Friday, January 13, 2012

Multiple European Sovereign Downgrades Prompt More Yawns

In ordinary times, the pending downgrade of several advanced economies' sovereign credit ratings would prompt some kind of sensible reaction.  Portfolio managers would dump those countries' bonds.  Yields would rise for future issues.  It says something about the collective ability of bond market buy-side players that these things are happening in slow motion and not immediately.

Maybe buyers have no highly liquid safe havens left, with the U.S. and Japan already having fallen off the triple-A perch.  Maybe "anticipated" is too kind a way to describe sovereign credit deterioration, with Bill Gross and others banging the drum for months in public about what to expect.  Maybe investment professionals and their cheerleaders in the media really are so clueless that they can't see the rapids churning into a waterfall up ahead.

I have zero exposure to European equities or debt at the present time.  No one can entice me to go long either of those things until long after the euro has dissolved and regrouped into something much smaller.