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Moody's Puts US AAA Rating On Downgrade Review

Tyler Durden's picture


Moody's Places US Aaa Government Bond Rating and Related
Ratings on Review for Possible Downgrade

New York, July 13, 2011 -- Moody's Investors Service has
placed the Aaa bond rating of the government of the United States on review for
possible downgrade given the rising possibility that the statutory debt limit
will not be raised on a timely basis, leading to a default on US Treasury debt
obligations. On June 2, Moody's had announced that a rating review would be
likely in mid July unless there was meaningful progress in negotiations to
raise the debt limit.

In conjunction with this action, Moody's has placed on
review for possible downgrade the Aaa ratings of financial institutions
directly linked to the US government: Fannie Mae, Freddie Mac, the Federal Home
Loan Banks, and the Federal Farm Credit Banks. We have also placed on review
for possible downgrade securities either guaranteed by, backed by collateral
securities issued by, or otherwise directly linked to the US government or the
affected financial institutions.


The review of the US government's bond rating is prompted
by the possibility that the debt limit will not be raised in time to prevent a
missed payment of interest or principal on outstanding bonds and notes.

As such, there is a small but rising risk of a
short-lived default.

Moody's considers the probability of a default on
interest payments to be low but no longer to be de minimis. An actual default,
regardless of duration, would fundamentally alter Moody's assessment of the
timeliness of future payments, and a Aaa rating would likely no longer be
appropriate. However, because this type of default is expected to be
short-lived, and the expected loss to holders of Treasury bonds would be
minimal or non-existent, the rating would most likely be downgraded to
somewhere in the Aa range.

The specific rating that would be assigned at the
conclusion of the review once such a default is cured would depend on (1) the
speed with which the default is cured; (2) an assessment of the likely effect
on future borrowing costs; and (3) whether there is a change in process for
raising the debt limit that would preclude another default. A return to a Aaa
rating would be unlikely in the near term, particularly if there were no
progress on the third consideration.

While the debt limit has been raised numerous times in
the past, and sometimes the issue has been contentious, bond interest and
principal have always been paid on time. If the debt limit is raised again and
a default avoided, the Aaa rating would likely be confirmed. However, the
outlook assigned at that time to the government bond rating would very likely
be changed to negative at the conclusion of the review unless substantial and
credible agreement is achieved on a budget that includes long-term deficit
reduction. To retain a stable outlook, such an agreement should include a
deficit trajectory that leads to stabilization and then decline in the ratios
of federal government debt to GDP and debt to revenue beginning within the next
few years.

Moody's does not take a position on what measures should
be included in any deficit reduction package. Instead, it is the resultant
deficit and debt trajectories that are relevant to the rating and its outlook.


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Wed, 07/13/2011 - 17:01 | 1453580 Dreadker
Dreadker's picture


Wed, 07/13/2011 - 17:11 | 1453629 Dolar in a vortex
Dolar in a vortex's picture

It's a cry for credibility.

Some people try suicide.

Wed, 07/13/2011 - 17:25 | 1453683 Maniac Researcher
Maniac Researcher's picture

Since people both joke and seriously discuss apocalypse fantasy here on a daily basis, please entertain this fantasy: What happens if a new discovery, say from MIT or elsewhere, allows sunlight to be captured as heat energy cheaply and efficiently, prompting a boom in technological development? Would you still be whining about the value of the dollar or various bond ratings?

Wed, 07/13/2011 - 17:30 | 1453712 cougar_w
cougar_w's picture

What if monkeys flew out of my butt? That would be pretty cool, too.

Besides, if I want to capture sunlight as heat I don't need MIT for that. A brick wall painted black does fine.

Wed, 07/13/2011 - 17:49 | 1453789 LetThemEatRand
LetThemEatRand's picture

Are you talking something smallish like a pygmy marmoset, or something bigger like a Mandrill monkey.  Could affect the coolness factor.  

Wed, 07/13/2011 - 18:36 | 1453893 Arius
Arius's picture

since we are dreaming ....

how about that $1 trillion in precious metals reserves discovered (at least claimed MIT researchers...) in Afganistan a year or two ago (it was good to smash precious metals for few hours..)? hey, if it only was true... that would be cool to smack it to ZH doomsayers .... still dreaming? ... yeah well

Wed, 07/13/2011 - 19:44 | 1454195 Arthor Bearing
Arthor Bearing's picture

I wrote a poem for you guys, some day it will be a punk song:

We don't like your online blog
so we took your fucking job
confiscate your home and bed
because you post on zerohedge
sell off you your wife and daughter
put to use what college taught her
suck and fuck a billionaire
wash his cum out of her hair
though you suffer and despair
prison planet doesn't care

we're just here to play our role
to crush dissent, assert control
to collect taxes, charge you fees
and bring about equality
except for us who run the show
the government and CEOs
doing god's work every day
that's why we are so well-payed
though you suffer and dismay
prison planet says OBEY

fire all the dissenters.

Wed, 07/13/2011 - 22:32 | 1454628 Atomizer
Atomizer's picture

Contact Henry Rollins, Al Jourgensen or Trent Reznor. ;v) You'll need to change a couple of lines due to copyright infringements.

Edit: Believe we grew up in the same era. The last card to be played within the cartel.....

FEAR - Let's Have a War


Enjoy. In retrospect, my parents always saw me leaving the house in my Izod/Polo shirt, khaki pants and penny loafers. Little did they know, my combat boots, biker jacket, pants and T-shirt were dropped out of my second story bedroom window.

Moshing, stage diving and learning about politics was my double life in my early 20's. One day, my mom found my biker jacket buried in the bowls of my closet. She never told my dad. I was relieved she kept our secret from my father.

Shortly after; I grew tired of moshing, but continued to follow that music scene. Good luck with your endeavors.

Thu, 07/14/2011 - 01:33 | 1455120 Temporalist
Temporalist's picture

Maybe your mom was wondering why you had a jacket in bowls in your closet?

Thu, 07/14/2011 - 02:56 | 1455195 thunderchief
thunderchief's picture

Star Trek, episode 19, Capt. Kirk finds Diamonds littered all over a planets surface during a gut wrenching knock down drag out fight with Lizard man.  There are a lot of resources out there, it's just of the cost of extracting them.  That is why they are so expensive.

