EURUSD

Interesting view, however, a correction is in order not that it matters a whole lot in the scheme of things. It was during the Clinton administration when the mortgage derivates went full flower. Clinton, to his regret, wishes he would not have ignored the warning signs. It was Bush that tried to reign in this potential disaster. He rightly thought that fanny mae and freddy mac were out of control and, of course he was right. The bull headed congress voted him down multiple times. But I agree that Bush did not control the spending as he should. He let congress have virtually anything they wanted. Now when a house gets repo'd in California, France, England, or anywhere else feels the pain along with U.S..

Israel stock market.(open on sunday ). it had to be stopped because of the fall.

several hours later ,how about Tokyo, HK, ???!!!

dubai down 3.7%, qatar down 2.5%...
and saudi-arabia down 5.46%...

i do not know they all open market on sunday . will BOJ do something AGAIN? let's c.

I agree with ya on the Fannie Mae and Freddie Mac thang...There is no doubt the entirety of this situation went waaaaaaaaaay to far before anybody really had a good serious look at the books...or perhaps there were too many padding their own back hipsters to even really give a shit.

My ideas go along with strengths and weakness, or value vs perceived value.

New houses with $60k cars parked out front of every "Sip N Save" gas jockey living the American Dream under the Clinton Admin, was certainly no saviour for the economy...

Hello Fan, Meet Shit.

At the same time, the idea of economic stimulation through the use of rolling out the "Big War Machine", by the Bushes was larger on the, "Whoops, that didn't work", scale. What started out as defending national pride and saving the American way, turned into an all out frenzie of bum fuckery for all the 'have nots'.

So busy waving flags that nobody seemed to realize that the dreams were getting lost like the fading of clouds. And while repartation was demanded over the 9-11 events and the world threats by Al-Qaeda, this hunt for the cave dwelling hate monger turned into a money funneling project of mass proportions. A diversionary tactic to keep the eyes off of the real problems on home soil by inflating the importance on the hunt for 1 guy.

If ya got kids, this relates to a tantrumed child in the backseat of the Suburban with the parent pointing out the window saying, "Hey Sussie, look at the Reindeer".

You want the truth?

You can't handle the truth...

None of us can. It is easier to sit back, armchair quarterback history with the use of 20/20 goggles and pretend shit is getting better, whilst cautiously tucking a few bucks into the mattress incase things get worse.

We are the sheep to "Beyond your Wildest Dreams", Sheppard, and now that the Ether is starting to wear off, are already in line to take the next hit...

But which was it again?

The blue pill or the red one?

I did. Got tired of same bs.... j/k

You are spot on with many things. Yes I would agree that the war turned into a major cluster f*ck. Being a US citizen, I'm tired of my country playing the nanny of the world. Our own government is our biggest enemy right now. We have more oil in our country that we could be completely independant and even export but congress is too concerned with the snail darter and perceives if we do anything remotely related to energy independance we'll destroy the earth and ourselves. We have children now running our country spewing out endless rules on a daily basis. The Bush's, the Clinton's, or even the Obama administration is really not the issue. It is all this pretend money we are producing out of thin air and being contolled by a private entity (Federal Reserve) that is not accountable to the American people.

Thanks Clogg's. Very impressive & helpful.

just for info...



This Is What Happens After A US Downgrade



So, Who Owns Treasuries?

The owners of U.S. Treasury's are what we need to think about when we consider a reaction to a downgrade. The first thing to notice is that the Federal Reserve holds 14 percent of U.S. government debt. That's one large holder unlikely to sell because of a downgrade.

Insurance Companies: Don't Expect a Fire Sale

Most insurance companies are required by law to hold a huge portion of their portfolios in very safe and very liquid securities. They won’t be forced to sell U.S. bonds in the event of a downgrade, however, because they’re almost always allowed to simply assume the safety and liquidity of U.S. Treasury's—regardless of how they’re rated.

Take New York’s life insurance law: It issues blanket permission for life insurers to own obligations issued by “the United States of America or any agency or instrumentality thereof.” There’s no ratings requirement at all.

