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Having Standard & Poors downgrade the creditworthiness of the United States, and warn it about further downgrades, is a little like having the Catholic Church lecture scout leaders on the proper behavior toward boys. The moral authority seems to be wanting.end quote.
That being said they are now downgrading Freddie Mac and Fannie Mae and a host of other investments.
http://news.yahoo.com/p-downgrades-fannie-freddie-us-backed-debt-145648051.html
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S&P downgrades Fannie and Freddie, US-backed debt
WASHINGTON (AP) — Standard & Poor's Ratings Services on Monday downgraded the credit ratings of Fannie Mae and Freddie Mac and other entities linked to long-term U.S. debt.
S&P also lowered the ratings for: farm lenders; long-term U.S. government-backed debt issued by 32 banks and credit unions; and three major clearinghouses, which are used to execute trades of stocks, bonds and options.
All the downgrades were from AAA to AA+, reflecting the same downgrade S&P made of long-term U.S. government debt on Friday.
The downgrade of the mortgage giants Fannie and Freddie reflected their "direct reliance" on the U.S. government, S&P said.
The U.S. government rescued the two mortgage giants in September 2008 and has funded them since the financial crisis. Fannie and Freddie own or guarantee about half of all U.S. mortgages and nearly all new mortgages. So if the U.S. government can't pay its bills, neither can Fannie and Freddie.
It's unclear how the lower credit rating would affect consumers. The downgrade applied only to corporate bonds, not the mortgage-backed securities that Fannie and Freddie issue. end quote.
By doing this it likely will drive more capital out of Freddie Mac and Fannie mae and more into U.S. Treasuries which now appear to be the investment of choice worldwide because of the debt problem in Europe.
The Debt problem in the U.S. is ONLY a political problem. However, the Debt Problem in Europe is both a political problem AND a very REAL Problem. So, the smart money worldwide appears to be channeling into U.S. Treasuries, the U.S. Dollar, the Yen, the Swiss Mark and into Gold. It is unknown how long this will go on like this. Everyone it appears is looking for some safety in their investments while walking on quicksand worldwide. However, I believe if you already are in long term safe investments and you can afford to wait for those investments to recover over time then I would stay pat wherever you are now. However, only you can know just how safe your investments are through diligent research. Panicking isn't going to help. Diligent calm research might.
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