PIMCO: "U.S. Downgrade Heralds A New Financial Era"

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Sat, 08/06/2011 - 11:44 | 1530456 automato
automato's picture

It's not the economics of the AAA rating that matters and the scary thing is TPTB know this. It is just one more chink in the armor of americanism that the government has allowed to occur because they are all corrupt and could care less about people. These assholes will of course blame each other, George Bush, the Tea Party, too much pork, not enough taxes.....and the band will play on as the Titanic sinks!

Sat, 08/06/2011 - 13:23 | 1530907 malikai
malikai's picture

Sadly, yes.

I think we see one of two things. Either S&P found jesus and now has a conscience to deal with, or we're looking at a far more twisted manipulation of public opinion than the surface describes. For instance, it is obvious that SS/Medicare/Military will never be cut "willingly" by the political class for they are all compromised. However, if rates jump, and the economic sitation takes a serious downturn, we may get the sort of market forced austerity Schiff has been talking about all along. After all, if you're a politician, you don't want to go down as the guy who voted to "let the terrorists loose" or the guy who voted to "let granny starve". We know that's how that stuff would be spun, so it is what it is.

So, what if the market forces austerity? Then the politicians can spin it as they were forced to do it. Nevermind it was their own action/inaction which got us here in the first place. Now they MUST cut, and cut big, because if they don't it's game over. Welcome to interest rate austerity.

I'm not sure if that's how it will play out. This is just a thought experiment, really.

Sat, 08/06/2011 - 13:42 | 1530997 grekko
grekko's picture

Hallelujah!  It has finally come, no more waiting!  Silver & gold anyone?

Sat, 08/06/2011 - 20:11 | 1531981 IQ 145
IQ 145's picture

Frankly, I think it "heralds" the same fucked up financial era that was going on last month, or six months ago; but what do I know. 

Sat, 08/06/2011 - 12:01 | 1530461 Captain Benny
Captain Benny's picture

Nothing of substance to be found from PIMCO.  Makes you wonder what they're thinking over there.


Another of Jim Sinclair's Golden Pillars is met ... Jim was laughed at for calling $1650 at the time... Is this the STHF moment when America gets a kick in the pants?  http://www.youtube.com/watch?v=2N8gJSMoOJc  (I hate NIA's stock picks, but the video is spot on)


Sat, 08/06/2011 - 13:23 | 1530918 Cursive
Cursive's picture

@Captain Benny

Nothing of substance, indeed.  How about this pablum:

putting the country back on the path of high growth, job creation and financial soundness.

Keynesians think we need government debt to do this, Austrians know that public debt is a drain on growth.  Until the Keynesians capitulate, there is no hope for a bright outcome.  Good job PIMPCO, for overlooking the obvious.

Sat, 08/06/2011 - 20:13 | 1531990 IQ 145
IQ 145's picture

worse than pablum; baby diarrhea for comic book reading morons.

Sun, 08/07/2011 - 01:48 | 1532276 Silverite
Silverite's picture

Hey, my comic books have done better than the stock market, and some even better than PMs!  Make fun of Television Watching Morons instead, comix are kewl!

Sat, 08/06/2011 - 11:50 | 1530474 PY-129-20
PY-129-20's picture


Saudi stock market first to plunge on S&P downgrade          Saudi Arabia's stock market dropped 5.46pc on Saturday as it became the first exchange to react to the historic US credit downgrade.


Sat, 08/06/2011 - 12:03 | 1530526 oogs66
oogs66's picture

saudi market was closed on thursday and friday.  I suspect at least part of this is catching up to the massive beating stocks took those days.  the $5 drop in oil since the last time they were open might also have an impact

Sat, 08/06/2011 - 12:21 | 1530599 Kat
Kat's picture

As the poster above noted, the Saudi market was closed on Thursday (when the S&P dropped 5%) and Friday.  98% of the Saudi economy is petroleum - and that has tanked.  The fall in the Saudi market reflected what happened in world markets.

It doesn't look like there was any reaction in the Saudi market to the downgrade per se.

Another point:  The news was leaked to the market throughout the day.  The S&P basically made it clear that the downgrade was coming.  Everyone on the street knew it was coming that evening.

Personally, I think that if the market reacted badly to the leak, the S&P would have held off on the downgrade or nixed it altogether.  But, the market closed unchanged and the Treasury sell-off was tiny - particularly considering the huge run-up in Treasurys all week.

