Monday, June 14, 2010

Another day, another downgrade

Greek debt downgrade bites into stocks' rally

"Moody's Investors Service lowered Greece's sovereign debt rating to 'BA1, which is junk-grade status, from an investment-grade level of A3, citing concerns about risks associated with euro zone's IMF support package".

Posted by alan @ 06:45 PM (1670 views)
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7 thoughts on “Another day, another downgrade

  • Most financial experts expect a Greek default

    Roughly three quarters of economists, global investors and analysts expect Greece to restructure or default on its debt, according to surveys conducted for Bloomberg and the Wall Street Journal (WSJ).
    The grim poll numbers come despite the European Union and the International Monetary Fund intervention in the country and the European Central Bank printing hundreds of billions of euros to buy up eurozone government debt.
    The WSJ economist survey showed 43% saw Portugal as in the same predicament, followed by 37% for Spain, 30% for Ireland and 28% for Italy, compared with 16% for Britain. (article continues below)
    Only 23% of investors and analysts questioned by Bloomberg thought the eurozone would survive its recent bail-out without a default.

    SOURCE – http://www.fundstrategy.co.uk/markets/eurozone/most-financial-experts-expect-a-greek-default/1013329.article

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  • A Greek default would be a good thing. Finally the investors with the riskiest investments actually lose money. That’s the way it should be. Problem is in this country this hasn’t happened yet.

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  • This is what Ronald Reagan believes:-

    A new laissez faire era heralded by Ronald Reagan was based on his belief that government was the problem, not the solution. His goal was to cut the size of government while slashing taxes and unleashing the animal spirits of the free market. Reagan was a rhetorical genius. It is a shame that his soaring rhetoric did not match what actually ensued. The basis of Reaganomics was:

    Reduce government spending,
    Reduce income and capital gains marginal tax rates,
    Reduce government regulation of the economy,
    Control the money supply to reduce inflation.

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  • Thanks, Jack C. Clearly not a time for the UK to join the Euro.

    As for those travelling to France for a short holiday, should we buy those Euros now, or wait 3 or 4 weeks? It is looking like 1.20 to the £ at the moment (or 1.17 in the post office).

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  • Safe-haven U.S. Treasuries and gold prices also sharply cut the morning’s losses after the Greek debt downgrade. Spot gold fell $5.70 to $1,224.50 an ounce, following the Greek debt downgrade.

    Five years ago you wouldn’t see gold prices regularly quoted in Reuters news wires. Gold is definitely pushing into the mainstream. How long before the gold price is read out on the 10 o’clock news, alongside the FTSE and the currency rates?

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  • drewster – I suspect you could well be right

    Precious metals experts say investors are pouring money into gold instead of the euro following sovereign risk fears.

    Nicholas Brooks, head of research and investment strategy for ETF Securities, said there has been a strong demand for gold exchange traded commodities with $1bn bought in the past four weeks.

    He believes this indicates that investors are increasingly viewing gold as an alternative store of value as sovereign risk concerns have spread.

    He added: “Investors are reassessing the outcome of the euro and whether it is viable as a currency and a lot of them are thinking ‘gosh what shall I do?’ and then buying into gold ETFs, ETCs coins or bars. So as long as there is a sovereign risk and concerns over the structural outlook for the euro then gold will remain the number one alternative.”

    James Steel, senior vice president and metals analyst for HSBC, said: “Gold has outperformed every other asset since the first signs of crisis in 2007. It is seen as a ‘safe haven’ and we do not see demand going down anytime soon.”

    ETC trading volumes have risen sharply, to £2.04bn ($3bn) a week, according to ETF Securities.

    Precious metals have made up around 70 per cent of volumes over the past few weeks, with gold making up around 50 per cent.

    Trading in energy and industrial metals has also risen sharply, partly because flows into physically-backed gold and silver ETCs have tended to have little sensitivity to price movements.

    During periods of sharp price declines, flows have tended to hold steady, reflecting the longer-term strategic nature of holdings.

    SOURCE – http://www.ftadviser.com/FinancialAdviser/Investments/News/article/20100610/426b4da8-6f02-11df-a7a2-00144f2af8e8/Gold-demand-up-on-back-of-sovereign-risk–experts.jsp

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  • @Drewster

    “Gold is definitely pushing into the mainstream.”

    I really hope you’re wrong about that. I don’t know anybody who has bought gold as an investment. Once the herd go for something …

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