Money Market Funds: Just Keep On Holding On

Money market funds are required to hold highly rated securities. Even so, they are unlikely to be forced to sell in the event of a U.S. rating downgrade.

Regulations allow for the securities held in money market funds to include a broad band of ratings—from triple-A to single-A. The U.S. would have to be downgraded several notches—far beyond what either S&P or Moody’s have discussed—before regulations would require money market funds to shun Treasury's.
Pension Funds: A Mixed Bag

Wells Fargo conducted a survey of the largest public pension funds in the U.S., and found that some funds might be forced to sell Treasury's in the event of a rating downgrade.

“Even so, federal, state and local retirement funds hold only around 3 percent of the outstanding U.S. government debt, so any forced selling at public retirement funds would likely have a negligible effect on the broader market for Treasury's,” the Wells analysts concluded.

What’s more, pension fund experts say that if the market becomes disorderly and prices are pushed too low, it’s unlikely that the fund managers would sell. They could hold the funds and wait for calm to return to markets.

Foreign Holders: Nowhere to Go

The most significant group of U.S. bondholders are foreigners, who account for 46 percent of the country's outstanding government debt.

Foreign U.S. bondholders include sovereign governments and central banks—many of whom are subject to few requirements, if any, when it comes to credit ratings. Traditionally, they invest only in highly rated securities, but as a practical matter they have a lot discretion in what they can hold.

First and foremost on their minds will be the question: Are U.S. government bonds still the safest and most liquid securities on earth?

The answer is likely to be yes—there aren't any practical alternatives.

The EU lacks a unified public security. Germany, partly as a result of its fiscal prudence, lacks the volume.


Germany Bonds Rally

It seems likely that the German bonds (bunds) would rally, at least on a relative basis to U.S. debt, in the event of a downgrade. Some investors will seek shelter and diversification, and Germany is one of the few nations that can offer a safe alternative to U.S. bonds.

The relative small supply of German debt could create a squeeze, however, if investors push into German bonds.


Chinese Bonds: A Question Mark

You might expect that Chinese bonds would follow the same track as German bonds. Don’t be so sure.

While its true that some of the same factors apply—apparent safety and lack of supply—China’s government is a huge holder of U.S. Treasury's.

If you’re afraid of Treasury's, turning to China’s debt makes little sense.


Money Market Funds: Breaking the Buck?

It is possible that a decline in the value of U.S. Treasury's could cause some money market funds to “break the buck” —see their net asset value decline below a dollar. This could cause some nervous investors to withdraw their cash, especially if they anticipate needing it in the short term.

But investors who do not need the liquidity would probably be wise to ride out the storm, since it's unlikely that the funds would stay below a dollar for very long.

Financials Get Downgraded

It’s almost certain that large, too-big-to-fail banks would get downgraded following the downgrade of the U.S. credit rating. These banks currently enjoy higher ratings than they would if not for the perception that they will be bailed out by the government if they get in trouble. If the U.S. debt is riskier, so are the banks backed by the U.S.

If it should happen, this could pose problems for some banks, because it would likely raise their borrowing costs. The most thinly capitalized banks might become distressed.

A Capital Crunch for Banks?

Some analysts fear that a downgrade of U.S. debt would force banks to raise hundreds of billions in new capital. The analysis works like this:

Banks aren’t required to hold any capital at all against U.S. Treasury's, because the assets are considered risk-free.
A downgrade would mean these assets are not risk-free, which would mean that banks might have to set aside capital for these assets.
Banks lack adequate available capital to reserve against their holdings of Treasury's, so they’d have to come to the market to raise new capital.

This outcome is far from certain. It may not even be plausible.

Regulators at the Federal Reserve would likely agree to forebear from requiring banks to hold additional capital against Treasury's—which would eliminate the need for capital increases.


Junk Bonds and Stocks Sell Off

A downgrade of the U.S.'s debt rating could cause a sell-off on the riskiest side of the bond and stock markets. Investors who discover that their portfolios of triple-A rated U.S. Treasury's are now considered technically riskier might decide to rebalance to reduce risk.