Sat, 08/06/2011 - 13:02 | 1530821 slaughterer
slaughterer's picture

Futures and AH trading was not significantly affected in US markets when the downgrade was issued.  I observed nothing more than a .5% move.

Sat, 08/06/2011 - 13:05 | 1530833 ZeroPower
ZeroPower's picture

Are you trolling? The only important index that matters (Europe was closed) was the S&P contract and it was long closed by 430EST on friday much before the official news hit. So no impact could be seen, but i assure you there will definitely be on.

Sat, 08/06/2011 - 14:59 | 1531362 Kat
Kat's picture

TLT, long bond ETF, continued to trade until 8 pm on Friday.  It was up 15bps.

While the SPUs were closed SPY traded until 8pm Friday and it was down 50 bps.  Of course, the stock market was up 2% and down 3% within minutes on Friday.  It's jittery. 

The problem is that there are no good alternatives to Treasurys.  There are other AAA rated sovereign bonds, but no market is as liquid and large as Treasurys.  The U.S. Treasury rates are set by the market, not the ratings agencies.  We are the cleanest dirty shirt.

Sat, 08/06/2011 - 15:02 | 1531375 Kat
Kat's picture

TLT, long bond ETF, continued to trade until 8 pm on Friday.  It was up 15bps.

While the SPUs were closed SPY traded until 8pm Friday and it was down 50 bps.  Of course, the stock market was up 2% and down 3% within minutes on Friday.  It's jittery. 

The problem is that there are no good alternatives to Treasurys.  There are other AAA rated sovereign bonds, but no market is as liquid and large as Treasurys.  The U.S. Treasury rates are set by the market, not the ratings agencies.  We are the cleanest dirty shirt.

Sat, 08/06/2011 - 13:03 | 1530825 ZeroPower
ZeroPower's picture

Regarding the downgrade news, it was first heard around midday (London time) but none of the traders here believed it. I.e. 'noone has the balls enough to downgrade the Motherland'. Unless people had specific insider knowledge, i doubt many trading desks acted on this stuff, certainly not any PMs who never trade off rumors unlike prop and desks taking flow orders. To that latter end, we saw lot of stuff coming through on the credit side, but the MMs had widened their b/o enough to cushion any sort of illiquidity that could have occured otherwise on the very volatile day.

Next step is to see how futures react tomorrow night along with Asia.

Sat, 08/06/2011 - 13:52 | 1531060 Kali
Kali's picture

"none of the traders here believed it".   I believe that.  Reminds me of a large corporate customer I told would have to pay cash cuz they never paid their invoices in a timely manner, had to pull teeth to get paid.  The fuckhead ivy league VP said to me " no one has EVER cut us off!  How can you do that?  We will not honor your invoices anymore!"  Fuckhead didn't get I wouldn't be invoicing them anymore. Entitled fucks, of all persuasions, have a CD moment when their entitlements are denied.

Sat, 08/06/2011 - 15:19 | 1531407 Kat
Kat's picture

Yes, but S&P has been telegraphing it for weeks and (hopefully) your traders also use their own internal credit research instead of relying on the political oligopoly of the "our probability of the entire U.S. housing market declining at the same time is zero because it's never happened before even though the national market never went up before either" ratings agencies.

It's not as if the objections the S&P lists are news to the market.  The S&P provided no insights to the market.  Yet, the Treasury yield is down 25 bps over the past week.  Europe is falling apart, which means that the U.S. is the tallest pygmy and there will probably be a flight to Treasurys again next week.

The stock market is another story.  But, an outflow from Europe could also boost the U.S. equity markets - even if that effect isn't immediate.  Maybe.  I covered my deltas and I'm long volatility.  That's pretty much my only opinion about the equity market.

Sat, 08/06/2011 - 16:04 | 1531476 youngandhealthy
youngandhealthy's picture

@ZeroPower....do your homework. Credit Swiss paper were "heavy" sellers at the ES pit form around 9:50 EDT. That instantiated the first wave of selling Friday. Sure they know.....

Sat, 08/06/2011 - 20:22 | 1532004 IQ 145
IQ 145's picture

Very rare opportunity; when the news actually corresponds to something you can do and use; and the contract is already at too high a price and overbought. Bingo.

Sat, 08/06/2011 - 20:17 | 1531997 IQ 145
IQ 145's picture

Short the long bond contract on the CME at the opening. it's already grossly overbought and into tough overhead resistance; this market is just saying; "Want some free money, short me."

