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S&P Butchers Europe, Says France Has High Deficits, Spain Needs Additional Measures, And UK Rating Being Evaluated
Not sure how this is news, but apparently it is impacting spreads currently. S&P officials are heard saying that they are evaluating the UK (-1 to 77.5 bps) rating in light of the emergency budget, that Spain (+26 to 244) needs additional measures to meet fiscal targets, and that France (+3 to 80.75) has very high deficits. This will certainly not help once again surging European cash and CDS spreads. And does anyone remember Greece? As the chart below shows, its various spreads to all other European sovereigns are blowing out. Risk off in Europe, as the EURCHF just hits a new all time low of 1.3590.
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Downgrade, Bitchez
(had to give that a try. Sorry, Trav.)
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Don't be so gloomy. After all it's not that awful. Like the fella says, in Italy for 30 years under the Borgias they had warfare, terror, murder, and bloodshed, but they produced Michelangelo, Leonardo da Vinci, and the Renaissance. In Switzerland they had brotherly love - they had 500 years of democracy and peace, and what did that produce? The cuckoo clock. So long Holly.
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What is it lately with the agencies? I mean the rating agencies couldn't and wouldn't grow a pair if their life depended upon it for the past 20 years. And yet now, when the party's over and the final looting is about to begin, NOW they grow a pair?
Sounds to me like it's intentional, part of that final looting thingy.
It's the same thing as with housing. They're incapable of taking a stand and can't stand up to any criticism whatsoever, so they don't bother to stick their neck out and say something controversial until it's already so blindingly obvious to everyone that it can no longer be refuted.
They rate things how they are instructed to or they don't get work in the future. Major investment banks are short the euro right now, so they get the euro downgraded. When these banks were trying to sell CSOs and CDOs to investors back 2005-2007, they rated the securities high, how the major investment banks wanted. They rate in a way that continues to get them more business. They work for who pays them not for you.
They do the same today with structured products. Just look at JPMs CMBS offering [ok, to be fair, that is actually a good structured product so the rating is justifiable] or most recent GE CLO [credit card loans] which was also assigned with an AAA. The MOST recent BAC offering [CMBS/CMBO hybrid] is also getting an AAA [and thus is cheaper for the issuer to service it].
Rating agencies are just being cautious right now, and are testing the waters. The truth about securitization is; its the most necessary market requirement i can think of. Without it; there is no new credit available [due to the inability to spread risk across]. Pray, or whatever, that we see securitization picking up in the next 6 months or so; its the only thing that will save small businesses and consumers. Not to mention housing.
So be careful what you wish for; you might get it. Securitization is what carried the 03-08 boom on its back; not productivity, monetary policy or IR policy; it was securitization; and in the most recent GASB conference, the 4000 participants who work in the field unanimously said they see no higher volumes of SPs hitting the market anytime soon. You know what that means; insta-deflation [there is only so much FED can buy, and not because the FED lack the money, but because the world doesn't have nearly enough things in it which the FED could buy to counter-act the consequences of dead securitization market]
Next stop...the gallows.
Show trials first..
Dont see the point in in s&p stating the obvious, unless we get a huge euro rally now...
Economic and financial warfare?
maybe goldman are shorting the eurozone
Good thing we have our house in order.
Yes. Next to useless, like a dog that only barks away from home.
When are they going to tell us something we haven't already known since January? Everyone, inlcuding the US debt, should be junk status right now.
indeed jkruffin: it's beyond me how S&P and the other can be sitting around downgrading here and there without noticing the situation of the US.
I'm really naive, am I not?
Here are specifics from the UK austerity plan - I read these over and think the U.S. could not take the pain from even 1/3rd of these proposals. One side or the other of the aisle would be howling like a banshee. I know, let's start a committe to look at the issue!
http://www.fundmymutualfund.com/2010/06/united-kingdom-joins-austerity-p...
