Saturday, August 6, 2011

DOWNGRADE! WHAT'S NEXT?


Under cover of weekend darkness the dreaded and much telegraphed downgrade of the U.S....S&P, one of the three major credit-rating firms, downgraded its rating for US debt Friday night – a move that has the potential to further spook global markets and drive up borrowing costs in the US. The reason for the downgrade, S&P said, was congressional dysfunction. headlines CSM...

If you think this was all initiated by the rating agencies.......think again. This is the same group that was present giving triple A ratings to all of the debt and companies that were literally bankrupted in 2008. Where were they rating Lehman...AIG...Bear Sterns....GE...GM...etc...?? these banks and companies were loaded with toxic debt to the tune of TRILLIONS that was collapsing under the weight of home prices and they did NOTHING. It was leveraged to the tune of 100:1 in some of these institutions. The initial drop of only 10% in home prices left them immediately bankrupted but there was NO action by the credit ratings agencies to warn us before it happened....or during the initial home price collapse. Many of you may be asking the question of what effect this will have on the system from a practical standpoint. The Fed is totally prepared for this event. We are in a DELEVERAGING cycle from unprecedented massive debt. This deleveraging is being engineered as well as any central agency can manage a catastrophe. Right now they are going to continue kicking the can while the deleveraging continues in the real economy.

Our economy is going through a structural collapse and rebuilding that will last for a decade. We have no one politically managing the fiscal side of policy. It is a disaster. Anyone that looks at this as a blame game for the current administration alone (and they do deserve plenty of blame) is ignorant of the past 30 years of public policy that destroyed the regulations and allowed an out of control banking industry to pump hundreds of Trillions of ponzi liquidity into the world. The same people that oversimplify the current situation as a democrat or republican problem still don't recognize that the entire political system is completely corrupted now. All three branches of government are now controlled by the influence of the largest corporations and a handful of "elites" (as Beck calls them) that have managed world banks and countries for more years than Count Drakula has existed. You aren't going to change that and it will continue long after this current debt debacle is over.

There is sun on the other side of this storm but there will be many years of pain ahead for us. Turmoil lies in front of us and we cannot avoid that. Perhaps we do get a conflagration that involves many nations, but that isn't something I can do anything about. If it happens many of you will probably wave flags like you did on the last two wars thinking its "necessary" as the carefully crafted MSM machine goes to work on you creating another evil empire or dictator. Its funny isn't it....."evil empire" speeches by a former President now are so obvious in their objectives.

To the issue of near term effects of this downgrade. Very little. It just sets in place for the public to see that the system is working to "monitor" the "collapse".
You are welcome to jump on the short bus Monday morning but as most of you know that bus could go over a cliff in a hurry. If you play anything look to catch the short squeezes on Monday. Gold will continue to benefit longer term ....PERIOD!!

40 comments:

  1. Every trade has two events. One is in and the other may be diversification. I dedicate myself to seeing that clearly for you. A virtual reserve currency is coming. You will not be able to own or trade that virtual reserve currency as you have been able with the dollar. Gold will be attached to that virtual reserve currency via a broad measure of world liquidity. It will be something akin to a planetary measure of liquidity as M3 was in the past for the dollar. That linkage, which is not convertibility, will translate into price, but no central bank of any nation will need to add to or delete from their then reserves.
    The Goldmans of the world will invent OTC derivatives and maybe even a listed second derivative to speculate on word liquidity via the gold price. There will be no 1980 type collapse in the gold price. Over valuation which occurs in all bull markets might be by 20%. This will result in producing gold mining shares becoming the utilities of 2016 onward.

    Respectfully,
    Jim

    THIS is from Santa

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  2. Thanks so much Kliguy! Really appreciate your page and insightful posts. You'd be surprised at the types of people out there you are helping :)

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  3. Kli,
    My question yesterday was will the news hold on QE EURO
    Your answer: All BS and only temporary......

    Man if the following is true,

    http://www.zerohedge.com/news/it-just-went-bad-far-far-worse-germany-says-italy-too-big-efsf-save-refuses-carry-euro-bailout-

    Seems like a bigger S$%t Storm is on the horizon for Monday!

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  4. Hi Kli,

    Any suggestion on possible shorts?

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  5. Dung.....don't be thinking short on Monday I'll speak more on that.....

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  6. Shit storm on Monday is for the EURO...maybe heheheheh

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  7. KLI: I really appreciate your insight. You cut through the BS and give us more facts in one column than we get watching 3 hours of CNBC.

    Dung: BAC looks like a prime target for shorting. Down 8% on Friday on triple the normal volume.