Wed, 07/13/2011 - 19:41 | 1454185 doesmybuttlookf...
doesmybuttlookfatinthis's picture

They are much funnier climbing back in like in Bruce Almighty. And if you want to be entirely factual, monkeys fly out of peoples butts all over south east asia and south America on a daily basis. They've just been digested.

Wed, 07/13/2011 - 20:52 | 1454431 Manthong
Manthong's picture

Since you brought it up...

Wed, 07/13/2011 - 17:50 | 1453794 barkingbill
barkingbill's picture

somewhere over the rainbow, way up high, there's an america that i dream of...once in a lullaby...

Wed, 07/13/2011 - 17:50 | 1453795 nonclaim
nonclaim's picture

Would you still be whining about the value of the dollar or various bond ratings?

Yes! The value of the product does not depend on which currency it is priced in.

Wed, 07/13/2011 - 17:50 | 1453797 Popo
Popo's picture

What if a gigantic solid-gold meteorite weighing 9 million tons, suddenly crashed into your momma's house?

Wed, 07/13/2011 - 17:53 | 1453806 LeBalance
LeBalance's picture


Wed, 07/13/2011 - 18:40 | 1453967 andybev01
andybev01's picture

Then Momma would be the wealthiest person on the planet...for 1/100,000,000,000,000,000th of a second.

Wed, 07/13/2011 - 18:24 | 1453894 dwdollar
dwdollar's picture

Yeah, cause the Ivy League Schools are big inventors / innovators right?  More like obsessed with winning government grants squawking about the status quo.

Wed, 07/13/2011 - 18:45 | 1453976 Bobbyrib
Bobbyrib's picture

Yes...because MIT would release the technology to bring down the cost of energy for your average consumer. I think you live your whole life in a fantasy.

Wed, 07/13/2011 - 18:45 | 1453982 Zeilschip
Zeilschip's picture

As I see it, the major technological breakthroughs happen during wars. So the question really is, who should the US attack?

Wed, 07/13/2011 - 21:38 | 1454603 bigwavedave
bigwavedave's picture

i have thought about this at length and i think that the best option would be Canada. 

Wed, 07/13/2011 - 22:20 | 1454734 msamour
msamour's picture

Eh now, careful about that thought. We'll release more Canada Geese down South, and throw in a few thousand beavers to dam all your rivers. That will only be the initial strike. Wait till we come down with hockey sticks and chain saws!

Wed, 07/13/2011 - 23:01 | 1454860 ceilidh_trail
ceilidh_trail's picture

 Just please keep your roots tshirts and hosers up north...

Wed, 07/13/2011 - 18:56 | 1454013 Peak Everything
Peak Everything's picture

If you want to understand the potential of a breakthrough in solar (or any other renewable energy) you should read Sustainable Energy Without the Hot Air by David MacKay. The book is available online for free. I think you will see that even after making wildly optimistic assumptions about technology progress, we will still have to consume dramatically less energy (and everything else). Soon.

Wed, 07/13/2011 - 19:30 | 1454126 simonsito
simonsito's picture

thanks for the info, I ll read that only for the fact that it comes "without hot air"

Wed, 07/13/2011 - 19:19 | 1454084 gall batter
gall batter's picture

indeed, Candide. 

Wed, 07/13/2011 - 19:46 | 1454204 Hulk
Hulk's picture

We use over twice the energy eq to sunshine falling on the continental US on a yearly basis...

Sunshine, on my continent

ain't going to do shit...

Sunshine, on my continent

makes us go broke

Sunshine, on my continent

makes the greenies high...

Wed, 07/13/2011 - 21:09 | 1454495 tmosley
tmosley's picture

Nope.  We use 1/5th that much.  And you are for some strange reason assuming that any new energy source must produce 100% of used power.  

Death worship from you?  Et tu, Hulk?

Thu, 07/14/2011 - 08:22 | 1455478 fallout11
fallout11's picture

Yes, but our best conversion/capture/reuse technologies are only 10% efficient, not 100%.

1/5th of the land x 100% efficient = 10/5th the land x 10% efficient.

Wed, 07/13/2011 - 20:22 | 1454328 malek
malek's picture

It's called solarthermics, genius, and some people already heat their home only with sunlight, year round:


Wed, 07/13/2011 - 20:40 | 1454394 Founders Keeper
Founders Keeper's picture

[What happens if a new discovery...allows sunlight to be captured as heat energy cheaply and efficiently, prompting a boom in technological development? Would you still be whining about the value of the dollar or various bond ratings?]---Maniac Researcher

Well let's see what history teaches us. The following were inventions of the late 1920's and 30's:





Synthetic rubber

Jet engine

Electron microscope

Nylon, baby food, liquid fuel rocket, helicopter, photocopier, insulin.

History tells us NONE of these life-changing inventions prevented or cured us of the Great Depression.

(As I'm sure you're aware, all good "research" is humbly built upon the shoulders of giants. Unfortunately, your post was spectacularly arrogant.)


Wed, 07/13/2011 - 20:55 | 1454441 tmosley
tmosley's picture

Uhh, are you saying that the Great Depression wouldn't have been longer WITHOUT those inventions?  Are you saying that we could subtract all of the economic gains they have produced without changing economic conditions over the past 80 years?

Christ, how can human being be this stupid?

Wed, 07/13/2011 - 21:20 | 1454534 Founders Keeper
Founders Keeper's picture

Hi t.

I think you missed my point in Replying to Maniac Researcher.

Nevertheless, in response to your post. Technology or invention of the day does not change unchanging human nature. For example, if we all had free endless clean energy it would not change human nature; and thus another economic great depression and/or war would be inevitable. Seems someone is always trying to take from someone else. I wish it were otherwise.


Wed, 07/13/2011 - 20:43 | 1454405 Use of Weapons
Use of Weapons's picture

Your reference?:

Or, if you're not actually backing up the snark with any real knowledge, somewhere like this:

In which case, go read the prior links.


Yes; its a nice leap, and makes solar much cheaper / efficient. We might get the vast solid state arrays in deserts that we've been promised since the 70's in about 20 years, if we're lucky. At the moment, the issue (as ever) is [size=20]scale[/size].

