Mohamed El-Erian on Fitch

Why now? Odd reasons in his opinion.

He is saying people see no relief from inflation in the long run.

That may or may not be his point of view but it is the public’s point of view.

The big risk factor here with the rate change is to the credit default swaps. El-Erian says currently the USD is showing strength with the downgrade.

He is dismissive of nonsense that the US is getting weaker.


He is worried the FED will overtighten.

He is stating it is bad for the supply problem to overtighten. Meaning it is bad for a factory buildout.

He is calling a policy mistake overtightening. He would not have hiked in July and he certainly would not hike in September. He is doubting the FED has a strategic view of the economy.

Otherwise he has been saying no recession. In other words he is not owning it.

I think he is wrong. The FED will continue tightening. The recession will happen and sooner and be mild for labor.

Commercial property and the banks are in trouble along with the industrial mix around them.

*** one of the things with blaming the FED, if El-Erian’s investors lose money it is the FED’s fault…


Who’s still paying any attention to the debt rating agencies like Fitch and Standard & Poors?

In the 2008 mortgage crisis, too much of the stuff they rated AAA went bad. And then we found out afterwards athat a debt issuer could buy a favorable rating.



Unfortunately, many regulated pension funds, etc require a certain minimum rating for funds in order to invest.

Guys, didn’t one of the other ratings agencies downgrade Shiny-land several years ago?



During Obama’s time with the debt limit standoffs we were downgraded as well. We had recovered our rating. Now it is down a notch again.

Large part of this is how crazy the arguments are in congress on how the debt should be managed. Cutting the spending is really a bad idea because we are in a demand side period. Cutting taxes if allowed is an even worse idea. In other words nothing good is coming out of congress this year.


Dealbook NYT column by Andrew Ross Sorkin

But “it doesn’t really matter much,” Jamie Dimon, JPMorgan Chase’s C.E.O., told CNBC yesterday, echoing a common refrain to Fitch’s move. Critics of the move noted that according to criteria laid out last year by Fitch itself, including debt-to-G.D.P. ratio and macroeconomic performance, the U.S. was improving.

1 Like

In Venezuela the rating agencies would be asking, "¿Cuanto hay pa’ eso?

The Captain

"How much for that?

So, this is like the media hysteria about the “terror threat level”? Quietly back the “level” down a notch, so it could be raised again, and set of another wave of media hysteria?


1 Like

All interest rate tools, read all yield tools, including dividend producing shares of companies have a higher cost of capital. The risk factor has risen.

Yield has three factors, prime rate, risk factor and inflation factor. It is not written in stone to use the prime rate and for some tools there are premiums on top of those factors.


S&P did, and never raised it back. The thing that all stories seem to miss on this topic is that we have not been AAA by the S&P since 2011. Only one rating agency has us at AAA now.


Thanks for the confirmation that the latest BREAKING NEWS hysteria, is not really all that breaking. Much like the repeating hysteria about the “terror threat level” in the early 2000, or the daily hysteria about high temperatures in the southern US in the summer, which the “news” has been huffing and puffing about for weeks.

Steve…and in more ALARMING NEWS, there is less daylight today than there was on June 21st.


Tell that to the Aussies. :grin:



There is steadfastly as much sunlight as ever if we’d just hold still.

:rofl: :rofl: :rofl:

think at the end of the day, the entire U.S. industrials is still the lead, spearheaded by tech. I will not be so worried about any downgrade as long as the U.S. dollar holds its influence.

I am not worried. I am looking for opportunities to be open about it.

I am not long.

For those saying not to worry are you figuring out your own angle? That seems to be a struggle for some of you.