So much to cover, so much tied to each other. Wow, this is going to be a great week.
1. The downgrade of US debt by S&P is ridiculous. Since when can't the US print money to pay its bills? Is there really any risk of default? No. If you loan green slips of paper to the US government, they can always give you green slips of paper in return. Get it?
2. The S&P downgrade and possible downgrades by Fitch and Moody is payback for the Dodd-Frank bill which begins to reign in and regulate this industry. If you go to this page on S&P's website you can see how they refute some of the new regulations. For a quick history about the rating agencies you can go to this NPR Planet Money story. It is quite interesting to see that the federal government outsourced the rating of debt instruments to these firms and now wants to take that away. Someone isn't too happy with that. Also very interesting that the source of money of these firms were you and me, the buyer of debt, but now their revenue comes from the issuer of the debt. By the way, if the government doesn't issue any more debt then there are no more dealers creating/selling bonds and thus S&P, Fitch, and Moody have less to rate and thus less income. Now you know why Obama is saying it is the Tea Party's fault for the downgrade since we didn't issue enough more debt. And you can forget what S&P says that we need to balance our budget. Hogwash, they want more debt. Of course that won't sell to you, so they have to repackage it. Of course there could be another reason to do the downgrade...
3. With the downgrades making an excuse to topple the market, one has to ask why now? How about bank failure. After the TARP episode of 2008, and everyone clamouring to stop any more banker bailouts, what would happen to a bank if it were to fail today? Or at least get severely hammered that it didn't have the capital to exist anymore and desperately needed a suitor? Well, look no further than BoA's 20% decline today. That's the next ship to go under. Now the question is who will pick them up?
NOTE: The below is NSFW, but chalk full of good information.
Note: The above video was made on August 5th. They nailed the events of today (Monday).
If you skipped the video, here's the run down. JP Morgan is looking to swallow BoA. Welcome to the 1890's people. The 'Morg is back and running the show. They've got to work fast before the Tea Party steps up and wipes out their pols in the Congress, so brace for impact. Oh, and we'll all cheer about the 'Morg taking over BoA. Since after all that's the "free market" way of doing things.
4. The metals are heating up too especially with the information that China is a heavy buyer who are going directly to the miners. Hmm, I recently heard someone (RM) say they were investing in miners.
Wild and wooly. Hang on to your hats. This week should get real interesting. (I reserve the option of supplying an oops post later.)
As for the future? Never bet against the Fed (while it still exists). Thus, we're fire'n up the printing press, and we're having a party. Or at least trying to maintain equilibrium the Keynesian way. Until we can't float anymore.