Sub prime was parcelled up so that sections of it emerged as AAA and could be bought by, say, pension funds.

[CaerMyrddin]

Many institutions are constrained by legislation or by their own prospectus into buying investments graded above certain ratings

That's the major problem, I would say.

I'd love to see that change in Europe, what sense does it make to oblige these institutions to buy something that is graded by someone that takes no liability in the ratings?

[superfrank]

Stock markets getting hammered this afternoon
http://www.igindex.co.uk

DAX down over 3%.

[payuppal]

The constraints are there to reassure investors that they will get the investment policy they signed up for.

After all, if in the search for return, pension funds started getting into high risk investments, the sh''t would hit the fan if there was no money to pay out.

Competition between them is supposed to produce good results; I'd still back them against EU produced figures...

Obviously something went badly wrong with their assessment of sub prime. They were gamed into giving a lot of supprime bits AAA.

But an awful lot of people did not spot it at the time.

As Yogi Berra said, Prediction is difficult, particularly about the future.

[Iron]

As an aside, it's for that reason that I'm a big fan of the trend following approach to trading the financial markets. The only prediction it makes is that humans will continue to remain irrational, and create bubbles which eventually burst!

Jeff

As Yogi Berra said, Prediction is difficult, particularly about the future.

[Euler]

The trouble is nobody is willing to really bite the bullet. Until they do there is always the risk the bullet blows there head off!

http://www.bloomberg.com/news/2011-08-0 ... fused.html

[Iron]

I wonder if it's a case of kicking the can down the road until after the next election. That might explain why President Obama was so keen for the next round of debt negotiations not to take place right before a general election...

Jeff

[payuppal]

It's a racing certainty that he wants to leave a further increase until after the election.

If there's this much grandstanding now, there will be much more in an election period.

Pretty good idea for the rest of the world as well, I'd say.

[Iron]

This made me laugh!

Jeff

[Iron]

And another...