Tag: finance

Just as we wondered earlier in the day…

Has Icahn tweeted an update on his NFLX position yet?

— zerohedge (@zerohedge) October 22, 2013

 

 

Sold block of NFLX today. Wish to thank Reed Hastings, Ted Sarandos, NFLX team, and last but not least Kevin Spacey: http://t.co/BRWpKOBfD2

— Carl Icahn (@Carl_C_Icahn) October 22, 2013

 

What is perhaps most worrisome for the market is the sale of 2.99 million shares collapsed the market cap by around 20%…

 

Of course, he hedges his sell…

• *ICAHN SAYS NETFLIX REMAINS `SIGNIFICANTLY UNDERVALUED’
• *NETFLIX HOLDER ICAHN REPORTS SALE OF 2.99M SHRS
• *ICAHN CITES 457% NFLX SHR PRICE BOOST SINCE ORIGINAL INVESTMENT

 

 

 

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/35OgRgydCIw/story01.htm Tyler Durden

The National Consortium for the Study of Terrorism and Responses to Terrorism (START) Global Terrorism Database – part of a joint government-university program on terrorism –  is hosted at the University of Maryland.

START is the most comprehensive open source terrorism database, which can be viewed by journalists and civilians lacking national security clearance.

A quick review of charts from the START database show that terrorism has increased in the last 9 years since the U.S. started its “war on terror”.

This chart shows the number of terror attacks conducted in Iraq:

Afghanistan:

The Middle East:

Asia:

Africa:

Indeed, global terrorism had been falling from 1992 until 2004 … but has been skyrocketing since 2004:

Our Wars In the Middle East Have Created More Terrorists

Security experts – including both conservatives and liberals – agree that waging war in the Middle East weakens national security and increases terrorism. See this, this, this, this, this, this, this and this.

Ooops.

Killing innocent civilians is one of the main things which increases terrorism. As one of the top counter-terrorism experts (the former number 2 counter-terrorism expert at the State Department) told me, starting wars against states which do not pose an imminent threat to America’s national security increases the threat of terrorism because:

One of the principal causes of terrorism is injuries to people and families.

The Iraq war wasn’t even fought to combat terrorism. And Al Qaeda wasn’t even in Iraq until the U.S. invaded that country.

And top CIA officers say that drone strikes increase terrorism (and see this).

Furthermore, James K. Feldman – former professor of decision analysis and economics at the Air Force Institute of Technology and the School of Advanced Airpower Studies – and other experts say that foreign occupation is the main cause of terrorism

University of Chicago professor Robert A. Pape – who specializes in international security affairs – points out:

Extensive research into the causes of suicide terrorism proves Islam isn’t to blame — the root of the problem is foreign military occupations.

 

***

 

Each month, there are more suicide terrorists trying to kill Americans and their allies in Afghanistan, Iraq, and other Muslim countries than in all the years before 2001 combined.

***

 

New research provides strong evidence that suicide terrorism such as that of 9/11 is particularly sensitive to foreign military occupation, and not Islamic fundamentalism or any ideology independent of this crucial circumstance. Although this pattern began to emerge in the 1980s and 1990s, a wealth of new data presents a powerful picture.

 

More than 95 percent of all suicide attacks are in response to foreign occupation, according to extensive research [co-authored by James K. Feldman – former professor of decision analysis and economics at the Air Force Institute of Technolo
gy and the School of Advanced Airpower Studies] that we conducted at the University of Chicago’s Project on Security and Terrorism, where we examined every one of the over 2,200 suicide attacks across the world from 1980 to the present day. As the United States has occupied Afghanistan and Iraq, which have a combined population of about 60 million, total suicide attacks worldwide have risen dramatically — from about 300 from 1980 to 2003, to 1,800 from 2004 to 2009. Further, over 90 percent of suicide attacks worldwide are now anti-American. The vast majority of suicide terrorists hail from the local region threatened by foreign troops, which is why 90 percent of suicide attackers in Afghanistan are Afghans.

 

Israelis have their own narrative about terrorism, which holds that Arab fanatics seek to destroy the Jewish state because of what it is, not what it does. But since Israel withdrew its army from Lebanon in May 2000, there has not been a single Lebanese suicide attack. Similarly, since Israel withdrew from Gaza and large parts of the West Bank, Palestinian suicide attacks are down over 90 percent.

