S&P Downgrade and the Volitile Markets

Today marks the fifth or sixth day in a row of extreme highs and lows for the market. This all started because of fears of a downgrade by the S&P in the US debt rating, then continued after our downgrade, and then sprang back up after many wisely reacted to the fear and bought in while the market was down about 10% in a few days. This, of course, prompted a sell off the next day, or those investors timing the market simply taking their profits, and we see the markets tumble again. That brings us to today, where markets are again undervalued, and those that have assets liquid enough to do so, are buying in hopes that they can either take a profit or catch a stretch of good new (which may be coming up... and I will discuss this in a moment) This is an extremely volatile and stressful time to be in the investment world – overall the markets are off their highs from just a few weeks ago by as much as 1000 points (around 8% or so) and this is bad for everyone involved. My typical go-to safety funds of emerging markets aren't doing too hot either, as the Euro is in serious trouble, and the European debt crisis (Greece, Spain, Italy, Portugal... etc) is far worse (respectively) than the situation in the United States. This may not mean that Brazil or India is in bad shape, but it means that no one is buying their products or services at the moment, and therefore a best case scenario is a stalled economy, if not a significant drop as we are seeing here in the US.

Going back to the root of the matter – The S&P downgrade – seriously, what the hell? Where do they get that kind of nerve? The United States is the model economy in the world, yes, even right now. If we are not AAA, then who is? As much as much as the President and I do not agree on a few fundamentals, I did like what he had to say about the drop in the Dow “Markets will go up, and markets will come down, but this US has always been, and will always be a AAA country.” The United States and the US Dollar are the standards upon which everything else in the world is judged, and there is no denying that. It's strength may wax and wain depending on the performance of some emerging market or new investment in currency or industry, but we will always be there, and be on top. Something my Economics teacher told me my sophomore year at West Point is that “If America fails, the world fails, and that is just not going to happen” I could write volumes on why the world depends on the United States, and will do so for the foreseeable future, but that would really take away from the object of this post.

The past week or so has been caused by fear mongering and speculators taking advantage of low markets. It drives me crazy to watch it, but it is what it is, and nothing I do is going to change that. I think that tomorrow will be a good day for the market as well, when the Jobs report comes out favorably (which I believe it will) we will still see a run in the green, and it is always nice to end on a high note going into the weekend. I am annoyed at S&P, because if we are not AAA, then who is? I am not happy with our current deficit or spending plan, and think that it seriously needs to be addressed (without doing something as brutally cold hearted as cutting military retirement for those who served 20 years in harms way) but the simple fact of the matter is that the US will never default. There may be a long and hard road ahead of us, but we are the United States of America, and the collective ingenuity and work ethic of this great nation will push us through it.