Submitted by: Donald Hank
The REAL Problem With The Downgrade
I've not heard this yet in the MSM, and it's a serious miscalculation.
Note that since the "downgrade" rumors started the ten year treasury yield has dove. You'd think it would do the opposite. You'd be wrong.
The issue with the downgrade is not the fundamental risk of holding Treasuries. The difference between "AAA" and "AA+" is nearly immaterial.
Rather, the problem is the capital calls it may generate within the banks and the impairment against the ability to raise capital from stock price declines.
We're now back to stock prices last seen in October - in less than two weeks.
Note that since the "downgrade" rumors started the ten year treasury yield has dove. You'd think it would do the opposite. You'd be wrong.
The issue with the downgrade is not the fundamental risk of holding Treasuries. The difference between "AAA" and "AA+" is nearly immaterial.
Rather, the problem is the capital calls it may generate within the banks and the impairment against the ability to raise capital from stock price declines.
We're now back to stock prices last seen in October - in less than two weeks.
