"When misguided public opinion honors what is despicable and despises what is honorable, punishes virtue and rewards vice, encourages what is harmful and discourages what is useful, applauds falsehood and smothers truth under indifference or insult, a nation turns its back on progress and can be restored only by the terrible lessons of catastrophe." … Frederic Bastiat

Evil talks about tolerance only when it’s weak. When it gains the upper hand, its vanity always requires the destruction of the good and the innocent, because the example of good and innocent lives is an ongoing witness against it. So it always has been. So it always will be. And America has no special immunity to becoming an enemy of its own founding beliefs about human freedom, human dignity, the limited power of the state, and the sovereignty of God. – Archbishop Chaput


Monday, April 18, 2011

US downgraded by S&P

Here's something that 10 years ago many of us would not have ever thought was possible: What a terribly sad day for our nation and a commentary on the dangers of debt.

Standard & Poor’s Puts ‘Negative’ Outlook on U.S. AAA Rating


  1. okay Dan as a trader you aren't very sharp.. Read the article carefully - S&P has not downgraded US debt rating, but has changed the outlook on them to negative. Rating agencies have this system where alongwith a rating they also have an outlook on the rating, which signifies in which direction are things headed in general and which side the rating could change. In this case, S&P says that US has time till 2013 to come up with a credible solution to reduce deficit, ie, mostly nothing is going to happen till 2013 atleast unless something other dramatic happens. If S&P had actually downgraded, then ES would have been down 5% atleast, gold/silver up 3-5% apiece. But, i definately agree that its still a big piece of news and difficult to imagine a few years ago.

  2. Pi;

    Read my posting carefully before you write such things. Did I state that S&P had downgraded US debt? I did not. I warned about the reason behind the downgrade - namely DEBT. And incidentally, they did DOWNGRADE the US from "stable" to "negative". Stop quibbling please.

    For Pete's sake, why is it that some of you are so ready to criticize?

  3. Good job refuting a negative post...

  4. And the dollars RALLIES on this news? I do not really know what to say to that.

    Dan: regarding Pi - some just don't have a life and have to use every possibility to feel important. I think the correct term is "troll". Everyone who runs a website or blog with a comment section will get to know them sooner or later. It's annoying, but unavoidable.

    How to identifiy them? Their modus operandum is to get attention through various means:
    - engage in conflict with someone, if very direct/overt or only subtly. Provoke to get a reaction, no matter what kind of a reaction, because any reaction is a form of attention.
    - act like an expert. Just make some statements or predictions (often outrageous), and maybe someone will actually think you're smart. They will not provide reasons for their beliefs or arguments, since they have none.
    - Just go with the flow - repeat whatever the majority of people say, this way you're bound to receive some affirmation.

    Often they're just kids, 10, 12, 14 years old, acting like they're grown up and/or someone whose opinion should be respected under the cloak of anonymity.

    If I have the time I try to engage them in an argument, to which there usually isn't much of a response, since they 1) don't want any constructive discussion 2) their knowledge is usually very limited.
    If not, it's best to ignore them, because if they do not receive the attention which they seek, they will not like it and usually move elsewhere.

  5. By my calculations we hit sub 0.075 on the Silver HUI index, not seen since 2001 and actually surpassed that low. Obviously not a daily close, but has this market lost its proverbial marbles ? Any thoughts out there ?

  6. "why is that some of you are so ready to criticize"?
    ...because all those guys already missed the train and are furious at themselves for been so dumb and arrogants, that now are realizing about this secular bull market was true, that people like Dan were trying to waking up the masses...so now, these trolls are going to try hard disqualifying the one that were and are right for years...shame on the trolls.

  7. David: the last 10 years of this bull market, the best method to gain leverage to the PM prices have been various derivatives. This won't change all too soon probably. Miner shares are just too easy to suppress for the powers that be. You can't suppress physical with paper, but you sure can suppress paper with paper. I currently own physical metal, and a leveraged paper position via CFDs and FX. Will switch from derivatives to miners when I think miners will outperform.. might be this year, or might be 2, 3 years off.

  8. Hi Dan, I always appreciate your blog commentary, thanks for taking the time to share you knowledge and views. Best Regards, Greg

  9. Surreal that even in the face of a possible downgrade the long bond is trading higher. I think that once the floor is swept from under the bonds there will be nothing to hold it. I mean, everyone is dumping them, plus rates "should" rise. I just find it funny that the general public sees bonds as a "safe" investment.

  10. nice work dan, ignore them trolls

  11. Markus, love the style about trolls :)
    Thanks to Mr Norcini for this great site and the constant work it represents!

    This is my first mail to you, and I have a few questions :
    1) some consider that Silver is in such a short squeeze that prices will simply keep going up without even a chance for a correction, as the endgame for Crimex is pretty close. Do you think it's possible? I am becoming a bit nervous to reinforce my monthly positions in front of this uninterrupted rallye.

    2) if the comex stocks are down to zero and the paper owners eat their hats, what happens regarding CFDs? CFDs are contracts for difference, not an option on the real metal delivery, so, the bearer of long CFDs could have a problem or not, in case of delivery failure on the spot market?
    3) End of QE2 will have markets correct. Do you think that metals and especially Silver will correct as well?

    Thanks very much once more for this blog :)
    A french amateur,

  12. Henri,

    As far as I know CFDs are OTC derivatives, which means your broker is responsible for them. So unless your broker goes bust, I think you're in the clear.

    Anyway, even if the COMEX "defaults", I think it will only mean there will be cash settlements. As various derivatives are paper anyway and you are aware of this, I think it's totally acceptable to receive paper for settlement.


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