Moody's Next To Slash U.S. Debt Rating

Who could have seen this coming? Just 3 months after Fitch downgraded the U.S.’s credit rating, Moody’s is in line to be next on the list.

Hilariously, the downgrade comes after a Friday which saw markets, propelled by only a small number of stocks, rally 2%, despite the nation’s worsening fiscal situation that even Moody’s, who has had a AAA on the U.S. since 1917, couldn’t ignore.

Friday’s rally, like most of the S&P gains so far this year, was likely driven by just 10 stocks and, as Zero Hedge noted on Friday, NASDAQ breadth is at all time lows while just a handful of companies keep pushing the index higher.

In other words, for the people in the back, the nation’s last AAA rating is at risk and the stock market is an air pocket reliant on just a handful of stocks.

Moody’s remains the only rating agency — part of the big 3 with S&P and Fitch — that now maintains a AAA rating on the United States.

The rating agency cited the “nation’s diminished fiscal strength, undone by extreme partisanship in Washington,” according to CNN Business.

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“In the context of higher interest rates, without effective fiscal policy measures to reduce government spending or increase revenues, Moody’s expects that the US’ fiscal deficits will remain very large, significantly weakening debt affordability,” it said.

In other words: the U.S.’s spending is out of fucking control. Love, Moody’s.

But don’t worry, I’m sure we’ll see CNBC anchors, Janet Yellen and Warren Buffet do what they all did after the Fitch downgrade and erroneously tell Fitch they are imagining things, and that all is fine and well here in the U.S. Hell, remember when CNBC brain trust Tim Seymour said something like he thought Fitch’s downgrade was based on “no specific data”? Good times.

United States Gross Federal Debt to GDP / TradingEconomics.com

Anyways, Fitch’s similar reasoning for the U.S. downgrade in August was also clear, with the agency citing “debt-limit political standoffs, an inadequate fiscal framework and a complex budgeting process”. James McCormack, Fitch Ratings’ managing director and global head of sovereign and supranational ratings, said earlier this year:

“It’s not just the debt limit. What we’ve seen in the United States is a steady deterioration in governance.”

Sadly, Moody’s cutting their outlook comes as no surprise to me, especially after last week’s horrific 30 year bond auction.

Last week I wrote about exactly why the 30 year auction was such a shit show here: Treasury Auctions Explained For People With Short Attention Spans

I also happened to publish a piece called “There’s No Easy Way Out Of This Debt Spiral”, which lays out the exact issue that the rating agencies are being forced to stare down the U.S.’s fiscal situation: There's No Easy Way Out of This Debt Spiral

I also wrote about a couple of tea leaves I’ve noticed over the last two weeks indicating the party in markets is coming to an end. I wrote that individual companies going bust would be first (WeWork, FTX, etc.) but that entire sectors would be next: Douchebag Dominoes Topple Towards Dow's Doomsday

Finally I commended regulators on the quick mop-up job they did with Sam Bankman-Fried and FTX and — again — why I think FTX is a badly needed reality check for markets: Sam Bankman-Badly-Needed-God-Damn-Reality-Check-Fried

Finally, here’s what else is new on the blog:

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