DOUBLE AA+ THE US DOWNGRADE

Friday's markets had just closed when Standard & Poor's announced the first US rating adjustment ever. A wave of disbelief hit the political establishment around the world. However, after several rating downgrades of European nations during the recent credit crisis the US downgrade was just a matter of time. Either rating agencies use the same approach towards all nations or their ratings would become noncredible.

While the markets have reacted towards all news of recent days immediately and with a vengeance, the reaction to this downgrade seems rather muted during the early European trading hours. 'Sell the rumours - buy the facts' - an old trader's wisdom seems to become reality.

While Europe is not only battling significant financial problems of individual states, it is also fighting its own inability to come up with coherent financial and economic European policy standards covering all EU nations. At the same time the US is in a crisis of values. The deep political divisions between Democrats and Republicans made it impossible to solve a credit crunch until the last minute because of pure political pickering.

Extreme political positioning, extreme financial reactions, however no immediate solutions. This could be a good description of today's situation. As a result we have just seen a surge of gold above the 1,700 Dollars mark - another all-time-high. Swissie, Yen and Silver - the other recent risk-aversion-products have remained within their range. As already indicated last week, while a significant trend change could be in the cards, a consolidation of the bearish dollar and precious metal prices is more likely than further and immediate price collapses.

In the medium term, however, political and financial leaders will need to dedicate all their attention towards the worldwide bond crisis in order to prohibit the collapse of our system.

Have a great trading week!
Gerhard