U.S. Credit Downgraded

I don’t see why this is even news. It’s painfully obvious that the American dollar is going to be worth nothing in a few years. And downgrades like this one could easily become commonplace, as long as the US allows the Federal Reserve to fund the debt with more debt. As The Wall Street Journal reports: Chinese Credit Rater Downgrades U.S. Dagong Global Credit Rating Co., the Chinese rating company that was recently rejected in its bid to be an officially recognized bond rater in the U.S., just downgraded the entire U.S. The always objective Xinhua has the “scoop.” The United States has lost its double-A credit rating with Dagong Global Credit Rating Co., Ltd., the first domestic rating agency in China, due to its new round of quantitative easing policy. Dagong Global on Tuesday downgraded the local and foreign currency long-term sovereign credit rating of the U.S. by one level to A+ from previous AA with “negative” outlook. The Chinese rating agency said the downgrade reflected the U.S.’s deteriorating debt repayment capability and drastic decline of the U.S. government’s intention of debt repayment. “The serious defects in the U.S. economy will lead to long-term recession and fundamentally lower the national solvency,” Dagong said in a report. The Chinese rating agency said the Federal Reserve’s new round of quantitative easing would further depreciate the U.S. dollar and was entirely counter to the interest of the creditors. The Federal Reserve last week decided to buy 600 billion U.S. dollars of U.S. Treasury securities and other assets held by banks in a bid to inject fresh funds into the economy and bring down long-term interest rates. “The credit crisis is far from over in the United States and the U.S. economy will be in a long-term recession,” Dagong Global warned in the report, adding a weakening greenback will cripple U.S. capability to attract dollar capital reflow. Needless to say, the markets don’t find this credible. Bond yields haven’t done anything. As the Journal’s Joy Shaw reported , Dagong was little-known before it surprised the credit-rating world in July by publishing sovereign ratings for China that were higher than those for the U.S., the U.K., Japan and other major economies. The results differed from those issued by major credit-rating firms. While we feel justified in giving Dagong’s neutrality the stink eye on this one, it’s not like Western credit ratings agencies have really distinguished themselves in recent years by slapping their good housekeeping AAA seal on some of the most toxic bond sludge Wall Street could concoct. But as long as we’re looking to Communist state media for market update, we might as well point out one of our favorite pastimes here at MarketBeat, perusing the online pages of the Pyongyang Times. Here’s an insightful read on American culture published back in April. (Sadly, no link is available as the whole internet spirit doesn’t seem to have caught on so well in North Korea.): The US is a society that is based on extreme individualism and governed by the …

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Money Morning Mailbag: U.S. Credit-Rating Agency Fights Back to China’s Attacks

Filed in credit-rating, Gold Investing by on August 13, 2010 0 Comments

Last week, the credit rating feud between Standard & Poor’s Financial Services LLC and the Chinese firm Dagong Global Credit Rating Co. Ltd – which Money Morning Contributing Editor Martin Hutchinson examined late last month – heated up. Harold “Terry” McGraw III, chairman and chief executive of S&P said that companies like Dagong joined up with politicians and other countries to unfairly attack U.S. ratings firms. ” If you’re in a populist mood, you’ve got to find the villain, ” McGraw told the Financial Times in an interview in Beijing. McGraw referred to comments made to the Financial Times in July by Guan Jianzhong, the chairman of Dagong.

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Has the U.S. Lost its Grip on the Credit-Rating Business?

Filed in credit-rating, silver by on July 27, 2010 0 Comments

There’s a new name in the credit-rating-agency business these days: It’s Dagong Global Credit Rating Co. Ltd., and this Beijing-backed business is China’s bid for a spot in the global-credit-rating oligopoly. And Dagong ‘s Chairman Guan Jianzhong doesn’t think much of his long-established U.S. competitors. “The Western rating agencies are politicized and highly ideological and they do not adhere to objective standards,” Jianzhong told The Financial Times earlier this month. Is he right? And does the newly passed Wall Street Reform and Consumer Protection Act correct their flaws, or does it make matters worse? It’s a question that affects all investors – even those of us that don’t invest in bonds, as we’ll soon see. To understand how credit-raters will influence investments going forward, please read on…

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US Credit Rating Downgraded

After years of warnings — from our own “waste of time” credit raters —- the seemingly untouchable US AAA rating was just cut by China’s Dagong Global Credit Rating Company to AA. This, after repeated Geithner promises that the US would never lose its credit ratings, despite outrageous budget deficits and our raised $14 trillion debt ceiling. It’s not as if US credit rating agencies have been credible these past few years. The China firm just did what Moody’s and S&P could never even dream about doing… unless orchestrated by the Fed. How these credit raters still have a job after the housing disaster is beyond me. Here’s more from Zero Hedge: Despite repeated warnings going back several years from Moody’s, S&P et al that the U.S. could lose its top credit rating with ongoing fiscal deficits and heavy debts, theplatinum-plated AAA rating of the United States seems alluntouchable. The top notch rating certainly has helped with continuing debt financing and bolstered the confidence of some government officials. Secretary Geithner, for example, said in a February interview that the U.S. government “will never” lose its credit rating, despite big budget deficits and a newly raised debt ceiling of $14.3 trillion. Along came a Beijing-based rating agency— Dagong International

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Freeport-McMoRan (NYSE:FCX) Issued "BBB" Rating by Morningstar

Freeport-McMoRan (NYSE:FCX) is now being covered by Morningstar, and their first credit rating for the company was a “BBB.” Morningstar said, “After retiring a sizable chunk of debt in 2009 and early 2010, Freeport reported pro forma total debt of $5.1 billion at April 1. With a significant cash hoard, only modest maturities over the next five years, and preferred dividend requirements ending

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