Stocks were set to edge higher at the open on Tuesday as investors hoped S&P's downgrade warning for the euro zone would help force budget changes at a European Union summit this week.
The illogic of this whole concept is stunning, of course. When the credit agencies were threatening to downgrade US credit there was huge alarm that it would cause the bond market to go crazy and the stock market to collapse. In the actual event, of course, everyone yawned and pretty much nothing happened because investors figured the credit rating agencies didn’t know what the hell they were talking bout.
Now the thinking resembles a billiard shot; being that the downgrade will alarm not the bond market but the governments and will cause the governments to do something about their budgets. That action would please the hell out of the bond buying deficit hawks, of course, but it would also trigger a recession and crash the stock market, but naturally “no one could have seen that coming.” Fabulous.
We won’t go into hope and its effect on general elections.