Why NetWorthProtect Believes We Are In Buying Territory

1) U.S. Downgrade is basically a ”Political Leader B#tch Slap” (one I think they deserve): Below is an excerpt from Standard & Poor’s (S&P) most recent Sovereign Default Study – the study most applicable for discussing US debt obligations.  Notice anything concerning the difference between AAA, AA and A?    This is an average cumulative default table – so on average, for instance, the 5-year cumulative default study for BBB-rated debt is 3.97%.  THERE IS NO DISCERNIBLE DEFAULT FREQUENCY or frequency variation around any sovereign debt rated above A.  Thus, S&P’s own study shows no default variation differential between AAA & A.  The fact that the US is AA+ or A- is completely qualitative and arbitrary relative to historical default data.  This means that the market will continue to view the U.S. as effectively AAA because the downgrade has nothing to do with statistics and models.  BUT, it has everything to do with telling the U.S. Leaders that they screwed up so bad that a subjective over-ride of their debt rating model is warranted given the government’s inability to balance the budget, control spending (and its general failure investing money).

S and P 500

 

2) 10-year Treasury Yields of 2.4% are lower than … Read the rest

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