However, here's the rub: oil isn't just energy. It is plastics, fertiliser, lubricants, yadda yadda yadda, used in circa 70-75% of all industrial processes at some point. It is geopolitics and vested interest and $6 trillion spent on having the largest land force in the world on the ground killing off the indiginies for ten years+. You have serious scientists telling the world to mass build nuclear plants because the energy drop is going to be a shocker [and, post Japan, that's not a big seller - see German protests]. Solar energy, and the infrastructure [which will be built using oil-based products, e.g. tarmac for one] need building - which is about 10-20 years away, less if the West can pull a China [which it can't - hipsters don't work, apparently].

So - if you're going to get snarky about your 'high pedestal' - just be warned, there's lions, tigers & bears in these parts, and I'm a minnow compared to some of the posters / lurkers. Many are trained to analyse trends, technology, statistics and probabilities, all looking for $ possibilities/probabilities; which is all that matters to those that matter. Doubting their 'negative' outlook as 'fantasy' rather belies the real work that gets done off the page. You know those nice .pdf packages GS & others make? Countless hours of research to make the "smart choice" in investing?

Turns out - if you're not baking the cake yourself (which is the gripe zone in here), most don't rise. I reference the hybrid car technology, and GS' papers on it, and obvious government policy collusion to make happen - if you want more, try GS' biotech (15th or 16th now) summits, and where the big boys are putting R&D into.


Oh, and this isn't Xkcd or Reddit or fluffy-land, so don't expect Star Trek Solutions [Ltd] to be a matter of faith.



Wed, 07/13/2011 - 20:52 | 1454430 tmosley
tmosley's picture

Wow, you guys are really all about as dumb as dogshit.

This is NOT a hypothetical.  It hit the press today.  Some fancypants MIT researchers (who according to morons never make or invent anything, in stark contrast to the millions upon millions of patents registered in the name of MIT scientists) have come up with a way to print solar panels onto paper with a process that is as cheap as the production of shiny chip bag material.  Which is to say practically nothing.  You can take this shit, crumple it up into your pocket, fold it a thousand times, and it still works.  The only drawback is a currently low efficiency, about 1%.  But that can be improved with a little more research into the proper patterning.  This was basically a first shot.

I've been warning you peak oil morons about this shit for months.  There are massive changes coming down the pike in terms of solar production.  These are REAL.  And this paper shit is only the first of them.  Graphene will be the last, and most important.

Christ, I can't get over how fucking stupid you death worshippers are.  Pages and pages of stupidity.

Wed, 07/13/2011 - 21:10 | 1454492 Use of Weapons
Use of Weapons's picture

Ah, Mr "I've no idea about scale" issues.


First off - just because you read about it today, doesn't mean it is new tech.

For over a decade, he and his colleagues have been developing multilayered molecular thin films to demonstrate organic LEDs that can be used as paper-thin TV screens and similarly slim photodetector planes of nanoscale thickness. Extending this molecular work to colloidal quantum dots, Bulovi? and Bawendi recently developed new printing techniques that can deposit thin layers of quantum dots on top of a substrate of choice—just the type of process they now need in their development of nano-PVs.


Peer-reviewed paper:

Published online 17 March 2011



You don't think that we're aware of stuff like this? Fucking monkey.

Wed, 07/13/2011 - 21:11 | 1454504 tmosley
tmosley's picture

What kind of fucking argument is that?  Some guy used some other tech (not the one we are talking about) for some other purpose, therefore mass production of solar panels printed on paper is not possible?

Is this the best your loser cult can do?

Wed, 07/13/2011 - 21:27 | 1454526 Use of Weapons
Use of Weapons's picture


My link is to a process that cuts the costs of cutting wafers by 60%, and the factory is going into build in 2013. $150 mil on the table (part funding) by the US gov. so there's semi-serious investment in it.

Your link is to a unproven tech, that has been been around for a decade [note: they are VERY cagey on what the materials used are, and how toxic they are] and is well known about. They are at the stage of "well, it'd be cool if this was in any way efficient" - not mass production, and certainly not at the stage of making it the back bone of an industrial economy.


Have you even read the source paper, or are you adding "cool article + my imagination which is awesome" and getting "I solved the world's problems"?

But sure - Star Trek has warped your brain, and you've no concept of scale.


[Edit - I notice that your faith in graphene is purely based on this article: . It is hugely irresponsible to base any faith in this tech at the moment. A single paper... sheesh.]



Thu, 07/14/2011 - 07:27 | 1455369 Dreadker
Dreadker's picture

Dude - I'll bet 90% of 'Doomsayers' would like all this shit to be solved in am amicable way that does not force Argentine type sufferring on billions of people. The problem is we are a reactionary race that doesn't believe anyhting changes until its changed. Until i see some actual evidence of massive change in the direction of economic, governmental and average persons mentality i' gonna keep preparing for the worst and hoping for the best... Cause if the worst happens and you're not prepped you're fucked. If the best happens i have some stuff to sell and life skills to teach my kids

Fri, 07/15/2011 - 13:17 | 1455488 fallout11
fallout11's picture

TM, I get the idea you're not that old, hence still optimistic, and actually believe the babble that techno-salvation is just around the corner. Those of us who are have been hearing this shit and stuff like it for the better part of 50 years now. Pick up an old Popular Science magazine from the 40's to today to see what tomorrow promises thanks to brand new developments.....that never materialized.  I've been hearing claims of revolutionary solar power developments since the mid-70's, and lo, they're still not here. The 4 year old PV panels on my own roof cost more, on a per-KW generated basis (after adjusting for inflation) than they would have in 1979.  Pollyannas never solved any engineering problems (unlike us real engineers), which is why they cannot understand that real world<tm> hurdles limit development. 

Wed, 07/13/2011 - 19:08 | 1454051 Camtender
Camtender's picture

Texans buying guns.

Do you think there might be some Gerald Celente fans in Texas (listen at 1:05)

Wed, 07/13/2011 - 19:33 | 1454140 Hugh G Rection
Hugh G Rection's picture

Def a Celente fan.  When people lose everything, they lose it.


Happy both shopkeepers were articulate and well-spoken.  Usually MSM tries their darndest to make gun owners out as toothless inbred mongoloids.

Wed, 07/13/2011 - 20:02 | 1454273 JW n FL
JW n FL's picture

to new family members who do not know what the buy list for firearms are..


