Tuesday, April 19, 2011

S&P cuts U.S. rating outlook to negative and my thoughts

NEW YORK (MarketWatch) — Standard & Poor’s cut its ratings outlook on the U.S. to negative from stable on Monday, lighting a fire under Washington’s deficit-reduction debate and sending stock markets sharply lower.

The rating agency effectively gave Washington a two-year deadline to enact meaningful change, just days after House Budget Committee Chairman Paul Ryan and President Barack Obama each outlined their plans for slashing debt. S&P nonetheless kept its highest rating, AAA, on the U.S.

Ratings selloff isn’t bear market start
The sharp selloff in stocks after Standard & Poor's cut its outlook on U.S. ratings doesn't signal the start of a bear market, says Max Bublitz, chief strategist at SCM Advisors. If stocks were really near a top, markets would have shrugged off the news. MarketWatch's Laura Mandaro reports.

Relative to triple-A-rated peers, the U.S. has very large budget deficits and rising government indebtedness, and the path to addressing those issues is unclear, S&P analysts said.

This is a piece of very old news(anything more than 24 hours in the digital space is considered old). After reoriented myself with different time zones and caught up with backlog, I finally got a chance to blog.

I have not been to United States for about 4-5 years. The last time I went there, I was not impressed at all as many airports were run down. I never stopped praising how good were Asian airports(Changi, Shanghai, Suvarnambhumi, KLIA, Hong Kong, Chiang Kai Shek, etc......). This time was much different, the airports were super modern and the aesthetic was, in my opinion, something Asian have a lot to learn from them. They are still a tough competitor and leading. What I am saying is their innovation and creative culture are still intact, without a doubt man!.

When I hit on the street of silicon valley, Porsche, BMW, Mustang, Camarro, etc flooded the road. These people are so well behaved and would not zigged or zagged like Malaysian rejected or frustrated F1 drivers. That speaks volume of the prosperity and manners.

When I was down in a restaurant with two hands full of plates, struggling to get some muffins on a lidded-shelf, an old lady offered to hold the lid for me. That again speaks volume of caring and thoughtfulness.

My American counterparts still work more than 12 hours/day. They don't mind to drag in the meetings till late night to debate about tough issues. Well Warren Buffett is still working at 80 years old. That again speaks volume of strong work ethics, or perhaps I am bias with such a small sample size.

When I went down to shopping mall, again I could not detect any signs that people were not buying.

When I sit in business meetings, many of the executives will push their operations to expand their business beyond American shores --- go global. Plant businesses all over BRICs. That is true if you look at top American companies, at least 30-40% of their revenue are coming from outside USA.

Warren Buffett said he is super optimistic about the future of Americans because of 300 million people are trying figuring out what they can do better everyday, which is not captured in any of the statistics, am I convinced? Yes to some extend but there are dark clouds gathering over Americans --- too much unfunded liabilities in health care and social security. Some estimated close to 100 trillions, 7 times of their GDP though it is not necessary needs to be payout within short time frame. Yes, many of you are right that the private sector is well and alive but the government is pretty screw up!

Some suggests they need to cut back those promises or raise taxes. To take actions, both are extremely unpopular politically. They need not only determination but big balls. Obama is reforming medi-care and etc, of which I think he is on the right track. To raise taxes? They have done that in past and if things go bad, they may forced to do so.

If the dollar was to crushed to the ground, I believe their private sector will still be able to weather the storm. With the right stock picking skills, many of US stocks are offering a lot of value. So, don't write off the Americans yet! Yeeeee......haaaaa

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