The easiest way to do this would be to sell the riskiest portion of your stock and bond portfolio. Since you’ve lost the safe side of your portfolio, you ditch the risky side.


A Collateral Crunch

U.S. Treasury's are used to collateralize all sort of obligations, including margin requirements, short-term loans, and derivatives.

Counter-parties may be able to require those on the other side of their transaction to provide more of the downgraded bonds as collateral-backing obligations. This could slow some transactions and make markets less “efficient” than they might be otherwise.


Treasuries Rally?

Perhaps the most surprising result of a downgrade could be a rally in U.S. Treasury's.

Investors selling off riskier assets would need to put the proceeds somewhere, and bonds are likely to benefit. The need to provide more collateral to counter-parties would also increase the demand for Treasures.

The old rule that investors buy Treasuries when seeking liquidity and safety might still apply, creating the very odd effect of U.S. bonds rallying in the face of a downgrade.


A Fed Rescue?

The Federal Reserve has a dual mandate: price stability and full employment. Anything that threatens to destabilize markets would likely provoke a response from the Fed.

Some possible responses:

Making it very clear that the Fed will continue to accept U.S. Treasury's as collateral for every type of transaction, including the discount window.
Expanding the balance sheet even further and buying bonds from any "forced sellers."


Government Backstops?

The U.S. Treasury and the Federal Deposit Insurance Corp. (FDIC) could provide backstops to almost anything they see as irrationally under stress, such as money market funds, bank debt, and insurance company obligations.

The traditional arguments about moral hazard wouldn’t apply, since the government likes the kind of moral hazard that encourages people to buy its debt.


Look at Japan

S&P downgraded Japan's credit rating in 2002. Many investors figured it would mean that Japanese bond prices would fall and interest-rates would rise. They rose a bit—but far less than the doom-sayers thought.

Betting against Japan's bonds became known as the "trade of death," because it doomed so many people.


We Don't Really Know

The most important thing to keep in mind is that there’s a technical term for people who tell you that they know with 100 percent certainty what will happen in the event of a downgrade.

We call them "liars."

We’re in unprecedented territory, so all we have are educated guesses. Investors need to be cautious, agile and well-informed to protect themselves from unexpected outcomes.

The one thing we know for certain is that there are likely to be surprises ahead.

http://www.businessinsider.com/this-...s-treasuries-1

will be in Gold the refugy....i think Gold will make new highs!

I see he's eying you from down below right now!

Still trying to get up my @rse unsuccesfully I guess. The kid is useless but entertaining at times.

Probably just some scalps. These are not good times for daily charts... lol.

Admist all the 'panic' and fear going on...I still am biased short until we clear 4365.

I aint skurred. lol...

need new episodes. I hate re-runs...

hehehe

Think he fakked off now. Probably broke his heart to read this post...
Nice one, by the way...thorough!

I share the same sentiment on a lot of what you said. Hadn't thought about some of it, because I just don't/won't trade it. Gold (Silver) and a few FX pairs is all I'll be trading.

There really does seem to be a perfect storm brewing. Perfect for what, I'm not really sure yet! EZ in a lot of trouble. Was always talk around that Italy would be the back-breaker...we'll see. The pollies will certainly be earning their money in the coming days and weeks...not time for fakking about...that means you Berlusconi!

Cheers clogs!

Total collapse of capitalism maybe?

Haha would be a good show! You reading what economists are saying about the frogs?

Will definitely be interesting.

I'm changing my default screen layout for the next 24 hours or so. I'm going to dedicate one monitor to any instruments I'll actually contemplate trading (not many). The others will have loads of instruments open so I can just observe as much of what happens as possible...just for "first-hand historical experience" in the future. Just want to see how much of an "everything-you-know-is-wrong" effect there may be.

Small and tight for me tonight!*

*That's what I said!

hehehee... yep. I may do as another suggested here and just play with my test micro account. I think there is only about 300$ bones or so setting in it... but it's the account I use to test strategies with live cash, even if it is a wee bit. Going to be crazy regardless

I might have to take a job in that Martian water factory. Pay's shite...but at least there's water!