Home Defense.. 12ga shot gun.. for those on a budget.. a pump (Mossberg) will work.. for those with a few more pennies.. a 930spx (Mossberg) semi auto shotgun and for those with more money than sense.. see Benelli Cryo.


For a carry weapon.. for women.. .22L (Ruger, Walther and so on) or 5.7 herstel.

Real Men carry .45 acps.. period.


For a long gun.. see Sig 556 anything for an affordable gun and if once again more money than sense kicks in.. H & K comes to mind.


anyone else in the family can or would be happy to help steer you to some good guns here.. for the safety of your family and loved ones.


Given Police Departments are being cut in half! and Emergency Services as well are being cut in Half.. in some locations.. consider some medical purchases as well.


Dry Goods for food, and most importantly! a fall back position.. a safe place that is not your primary residence that you can easily make it too. ie not across state lines or county lines if you can help it.


Money is Gold and Silver.. think about what is worth something to you in the event things go badly.. have that as well.


Like YOU were taught! be fucking prepared.. and for the record I Pray every day for everyone that we all never see anything that bad and I would LOVE for ya'll to make fun of me in a few years and say James! you worry wart! everything turned out fine! I am HAPPY to be wrong! or over prepared! HAPPY! TO BE WRONG!!!

Wed, 07/13/2011 - 20:26 | 1454344 XenoFrog
XenoFrog's picture

You forgot to add,

Take a gun safety course, so that you don't end up shooting yourself or a loved one unless they, or you, have become zombified.

Wed, 07/13/2011 - 21:15 | 1454514 baby_BLYTHE
baby_BLYTHE's picture

Got my glocks, gold and good booze ready to go.

Bring it

Wed, 07/13/2011 - 22:37 | 1454782 DoChenRollingBearing
DoChenRollingBearing's picture

OK, that´s very good b_B.

But, as JW said above, paraphrasing, if/when TSHTF it WILL be ugly for everyone, even the prepared.

Include a good water supply and cleaning materials (filter, etc.), food and medical supplies.  TWICE as much as you think you could possibly need.  Then you can barter your extra supplies.

Just being a little extra paranoid you know.


ZH-ers interested in TEOTWAWKI, gold, Peru, etc. might be interested in my blog, if so gmail me at my name, and promise me you will behave, for the link (I use my real name and so do not putthe link here).  170 ZH readers can´t be wrong!

Wed, 07/13/2011 - 22:42 | 1454805 baby_BLYTHE
baby_BLYTHE's picture

I already have 80% of my assets in PMs, own multiple firearms, have a reverse osmosis waterfilter, have about 6 months worth of food supply and all other basic survival necessities. 

I am ready as can be for the inevitable outcome of endless monetary debasement in the face of a generational credit collapse.

As history tells us, human behavior never changes.

It is no different this time.

Thu, 07/14/2011 - 01:03 | 1455089 DoChenRollingBearing
DoChenRollingBearing's picture


I am only at three stars.  Good for you.  Keep thinking like that, and not only you, but any children you may have will be OK (assuming no Black Swans land on you).

It is my understanding that you are quite young (vs. me being 55).  Your understanding of our financial predicament is very high and you have acted upon it.

Whatever guy finds you should consider himself VERY LUCKY!  You are in the top 1% should things go REALLY BAD.  While I do not think things will go SHTF (though they sure might), should things go the trajectory I guess, your PMs will make you RICH! 

My sincere congratulations!

Thu, 07/14/2011 - 07:33 | 1455379 Dreadker
Dreadker's picture

Lol - my wife packs a .357 Sig... Real stopping power ;-)

Wed, 07/13/2011 - 17:21 | 1453673 Bowgett
Bowgett's picture

LOL. Triple kill.

Wed, 07/13/2011 - 17:32 | 1453718 max2205
max2205's picture

Who gives a fuck. -.05%. Won't get paid - $10 a year. What the fuck am I gonna do?!

Wed, 07/13/2011 - 17:53 | 1453813 Hard1
Hard1's picture

Well you should give a fuck, 1) All texbook finance on it's head since there is no risk free aset (2) Rating agencies always waaaay behind the curve. USA 5 yr CDS is 50 bps which imples something like an A rating (3) I don't think US will default as it has only internal debt, but it will have to make the burden lighter by inflating it me it's not going to be an easy ride.

Wed, 07/13/2011 - 18:15 | 1453877 redpill
redpill's picture

Moody's does this admin's bidding.  This move is nothing more than an attempt to apply pressure on hold outs in Congress.

Wed, 07/13/2011 - 18:22 | 1453902 HowardBeale
HowardBeale's picture

And, of course, Congress knows that. So Obama uses Moody's to say "Do as I say or esle," and I'm guessing there are some people in Congress (they're all egomaniacs) that don't like being told what to do; thus, this might actually cause a brick wall to suddenly rise just in front of Obama's nose...

Wed, 07/13/2011 - 18:26 | 1453916 max2205
max2205's picture

So did Ben know while he was in the gay meeting today. He smerked a lot

Wed, 07/13/2011 - 17:54 | 1453820 Caveman93
Caveman93's picture


Wed, 07/13/2011 - 18:10 | 1453861 Al Gorerhythm
Al Gorerhythm's picture

pAWNED. There ya go.

Wed, 07/13/2011 - 18:17 | 1453872 Zero Govt
Zero Govt's picture

Hard1 -  "inflating away" $14 Trillion of debt is "not going to be an easy ride". I like a man of massive (near insane levels of) understatement.. Good luck with hanging onto Bucking Benny

Wed, 07/13/2011 - 17:18 | 1453582 cougar_w
cougar_w's picture


Edit: And now the deer-in-headlights. Rockness. Never miss a trick, do you?

Wed, 07/13/2011 - 17:03 | 1453583 Dreadker
Dreadker's picture

Bullish for QE3 though ;-)

Wed, 07/13/2011 - 17:17 | 1453662 A Man without Q...
A Man without Qualities's picture

It's actually quite bullish for equities, since Moody's are demanding the spend to infinity option.

Wed, 07/13/2011 - 17:26 | 1453690 doomandbloom
doomandbloom's picture

How long before US asks investors to ignore ratings, just like ECB?



Wed, 07/13/2011 - 17:31 | 1453717 gmrpeabody
gmrpeabody's picture

But for now, they are using the Moody rating. They probably made the call requesting it.