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  8. A few comments from Phil's Stock World:

    He feels that the US knew the downgrade from S&P was coming. I believe in July/2011, S&P told the US that unless 4 trillion in cuts were found, they would be downgraded. Since our Congress/etc. voted on legislation that only provided for 2 trillion, the downgrade was not unexpected.

    He also points out that there are really not too many AAA countries anyway. The remaining are: Canada, Australia, and several of the European countries--and some of those should not be AAA. Perhaps their downgrades are coming.
    Also, only 4 major companies have AAA ratings. They are MSFT, JNJ, ADP, & XOM. There used to be 60 companies, but now only 4. These remaining 4 companies might POP Monday.

    He also warns about shorting. This downgrade may be priced in already. Also, he feels that a single rating agency downgrade won't significantly hurt the US. But if another comes along with a downgrade, the poop will hit the fan.

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  9. S&P downgrade mostly symbolic IMO, they're just stating what everyone already knew. Markets didn't seem to care much about months of BS about "debt default", I don't think the downgrade will be much of a big deal.

    There's speculation that fund managers will have to liquidate due to various laws and rules about AAA ratings but I have a feeling those rules can be bent and changed the moment they become a liability.

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  10. Hell if anything the market seemed sad when the "default" fearmongering went away, maybe this will cheer it up a little.

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  11. Market makes money on volatility...the decrease in the vix kills floor traders.....at least some players are happy.....GS definitely is happy.....long only MMs are in deep shit now and will cackle incessantly now as they did in 07,08, that we are in only a minor corrective phase.....

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  12. From Apmex, as of this posting:

    *Attention – Due to the uncertainty in the global precious metals markets, we will not be able to accept any additional orders until the global markets re-open in Asia. We expect to be accepting orders around 6:15 pm EST. Sunday August 7th, 2011, following the market open.

    Maple Leafs are going for almost $1750/oz. Holy crap! I wonder if gold is going to the moon on Monday.

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  13. Hmm Israel's stock market down almost 7%, my "this downgrade is no big deal" theory might have a few holes in it. Israel has it's own protests going on and this did involve circuit breakers (which IMO can be more frightening to investors than the triggering plunge). Let's see what Asia and the PM markets think tomorrow.

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  14. I'm still speechless that this scum of an organization seems to take no responsibility for aiding and abetting the banksters and putting this country and world in this position. I had a whole rant planned but I give up. On the funnier side of things:

    "The e-mail message that unleashed hours of debate between U.S. Treasury Department officials and Standard & Poor’s arrived at 1:45 p.m. on Aug. 5, just as U.S. and European stock markets were limping toward the end of their worst week since 2008.

    "Something didn’t look right to John Bellows, the Treasury’s acting assistant secretary for economic policy. He found what he later called a $2 trillion “basic math error” in the e-mail, a preliminary press release announcing S&P’s first-ever downgrade of U.S. creditworthiness."
    ...
    "S&P called back about 5:30 p.m. to acknowledge the discrepancy and changed the debt-to-gross domestic product numbers in the report, the person said. S&P told the Treasury that a majority of the credit committee had been made aware of the matter and had not changed their decision.

    At 6:20 p.m., Mary Miller, the Treasury’s assistant secretary for financial markets, left a voicemail with an S&P executive and said the firm’s analysis was inconsistent with one of the charts in the report, the person said.

    S&P reiterated to the Treasury around 7:15 p.m. that it planned to move ahead with the downgrade and sent Treasury officials the final press release around 8 p.m. It was sent to news outlets about 15 minutes later.

    Just before 9 p.m., a Treasury spokesman told reporters S&P had made a $2 trillion error.

    The firm’s reply came a few minutes after midnight with an e-mailed statement saying the rating was unaffected by the “change of assumptions.” "

    http://www.bloomberg.com/news/2011-08-07/dispute-over-basic-math-began-with-s-p-e-mail.html

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  15. They get paid for this type of analysis? lol

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  16. Armstrong posted about the down grade.

    on 8/1/2011 he posted this..

    http://www.martinarmstrong.org/files/USA%20Debt%20Downgrade%2008-01-2011.pdf


    on Saturday he posted this..

    http://www.martinarmstrong.org/files/Standard%20and%20Poors%20Downgrade%2008-06-2011.pdf

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  17. Like I say the rules can be changed the moment they become troublesome. Martin's second piece links to where the Fed says the bonds still count as AAA for legal purposes.

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  18. "Let me issue and control a nation's money and I care not who writes the LAWS or the RULES or the REGULATION.....for I OWN your dumb asses.....you are sheep and you will always be sheep!!!" .....unkown author..

