The BootThe Boot““The Boot” will be the topic that The Boot” will be the topic that

we are going to talk about. we are going to talk about. Larry LevinLarry Levin surely has the reason surely has the reason

to public this topic for us. Just to public this topic for us. Just check to see what the news we check to see what the news we

should care for our trading.should care for our trading.

Italy just got “the boot” from Italy just got “the boot” from Standard & Poor’s: it was Standard & Poor’s: it was downgraded. The immediate downgraded. The immediate reaction in the ES futures was a -reaction in the ES futures was a -10.00 point drop; however, the 10.00 point drop; however, the market rebounded rather quickly market rebounded rather quickly – rising +9.25 points from the – rising +9.25 points from the recent nadir.recent nadir.

Surely the market is thinking “What’s Surely the market is thinking “What’s the worry? Benny & The Inkjets new the worry? Benny & The Inkjets new tune will be ‘Bail Out Europe’ and tune will be ‘Bail Out Europe’ and they’ll drop it at their 2-day FOMC they’ll drop it at their 2-day FOMC meeting.” No worries – right? After meeting.” No worries – right? After all, Moody’s didn’t downgrade Italy. all, Moody’s didn’t downgrade Italy. Then again, Moody’s doesn’t Then again, Moody’s doesn’t downgrade anything.downgrade anything.

From Bloomberg we read From Bloomberg we read http://www.bloomberg.com/http://www.bloomberg.com/news/2011-09-19/italy-s-news/2011-09-19/italy-s-credit-rating-cut-one-level-credit-rating-cut-one-level-to-a-by-s-p-as-government-to-a-by-s-p-as-government-debt-mounts.htmldebt-mounts.html

Italy’s credit rating was cut by Italy’s credit rating was cut by Standard & Poor’s on concern that Standard & Poor’s on concern that weakening economic growth and weakening economic growth and a “fragile” government mean the a “fragile” government mean the nation won’t be able to reduce the nation won’t be able to reduce the euro-region’s second-largest debt euro-region’s second-largest debt burden.burden.

The rating was lowered to A from The rating was lowered to A from A+, with a negative outlook, S&P A+, with a negative outlook, S&P said in a statement. said in a statement. S&PS&P said Italy’s said Italy’s net general government debt is the net general government debt is the highest among A-rated sovereigns, highest among A-rated sovereigns, and the company now expects it to and the company now expects it to peak later and at a higher level peak later and at a higher level than it previously anticipated.than it previously anticipated.

The decision sent the euro The decision sent the euro sliding for a third day against sliding for a third day against the dollar as investor concern the dollar as investor concern rises that European policy rises that European policy makers will fail to contain the makers will fail to contain the debt crisis.debt crisis.

Greece’s government plans Greece’s government plans another call with its main another call with its main

creditors today as it seeks to creditors today as it seeks to stave off default, while U.S. stave off default, while U.S.

Treasury Timothy F. Geithner Treasury Timothy F. Geithner urged the region to adopt urged the region to adopt

additional tools.additional tools.

““It’s a reminder that we’ve had It’s a reminder that we’ve had the market in control but policy the market in control but policy makers have been slow to think makers have been slow to think in any forward-looking context,” in any forward-looking context,” said Adrian Foster, head of said Adrian Foster, head of financial-market research for financial-market research for Asia at Rabobank Groep NV in Asia at Rabobank Groep NV in Hong Kong.Hong Kong.

““Policy makers across the Policy makers across the euro-zone have been well euro-zone have been well and truly asleep at the and truly asleep at the wheel for quite a while now wheel for quite a while now and are only taking and are only taking measures when the market measures when the market pushes them to it.”pushes them to it.”

U.S. RatingU.S. Rating

The decision comes just weeks after The decision comes just weeks after S&P stripped the U.S. of its AAA credit S&P stripped the U.S. of its AAA credit rating for the first time. While the rating for the first time. While the Aug. 5 move roiled global markets, Aug. 5 move roiled global markets, bond investors ignored S&P’s bond investors ignored S&P’s warnings about U.S. creditworthiness warnings about U.S. creditworthiness and piled into Treasuries.and piled into Treasuries.

The yield on the benchmark The yield on the benchmark U.S. government bond fell to a U.S. government bond fell to a

record 1.8770 on Sept. 12.record 1.8770 on Sept. 12. Italy’s downgrade may Italy’s downgrade may

aggravate a volatile political aggravate a volatile political situation — Berlusconi faces situation — Berlusconi faces four trials — after a decade four trials — after a decade with virtually no economic with virtually no economic

growth that has undermined growth that has undermined debt reduction.debt reduction.

Its government debt was Its government debt was 119 percent of gross 119 percent of gross domestic product last year, domestic product last year, more than any euro more than any euro country after Greece.country after Greece.

Unlike Ireland and Portugal, which Unlike Ireland and Portugal, which followed Greece in seeking followed Greece in seeking bailouts from the European Union bailouts from the European Union and the International Monetary and the International Monetary Fund, Italy until July had managed Fund, Italy until July had managed to skirt the worst of the fallout to skirt the worst of the fallout from the debt crisis.from the debt crisis.

While its budget gap was 4.6 While its budget gap was 4.6 percent of GDP in 2010, lower percent of GDP in 2010, lower than France and Germany, than France and Germany, debt will reach 120 percent debt will reach 120 percent this year.this year.

The balance of story can be The balance of story can be read at the link above.read at the link above.

Trade well and follow the trend, not Trade well and follow the trend, not the so-called “experts.”the so-called “experts.”

Behold the age of infinite moral Behold the age of infinite moral hazard! On April 2nd, 2009 hazard! On April 2nd, 2009 CONgress forced FASB to suspend CONgress forced FASB to suspend rule 157 in favor of deceitful rule 157 in favor of deceitful accounting for the TBTF banksters.accounting for the TBTF banksters.