Wed, 07/13/2011 - 17:52 | 1453803 LetThemEatRand
LetThemEatRand's picture

Question:  Is [fill in the blank] bullish for equities in the current Bernank-driven market?  

Answer:  Yes.  

Wed, 07/13/2011 - 17:10 | 1453584 Ghordius
Ghordius's picture

Now this would be the fun moment to audit who exactly holds CDS on this theme, Italian style...

Wed, 07/13/2011 - 19:37 | 1454159 InvalidID
InvalidID's picture

Interesting thought there. Who holds CDS on US debt? What's the spread? Is there even a point in buying CDS on US debt? If the US defaults we're all pretty much shit outta luck anyway so what's to collect...if there's a bank left to collect from.

Wed, 07/13/2011 - 19:42 | 1454167 InvalidID
InvalidID's picture


Wed, 07/13/2011 - 17:02 | 1453585 Concentrated po...
Concentrated power has always been the enemy of liberty.'s picture


Wed, 07/13/2011 - 17:14 | 1453589 Ghordius
Ghordius's picture


Wed, 07/13/2011 - 17:03 | 1453593 Hugh G Rection
Hugh G Rection's picture

Quick, throw em some bailout money!

Wed, 07/13/2011 - 17:04 | 1453596 unky
unky's picture

but at least in euro terms gold goes down a little...

Wed, 07/13/2011 - 17:33 | 1453729 gmrpeabody
gmrpeabody's picture

It's a race to the bottom. Gold will eventually rise and rise rapidly.

Wed, 07/13/2011 - 17:49 | 1453792 LongBalls
LongBalls's picture

Exactly. Currency debasement is all they have left or want to use anyway. The dollar is the sacrificial lamb. Slow and steady until..............

Wed, 07/13/2011 - 18:24 | 1453903 Zero Govt
Zero Govt's picture

the US Dollar isn't the sacrifical lamb, the nation is... typical political decision-making, it's 'us' (1,000 elite educated bankrupts) or 'them' (260 million citizens and businesses) contest everytime, the nation gets sacrificed to save face for their DC and WS careers

Wed, 07/13/2011 - 17:04 | 1453597 luigi
luigi's picture

Are you serious? Eventually they realized how much they were making a laughing stock of themselves

Wed, 07/13/2011 - 17:04 | 1453602 caerus
caerus's picture


Wed, 07/13/2011 - 17:05 | 1453603 johnnyblade
johnnyblade's picture


Wed, 07/13/2011 - 17:05 | 1453605 There is No Spoon
There is No Spoon's picture

thanks, Moody's, for entertaining, low liquidity, after hours action!

Wed, 07/13/2011 - 17:06 | 1453607 Robslob
Robslob's picture

Wonder what Moody's and S&P ratings are on Gold?


Wed, 07/13/2011 - 17:24 | 1453685 Long-John-Silver
Long-John-Silver's picture

Gold is not money. Did you forget to watch the Bernanke?

Wed, 07/13/2011 - 18:26 | 1453879 Al Gorerhythm
Al Gorerhythm's picture

Ben also said that the CBs hold gold as a matter of tradition. Why, those sentimental fools. The Constitution says that gold and silver are money so the Bernank has just confirmed the the Constitution only holds sentimental value.  Methinks The Bernank just got OWNED by that loony old guy from Texas.

Wed, 07/13/2011 - 18:32 | 1453932 Zero Govt
Zero Govt's picture

and Obumma dropped a clanger today in Press talking about the debt ceiling. He said he agreed with the Republicans now was not the time for tax hikes "in a weak economy".

That'll be the economy 'coming out of recession' officially as of July 2009 with "green shoots" no less

Obumma needs to make his fuking mind up on what the official status for the economy is, not talk with forked tongues 

Thu, 07/14/2011 - 00:24 | 1455037 Dr. Richard Head
Dr. Richard Head's picture

Screw the Bernanke. My two-year-old knows that gold and silver are money -

Wed, 07/13/2011 - 17:06 | 1453608 ghostfaceinvestah
ghostfaceinvestah's picture

I thought if you missed a payment the rating went to "D"

Wed, 07/13/2011 - 17:06 | 1453609 Clay Hill
Clay Hill's picture


Excellent news

Wed, 07/13/2011 - 17:06 | 1453612 Translational Lift
Translational Lift's picture

WHOOP....there it goes............

Wed, 07/13/2011 - 17:09 | 1453616 cougar_w
cougar_w's picture

So a US downgrade will trigger like --- what --- $46 gazillion in CDS?

Asian markets open shortly. This is going to be fun to watch.

Wed, 07/13/2011 - 17:16 | 1453656 magis00
magis00's picture

Right?  JPM holds $49 trillion last I saw -- which is the combined yearly GDP of the entire world. 


Multiply by thousands of off-balance sheet enitities and dark pools and . . . it's last scene of Fight Club.  $200 trillion?  $500 trillion? 

Doesn't even matter: cue the Reset!

Wed, 07/13/2011 - 17:07 | 1453618 unky
unky's picture

so if they raise the debt ceiling in a few days then gold will drop $100? that would be great

Wed, 07/13/2011 - 17:11 | 1453626 Translational Lift
Translational Lift's picture

If they raise the debt ceiling they will have to manufacture more X's & O's.......

The more X's & O's........the more gold will cost!!

Wed, 07/13/2011 - 17:09 | 1453625 Cheesy Bastard
Cheesy Bastard's picture

Yup, this is a disaster.  But as soon as my Moody's AAA rated asset backed secutities pay off, I'm on easy street.

Wed, 07/13/2011 - 17:09 | 1453627 Cole Younger
Cole Younger's picture

I would rate the U.S. credit rating as junk if they raise the debt ceiling.

Wed, 07/13/2011 - 17:10 | 1453628 imapopulistnow
imapopulistnow's picture

So I should flee into Treasuries as a safe haven against a downgrade of Treasuries?

Wed, 07/13/2011 - 17:34 | 1453730 candyman
candyman's picture

good point!

Wed, 07/13/2011 - 18:38 | 1453959 Zero Govt
Zero Govt's picture

Yes it is

the official policy is to stimulate the private sector with investment

let me repeat

The offcial polciy is to drive everyone out of private investment and into Treasuries

are we crystal clear now??

