Marc Becker TV

“The First Cut Is The Deepest”

This song of a heart break is prolific beyond lost love. When a previously uncompromised sense of trust is shaken our emotions run wild.

The U.S. Credit rating has fallen below perfect for the first time. Never mind the rating agency is one that lent itself to the financial crisis. Never mind this change of heart doesn’t reflect our ability to pay the interest on our debt. And, never mind the fact we dropped from “perfect” to “as close to perfect as possible without being perfect.”

It is merely the fact it has changed, the first cut, that has investors in an uproar. And just like reactions after a first heart break, what is happening now makes little sense.

Logically, since a credit rating identifies the level of risk associated with a debt, one should expect a demand that higher interest be offered for this additional risk. In short, people and institutions would sell bonds with low interest rates when the risk to the issuer increased.

But that’s not what happened. Money flooded into U.S. Treasuries decreasing the realized interest rate. Apparently dropping from AAA to AA+ isn’t enough to dissuade global investors.

Logically, the rating drop combined with good corporate economic news might lead one to expect a jump in stocks, since the government is in trouble but business is progressing. But that’s not what happened either.

Instead, money flooded into treasuries and the stock market has suffered substantially.

So what do we do?

“I still want you by my side
Just to help me dry the tears that I’ve cried
If you want I’ll try to love again, but you know,
The first cut is the deepest.”

Don’t sell low, BUY LOW. After all, we’ve learned to love again before.
I welcome questions and comments.

Warmly,

Marc Becker