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And
now we learn that Standard & Poor’s, the same unprincipled hacks
whose grossly inflated triple-A ratings made America’s real estate boom
and (ongoing) bust possible, has downgraded the USA itself. Or to be
more precise, their long-term outlook fell from “stable” to
“negative” – a Kremlinesque way
of hinting that an actual downgrade from AAA is possible if the U.S.
doesn’t get its fiscal house in order. As though that were even
possible, given that the Federal debt is $14.3 trillion and climbing, and
that the economy is on a permanent respirator. And whose payroll is S&P
on, we wonder? Until yesterday, we thought they were so busy putting
the screws to Europe’s cripples that there wasn’t time or manpower
enough to pore over America’s books. Now, it would appear,
they’ve found actual fiscal problems to worry about even if the real
worries began three years ago. And another thing: Whenever they slam the
PIIGS by taking their credit ratings down a peg or two, it is usually to buoy
the U.S. dollar that day so that Little Timmy Geithner’s
pep talk at some Rotary Club luncheon gets good press. Whatever the reason
for yesterday’s downgrade – about as shocking to millions of
Americans as the revelation that Liberace was gay – it was fun to watch
the bond market react.
Or
rather, to not react. T-Bond futures ended the day down a few measly
ticks, although the obligatory swoon on the “news” allowed
predators who live off such volatility to shake down the rubes. The June
contract plummeted more than a point-and-a-quarter on the opening bar, then spent the rest of the day making fools of those who
had bailed out at the lows. Nice to see the bonds acting conflicted for a
change. On the one hand, USA Inc. took one small step toward its inevitable
bankruptcy. On the other, the weak economic outlook prevented bonds
from sinking on inversely rising yields. Doubtless, those who bought
did so with a quick-exit strategy in mind.
Gold, Silver Swoon Too
The quasi-criminal shakedown wasn’t limited to
the Bond pits either. Gold and Silver both took a flying dive for no
particular reason – other, perhaps, than a fleeting lack of demand as
traders tried to figure out what it all meant. The answer to that question
being “nothing,” bullion quotes soon recovered even more sharply
than Treasury debt when it was realized that Standard & Poor’s
tasteless publicity stunt had laid an egg. For our part, we held an
existing position in Silver Wheaton over the four hours that it took for the
hysteria to run its course. Although the stock swung more than $4 yesterday
to close down $1, we’re not convinced that silver bulls are out of the
woods. Actually, we’d been looking to short silver ETFs on the
opening, and although the rally spike on the opening bar missed our offer by
pennies, we might be tempted to try again on Tuesday. On the bullish
side, June Gold still has a ways to go before it bumps into any Hidden Pivots
that look capable of briefly reversing the tide. If you’re interested
in our precise targets for Comex Gold (and Silver)
but don’t subscribe to Rick’s Picks, try a risk-free
seven-day trial by clicking here.
Rick Ackerman
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Information and
commentary contained herein comes from sources believed to be reliable, but
this cannot be guaranteed. Past performance should not be construed as an
indicator of future results, so let the buyer beware. There is a substantial
risk of loss in futures and option trading, and even experts can, and
sometimes do, lose their proverbial shirts. Rick's Picks does not provide investment advice to
individuals, nor act as an investment advisor, nor
individually advocate the purchase or sale of any security or investment.
From time to time, its editor may hold positions in issues referred to in
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