Wed, 07/13/2011 - 17:10 | 1453630 Quintus
Quintus's picture

Does anyone think this is anything other than Wall St throwing their toys out of the pram and stamping their feet because their bought and paid for politicians haven't raised the debt ceiling to facilitate more money pumping into the Banks?

Wed, 07/13/2011 - 17:13 | 1453639 unky
unky's picture

exactly, they try to make the pressure much harder to come up with a solution quick.

Wed, 07/13/2011 - 17:57 | 1453832 Jendrzejczyk
Jendrzejczyk's picture

Us Mericans ain't gotta clue whut a pram is.

Wed, 07/13/2011 - 18:07 | 1453858 HungrySeagull
HungrySeagull's picture

Wheeled baby carriage era 1890's or so

Wed, 07/13/2011 - 18:23 | 1453906 Jendrzejczyk
Jendrzejczyk's picture

Thanks Hungry,

    I'll throw you some fries next time I see you on the boardwalk......illegal or not.

Thu, 07/14/2011 - 07:08 | 1455327 Urban Redneck
Urban Redneck's picture

I ain't that old - and I think I still have the one I was wheeled around in.

Wed, 07/13/2011 - 18:05 | 1453840 LetThemEatRand
LetThemEatRand's picture

Exactly.  O is threatening seniors, the R's are threatening disabled vets, and Moody's is threatening everyone else.  They are basically saying, "Give us our money or we blow this place up!"  Kind of makes it painfully obvious who really benefits from the debt ceiling being raised.

Wed, 07/13/2011 - 18:12 | 1453870 Caviar Emptor
Caviar Emptor's picture

You're assuming those politicians really mean they want to limit the debt. They don't. They want to please their paymasters

Wed, 07/13/2011 - 17:11 | 1453631 digalert
digalert's picture


US government gives Moody's "disregard" rating.

Wed, 07/13/2011 - 17:11 | 1453632 Catullus
Catullus's picture

Scaremongering at it's finest. Moody's has no possibility of issuing a non-political statement with this rating. They're a mouthpiece for financial terrorists. That default of it's bonds or social security is even being contemplated at this point is a fantastic joke. They can shut the government down, stop payment to contractors, stop payment of electric power bills, stop payment on interest to treasuries held at the Fed.

Oh, and they could have rejected the defense department's ridiculous fucking budget this year.

This is a big political bluff.

Wed, 07/13/2011 - 17:40 | 1453757 oldman
oldman's picture

Hey Cat,

Great post, man.

Years ago no serious investor or specultor ever paid any attention to the rating agencies because they did the thinking and due diligence necessary to ascertain whether or not the security was money good.

Ratings were there for the retail cluck---to sell him bonds that he was too dumb or lazy to think about---and the from the 1980's forward to sell institutionally to the dumb clucks that ran the rapidly emerging bond funds.

We used to laugh at how anyone could believe a rating unless the issuer was an essential service----

Anyway, my point is that no one ever considered these guys worth listening to let alone allow them to do one's thinking. I am certain that in the last 30 years the intelligence and experience and integrity of these 'professionals', like everything else in this post-Glass-Steagal insane asylum finds a new low each day.

Evidence of this is the all too obvious political ploy you noted.


Wed, 07/13/2011 - 18:06 | 1453856 jm
jm's picture

This is an even better post.

Did you trade bonds in the 70s?

Wed, 07/13/2011 - 19:02 | 1454034 oldman
oldman's picture


I was a 'retail puke' trading bonds from '78 to '94.

Had the good fortune to be mentored by a few of the old swiss banker types who worked from '27/'30. I am a complete idiot when it comes all of this stuff----too many variables to hang anyone's hat on.

I don't know how so many here know so much

We used the term 'money good' for the earlier ZH types----they couldn't be sold, they only bought---an easy business if one did his homework

five hours with bonds and five hours with a basketball

not too much money, but a great way to live


Wed, 07/13/2011 - 20:36 | 1454384 jm
jm's picture

Please feel free to share your experience anytime, man.

Pre-Volker was a world entirely alien to people now.

Wed, 07/13/2011 - 19:01 | 1454028 Tyler Durden
Tyler Durden's picture

The only problem is all the autoclearing models who look at primarily rating thresholds for input into Copula calculations for trillions in structured products, to make buy-sell decisions. The same fixed income laziness that got 90% of the market to rely on CRA for purchase decisions, also happens to rely on these same ratings still to decide when to buy and sell.

Wed, 07/13/2011 - 19:10 | 1454061 oldman
oldman's picture


I don't understand a word of your post.

All I get out of it is that, perhaps, there is no 'plain vanilla' flavor left to analyze---that each security is so cross-linked today that each piece is compromised.

If this is what you are saying, then buying pm's and gold stocks is all that is left. And these dudes are all screaming that the above are manipulated---

too complicated to do bonds and too old for hoop

Shit, I guess it is off to the forest for this oldman, after all.

Wed, 07/13/2011 - 20:48 | 1454426 jm
jm's picture

Everything is "contextual" now.  There are iBoxxx and CDX indices that get rapid-fired just like stocks. You buy stuff financed with a prime rate, but now you can hedge the interest rate risk with an interest rate swap at just about any point on the yeild curve. You don't care so much about the credit risk, because you can buy and sell credit risk with a swap.  Of course this last depends as much on the credit risk of counterparties than the underlying.  It is more logically precise and mathematically sure, but in the end it is just a way to speculate on a high percentage shot.

This is not superior to good fundamental analysis where you are paid to determine if a credit is AAA or D, screw what lies between.  

Did you have leveraged loans at the time?

What kind of discount off par could you get on 30Y in the 70s?  Was it always bid?


Wed, 07/13/2011 - 22:56 | 1454849 oldman
oldman's picture


Thanks for the attempt at enlightening but I guess I got out just in time.

If the firm I worked for had raised such a suggestion I would laughed hard enough to have been run out of the office.

Fixed income is not risk---if you want to sex it up with indexes, it becomes a different animal.

Besides, we had yield!

SF BARTS 3.50/6-15-92/AA/66.55 or some such dude in '81/'83---don't hold me to the description because I don't remember exactly, but I did open an account with the big RE dude in LA with this type of coupon.

