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<blockquote data-quote="texan" data-source="post: 1025465" data-attributes="member: 38206"><p><strong><span style="font-size: 10px"><span style="font-size: 12px"><span style="color: #800000">Egan-Jones Welcomes QE3 By Cutting U.S. Credit Rating</span></span></span></strong></p><p><strong><span style="font-size: 10px"><span style="font-size: 12px"></span></span></strong></p><p><strong><span style="font-size: 10px"><span style="font-size: 12px">Stocks and risk assets might be fans of QE3, but <strong>Egan-Jones</strong> definitely isn’t.</span></span></strong></p><p> <strong><span style="font-size: 10px"><span style="font-size: 12px">The underdog rating agency on Friday downgraded its credit rating for the U.S. </span></span></strong></p><p><strong><span style="font-size: 10px"><span style="font-size: 12px">to AA- from AA, citing the Fed’s latest round of stimulus. </span></span></strong></p><p><strong><span style="font-size: 10px"><span style="font-size: 12px"></span></span></strong></p><p><strong><span style="font-size: 10px"><span style="font-size: 12px"><em>[T]he FED’s QE3 will stoke the stock market and commodity prices, but in our opinion will hurt</em></span></span></strong></p><p> <strong><span style="font-size: 10px"><span style="font-size: 12px"><em>the US economy and, by extension, credit quality.</em></span></span></strong></p><p><strong><span style="font-size: 10px"><span style="font-size: 12px"><em></em></span></span></strong></p><p> <strong><span style="font-size: 10px"><span style="font-size: 12px"><em>Issuing additional currency and depressing interest rates via the purchasing of MBS does </em></span></span></strong></p><p><strong><span style="font-size: 10px"><span style="font-size: 12px"><em>little to raise the real GDP of the US, but does reduce the value of the dollar </em></span></span></strong></p><p><strong><span style="font-size: 10px"><span style="font-size: 12px"><em>(because of the increase in money supply), and in turn increase the cost of commodities </em></span></span></strong></p><p><strong><span style="font-size: 10px"><span style="font-size: 12px"><em>(see the recent rise in the prices of energy, gold, and other commodities).</em></span></span></strong></p><p><strong><span style="font-size: 10px"><span style="font-size: 12px"><em></em></span></span></strong></p><p> <strong><span style="font-size: 10px"><span style="font-size: 12px"><em>The increased cost of commodities will pressure profitability of businesses, and increase</em></span></span></strong></p><p> <strong><span style="font-size: 10px"><span style="font-size: 12px"><em>the costs of consumers thereby reducing consumer purchasing power. </em></span></span></strong></p><p><strong><span style="font-size: 10px"><span style="font-size: 12px"><em></em></span></span></strong></p><p><strong><span style="font-size: 10px"><span style="font-size: 12px"><em>Hence, in our opinion QE3 will be detrimental to credit quality for the US…. </em></span></span></strong></p><p><strong><span style="font-size: 10px"><span style="font-size: 12px"><em></em></span></span></strong></p><p><strong><span style="font-size: 10px"><span style="font-size: 12px"><em>From 2006 to present, the US’s debt to GDP rose from 66% to 104% and will probably</em></span></span></strong></p><p> <strong><span style="font-size: 10px"><span style="font-size: 12px"><em>rise to 110% a year from today under current circumstances; the annual budget deficit</em></span></span></strong></p><p> <strong><span style="font-size: 10px"><span style="font-size: 12px"><em>is 8%. </em></span></span></strong></p><p><strong><span style="font-size: 10px"><span style="font-size: 12px"><em></em></span></span></strong></p><p> <strong><span style="font-size: 10px"><span style="font-size: 12px"><em></em></span></span><span style="font-size: 12px"><em>In comparison, Spain has a debt to GDP of 68.5% and an annual budget deficit of 8.5%.</em></span></strong></p><p><strong><span style="font-size: 12px"><em><a href="http://blogs.barrons.com/incomeinvesting/2012/09/14/egan-jones-welcomes-qe3-by-cutting-u-s-credit-rating/" target="_blank">Egan-Jones Welcomes QE3 By Cutting U.S. Credit Rating - Income Investing - Barrons.com</a></em></span></strong></p></blockquote><p></p>
[QUOTE="texan, post: 1025465, member: 38206"] [B][SIZE=2][SIZE=3][COLOR=#800000]Egan-Jones Welcomes QE3 By Cutting U.S. Credit Rating[/COLOR] Stocks and risk assets might be fans of QE3, but [B]Egan-Jones[/B] definitely isn’t. The underdog rating agency on Friday downgraded its credit rating for the U.S. to AA- from AA, citing the Fed’s latest round of stimulus. [I][T]he FED’s QE3 will stoke the stock market and commodity prices, but in our opinion will hurt the US economy and, by extension, credit quality. Issuing additional currency and depressing interest rates via the purchasing of MBS does little to raise the real GDP of the US, but does reduce the value of the dollar (because of the increase in money supply), and in turn increase the cost of commodities (see the recent rise in the prices of energy, gold, and other commodities). The increased cost of commodities will pressure profitability of businesses, and increase the costs of consumers thereby reducing consumer purchasing power. Hence, in our opinion QE3 will be detrimental to credit quality for the US…. From 2006 to present, the US’s debt to GDP rose from 66% to 104% and will probably rise to 110% a year from today under current circumstances; the annual budget deficit is 8%. [/I][/SIZE][/SIZE][SIZE=3][I]In comparison, Spain has a debt to GDP of 68.5% and an annual budget deficit of 8.5%. [URL="http://blogs.barrons.com/incomeinvesting/2012/09/14/egan-jones-welcomes-qe3-by-cutting-u-s-credit-rating/"]Egan-Jones Welcomes QE3 By Cutting U.S. Credit Rating - Income Investing - Barrons.com[/URL][/I][/SIZE][/B] [/QUOTE]
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