What Next After the downgrade by S & P to Us

By Paola Pecora

Today was quite expected, the market collapsed after the downgrade by S & P credit memo to the U.S. from AAA to AA + last Friday after the close of Wall Street. The Dow lost 634 points ( lowest level since last October, the greater percentage drop since December 2008 and the sixth largest drop in points), the S & P 6.7% and the Nasdaq Composite 6.9%. Golden new high in 1748 in the electronic market at the start of the operation on Tuesday, 9 Asian, with stock indexes down an average of 5%. Oil being dropped over $ 81. Turn up the dollar, flight to quality: rise of the yen, Swiss franc, rising Treasuries. Very sellers banks, particularly beaten the Bank of America (BAC -21.3%) and Citi (C-16, 4%) . In market after market continued to fall by 1%. Prior to the opening on Monday, Treasury Secretary Timothy Geithner U.S. emergency meeting with the Council of Financial Stability Observation, a group of U.S. regulators to discuss market volatility and how to face the day was coming, according to the Wall Street Journal. They tried to calm the situation, both local and international, but with no success, the 500 shares of S & P500 fell, and 30 of the Dow Industrials.

After a timid attempt to rally, the stock fell and early afternoon the market was down 4%, all negative unless mining. Then resumed down almost 6% losing half an hour before closing. Again he sought a rebound, but the sellers were ordered to deny it, closing at the lows with major losses, close to 7%. And the volume high, was the fourth highest volume in history. The "fear indicator", the VIX, rose to 48, its highest close since March 2009 when the bear market ended.

Those who were invested in leveraged ETFs were down today the winners, so FAZ, the 3x leveraged bear fund rose 28.06%, the EPV European leveraged went down 17.8% and oil and gas DUG by 16.6%.

After you go up the U.S. debt ceiling a few days ago, come the worst: a low rung of the note of U.S. debt. The U.S. has enjoyed the highest note of all the credit agencies for decades, even in times of wars and depressions. Many Washington himself, were responsible for killing the messenger, to discredit S & P. The agency was responsible for reinforcing the idea that the U.S. has raised the debt ceiling to keep spending. Is unemployment has fallen? Remains very high, at 9.1%. Has revived the economy? Just +1.3% in the second quarter of the year (first quarter revised down by 0.4% against 1.9% growth prior to the review).

Wall Street already has a drop of 17% in less than 12 wheels, and tomorrow it's up to Ben Bernanke, Federal Reserve meeting and is cornered. Investors speculate that need to intervene in some way. But whatever you do has no outlet. If you inject more liquidity is guilty, and if he does well.

Bill Gross said: "S & P hit. They are forcing some discipline. I tip my hat." But there are things to remember: first U.S. debt is AA +, it is more "junk" (junk) and the U.S. is not going to default tomorrow. But it was a bucket in the face of Americans who are still denying the debt problem and want to continue living under the roof of the credit card. If the U.S. intends to change the course accessible and spending money-present-future-to-pay, then this warning from S & P is a good place to start.



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