 

***

 

The first step is recognizing that occupations in the Muslim world don’t make Americans any safer — in fact, they are at the heart of the problem.

Our Program of Torture Created Terrorists

In addition, torture creates new terrorists:

• A top counter-terrorism expert says torture increases the risk of terrorism (and see this).

• One of the top military interrogators said that torture by Americans of innocent Iraqis is the main reason that foreign fighters started fighting against Americans in Iraq in the first place (and see this).

• Former counter-terrorism czar Richard A. Clarke says that America’s indefinite detention without trial and abuse of prisoners is a leading Al Qaeda recruiting tool

• A former FBI interrogator — who interrogated Al Qaeda suspects — says categorically that torture actually turns people into terrorists

• A 30-year veteran of CIA’s operations directorate who rose to the most senior managerial ranks, says:
  
  

  Torture creates more terrorists and fosters more acts of terror than it could possibly neutralize.

• A former US Air Force interrogator said that torture just creates more terrorists

• A former U.S. interrogator and counterintelligence agent, and Afghanistan veteran said, “Torture puts our troops in danger, torture makes our troops less safe, torture creates terrorists. It’s used so widely as a propaganda tool now in Afghanistan. All too often, detainees have pamphlets on them, depicting what happened at Guantanamo.”

• The Senate Armed Services Committee unanimously stated:

“The administration’s policies concerning [torture] and the resulting controversies … strengthened the hand of our enemies.”

• Two professors of political science have demonstrated that torture increases, rather than decreases, terrorism

• General Petraeus said that torture hurts our national security

• And the reporter who broke Iran-Contra and other stories says that torture actually helped Al Qaeda, by giving false leads to the U.S. which diverted its military, intelligence and economic resources into wild goose chases

So the widespread program of torture under the Bush administration didn’t help.

Nice Job Creating More Terrorists, You Morons …

Additionally – in the name of fighting our enemies – the U.S. has directly been supporting Al Qaeda and other terrorist groups for the last decade. See this, this, this, this and this.

Why Have We Given Up Our Rights If the Government Can’t Keep Us Safe?

We have given up the fundamental rights which make us American.

The government insisted that – if we gave up our liberties – it would keep us safe.

It has failed to do so, and has instead squandered our national treasure, our resources and our troops on efforts which have only increased the risk of terrorism.

Wasted Defense Spending

A large amount of the homeland security spending has been wasted … producing &ldquo
;a bunch of crap”.

For example, spending money on zombie apocalypse training  or other silly programs is a bad investment which led to a false sense of security.

Spending defense money on a workshop called “Did Jesus die for Klingons too?” and DOD-run microbreweries is probably not helping stop terrorist attacks.

Moreover, using homeland security resources to spy on average Americans or crack down on peaceful protesters or government critics distracts from getting the actual bad guys.

At the same time, both the Bush and Obama administrations have slashed funding for programs which would actually help prevent terror attacks.

Heck of a job, guys …

The Real Agenda

Regime change was planned throughout the Middle East and North Africa were planned 20 years ago … long before 9/11.

As just one example, U.S. Secretary of Defense Chuck Hagel, 4-Star General (and CENTCOM commander with responsibility for Iraq) John Abizaid, key war architect John Bolton,  a high-level National Security Council officer, President George W. Bush, Bush speech writer David Frum, Senator John McCain, Fed boss Alan Greenspan and Sarah Palin  all say that the Iraq war was about oil.   Documents from Britain show the same thing.

Much of the war on terror is really a fight for natural gas.  Or to force the last few hold-outs into dollars and private central banking.

Senior government officials have described terrorist attacks as a “small price to pay for being a superpower”.  And while politicians talk about ending the war on terror, endless war is a feature – not a bug – of our foreign policy.

Whatever the real agenda one thing is clear …  In the same way that NSA spying isn’t about preventing terrorism (proof here, here, here and here), the war on terror is cover for other shenanigans.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/uJ-qP4ayyBI/story01.htm George Washington

Submitted by Simon Black of Sovereign Man blog,

At our workshop in Chile some months ago, European MEP Nigel Farage blasted French President Francois Hollande as leading the pack “in the modern day Pantheon of idiots who are running countries around the world…”

(You can see Nigel’s scathing remarks here, about 35 seconds in to the clip)

Of course, the French president had recently introduced a ‘hate tax’ on its countries most successful people, driving out whatever few productive people remain in France.