I mailed him a letter telling him about a property well secured that yielded 10% tax fre-while he held it and after the sale in 10 years he would receive twice his cost. I believe the gross yield was 12% or 13%.

Thirty year 0% coupon T's were 14%. The zeros were great; I used them to fund retirement accounts and college accounts because you had the option of buying the clipped coupon in thise days---shit they came due every 6 mos and were Ts(when USTs were not AAA---there were 'riskless' by the raters and every other credit marked off against them. It is strange for me to read AAA next to UST.

No leveraged loans------you know all of this stuff came in with the banks and the repeal of Glass-Steagal--I was out in early '94. Most of the old-timers in those days knew why the banks were not allowed in our business---too fucking dumb and too fucking greedy. Excuseme, but I'm gonna leave the profanity this time---I'm still angry about those banks coming in.

Your last question I don't understand. I was always offered bonds by my trading desk, but worked the blue list daily just to keep everyone honest. I made a lot of money this way for myself, the client, and the firm, but the trading desk or the street took the hit.

When there were no bonds, I did swaps and when there was a sell-off I begged for money to buy----I was straight and my people trusted me. That is what I learned from those mentor gnomes---those old men made a difference in my life.

OK I hope that helps


Thu, 07/14/2011 - 07:30 | 1455356 jm
jm's picture

Thanks very much.  It actually does make a lot of sens ein spite of my ill-formed questions.

No doubt about it banks have changed the business to tis very core and probably have made it worse.

To the point:  banks don't lend as much now.  So companies issue bonds.  This is why there is so much HY in the pipeline.  Banks go in and buy the bonds.  Banks have so much capital that they turn a market for capital into a traders markets.

It still isn't liquid enough for a trader honed to jump on even the smallest advanatage.  So they made fixed income indexes that trade instead of the intrinsic.  HFT jack hammers this stuff.

This is all dependent on liquidity, frankly, ever increasing liquidity.  The source of all liquidity in fixed income is knowing that you can plop a practicallly unlimited amount of capital in the treasury in a millisecond market free of transactions cost and get it out in a millsecond.  One could argue that an alternative to move duration money is taking the fixed leg of a IR swap.  Arguable. 

There is no way of knowing how sensitive this architecture of fixed income is to the bull market in treasuries.  It may not be robust to changes to this bull market, and collapse like a sandcastle when the tide comes in.   

This is why I ask these ill-formed questions about treasury bear market liquidity.  I'm not sure what to expect because a treasury bear market is outside my experience.  I am not convinced that the "benevolent" influence of the Fed is so benevolent, and I know it won't last.  What happens then?  

P.S.  Don't think anybody in bonds ever has or ever will give a crap about ratings.

Thu, 07/14/2011 - 18:19 | 1456477 oldman
oldman's picture


Thu, 07/14/2011 - 15:24 | 1457206 oldman
oldman's picture


i missed your bit about 'bond bear market'

I came into the game in '76 trading commodities and my first client wanted to short Ginnie mMaes which we did, then 30 year 8's in treasuries. We were too naiive to hold a permanent short and trade in and out with other funds. We didn't get whip sawed but he paid a ton in transaction costs---my piece of the deal---no discounts

Anyway the market was as heavy as a dead slug for years--we would have made millions had we known how long it was to last and just piled short upon short

it was the only slam dunk of my experience, but no physical like the second slam dunk---gold I've bought two stocks and some coins and I will probably never sell

But back to bonds

History is everything---a long ride up means a long ride down in real and honest markets

The years behind us were different than today, and as I wrote below I do not think these are really markets, but more of a computer game or slot where the payer wins just enough to play again---and that ain't very damn much

I wonder if this show is not run by some algomaster who invents these conflicts and problems just to keep our eye focused on illusion rather that the real ball that Cog Diss writes about---I think this might be true.

I've only been back here two months or so and this country is a mess of mass hysteria----read the comments here for a couple of days and you will see HYSTERIA--and this blog is certainly not the average cluck's reading.

No bank employees? Maybe there is no bank----we just put all our energy and productivity in the black box and after fees, taxes, etc. we get enough back to keep paying


Sorry, my friend    this is too much for a simple guy like myself--i'm going back to the forest while I still have some mental health---too much greed and fear here for sanity

I apologize for being such a bore     om


Thu, 07/14/2011 - 19:00 | 1457894 jm
jm's picture

Not a bore at all.  Low volume, grinding losses, illiquidity that ensures you don't know what you have is worth... it's a metaphor for a mode of existence. 

I'm not sure if the business was "cleaner" then, but it may well have been--wasn't there.  What I do know is that the financial system today is almost entirely speculative as opposed to driven by fundamentals.  With this exited the "real market" you speak of.

Good or evil, the system now is the most efficient thing man ever constructed.  It is like a cheetah.  The question is whether a cheetah made for the savannah will die off in the swamp, or the desert.

Thu, 07/14/2011 - 05:07 | 1455253 trav7777
trav7777's picture

the structured finance market relied on ratings agencies to "permit" various entities to own various sliced and diced up ABSs.

This was an essential component of the systemic fraud, plausible deniability.  I mean who knew this CDO^2 was junk, it was rated Triple A.

Wed, 07/13/2011 - 17:12 | 1453635 Rynak
Rynak's picture


Wed, 07/13/2011 - 18:04 | 1453851 Cassandra Syndrome
Cassandra Syndrome's picture

Oh dear....

Wed, 07/13/2011 - 19:46 | 1454209 Rynak
Rynak's picture

Hey, it may not be more than a tactical tool to put pressure on raising the debt ceiling. But that doesn't stop it from sure as hell breaking the ice, that is the USA always being considered AAA no matter what. And that as i see it is "BOOM!" regardless of the involved agenda.

Wed, 07/13/2011 - 17:13 | 1453640 Zap Brannigan
Zap Brannigan's picture


Wed, 07/13/2011 - 17:14 | 1453641 kito
kito's picture

yes moodys, pressure our govt into more debt. its the right thing to do.

Wed, 07/13/2011 - 18:29 | 1453930 Arius
Arius's picture

really? can they do it? in my book this is a national security matter...

Wed, 07/13/2011 - 18:30 | 1453933 Jendrzejczyk
Jendrzejczyk's picture

Your turkeys and Santa suits comment earlier was the funniest of the day.

