Monday, August 08, 2011

Dow plunges 500 points on 4 Aug 2011

Dear fellow traders,

The credit rating agency Standard & Poor has lowered U.S. long-term debt rating one notch from AAA to AA+ on 5 Aug, 2011. But S&P has been pointed out of a $2 trillion error in its estimate of the size of the deficits over the next decade. It was said that the agency made a fundamental error in interpreting the budget projections of the Congressional Budget Office.

The plan that the Congress had passed on the 11th hour to raise the debt ceiling on Tuesday, 2 Aug 2011 could achieve between $2.1 trillion and $2.4 trillion in deficit cuts. But the S&P had warned for months of a possible downgrade and said that a credible plan would need to achieve $4 trillion in deficit reduction.

The Dow has already plunged more than 500 points on 4 Aug, 2011 amid fears of USA economic slowdown and Europe's debt crisis. European officials are trying to help Italy, the world's eighth-largest economy, to avert the kind of bailouts that Greece, Portugal and Spain were forced to accept to prevent them from defaulting on their debt.

Yours Truly,

Tony Chai