But this hate tax was just the tip of le iceberg.

Just look at what they’ve done or announced just in the last month:

1) Double the corporate surtax

It’s not enough that France has one of the highest corporate tax rates in the developed world. On top of this, they have a corporate ‘surtax’, or a tax on top of the tax.

And earlier this month, they announced plans to DOUBLE it.

2) Increase reporting obligations

Anyone who has ever started a business knows that a new business is like a newborn baby. It’s critical to focus on growth, not on filling out a bunch of paperwork.

The French government doesn’t care about this. So they’ve recently LOWERED the bar for reporting obligations, requiring a businesses with top-line revenue of just 80,000 euros to submit time consuming and onerous VAT reports to the tax authorities.

3) Increased pension tax

France has one of the most bankrupt… and unsustainably generous… pension systems in the world.

But rather than completely overhauling the system and expect people to, you know, actually work past the age of 55, they’ve just decided to raise the pension tax. Again.

4) Energy drink tax

Not to be outdone by Michael Bloomberg’s soda tax in New York City, the French National Assembly has recently proposed to tax energy drinks… as much as ONE EURO ($1.37) per can.

5) Higher property taxes

Last month, the French government announced plans to revise property value assessments across the country, which serves as the basis for a number of property taxes.

6) Data tax [my personal favorite]

You can’t make this stuff up.

In one of the most absurd tax propositions in history, the French government now has the idea that they should tax data transfers outside the European Union.

They actually plan on proposing this at this week’s European Summit. Strangely, though, they don’t seem to even understand what this means. They’re just so desperate to tax something… anything. They’re just monkeys throwing darts at the wall right now.

And they’re getting ready for more.

Earlier this year, the French government promised a ‘tax pause’ in 2014, suggesting that they would not raise taxes next year.

Last month, though, they revised this pledge, saying that the tax pause would take effect in 2015 instead.

Needless to say, there will be no pause in 2015.

Why? Because France is broke. Like so many other nations across the West, France has been rendered completely insolvent by decades of unsustainable spending.

France has been in this position before. In the 18th century, the French Bourbon monarchy was the pinnacle of civilization.

Yet decades of unsustainable spending took their toll on the economy. They tried everything– raising taxes, debasing the currency… yet their was no avoiding the inevitable. Revolution.

And this period of turmoil, from the time the French people stormed the Bastille, to the time when calm prevailed, took 26-years.

In the meantime, they had internal civil war, external war against both Austria and Prussia, hyperinflation, and the genocidal dictatorship of Robespierre.

Conditions are similar now, both in France and across the West. This includes the Land of the Free.

We have reached a time where it’s imperative to look abroad at different options and opportunities. Clinging to blind patriotism– staying home, doing nothing, and trusting your government– is akin to taking a toaster into the bathtub.

Wealth and power have constantly shifted throughout history. And the transitions are rarely smooth or peaceful. It’s foolish to assume that this time is any different.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/maGRVqDERt0/story01.htm Tyler Durden

Submitted by Simon Black of Sovereign Man blog,

At our workshop in Chile some months ago, European MEP Nigel Farage blasted French President Francois Hollande as leading the pack “in the modern day Pantheon of idiots who are running countries around the world…”

(You can see Nigel’s scathing remarks here, about 35 seconds in to the clip)

Of course, the French president had recently introduced a ‘hate tax’ on its countries most successful people, driving out whatever few productive people remain in France.

But this hate tax was just the tip of le iceberg.

Just look at what they’ve done or announced just in the last month:

1) Double the corporate surtax

It’s not enough that France has one of the highest corporate tax rates in the developed world. On top of this, they have a corporate ‘surtax’, or a tax on top of the tax.

And earlier this month, they announced plans to DOUBLE it.

2) Increase reporting obligations

Anyone who has ever started a business knows that a new business is like a newborn baby. It’s critical to focus on growth, not on filling out a bunch of paperwork.

The French government doesn’t care about this. So they’ve recently LOWERED the bar for reporting obligations, requiring a businesses with top-line revenue of just 80,000 euros to submit time consuming and onerous VAT reports to the tax authorities.

3) Increased pension tax

France has one of the most bankrupt… and unsustainably generous… pension systems in the world.

