Egan-Jones Analyst Hints At US Rating Downgrade Post QE3 - News and Current Events | futures trading

Go Back

> Futures Trading, News, Charts and Platforms > Traders Hideout > News and Current Events

Egan-Jones Analyst Hints At US Rating Downgrade Post QE3
Started:September 13th, 2012 (06:21 PM) by kbit Views / Replies:112 / 0
Last Reply:September 13th, 2012 (06:21 PM) Attachments:0

Welcome to

Welcome, Guest!

This forum was established to help traders (especially futures traders) by openly sharing indicators, strategies, methods, trading journals and discussing the psychology of trading.

We are fundamentally different than most other trading forums:
  • We work extremely hard to keep things positive on our forums.
  • We do not tolerate rude behavior, trolling, or vendor advertising in posts.
  • We firmly believe in openness and encourage sharing. The holy grail is within you, it is not something tangible you can download.
  • We expect our members to participate and become a part of the community. Help yourself by helping others.

You'll need to register in order to view the content of the threads and start contributing to our community. It's free and simple, and we will never resell your private information.

-- Big Mike

Thread Tools Search this Thread

Egan-Jones Analyst Hints At US Rating Downgrade Post QE3

Old September 13th, 2012, 06:21 PM   #1 (permalink)
Elite Member
Aurora, Il USA
Futures Experience: Advanced
Platform: TradeStation
Favorite Futures: futures
kbit's Avatar
Posts: 5,839 since Nov 2010
Thanks: 3,275 given, 3,321 received

Egan-Jones Analyst Hints At US Rating Downgrade Post QE3

WASHINGTON (MNI) - The latest round of quantitative easing announced Thursday by the Federal Reserve will almost certainly trigger a rating downgrade by Egan-Jones.

Already the rating agency had warned on Wednesday when it affirmed the U.S. rating at AA that "QE3 will likely trigger a negative action."

Given that the outlook is already negative (AA-), a downgrade to AA- would be a logical next step for the rating agency.

"We are not receiving QE3 positively," Vice President and co-manager of the ratings' desk Bill Hassiepen told MNI Thursday, while the fiscal situation is a "nightmare."

While the Fed is seeking to support economic growth through its quantitative easing, Hassiepen argued that the central bank's "massive monetization" is instead causing "sluggish to stagnant economic growth."

In fact, he expects growth to become stagnant within six months as a result of the Fed's policy.

The reason the country does not have a weaker rating, he said, is that it remains "the only viable reserve currency in the world."

The Federal Reserve Open market Committee said Thursday it "agreed today to increase policy accommodation by purchasing additional agency mortgage-backed securities at a pace of $40 billion per month," but did not announce an end date. At the same time, it will continue its Operation Twist through the end of the year as it is currently scheduled, while "maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities."

The Federal Reserve's "money printing," Hassiepen said, has not "really contributed to the improvement in the general economy" so far.

Instead, all it has done is increase inflation and the cost structure in the general economy, as will the new round of QE just announced Thursday.

"We actually think this is going to cause unemployment, not employment," he said. the Fed's policy will reduce household's disposable income and raising costs will also "lead companies to lay off people," he said.

"Let's say six months from now, you might see job actions" in some of the more commodity-sensitive industries that are particularly vulnerable to an increase in commodity prices and a weak dollar, he predicted.

"This is going to cause the economy to completely stagnate," he said, expecting the effect to start within three or four months.

He first expects a "rapid uptick in gasoline and food prices," which will affect households' disposable income. This in turn will take several months to work its way through into the general economy.

"People are going to feel nostalgic for the 1.7% for the last quarter," he said, referring to the second quarter GDP growth.

"Unfortunately we have a Federal Reserve that simply does not recognize the inflationary impact of food and energy prices any longer," he said.

He expects another "massive uptick in the speculation in the strategic commodities and energy markets." Speculators, he said, hedge themselves against a depreciating dollar by "boosting up the cost of the commodity."

"They have been doing it since 2004 and it's worked," he said.

While the Fed's policy is increasing the costs structure in the economy, he said wages are stagnant. "You don't have the buying power in the economy," he argued, and buying more securities won't resolve that issue.

Hassiepen also stressed that "the United States' financial flexibility is almost gone given $16 trillion in debt," which is 104% of GDP, and there is no real plan to put "the fiscal house under control."

In fact, even sequestration would not solve the problem of U.S. deficits, he said.

Reply With Quote

Reply > Futures Trading, News, Charts and Platforms > Traders Hideout > News and Current Events > Egan-Jones Analyst Hints At US Rating Downgrade Post QE3

Thread Tools Search this Thread
Search this Thread:

Advanced Search

Upcoming Webinars and Events (4:30PM ET unless noted)

An Afternoon with FIO trader bobwest

Elite only

NinjaTrader 8: Programming Profitable Trading Edges w/Scott Hodson

Elite only

Anthony Drager: Executing on Intermarket Correlations & Order Flow, Part 2

Elite only

Adam Grimes: Five critically important keys to professional trading

Elite only

Machine Learning Concepts w/FIO member NJAMC

Elite only

MarketDelta Cloud Platform: Announcing new mobile features

Dec 1

NinjaTrader 8: Features and Enhancements

Dec 6

Similar Threads
Thread Thread Starter Forum Replies Last Post
'Full-Scale' Bailouts for Italy, Spain in 6 Months: Egan-Jones Quick Summary News and Current Events 0 June 13th, 2012 12:10 AM
Egan-Jones Cuts US Credit Rating to 'AA,' Citing Debt Quick Summary News and Current Events 0 April 5th, 2012 08:00 PM
Egan Jones Downgrades France From AA- To A; Negative Watch, Sees Debt/GDP Rising From Quick Summary News and Current Events 0 November 30th, 2011 02:40 PM
Egan Jones Downgrades Jefferies On Concerns About Sovereign Exposure Amounting To 77% Quick Summary News and Current Events 0 November 3rd, 2011 12:50 AM
UK rating downgrade 'unavoidable' kbit News and Current Events 0 October 13th, 2011 02:12 PM

All times are GMT -4. The time now is 11:17 PM.

Copyright © 2016 by All information is for educational use only and is not investment advice.
There is a substantial risk of loss in trading commodity futures, stocks, options and foreign exchange products. Past performance is not indicative of future results.
no new posts

Page generated 2016-10-22 in 0.08 seconds with 19 queries on phoenix via your IP