Shocking: US Sunked from AAA to AA+
We had an exciting week last week. You should by now know that US is at risk of diving into a deep recession soon.
^ President Obama: Mmm… no more AAA? You must be kidding me.
Last Thursday we had our worst drop in DOW since 2008’s subprime mortgage crisis. The DOW went to the lowest of -8% before ending the week of bad news with -6%. When we Malaysian woke up on Friday, KLSE join the bear rush and ended the Friday with a -2% retreat.
^ Financial graph from Yahoo! Finances
America continued their Friday with rebounce only to be hit by another uppercut. Standard & Poor’s downgraded US credit card from brilliant AAA to AA+. Not just any AA+, its AA+ with negative outlook.
“United States of America Long-Term Rating Lowered To ‘AA+’ Due To Political Risks, Rising Debt Burden; Outlook Negative” – Standard & Poor’s official statement.
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AAA-rmageddon!
“NIA is absolutely shocked by this. What shocks us is just how long it took them to make this downgrade”, said National Inflation Association.
Who is with S&P’s AAA now?
18 countries. Australia, Austria, Canada, Denmark, Finland, France, Germany, Guernsey, Hong Kong, Isle of Man, Liechtenstein, Luxembourg, Netherlands, Norway, Singapore, Sweden, Switzerland and United Kingdom.
Who else is AA+?
2 countries. New Zealand with stable outlook. Belgium is US’s mate in negative outlook camp.
China?
AA-
Malaysia?
A-
What’s AAA?
EXTREMELY STRONG capacity to meet its financial commitments.
What’s AA?
VERY STRONG capacity to meet its financial commitments. It differs from the highest rated obligors only in small degree.
What’s A?
STRONG capacity to meet its financial commitments but is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligors in higher-rated categories.
So?
It is going to be a long week ahead. You might wanna make another mug of coffee and continue reading the following recommended readings.
Let’s ride!
Recommended Readings:
Wealthcycles.com: What does the S&P Downgrade of the United States mean?
Reuters.com: United States loses prized AAA credit rating from S&P
Huffingtonpost.com: China Blasts U.S. Over Credit Rating Downgrade, Debt ‘Addiction’
Politicalmetals.com: BullionVault’s 24×7 trading platform may offer some clue on what’s ahead for gold on Monday
References:
Reference #1: http://www.standardandpoors.com/ratings/articles/en/us/?assetID=1245316529563
Reference #2: http://en.wikipedia.org/wiki/Standard_%26_Poor%27s
Reference #3: http://en.wikipedia.org/wiki/List_of_countries_by_credit_rating
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