Sat, 08/06/2011 - 20:20 | 1532001 IQ 145
IQ 145's picture

It's a gift from God,(whatever); just short the fucking contract on the opening. It's free money.

Sat, 08/06/2011 - 11:52 | 1530478 Milton Waddams
Milton Waddams's picture

Since 'analysts' don't think it is happening, it is virtually guaranteed to happen.  Maybe a few punches get thrown before it happens, but it'll happen nevertheless.  It's been in the cards for more than half a decade.    


Xinhua called for the printing of US dollars to be supervised internationally and repeated China's contention that a new global reserve currency might be needed.

Analysts say neither suggestion is likely to happen.


Sat, 08/06/2011 - 11:51 | 1530481 Chuck Bone
Chuck Bone's picture

You can dress it up any way you want. In the end, it's simple logic. When you borrow, as we have done over the past 30 years in order too boost GDP (and gotten less GDP for each $ borrowed each successive year), you get more in the present and less in the future. We are now in the future. It's simple exponential math. If debt grows faster than GDP, which it has for decades, then there is no way to "grow our way out of it."

At some point one is forced to stop the borrowing and pay down the debt. Of course no one tells the truth about what this actually means: an at least 10% hit to GDP as the so-called stimulus masquerading as growth disappears. Watching BBG TV last night, every single asshole they brought up was singing the "more short-term stimulus is needed" tune. Well, that's what you said in 2008! That's what you said in 2000! You can't paper over the simple fact that we are NOW facing the fact that we pulled forward demand for the past 30 years through debt-financed deficit spending, and that we actually have to pay that back now.

When you borrow, you get more in the present for less in the future. Welcome to the future.

Sat, 08/06/2011 - 12:18 | 1530589 Cleanclog
Cleanclog's picture

Yep, we have debt saturation, not just in the USA but worldwide. Banking systems, households, governments. There is insufficient economic engine to surmount this mountain (or quicksand bog) of debt. Repudiations, write downs, forgiveness and living smaller is the only exit strategy with a chance.

Sat, 08/06/2011 - 12:40 | 1530700 Kat
Kat's picture

You mean the long run is here?  Oooooh.  Don't tell the Keynesians.  They assumed we'd all be dead.

BTW...GDP is a horrible measure of economic prosperity.   It's just spending.  There is so much it doesn't capture, but it's so simplistic that even a few politicians understand it.


Sat, 08/06/2011 - 15:38 | 1531437 Diogenes
Diogenes's picture

They are all dead. Keynes, Roosevelt, Atlee and thousands of others all managed to skate with the swag before the SHTF.

Sat, 08/06/2011 - 12:52 | 1530767 Athemos
Athemos's picture

Well that's what happens when you get off the gold standard and onto the debt standard.

Sat, 08/06/2011 - 20:24 | 1532005 IQ 145
IQ 145's picture

Yeah; reality is a bitch, isn't it?

Sat, 08/06/2011 - 11:51 | 1530482 Caviar Emptor
Caviar Emptor's picture

The fight is just warming up. Everyone will blame, nobody will want to take a hit

Sat, 08/06/2011 - 11:52 | 1530485 disabledvet
disabledvet's picture

yeah it's a "new age" all right with gold prices still surging, silver soaring and oil still running the so called global economy into the ground. a veritible "victory" for the epononymous "New World Order." we shall see how the Asian "success stories" open Sunday evening. Methinks "rising above it all" is fast becoming more than just some philosophical joke at this point. and again i renew my call for a draft. i think it is safe to title our Zero Hedge saga "FIATSCO!" at this point.

Sat, 08/06/2011 - 11:54 | 1530488 Bam_Man
Bam_Man's picture

The real insult here is that France now has a higher credit rating than the U.S.

Sacré bleu!

Sat, 08/06/2011 - 12:23 | 1530618 falak pema
falak pema's picture

but, but, but they make good chardonnay to take the bitter taste away. Go long champagne!

Sat, 08/06/2011 - 11:57 | 1530489 Bam_Man
Bam_Man's picture


Sat, 08/06/2011 - 11:54 | 1530492 CapedCrusader
CapedCrusader's picture

Pimpco has been decimated by its short treasury and long Italy positions.  These are a bunch of shysters.  I wouldn't give them a plug nickel.



