Jack Barnes over at www.themarketoracle.co.uk alerts everyone to an invisible investor placing $1 billion on the futures market betting American Treasuries would be downgraded. From the timing of the trades, it is clear that the news had been leaked to a major proprietary trader. The single trade triggered bond holders to divest.
Market Oracle speculates on the possible investor. The Chinese government, John Paulson and Bill Gross of Pimco are candidates. Paulson had scored $6 billion when he bet against the subprime mortgages that brought Lehman Brothers down. The investor had to know the internal deal of the debt negotiation in Washington as well as Standard and Poors' thinking prior to their downgrade.
What the Market Oracle predicts is that interest rates will rise and soon as the Treasury has to bolster normal investor confidence.
Meanwhile Warren Buffet says that America should be given a AAAA rating because we owe our debts in American dollars and we can always print them. Which may in fact be the larger game here. With Chinese remarks today,the implications of another foreign reserve currency would devastate the American economy and reduce its position in the world.
Europe is quietly raising the question,"Who bails out the world economy if not the United States?" And China is not the likely answer.
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