But rather than completely overhauling the system and expect people to, you know, actually work past the age of 55, they’ve just decided to raise the pension tax. Again.

4) Energy drink tax

Not to be outdone by Michael Bloomberg’s soda tax in New York City, the French National Assembly has recently proposed to tax energy drinks… as much as ONE EURO ($1.37) per can.

5) Higher property taxes

Last month, the French government announced plans to revise property value assessments across the country, which serves as the basis for a number of property taxes.

6) Data tax [my personal favorite]

You can’t make this stuff up.

In one of the most absurd tax propositions in history, the French government now has the idea that they should tax data transfers outside the European Union.

They actually plan on proposing this at this week’s European Summit. Strangely, though, they don’t seem to even understand what this means. They’re just so desperate to tax something… anything. They’re just monkeys throwing darts at the wall right now.

And they’re getting ready for more.

Earlier this year, the French government promised a ‘tax pause’ in 2014, suggesting that they would not raise taxes next year.

Last month, though, they revised this pledge, saying that the tax pause would take effect in 2015 instead.

Needless to say, there will be no pause in 2015.

Why? Because France is broke. Like so many other nations across the West, France has been rendered completely insolvent by decades of unsustainable spending.

France has been in this position before. In the 18th century, the French Bourbon monarchy was the pinnacle of civilization.

Yet decades of unsustainable spending took their toll on the economy. They tried everything– raising taxes, debasing the currency… yet their was no avoiding the inevitable. Revolution.

And this period of turmoil, from the time the French people stormed the Bastille, to the time when calm prevailed, took 26-years.

In the meantime, they had internal civil war, external war against both Austria and Prussia, hyperinflation, and the genocidal dictatorship of Robespierre.

Conditions are similar now, both in France and across the West. This includes the Land of the Free.

We have reached a time where it’s imperative to look abroad at different options and opportunities. Clinging to blind patriotism– staying home, doing nothing, and trusting your government– is akin to taking a toaster into the bathtub.

Wealth and power have constantly shifted throughout history. And the transitions are rarely smooth or peaceful. It’s foolish to assume that this time is any different.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/maGRVqDERt0/story01.htm Tyler Durden

Click here to follow ZeroHedge in Real-time on FinancialJuice

It’s all for play isn’t it when the French Minister of the Interior Manuel Valls summons the US Ambassador? It’s just for the newspeak and the media on the advice of his spin-doctor to swivel the French public around so much that they won’t know what’s hit them. The National Security Agency will hardly be quaking in its eavesdropping boots since they probably got wind of it long before Valls had even picked up the phone. Anyhow, what will come of it all. The NSA is hardly going to either back down or come clean, is it?

Revelations

The French newspaper Le Monde has published an article today in which it reveals that Edward Snowden has provided the proof that there was a massive-scale program carried out between December 2012 and January 2013in which not only suspected terrorists were being listened in on but also members of industry and politicians as well as the general public.

There were 70.3 million calls that were recorded during that period.

Apparently by simply dialing certain numbers the NSA was triggered and the calls were listened into. The codename of the operation was US-985D. It also covered text messages that were sent and not just voice communication.

USA

The US has declined to make a comment so far on this matter and has simply referred media to a statement that was issued by the NSA in June regarding the surveillance of foreign countries. It was restated today that the practices “are lawful and conducted under authorities widely known and discussed, and fully debated and authorized by Congress. Their purpose is to obtain foreign intelligence information, including information necessary to thwart terrorist and cyber-attacks against the United States and its allies”. So, the US has been listening in on French politicians to thwart terrorist attacks on those very same allies. Ah! Gotcha! It’s a homegrown version of terrorism yet again. It’s the French state that is pitching against itself in this story. Is that it?

Just as we thought that there was nothing more to come, Edward Snowden’s father returned after a visit to meet with his son to publically announce that there were more revelations. Snowden had been rather quiet for the past few months and rightly so. The media space was taken up with the trials and tribulations of the US shutdown. Now, it’s the best time for new impact.

France’s Reaction

Valls has also requested an explanation from Washington. But, what is happening is nothing more than the tentative vociferations by a country that will do nothing in the face of the USA. What happened last time when the NSA was revealed to have spied on the EU?