Sat, 08/06/2011 - 11:57 | 1530499 gwar5
gwar5's picture



Hey, if they we spiral currency values down simultaenously, then maybe we can spiral down our credit ratings all together and nobody will notice either.

NWO time, Bitchez! 

That's what they all mean by "new financial era", etc, etc.

Obama has killed America.

Sat, 08/06/2011 - 12:45 | 1530729 Pure Evil
Pure Evil's picture



America died a few decades back, think sometime around 1971, they've just been covering up the stench of the decomposing corpse with bling-bling like materialism and conspicuous consumption.

Only now are some willing to come to grips with the fact that the corpse is now nothing more than a gelatinous ooze.

Sat, 08/06/2011 - 20:28 | 1532010 IQ 145
IQ 145's picture

Yep; 1971. the little date that everyone overlooked. When they gave China most favored nation status; I almost shit myself. Of course, it all started when the professional snipers took out JFK.

Sat, 08/06/2011 - 11:58 | 1530503 machineh
machineh's picture

Zerohedge featured an excellent article posted on 07/20/2011, about CDS implied spreads. It correctly forecasted a downgrade for the US.


France was lumped in with its AAA peer group, which has now shrunk by one member (the US).

With the French-German yield spread having widened to 84 basis points last week, it would be interesting to know the latest reading on what French CDS spreads imply that its credit rating should be.

If 'FrAAnce' gets consigned to the periphery instead of to the mighty Teutonic core, the euro experiment is OVER.

Sat, 08/06/2011 - 12:47 | 1530647 falak pema
falak pema's picture

To be or not to be the euro queen, is the question that MERKEL ASKS herself. Its a game changer. For the EU as a whole. If the USD really starts spinning down and there is a consolidated cabal to search for a new reserve, then the Euro will be fortified, by the chinese and russian nest eggs. How the market regulation rules will be changed if the FED and US government get sidelined in the new financial architecture is what the chinese are asking themselves. Merkel/China/Russia (for its RM), plus a weaker USA is what the NWO will be if the US tanks economically. Its all pie in the sky as nobody knows how the US political system + WS Oligarchs will play their cards. In its current gridlocked state in DC it is a bonus for the other side. 

But as the clock turns, it looks like Merkel will find it difficult to swallow the Italian cum Spanish monster debt. Ciao, ciao euro queen if this is true.

Sat, 08/06/2011 - 12:00 | 1530504 machineh
machineh's picture

deleted duplicate post

Sat, 08/06/2011 - 11:58 | 1530506 Bam_Man
Bam_Man's picture

"Deficits don't matter."

Sat, 08/06/2011 - 11:59 | 1530510 plocequ1
plocequ1's picture

Dr Pretorius: " A new world of gods and monsters"

Sat, 08/06/2011 - 12:01 | 1530512 johngaltfla
johngaltfla's picture

So when does PIMCO get downgraded? After all they invest in all the crap in this country which is now up for further downgrades...

Sat, 08/06/2011 - 12:02 | 1530520 oobrien
oobrien's picture

Fuck PIMPCO in its hedge-fund ass!

Let's start being patriotic Americans again!

Fuck Wall Street!  And fuck the multi-national corporations!

We've done it before. We can do it again..

Let's love our country, and fuck the rest.


Sat, 08/06/2011 - 20:30 | 1532014 IQ 145
IQ 145's picture

wow, you're really out of your mind.

Sat, 08/06/2011 - 12:07 | 1530543 wang (not verified)
wang's picture

Gross was talking bad about Fraance on Friday



also not normal for Blooomberg to be so unflattering of the Pres this image from their current headline


Sat, 08/06/2011 - 12:08 | 1530549 MobBarley
MobBarley's picture

Germany would withdraw from the ESFS except in the backrooms they're

discussing a new form of European Conquest unt German Superiority

with glee. I foresee a great deal of German tourists in Ireland, Spain, Portugal, Italy, Greece and France soon.


Sat, 08/06/2011 - 12:09 | 1530554 gwar5
gwar5's picture



Hey, if they we spiral currency values down simultaenously, then maybe we can spiral down our credit ratings all together and nobody will notice either.

NWO time, Bitchez! 

That's what they all mean by "new financial era", etc, etc.

Obama has killed America.

Sat, 08/06/2011 - 12:10 | 1530555 CombustibleAssets
CombustibleAssets's picture

My opinion of the Ratings agencies has gone up another notch.

They're actually starting to grow a pair.

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