Just to emphasize how stupid his arguments are, in case anyone was confused by them. When the U.S. had its credit rating downgraded by S&P, yields actually went down the next business day. Cite
As anyone familiar with fixed income investments knows, if the market price of the instrument goes up, yields go down. This happens when investors are basically willing to pay a higher price to own that instrument. This is not what you’d expect of a corporate bond that has had its credit rating downgraded. Typically investors will sell corporate bonds the lower their rating is cut. This increases the actual yield relative to price for current buyers (as the sell-off reduces market price), and generally means if the corporation wishes to sell new bonds the market will probably demand a higher coupon rate (so their borrowing costs have increased.)
That obviously has not applied to the United States, because investors were willing to pay an even higher premium on our Treasury notes the first trading day after the downgrade, which ultimately is reflected in lower borrowing rates at the monthly or quarterly Treasury auctions.
You can actually query historical auctions on TreasuryDirect.gov. In Jul 2011, a batch of 9-year & 10 month notes was sold with an interest rate of 3.125%. (This refers to the coupon payment, or rate of return on the nominal value of the issue–“yield” will refer to the value relative to what you paid.) On Aug 10, 2011 another auction was held, the first auction since the downgrade. The secondary market already reflected an increased demand for treasury debt in spite of the downgrade, and this was reflected in the auction. The 8/10/2011 auction of 10-Year notes had an interest rate of 2.125%. A further auction of 9-year & 11 month notes was held on 9/13/2011 and the interest rate stayed at 2.125%. An auction of 9-year & 10 month notes was held on 10/12/2011 and the rate was again, 2.125%.
On 11/9/2011 an auction of 10 Year notes was held and the rate fell to 2.00%.
The reason actually explains why you should not listen to deltasigma at all on these issues (and in fact if he responds to me at all I’ll disregard it, he is an idiot not worthy of notice.) As anyone who understood debt markets could tell you, the reason the interest rate on Treasury notes continued to fall despite the downgrade is the market viewed the downgrade as basically saying “the U.S. economic future is uncertain so we need to get the fuck out of stocks and risky investments and buy more Treasury debt!!.” This shows that the U.S. government isn’t like “a company” or even a small country like Greece or Cyprus. Because the reaction of the market to our debt being downgraded was to flee equities and leap further into treasuries. This shows that the market doesn’t really regard the riskiness of Treasuries in terms of their credit rating, and in fact appears to believe in Treasuries regardless of what the credit rating agencies say.
Just for something to do, I’ll inject myself into one of the sub-debates.
Martin Hyde’s comments on economics are usually quite correct and useful. He and I have different perspectives, however, so often appear to be arguing against each other.
This is the first time I recall him losing his temper. deltasigma is a bright guy who knows a fair amount about a broad range of subjects, though even bright people can suffer from the Dunning–Kruger effect. He reminds me of myself a bit, though I think I’m three times his age.
On the specific subject of U.S. sovereign credit rating I’d take a middlish position too boring to explain. However …
**Martin **is obviously butt hurt and has no understanding of any of the posts he’s cited as being in error so I’m not even wasting my time with his wall of text. It is interesting though that I challenged him to find any posts where I was wrong about economic issues and he thinks a post regarding the NAACP is an economics issue. It’s also interesting that as to the other 2 posts the best he could manage is to go back 1 day in my posting history to find anything economics related when I have posted extensively on subjects such as the fed, money supply and interest rates. LOL.
Septimus: Well hopefully you can do a better job than Marty in proving me wrong.
applause But don’t forget the many physicsthreads he seems to want to continuously jump into and shit upon. I’ve been sincerely hoping that one of the resident physicists he keeps :rolleyes:ing would pit him finally, but they all seem to be too classy for that.
I do tend to be a bit argumentative and I guess that comes across as threadshitting so I apologize for that (I was a lawyer in a former life after all so it’s in the DNA :p). You have to admit I’ve been much better about that lately though.
The reason I could make that claim with confidence is that just a few days ago you made an absurd statement to the effect that DJIA was meaningful in a way that DJIA-with-reinvestment was not. When the error was pointed out, you got rude. Care to comment on that?
Hint: There’s zero doubt that you were wrong. Failure to admit error now will only deepen your hole.
There may have been a few other economics or finance threads where you disagreed with me. My guess is I was correct in each case. You do the grunt work, if you dare, find a case where you were right and I was wrong; and we’ll rehash it here, or ask for expert help.
Well, it’s obnoxious. Knock it off. I have grown to expect that physics threads around here start with articulate and erudite insights form our local stable of professional physicists, intermixed with vapid links to pop-science publications from you, and then devolves into a “DeltaSigma quotes one of the real physicists and uses the rolleyes smiley”-fests.
Yawn. Like I said. If you can’t provide a cite that show WHY I was wrong asshole, then fuck off. I’m the first one to admit I have no life but even I have better things to do with my time than sit here and respond to idiots like you who can’t even use google to find a simple citation that shows WHY I’m such a fucking moron. I’m if it’s so clear and so simple to prove then JUST FUCKING DO IT and shut the fuck up. M’kay? :smack:
In the Red Corner, we have the master of economic disaster! the count of monte physics!, the king of legal sting! the dancing cite destroyer - deltasigma - renaissance man!
In the Blue Corner, we have lawyers, physicists, financial guys - IOW, a whole shitload of people who have a long track record of knowing what the fuck they’re talking about! Even when you disagree with them!
LET’S GET READY TO RRRRUUUUUUUUUUUUUUUUUMMMMMMMMMMMMMMMMMMMMMMBLE!
Well, if you want my pedigree, I’m happy to oblige. I studied economics as an undergrad but also religion and philosophy. I changed my major senior year since I was applying to law schools and I wanted to focus on my study of Buddhism anyway. I then went to law school, passed the bar on the first try and proceeded to business school where I got an MBA in finance.
I practiced law for 4 or 5 years mainly doing research and writing before changing careers for a job in mortgage banking. From there I got involved in IT support of all things and decided I wanted to be a programmer. After becoming self taught on a PC in various languages, I got a job as a data control clerk in a main frame shop. That turned into an entry level programming job. I went back to school and became a CICS programmer.
I eventually retired but that was mainly because I hadn’t needed to work for quite a while anyway and because my disability finally caught up with me. I’ve always been a science geek and I admit I’m a hopeless dilettante.
I would think that you didn’t have to work from the get go seeing as how you must be independently wealthy because I don’t see how anyone can have that CV and not be swimming in debt.
That or you’re embellishing the amount of time you spent not holding down a full time job (read: in school).
Well if graduate degrees and years of work experience don’t count as ‘mastery’ I’m not sure what does dude. Did I have to become professor at Oxford or something?
I haven’t “embellished” as you put it, but it’s not like I expect you to believe that at this point. In fact if I wanted to beat my own drum I could have also said, as you will see in my profile, that I graduated from college magna cum lauda and am a member of Mensa (well, expat member anyway). But if you think I’m going to start discussing my finances here you’re also stoned.
ugh. Can’t believe I spelled laude wrong (ahem, ‘incorrectly’). At least I managed to get it right in the profile. Oh well. I think it still pisses me off that missed summa buy a few thousandths of a gpa point.
You do the grunt work, if you dare, find a case where you were right and I was wrong; and we’ll rehash it here, or ask for expert help.