Hollande said “we would like an explanation…please” and Merkel said nothing more than “you can’t do that to your friends” or words to that effect. Nobody did much else in the EU as they were more preoccupied by their own state fallout from the sovereign debt-crisis than human rights. To boot, we all know that all countries are doing the self-same thing. Spying is as old as the hills and nearly as old as the other oldest profession. Wouldn’t do any good to shout too much, the people might just hear you leaders and they certainly wouldn’t want questions to be raised about their own eavesdropping on their very own citizens, would they?

Valls stated on Europe-1 Radio station: “Rules are obviously needed when it comes to new communication technologies, and that’s something that concerns every country. If a friendly country, an ally, spies on France or other European countries, then that is completely unacceptable”.

Mais oui, Mais oui, but what are you going to do about it Monsieur Valls? Is there going to be a duel at dawn after knocking back a good drop of claret? At one time Manuel Valls had stated that despite looking at a request for asylum for Edward Snowden he wouldn’t be in favor of it. Then, it really isn’t worth saying anything. Another example of newspeak?

39% of US citizens believe that Snowden is a traitor, while 35% believe him to be a patriot. It would be interesting to see just how many French people agree with those figures of a divided nation. I thought that Putin had granted asylum on the condition that Snowden would cease damaging the US. That has obviously been thrown out of the Siberian window, hasn’t it?

Well, no worries, Snowden is learning Russian and reading Dostoyevsky by all accounts. I wonder what he is leafing through right now? Is it Crime and Punishment or The Idiot?

Looks as if Dostoyevsky was made for Snowden anyhow…it could have been any of his books but maybe one has a more fitting title than any of the others: The Dream of a Ridiculous Man.

Originally posted: France Summons US Ambassador in Snowden Affair

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via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/mbJI8LfZBZ4/story01.htm Pivotfarm

While Cramer exclaimed this morning that his 'cult' stocks were unstoppable, the MoMo names were crushed today (for no good reason) with NFLX, FB, P (late saved by AAPL), and TSLA all monkey-hammered (as rumors of a major option algo going pear-shaped spread). Meanwhile, the S&P rose for the 9th day of the last 10 and closed once again at another all-time high above another magical level – 1750. Markets keyed off the weakness in the jobs report (ignoring the construction spending beat) and ran in a Taper-off-related manner across all assets – USD was battered, Bond yields compressed, Gold and silver soared. Oil prices did not follow the pattern leaking to $97.60 (-3% on the week). Market internals today were very "glitchy" though… EURJPY was in charge once again but VIX remains bid (and higher on the day), and while credit rallied, it remains less exuberant than stocks.

 

The market was a mess today as clearly algos went nuts early on with indices soaring and the widely held momo names bashed (and AAPL's mini flash crash) suggesting someone was knocked out of their market-hedged longs…

 

From last week's lows… this is just unreal…broadly…

 

and in sectors…

 

Treasuries bid…

 

USD sold…

 

But EURJPY ran the world today…

 

Gold and silver in demand… (but oil not so much – not exactly "growthy")…

 

S, we wonder… the Fed did not Taper last time because EVERYONE was expecting it… This time around, not only are the bubbles bigger (stocks and credit), the market technicals worse (fails are up), data is just as nebulous (some bad, some good)… but this time EVERYONE expected No TAPER… are you ready for shOctTaper…

 

Some seem more worried than others… notice the rise in VIX at the open even as stocks surged higher…. and the top came when AAPL flash-crashed… very fishy

 

Charts: Bloomberg

Bonus Chart: NFLX is now losing out to Caracas as best performing idiocy of the year…

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/TsuztTx4KLI/story01.htm Tyler Durden

While Cramer exclaimed this morning that his 'cult' stocks were unstoppable, the MoMo names were crushed today (for no good reason) with NFLX, FB, P (late saved by AAPL), and TSLA all monkey-hammered (as rumors of a major option algo going pear-shaped spread). Meanwhile, the S&P rose for the 9th day of the last 10 and closed once again at another all-time high above another magical level – 1750. Markets keyed off the weakness in the jobs report (ignoring the construction spending beat) and ran in a Taper-off-related manner across all assets – USD was battered, Bond yields compressed, Gold and silver soared. Oil prices did not follow the pattern leaking to $97.60 (-3% on the week). Market internals today were very "glitchy" though… EURJPY was in charge once again but VIX remains bid (and higher on the day), and while credit rallied, it remains less exuberant than stocks.

