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S&P downgrades with a knock out punch to the US

S&P downgraded US Treasury debt from AAA to AA delivering a knockout punch to the groin. Weeks of political wrangling and bickering among members of Congress over Debt deal has taken its toll. The markets are taking it much better than expected as this is the first time in history US debt has been downgraded, making it much harder to borrow money. But the S&P down grade massacre is continuing with the downgrades for real estate giants Fannie Mae and Freddie Mac and 32 associated banks.

There will be further downgrades on municipalities, student loan provider Sallie Mae etc. No doubt this will hurt the flagging economy. It will be lot more expensive to borrow money and that cost will be reflected in mortgages and credit cards and other financial instruments. It’s a complete credit massacre that we are witnessing today. Here is a quick video:

The DOW opened 300 points down and In the short run the damage is done. The market is extremely oversold and hence they can bounce sharply.

It remains to be seen if theseĀ  market crash or go down any further. The selling may stop if we rally back above 1200 levels. Taking long positions is risky at best and any rallies that develop may get shorted again sending the markets down. I would suggest taking a look at the charts again in a day or so to avoid this trap.

{ 7 comments… read them below or add one }

A shah August 8, 2011 at 12:33 pm

Obama spoke and stocks dropped is there a connection? I think so he gives no confidence to the stocks

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DayHester31 August 9, 2011 at 12:25 am

Every one acknowledges that modern life seems to be expensive, nevertheless some people need money for different things and not every man earns big sums money. Thus to get good loans or financial loan will be a correct solution.

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Hassan August 12, 2011 at 3:22 pm

America should change their financial polices on a great deal…… They should come up with new ideas of investment, rather than making more cash…..

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