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Is "Is AA+ So Bad?" asks Mark Gongloff. Not really he says, pointing out that Japan, Canada and...

Is "Is AA+ So Bad?" asks Mark Gongloff. Not really he says, pointing out that Japan, Canada and Australia have lost AAA ratings without borrowing costs rising in the long run. And what about investors with stipulations about AAA securities? Some "put Treasurys in a special category," while others "are considering tweaking their rules."
Comments (5)
  • Ove Sentlig
    , contributor
    Comments (32) | Send Message
     
    "others are considering tweaking their rules" :-) How American!
    7 Aug 2011, 05:41 AM Reply Like
  • Daniel M. Harrison
    , contributor
    Comments (139) | Send Message
     
    WSJ's Mark Gongloff always misses the point when it comes to Japan. The point is not that "borrowing costs (haven't) risen in the long run," it's that growth hasn't either!
    7 Aug 2011, 05:50 AM Reply Like
  • cynic2011
    , contributor
    Comments (652) | Send Message
     
    the trend of the US's budget deficit will lead to financial Armageddon if nothing fundamental changes. At this point nothing fundamental is changing,so even a AA+ is too high. A corporation with the same data would be rated as junk
    7 Aug 2011, 05:57 AM Reply Like
  • Daniel M. Harrison
    , contributor
    Comments (139) | Send Message
     
    That's exactly right. The S&P now looks beholden to corporate America ... If my neighbor has a $25k salary, a $150k o/d and and $50k on credit cards, and he asks me to lend him $30k and I agree, even if he had a $1 million salary three years ago, how does that make my paper AA+??
    7 Aug 2011, 07:52 AM Reply Like
  • cynic2011
    , contributor
    Comments (652) | Send Message
     
    Methinks things are even worse. Say you have a Visa card with no limit. The outstanding balance increases at 10% every year,but your salary increases at 5% every year. It is only a matter of math until you can't service the debt. That makes it a junk credit. Same with the US treasury.

     

    If Exxon or IBM had the same problem nobody would buy their bonds except for a junk bond fund.
    7 Aug 2011, 10:04 AM Reply Like
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