 

The market was a mess today as clearly algos went nuts early on with indices soaring and the widely held momo names bashed (and AAPL's mini flash crash) suggesting someone was knocked out of their market-hedged longs…

 

From last week's lows… this is just unreal…broadly…

 

and in sectors…

 

Treasuries bid…

 

USD sold…

 

But EURJPY ran the world today…

 

Gold and silver in demand… (but oil not so much – not exactly "growthy")…

 

S, we wonder… the Fed did not Taper last time because EVERYONE was expecting it… This time around, not only are the bubbles bigger (stocks and credit), the market technicals worse (fails are up), data is just as nebulous (some bad, some good)… but this time EVERYONE expected No TAPER… are you ready for shOctTaper…

 

Some seem more worried than others… notice the rise in VIX at the open even as stocks surged higher…. and the top came when AAPL flash-crashed… very fishy

 

Charts: Bloomberg

Bonus Chart: NFLX is now losing out to Caracas as best performing idiocy of the year…

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/TsuztTx4KLI/story01.htm Tyler Durden

For the first time (in the 44 years of polling), the majority of Americans favor legalizing marijuana. As Gallup notes, from a low of 12% in favor in 1969, the latest poll shows a clear majority (58%) now believe the drug should be made legal.

Perhaps not so surprising, given the prospects for much of today’s youth (67% of 18 to 29 year olds in favor), Gallup adds that a sizable percentage of Americans (38%) this year admitted to having tried the drug, which may be a contributing factor to greater acceptance.

 

Those who identfied themselves as Democrats  were almost twice as ‘in favor’ of legalization as Republicans.

 

Via Gallup,

It has been a long path toward majority acceptance of marijuana over the past 44 years, but Americans’ support for legalization accelerated as the new millennium began. This acceptance of a substance that most people might have considered forbidden in the late 1960s and 1970s may be attributed to changing social mores and growing social acceptance. The increasing prevalence of medical marijuana as a socially acceptable way to alleviate symptoms of diseases such as arthritis, and as a way to mitigate side effects of chemotherapy, may have also contributed to Americans’ growing support.

 

Whatever the reasons for Americans’ greater acceptance of marijuana, it is likely that this momentum will spur further legalization efforts across the United States. Advocates of legalizing marijuana say taxing and regulating the drug could be financially beneficial to states and municipalities nationwide. But detractors such as law enforcement and substance abuse professionals have cited health risks including an increased heart rate, and respiratory and memory problems.

 

With Americans’ support for legalization quadrupling since 1969, and localities on the East Coast such as Portland, Maine, considering a symbolic referendum to legalize marijuana, it is clear that interest in this drug and these issues will remain elevated in the foreseeable future.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/uJsc02iBaM0/story01.htm Tyler Durden

It would appear that French-owned Fitch, following its rating-watch-negative shift on the US credit rating last week, has got a tap on the shoulder from the powers that be. As Hollande complains about Obama's espionage, Fitch has released a statement explaining how the USA can do whatever it wants and not be downgraded. With only the Chinese ratings agency "able" to openly comment on the creditworthiness of the USA, it is no surprise that Fitch gave itself an "out" on the basis of the USDollar's exorbitant previlege.

 

Via Fitch,

Fitch Ratings says in a new report that even for a sovereign with the strongest credit fundamentals, there will be a gross general government debt (GGGD)/GDP level above which Fitch believes its rating is no longer compatible with 'AAA'.

 

This is usually 80%-90%, but can be higher for sovereigns with exceptional financing flexibility, such as benchmark borrowers with reserve currency status. As we have highlighted before, for France, Germany and the UK, this threshold is currently 90%-100%, and for the US, it is currently 110%, provided debt is then placed on a firm downward path over the medium term.

 

Our 80%-90% threshold recognises that sovereigns with (otherwise) 'AAA' characteristics have high financing flexibility and debt tolerance. Nevertheless, such a high level of debt tends to persist and potentially limits the capacity to respond to future shocks. It can also have a negative impact on growth.

 

Fitch gives a 'AAA' rated sovereign some leeway in allowing a temporary rise in its GGGD/GDP ratio before a downgrade. This stickiness also works in the other direction. The ratio needs to be steadily declining before restoring 'AAA' status, if warranted by other credit factors. Debt dynamics would need to be resilient to shocks to ensure that the 80%-90% level is not breached again. This would imply a fall in the debt ratio (not just a projected fall) of around 10pp of GDP or more from the downgrade level and would likely take several years.