Wed, 07/13/2011 - 17:14 | 1453642 Parallax View
Parallax View's picture

Game over baby......

Wed, 07/13/2011 - 17:14 | 1453643 flaunt
flaunt's picture

This is just a ploy to scare the politicians into raising the debt ceiling.  Watch it happen quickly now.  Just like TARP.

Wed, 07/13/2011 - 17:25 | 1453691 freethinker4now
freethinker4now's picture

me think so 2

Wed, 07/13/2011 - 17:14 | 1453644 luigi
luigi's picture

Ah, no, it's theatre after all: just some pressure in wiew of the debt ceiling vote I suppose...

Wed, 07/13/2011 - 17:15 | 1453648 weltvermesser
weltvermesser's picture


money out of bonds into stocks

And the fed is gonne anyway continue buying.

Thought it might be bullish for Gold as well, but i will sell all my Gold tomorrow as i have leared today that Gold IS NOT money. and isn`t there more trustworthy person with greater insight than Bernake. 

Wed, 07/13/2011 - 17:16 | 1453651 caerus
caerus's picture

ES,NQ looking ugly what will tomorrow bring?  I know what tonight will bring...booze

Wed, 07/13/2011 - 17:16 | 1453654 spartan117
spartan117's picture

Something doesn't feel right about this release.  I figure the debt ceiling will be raised, and Moody will come out and reaffirm the Aaa rating for US debt.  "All is well!"

Wed, 07/13/2011 - 17:56 | 1453827 max2205
max2205's picture

Buffet owns Moody's. CDS. MUST. PAY. OFF

Wed, 07/13/2011 - 17:17 | 1453655 john milton
john milton's picture

this is what I call a mushroom cloud card, wb, bummer joint venture

Wed, 07/13/2011 - 17:17 | 1453660 Quintus
Quintus's picture

Wow.  Look how fast the fallout was contained.  S&P drops to 1305 and 'Somebody' stands ready to buy it back up again.  Gold surges to $1,586 and 'Somebody' starts selling to keep it under control.  It's almost as though somebody was waiting for this to hit the wires.  Spooky.

Wed, 07/13/2011 - 17:18 | 1453666 RobotTrader
RobotTrader's picture

Gold briefly rallied by $4, then the CARTEL puked on it and sold it back down.

Treasuries will probably rally again tomorrow, driving the 10-yr. yield down to 2.5% based on all this "fear" of deficits and default.  Lemmings are so conditioned to buy paper, too early for that momentum to be lost now.

If the debt ceiling is raised and a new jobs plan is announced, the Dow will rally 500 points easy.

Wed, 07/13/2011 - 17:35 | 1453732 Quantum Nucleonics
Quantum Nucleonics's picture

When will the political class and a sizable swath of America give up on the notion that we can "come up with a jobs plan".  Government can create the conditions where jobs are created, through less regulation and lower taxes.  What we mostly get from DC is more regulation and higher taxes, and correspondingly few jobs.


No jobs plan will work at this point.  The US's unemployment situation is structural.  Good luck retraining a 50 year old unemployed assembly line worker as a software developer.  That dog doesn't hunt.

Wed, 07/13/2011 - 18:41 | 1453971 steve3828
steve3828's picture


Wed, 07/13/2011 - 17:42 | 1453764 LooseLee
LooseLee's picture

Stocks are paper......

Wed, 07/13/2011 - 17:45 | 1453777 lieutenantjohnchard
lieutenantjohnchard's picture

but notice the 1099 processor doesn't step up and buy. he simply brays and continues to hide under his mama's widows and orphans stocks of mo, hd and vz.

Wed, 07/13/2011 - 17:20 | 1453667 caerus
caerus's picture

Also, USDX failed miserably to break resistance around 76

Wed, 07/13/2011 - 17:20 | 1453668 Wheatman
Wheatman's picture

+1000 What a fking joke the Teasury market is. All Ts bought by ponzi proxies in UK or ponzi proxy PDs. Yeah but treasureis as a safe haven against treasury downgrades. What a fking ponzi joke the USA is.

Wed, 07/13/2011 - 17:20 | 1453671 chunkylover42
chunkylover42's picture

This feels like the White House smells blood in the GOP waters and is going for the kill: raise the ceiling without forcing cuts in spending.  The cynic in me thinks the WH put this out just to force the Republicans' hand into accepting McConnell's plan.  They key is this little statement:

"If the debt limit is raised again and a default avoided, the Aaa rating would likely be confirmed."

Ignore the following part about a negative outlook without some credible deficit reduction plan, the whole thing buys time for the WH to let the economy improve to bolster the case for raising taxes rather than cuting spending.

Wed, 07/13/2011 - 20:57 | 1454453 Use of Weapons
Use of Weapons's picture

When Potus did an abrupt shift last week & basically rolled over to agree with the GOP on their stance, my nose wiggled. Thanks for semi-confirming a suspicion.

Having seen the theatre of taking down 'The Donald' and his birthers, current regime play much harder poker than the GOP realise, I think. No more looking downcast and guilty as you get busted for a BJ from an intern.

Wed, 07/13/2011 - 17:21 | 1453674 luigi
luigi's picture

I can't wait to hear the Teleprompter or even the berniecopter quoting Trichet... Hahaha! If that is a nemesis...

Wed, 07/13/2011 - 17:21 | 1453675 rsnoble
rsnoble's picture

Just a quick not before my siesta:  Several years ago when I was in real trouble with credit cards etc I threw my hands up in the air and defaulted.  Today things are much better. Or should I say way, way better.  Of course at that point in time Citibank wasn't allowed to kick in your door and I didn't have to worry about a nuke dropping on my house.

Wed, 07/13/2011 - 17:24 | 1453680 DollarDive
DollarDive's picture

So let me understand......  We're being considered for downgrade because we've got too much debt.  If we raise the debt ceiling and take on more debt, we won't be downgraded...right !

Wed, 07/13/2011 - 17:28 | 1453700 LawsofPhysics
LawsofPhysics's picture

Exactly.  Sort of like saying, agree with me or I will junk you.  Fuck the paper pushing thieves.

Wed, 07/13/2011 - 17:39 | 1453751 andybev01
andybev01's picture

Just like CC companies and the mystical, magical FICO scoring system.

Not enough debt, too much debt you're screwed, but good luck finding the sweet spot.

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