Britain announced the toughest cuts to public spending in decades and new tax rises on Tuesday in an emergency budget aimed at sharply reducing the country's record debts. The pain fell on shoppers who will be paying higher sales tax, wealthy people who will be hit for higher capital gains taxes, and banks targeted by a new levy. Even Queen Elizabeth II, who accepted a freeze in her support from taxpayers, will feel the pinch. There was good news for business, who will benefit from a cut in corporation tax from 28% to 24% over four years.
it's always the same - tax the spenders, tax the producers, tax the workers. But golly gee, we better not interrupt the welfare checks, the cellphone subsidies, food stamps; or otherwise impinge on the "disadvantaged" entitlement class.
Discretionary Spending is now everything EXCEPT the free-money handouts of entitlement expendatures (which invariably seem to consume the vast majority of goverment spending). I suppose they're afraid of the servants biting the hands that feed them?
It's about not disturbing the beaureaucrats who administer the handouts. If the meat axe really falls welfare payments will be cut to nothing before they fire or lay off a single government employee, even if it means there are 40 administrators for each recipient. I am not kidding, this is what has happened in other countries under "austerity programs".
RRA 223 = Rock River Arms .223?
The big story is China, not Europe
Well, after 2 years of a constant peg and a giant housing bubble combined with a big inflation one it appears that foreign investors and the Chinese that are able to take their money where starting to loose patience.
In an article published on April 29 Vice President of Shenzhen Development bank mentioned that deposits in banks were decreasing since many investors were rushing into the property market.
In a June 21 article their was a report that the major banks in China have been suffering from significant decreases of RMB deposits in the last c two months. The article also mentions that their was an even larger decrease of foreign exchange deposits.
An older article confirms this news and states that new RMB deposits fell dramatically in the major Chinese banks. It also quoted one of the Chinese bank officials mentioning that it is time to let the Yuan float more freely in order to attract foreign capital.
That is the reason why as reported at Zero Hedge China 1 Month Inter Bank Rate Was At A Multi Year High.
So foreign capital is rushing once again into China to get a quick return on capital. It seems to be a no risk bet. But there is no such think as a capital gain with no risk associated with it, and when the world discovers the risks associated with investing in China they will be in for a nasty surprise.
Source:
The End of The Yuan peg- China is Desperately Trying to Attract Foreign Capital in Order to Prevent a Banking Crisis
++ Dan. Gotta look behind a few curtains to find the real Chinese intentions.
If this is their real rationale, its even more $ bearish than other analyses.
$ and Treas down. US rates up. QE2 sooner. Gold to 1500 and beyond. Soon.
Now that everyone knows the rating agencies have been the "bag boys" for the investment banks for the past twenty years they are trying to be honest??
Up to something or maybe they cannot hide the obvious anymore.
Thank you for ZH ers.
The UK did make a step towards austerity today with her rise in VAT to 20% and her public spending cuts. So overall she is edging towards sorting things out. However for those interested in inflation and how international measures of it are becoming less realistic and less credible I notice that the notayesmanseconomics web blog spotted another move in this trend. You see indexation of benefits and tax credits and public sector pensions will in future be uprated by an inferior i.e lower inflation index.
"Let me spell out the implications of it on this years evidence. Currently CPI inflation is at 3.4% and RPI is at 5.1%. However this is not a one month fluke. Let me explain by showing the annual rates of change for the two indices from 2002 to illustrate my point.
CPI: 1.3%;1.4%;1.3%;2.1%;2.3%;2.3%;3.6%;2.2%
RPI:1.7%;2.9%;3.0%;2.8%;3.2%;4.3%4.0%;-0.5%
As you can see in every year RPI inflation exceeded CPI inflation up until 2008.
NB: 2009′s implications are not what you might think"
This is part of a world wide trend to convince us we have no inflation I think. For the full article http://notayesmanseconomics.wordpress.com.
FUKPIIGS?
The rating agencies are the signal corp of the marauding army of the big investors.
You forgot Rumania.
PIIGFUKRS
East European dominoes in today's Telegraph
http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/462352...
Apologies for post 427520 Telegraph article was Feb 2009
test comment.