 

A larger fall in the debt ratio would likely be required to restore the 'AAA' if the associated shock that precipitated the sharp increase in the debt ratio and downgrade revealed or triggered other negative credit developments such as weakening in the fiscal policy framework or credibility, a worsening in the structure of government debt, deterioration in economic growth prospects or a weakening in political stability or governance.

 

The 2013 median GGGD/GDP ratio for 'AAA' rated sovereigns is 47%, compared with 42% for all Fitch-rated sovereigns. But other credit strengths are sufficient to outweigh the potential drag on the rating from public debt. They typically have debt denominated in their own currency and can issue at long maturity while low interest rates hold down service costs.

 

The trajectory of GGGD/GDP may, at a particular time, be the key driver of rating actions for 'AAA' or 'AA+' rated sovereigns. However, ratings reflect the strengths and weaknesses of many factors, not just public debt. Thus rating actions can bite at various GGGD/GDP ratios.

So there it is folks… because of the dollar's exorbitant privelege position of world reserve currency, Reinhart and Rogoff's 90% barrier is irrelevant… It seems that Fitch is measuring pure default risk and not a "default and recovery" measure…

Simply put, there ain't no stopping US now…

 

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/-lkpnllo-XM/story01.htm Tyler Durden

It would appear that French-owned Fitch, following its rating-watch-negative shift on the US credit rating last week, has got a tap on the shoulder from the powers that be. As Hollande complains about Obama's espionage, Fitch has released a statement explaining how the USA can do whatever it wants and not be downgraded. With only the Chinese ratings agency "able" to openly comment on the creditworthiness of the USA, it is no surprise that Fitch gave itself an "out" on the basis of the USDollar's exorbitant previlege.

 

Via Fitch,

Fitch Ratings says in a new report that even for a sovereign with the strongest credit fundamentals, there will be a gross general government debt (GGGD)/GDP level above which Fitch believes its rating is no longer compatible with 'AAA'.

 

This is usually 80%-90%, but can be higher for sovereigns with exceptional financing flexibility, such as benchmark borrowers with reserve currency status. As we have highlighted before, for France, Germany and the UK, this threshold is currently 90%-100%, and for the US, it is currently 110%, provided debt is then placed on a firm downward path over the medium term.

 

Our 80%-90% threshold recognises that sovereigns with (otherwise) 'AAA' characteristics have high financing flexibility and debt tolerance. Nevertheless, such a high level of debt tends to persist and potentially limits the capacity to respond to future shocks. It can also have a negative impact on growth.

 

Fitch gives a 'AAA' rated sovereign some leeway in allowing a temporary rise in its GGGD/GDP ratio before a downgrade. This stickiness also works in the other direction. The ratio needs to be steadily declining before restoring 'AAA' status, if warranted by other credit factors. Debt dynamics would need to be resilient to shocks to ensure that the 80%-90% level is not breached again. This would imply a fall in the debt ratio (not just a projected fall) of around 10pp of GDP or more from the downgrade level and would likely take several years.

 

A larger fall in the debt ratio would likely be required to restore the 'AAA' if the associated shock that precipitated the sharp increase in the debt ratio and downgrade revealed or triggered other negative credit developments such as weakening in the fiscal policy framework or credibility, a worsening in the structure of government debt, deterioration in economic growth prospects or a weakening in political stability or governance.

 

The 2013 median GGGD/GDP ratio for 'AAA' rated sovereigns is 47%, compared with 42% for all Fitch-rated sovereigns. But other credit strengths are sufficient to outweigh the potential drag on the rating from public debt. They typically have debt denominated in their own currency and can issue at long maturity while low interest rates hold down service costs.

 

The trajectory of GGGD/GDP may, at a particular time, be the key driver of rating actions for 'AAA' or 'AA+' rated sovereigns. However, ratings reflect the strengths and weaknesses of many factors, not just public debt. Thus rating actions can bite at various GGGD/GDP ratios.

So there it is folks… because of the dollar's exorbitant privelege position of world reserve currency, Reinhart and Rogoff's 90% barrier is irrelevant… It seems that Fitch is measuring pure default risk and not a "default and recovery" measure…

Simply put, there ain't no stopping US now…

 

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/-lkpnllo-XM/story01.htm Tyler Durden