What Deficit Are They Looking At?

Steve Reitmeister of Zacks

The main story on Monday was that Standard & Poors kept US government bond ratings at AAA, but cut its outlook from stable to negative. This sent stocks tumbling out of the gate to as low as Dow 12,093 before bouncing over a hundred points. Yet even that finish was still well into the red.

Personally I am shocked and dismayed by this reaction. Why? How could anyone think that our debt situation was actually in good shape?. In fact, how is [the US bond rating] still AAA and not lower? I assumed, falsely I now see, that everyone with an IQ above room temperature was working off the same premise that our deficit was raging out of control. And that, my friends, provides a valuable investing lesson. Don't assume anything.

My strong hope and desire is that this truly lights a fire under our politicians to take make aggressive deficit cuts soon. If not, then our debt ratings will drop while interest rates go higher. This will make financing the debt all the more difficult and wreak havoc on the economy. If we can show resolve to reign in our bad ways now, then this economic recovery can stay on track with stocks moving higher.

From What Deficit Are They Looking At?

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Incidentally, Obama's IRS return was released yesterday. He made a little more than $1,700,000 last year. I hope the Obamas can survive.