Investors Are Piling Into US Debt, Not Out of It = Massive Market REJECTION of S&P

Chimichurri

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Mon Aug-08-11 10:29 AM
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Investors Are Piling Into US Debt, Not Out of It = Massive Market REJECTION of S&P

Once again: S&P declared that US debt is no longer a safe investment; yet investors are piling into US debt, not out of it, driving the 10-year interest rate below 2.4%. This amounts to a massive market rejection of S&P�s concerns.

The �signature� of debt concerns should be stock and bond prices both falling; what we actually see is those prices moving in opposite directions. And that�s normally the signature of concerns about a weak economy and deflation risk (see Japan, decline of).

What triggered economy fears? To some extent I think this is a Wile E. Coyote moment, with investors suddenly noticing just how weak the fundamentals are. Also, the mess in Europe.

http://krugman.blogs.nytimes.com/2011/08/08/aaauuuggghhh-market-commentary-edition/?smid=tw-NytimesKrugman&seid=auto

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BeFree

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Mon Aug-08-11 10:40 AM
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1. It seems assbackwards

Good thing is interest rates will be kept low. The interest paid on our debt is going lower!

But let's say that somehow inflation hits hard and goes to 8% a year. Those holding notes at 3% will lose 5% a year. Somewhere, somebody knows inflation is not on the horizon?

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Chimichurri

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Mon Aug-08-11 10:48 AM
Response to Reply #1

3. seems so. The economy is suffering from a lack of demand.

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Viking12

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Mon Aug-08-11 10:43 AM
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2. Where else are they going to go? Depsite the rating, it is still the safest bet in the world.

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ozone_man

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Mon Aug-08-11 10:56 AM
Response to Reply #2

4. That's right..

Interest isn't much, but it's still the safest place to be.

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Chimichurri

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Mon Aug-08-11 11:23 AM
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6. Despite the rating, we will always pay our bills so long as we can keep printing money.

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BlueCheese

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Mon Aug-08-11 11:09 AM
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5. It's almost as if S&P has no idea what it's talking about.

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ThomWV

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Mon Aug-08-11 11:50 AM
Response to Original message

7. At the moment the DOW is down 307 points, looks to me like someone agreed.

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