Larry Levin's Blog : The Boot


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“The Boot” will be the topic that we are going to talk about. Larry Levin surely has the reason to public this topic for us. Just check to see what the news we should care for our trading.

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Larry Levin's Blog : The Boot

  1. 1. The Boot “ The Boot” will be the topic that we are going to talk about. Larry Levin surely has the reason to public this topic for us. Just check to see what the news we should care for our trading.
  2. 2. <ul><li>Italy just got “the boot” from Standard & Poor’s: it was downgraded. The immediate reaction in the ES futures was a -10.00 point drop; however, the market rebounded rather quickly – rising +9.25 points from the recent nadir. </li></ul>
  3. 3. <ul><li>Surely the market is thinking “What’s the worry? Benny & The Inkjets new tune will be ‘Bail Out Europe’ and they’ll drop it at their 2-day FOMC meeting.” No worries – right? After all, Moody’s didn’t downgrade Italy. Then again, Moody’s doesn’t downgrade anything. </li></ul>
  4. 4. <ul><li>From Bloomberg we read </li></ul>
  5. 5. <ul><li>Italy’s credit rating was cut by Standard & Poor’s on concern that weakening economic growth and a “fragile” government mean the nation won’t be able to reduce the euro-region’s second-largest debt burden. </li></ul>
  6. 6. <ul><li>The rating was lowered to A from A+, with a negative outlook, S&P said in a statement. S&P said Italy’s net general government debt is the highest among A-rated sovereigns, and the company now expects it to peak later and at a higher level than it previously anticipated. </li></ul>
  7. 7. <ul><li>The decision sent the euro sliding for a third day against the dollar as investor concern rises that European policy makers will fail to contain the debt crisis. </li></ul>
  8. 8. Greece’s government plans another call with its main creditors today as it seeks to stave off default, while U.S. Treasury Timothy F. Geithner urged the region to adopt additional tools.
  9. 9. <ul><li>“ It’s a reminder that we’ve had the market in control but policy makers have been slow to think in any forward-looking context,” said Adrian Foster, head of financial-market research for Asia at Rabobank Groep NV in Hong Kong. </li></ul>
  10. 10. <ul><li>“ Policy makers across the euro-zone have been well and truly asleep at the wheel for quite a while now and are only taking measures when the market pushes them to it.” </li></ul>
  11. 11. <ul><li>U.S. Rating </li></ul><ul><li>The decision comes just weeks after S&P stripped the U.S. of its AAA credit rating for the first time. While the Aug. 5 move roiled global markets, bond investors ignored S&P’s warnings about U.S. creditworthiness and piled into Treasuries. </li></ul>
  12. 12. The yield on the benchmark U.S. government bond fell to a record 1.8770 on Sept. 12. Italy’s downgrade may aggravate a volatile political situation — Berlusconi faces four trials — after a decade with virtually no economic growth that has undermined debt reduction.
  13. 13. <ul><li>Its government debt was 119 percent of gross domestic product last year, more than any euro country after Greece. </li></ul>
  14. 14. <ul><li>Unlike Ireland and Portugal, which followed Greece in seeking bailouts from the European Union and the International Monetary Fund, Italy until July had managed to skirt the worst of the fallout from the debt crisis. </li></ul>
  15. 15. <ul><li>While its budget gap was 4.6 percent of GDP in 2010, lower than France and Germany, debt will reach 120 percent this year. </li></ul><ul><li>The balance of story can be read at the link above. </li></ul>
  16. 16. <ul><li>Trade well and follow the trend, not the so-called “experts.” </li></ul><ul><li>Behold the age of infinite moral hazard! On April 2nd, 2009 CONgress forced FASB to suspend rule 157 in favor of deceitful accounting for the TBTF banksters. </li></ul>