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  19. For those of you who do not have experience with shorting individual stocks and like to play the short index ETFs, outside of DTO which has paid well since it hit low of 38 when Oil was close to 120, consider RWM. RWM goes thru less decay than double short ETFs, it's short small cap Russell2000:

    http://finance.yahoo.com/q/bc?s=RWM+Basic+Chart

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  20. Gold up 36 in futures.......hehehhehe

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  21. Looks like the boyz using the futures to try and set up cheap entries for Monday. Then they squeeze the shorts like a 3 year old with a tube of toothpaste. Hehehe

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  22. nnnnnnnnnoooooooooooooooooo..........ya think inlet???? hehehehehhehehehehehehe rideum cowboy

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  23. Gold is up 44. KLI, you and many others have been pushing gold for years now. I should have went long and went into a coma for a few years.

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  24. you guys are so jaded....have faith in people!!

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  25. doom n gloomers thats all you are

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  26. We do have faith Homer - all the faith in the world in the boyz and their intentions. hehehe

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  27. Whew!!! We may not understand what they do, but we do need to have faith they have the country's and world's best interests in mind.

    I watched inside job for the second time. What a bunch of scum. At least most of them refused to appear on camera, chuckle heads like Barney Frank appear and just don't realize they were a large part of it as well.

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  28. homer: the vast majority that voted for TARP were Democrats... Yet all the liberals at my work talk shit about the banks. hehe

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  29. Jay.....the Senate decides all do not get sucked into the dems vs the reps.....or they own you

    this was the vote breakdown for the original 08 tarp brought by the Rep..prez bush and the rep paulson sec treasury and the rep appt bernanke

    Republican 33 Yea; 15 Nay
    this was in the senate... there were 69 voting yes in the House INCLUDING....Paul Ryan....

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  30. During the March 18 broadcast of his nationally syndicated radio show, Rush Limbaugh falsely claimed that "[n]ot one Republican voted for this bailout. Remember way back in the fall, not one Republican voted for the TARP [Troubled Asset Relief Program] bailout?" He later repeated the false claim, saying, "Not one Republican voted for it the first time around." In fact, many Republicans in both the House and Senate voted in favor of the Emergency Economic Stabilization Act of 2008, which authorized the secretary of the Treasury to create the Troubled Asset Relief Program to provide financial aid to banks and other financial institutions. Indeed, on September 29, 2008, 65 House Republicans voted in favor of H.R. 3997, the original House vehicle for the act. After that legislation failed, on October 1, 2008, 34 Senate Republicans voted for H.R. 1424, the new vehicle for the act, and on October 3, 2008, 91 House Republicans voted for that bill. President Bush, a Republican, subsequently signed it into law.

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  31. make no mistake who runs BOTH parties....

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  32. Testify!!! The label does not matter. Who owns who is the question. While I believe they are one of the worst things to happen to politics, at least the tea party people have drawn a line in the sand and stand by a conviction. I think Ron Paul's original idea was superb, but the latest incarnation of the tea party has been corrupted. I do believe its too late, but maybe we can get folks in who don't tow the lobbyist line, cow tow to the banksters, etc.

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  33. KLI:

    TARP passage in 2008:

    The revised HR1424 was received from the Senate by the House, and on October 3, it voted 263-171 to enact the bill into law. Democrats voted 172 to 63 in favor of the legislation, while Republicans voted 108 to 91 against it.

    http://tinyurl.com/4haobn

    More TARP in 2009:

    Democrats: 241 AYE 10 NO
    Republicans: 19 AYE 156 NO

    http://tinyurl.com/dl3757

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  34. Way too late for tea party .....they were coopted by Dick Armey within 2 weeks of Santelli's rant. The PTB already recognized the threat.....they were then marginalized by inserting the kooks/wannabees into the party like Palin et al......easy to marginalize if you are called "radical" ....or "unelectable"

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  35. TARP is when I threw my blue team jersey in the trash and became a cynic. The best thing the American people can do is stop voting for the lesser of two evils. If all you see is evil, don't vote.

    I don't like the mentality of "voting is your duty, even if you're uninformed and apathetic, and don't even like the guy, get out there and vote like a patriot". We've poisoned our own system with this notion that voting blind or voting based only on fear is better than not voting at all.

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  36. I was part of the problem, voted for 2 bums I didn't believe in or care about because I was afraid of George W. Just one more brick in the wall keeping people like Ron Paul out of the system.

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  37. Jay.....the TARP vote was NEVER in doubt....the only doubt was how much horse trading for votes on both sides for its passage was going to be needed.....after the initial "failure" for public's consumption...the "swing votes" were quickly mustered. Only the "public" believed the outcome was in doubt or that "they" could influence their representatives.....

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  38. Morla.....I will never vote again

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  39. http://www.zerohedge.com/news/japan-rice-futures-surge-40-trigger-circuit-breaker-concerns-fukushima-radiation-will-destroy-c

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