...and now it starts. S&P Downgrades U.S. Debt

With prices heading higher, the S&P downgrades our debt status to an "A" instead of tripe-A. This shows how much trouble we are in...the roller coaster is headed down now. It won't be easy to get credit and trade may suffer too.We're not supposed to get excited yet, but first quarter earnings are lower for most corporations, Saudi Arabia cut their oil output because of "a lack of buyers." Gold surged to a new high at $1493.30 and silver is at a high not known for 31 years.

S&P downgraded us to an "A" because pf "very large budget deficits and rising government indebtedness" of the U.S. relative to its triple-A peers, S&P said in a press release. "The path to addressing these is not clear to us," the rating agency said.

In response, Assistant Secretary for Financial Markets Mary Miller of the U.S. Department of the Treasury noted that S&P emphasized "the importance of timely bipartisan cooperation and action on fiscal reform,"( i.e., we HAVE to take drastic measures NOW, not later or the recovery will not continue).

Yet Geithner stated we are in recovery. 

"Investors might come to see S&P’s decision in a positive light if it prompts Congress to focus on delivering a credible deficit reduction plan," Higgins wrote in a research note. "After all, the rating agency’s decision to put the UK’s AAA-rating on negative outlook in May 2009 fueled a debate on the need for massive fiscal tightening, and the tough decisions taken by the new coalition government were eventually rewarded by S&P with the UK’s outlook being revised back up to stable in October last year," (i.e., tighten the belt and tighten it now).

Still, disregarding the S&P warnings comes with risk, particularly if all of the buoyant voices are wrong and Washington pays no heed to S&P's shot across the bow.

The Federal Reserve can't keep printing money forever to pay the US debt, and the market faces its sternest test yet in two months when the central bank pulls its Treasury-buying program that has injected so much liquidity into the investing stream.

Hve a nice day everybody.