Blog Roundup
- Following Friday’s (Aug 5) downgrade of US credit rating, S&P is rumored to set France as its next downgrade target.
- France’s SocGen and UK’s Unicredit are rumored to be on the ‘brink of disaster’
- Europe pledged to use the EFSF to buy Italian and Spain bonds. This puts Germany, the only healthy economy in the Euroland, to pledge over 130% of GDP to bailouts. WIll German tax payers go for this?
- Italian government is scapegoating S&P by raiding their offices. Geithner follows his Italian counterparts by attacking the credibility of S&P’s rating downgrade. Ironically, when rating agencies needed to be investigated, the governments kept quiet. While rating crap CDOs as AAA, the rating agencies feared ‘loss of ‘market share’ and their bread and butter and went easy on Wall Street interests. Now that the rating agencies are waking up to the reality on sovereign debt, albeit a day late and a dollar short – literally, the governments are attacking the agencies.
- Bill Gross of PIMCO applauds S&P for its ‘spine’ in downgrading USAAA to USAA+
- Some market participants are expecting uncle Ben to arrive on horseback and miraculously save the world by announcing QE3. (I doubt if it is going to happen unless S&P correct by at least 20%).
- Oil is down on fear of global recession, and gold is up significantly (to above 1700) as a safe-haven asset. (I still believe that gold will settle down towards 1200 by the end of the year.)
