AAA Ratings are now Threatened – Negative Outlooks Abound
By: John Fisher Despite the fact that the news has been peppered with commentary on downgrading of sovereign debt in Europe and the U.S. by several credit agencies and major bankruptcy filings (MF Global, AMR Corp) in the US, gold and silver have remained largely unaffected (gold is moving modestly higher). Fitch rating agency announced that while it is maintaining the US’ debt rating of AAA for the time being, it has put it on negative outlook. The new stance is mainly due to the US Congressional Joint Select Committee on Deficit Reduction’s failure to reach an agreement in regards to the burgeoning deficit and AAA ratings are now threatened.
Also of note, the French newspaper La Tribune also warned that Standard and Poor’s may consider, in the next 10 days, a negative outlook on France’s AAA rating.
Yesterday, Standard & Poor’s reduced its credit ratings on 15 big banking companies on Tuesday, mostly in the Europe and the United States, as the result of a sweeping overhaul of its ratings criteria. JPMorgan Chase & Co (JPM.N), Bank of America Corp (BAC.N), Citigroup Inc (C.N), Wells Fargo & Co (WFC.N), Goldman Sachs Group Inc (GS.N), Morgan Stanley (MS.N), Barclays Plc (BARC.L), HSBC Holdings Plc, (HSBA.L) Royal Bank of Scotland AAHAUS.UL Group Plc and UBS AG (UBSN.VX), were among the banks that had their ratings reduced by one notch each. A notch is one third of a letter rating.
Today the markets are digesting AMR Corp’s filing for Chapter 11 bankruptcy protection. US stocks are bucking this and the other negative news with the Dow up 400-plus points as of this writing. Oil is essentially $100 per barrel. There is misplaced optimism surrounding a meeting of European finance ministers and the expectation of positive steps forward for the EU. Gold is currently trading $1745 up $27.00 and silver $32.80 up $0.88.
All Things Considered – John’s Commentary
With the overall macro picture still looking decidedly bullish, gold should be able to break through it in the coming days.
Action to take: Silver is the buy, especially pre-1965 90% silver coin.
Quote of the day: “As fewer and fewer people have confidence in paper as a store of value, the price of gold will continue to rise.” – Jerome F. Smith
