Tag Archive: Standard & Poors


Quick name the chief executive who was asked to serve as the opening speaker at the ultra-exclusive Davos/Klosters (World Economic Forum) powerfest last week?

And while you’re at it, ask yourself who has more to say about an entire continent’s economy, common currency and way of life than any other chief executive?

Could this be the same chief executive that oversees the fifth most powerful economy in the world with a 5.5 percent unemployment rate (the lowest jobless rate for this particular nation in two decades) and a Standard & Poors AAA bond rating (certainly nothing to be sneezed at in this economy…Gesundheit)?

The answer to this question ist Deutschland’s Kanzlerin Angela Merkel. This brings to mind the next question: Is this “skirt” the most influential chief executive in the developed world (didn’t say the most powerful) eclipsing all of those that compete in blue “suits,” white shirts and power ties? One could certainly make this argument, maybe for the first time since the Earth cooled.

merkel2

This week’s Economist and many other internationally oriented publications have focused even greater attention with each succeeding week on Chancellor Merkel. This week, the Economist proclaimed in a headline, “Merkel at the Top.” She may have to humbly concur with that conclusion as she was delivering the Davos keynote at a snowy Swiss mountain resort.

By entering into this discussion, I am not neglecting the obvious competing influence on this side of the Atlantic. There is no doubt that Mark Zuckerberg and his 800 million subscribers (third largest “country” in the world) deserves his due recognition…Does he ever wear a suit? Today, Zuckerberg’s Facebook (future ticker symbol, “FB”) issued its SEC mandated S-1 filing setting in motion the most long-awaited IPO since the formation of the Holy Roman Empire. But does a reported $10 billion market capitalized IPO translate into long-term influence?

Merkel’s Germany has already gone public (about 900 years ago), so it holds no sway over competing underwriters let alone warring stock exchanges all vying for the prestige of listing a high-visibility stock. Zuckerberg wins that competition in a nanosecond.

zuckerberg

At the same time one might ask: Does Zuckerberg directly influence the economic fate of 500 million Europeans and the future of a common currency?. He may be personally XX times wealthier than Merkel, but he does not hold the balance of an entire continent in his hands, no matter how well he understands social media software algorithms.

Some may conclude that I have overlooked the present occupant of that white house on Pennsylvania Avenue in Washington, DC. Perish the thought. The power of the presidency is the presidency. Having said that, President Obama would be getting his knickers in a twist to be able to run for re-election based upon a AAA bond rating, low unemployment rate, decreasing budget deficit and increasing economic growth. He has none of these cards to play, but Merkel does…maybe that is why she is running 12 points ahead of her nearest competitor, Peer Steinbruck of the Social Democrats.

What is particularly noteworthy about the former physicist, who grew up on the wrong side of the Wall, is that she is not a horn blower. The Europeans seem to hold as many summits as the Republicans stage debates, and yet Merkel’s steady style seems suited (skirted?) for these gatherings.

French President Nicolas Sarkozy (like Obama , facing a tough re-elect) has been forced to accept the junior partner role to Merkel, ironically the Chancellor from the “Fatherland.” As Charlemagne wrote in The Economist, “It is an old tenet of European politics that the Franco-German partnership is necessary to disguise German strength and French weakness.”

Republican frontrunner Mitt Romney has criticized Obama stating that the president wants to convert America into a European-style social welfare state. Emulating basket case Europe is not a pleasant vision, but duplicating Germany’s economic accomplishments under Merkel looks mighty inviting right about now.

https://www.cia.gov/library/publications/the-world-factbook/geos/gm.html

http://www.economist.com/node/21543540

http://www.economist.com/node/21543159

The setting is a Darth Vader-style black bus, capable of waging simultaneous nuclear warfare on two or more fronts, rolling through the farm fields of Minnesota, Iowa and Illinois. An unlikely visitor has just boarded the bus…

obamabus

Little Ole Me (LOM): “You asked for me, sir?”

POTUS: “You are probably wondering why I summoned a Republican from Eugene, Oregon…even though that sounds like an oxymoron…or maybe just a moro…”

LOM: “With all due respect sir we probably don’t want my neighbors to know my political affiliation. They are already really concerned about neighborhood property values.”

POTUS: “Look I only have limited time. In fact my time is running out, if things don’t change pronto. Comprende senor?

LOM: “Si, el Presidente…I am willing to serve my country. What can I possibly do to help the red, white and blue?

POTUS: “You mean the Tea Party colors? Don’t get me started…Let me get to the point. You write Almost DailyBrett, a strategic communications blog…”

LOM: “You know about Almost DailyBrett? I don’t know if I should be flattered or appalled…”

POTUS: “The question is how can I change my image, my perception and my messaging to turn around my 39 percent polling numbers nationally, and in particular win Florida, Ohio, Virginia, Colorado, Nevada and all the other swing states.”

LOM: “They really like you in San Francisco…

POTUS: “Think again. They don’t like anyone in San Francisco. Have you ever seen a happy social-justice activist?”

LOM: “Can’t say that I have ever seen a ‘happy’ activist in my entire life.”

POTUS: “What I really need to do is embrace Republican principles without setting off a rebellion among my liberal…err…progressive base…”

LOM: “That’s going to be tough sir. You are trying to do the right thing…Sorry sir…You are trying to do the correct thing without pissing off the pissed off. How can you satisfy the insatiable?”

POTUS: “I can’t afford a Ted Kennedy or Pat Buchanan-style primary challenge. I have enough problems with Mitt Romney, Rick Perry and Michele Bachmann…They are all more telegenic than me.”

LOM: “Especially Michele Bachmann…I get lost in her eyes…”

POTUS: “So do I…Let’s get off this tangent before I get in trouble with my Michelle, my belle. I already have enough comparisons with Jimmy Carter, particularly his incompetence, to have to face a similar primary challenge from the left wing of my party…”

LOM: “Mr. President. Can someone really run to the left of you? Do you really think it is still possible for a credible primary challenge to be mounted at this late date? And do you think the redistributionist social justice crowd is going to sit it out next November, if Mitt Romney or Rick Perry or Michele Bachmann is the GOP standard bearer? I think not.”

POTUS: “Maybe I just blame the Standard & Poor’s downgrade, the massive unemployment and the record $14 trillion deficit on George W. Bush and the Tea Party?…And then I can vilify the Republican nominee. I think I have a winning strategy. You don’t think I should run on my record?”

LOM: “Do the names Harry S. Truman and Ronald Reagan ring a bell?”

POTUS: “Of course, they were well respected throughout all 57 states, Alaska and Hawaii too…”

LOM: “Truman said, ‘The Buck Stops Here.’ You should declare that you are the president. You accept responsibility for the past three years, and you have a plan for the future.”

POTUS: “I do?”

LOM: “And Reagan campaigned for re-election with the mantra, ‘Morning in America.’ It was a message of optimism and hope. Why can’t you go back to offering hope for a better tomorrow? Maybe even a Shining City on the Hill?”

POTUS: “You know, I remember mentioning the notion of hope in 2008.”

LOM: “Do you remember when Bill Clinton fried his fellow Democrats with a massive welfare reform bill, so much that it even upset Hillary?”

POTUS: “You are reminding me about upsetting Hillary?”

LOM: “Sorry sir. I am just suggesting that you should infuriate Harry Reid and Nancy Pelosi. Let them start attacking you. Your polling numbers will skyrocket…even better than taking out Osama bin Laden.”

nancyharry

POTUS: “Do you think I can send in the Navy SEALS to take out Harry and Nancy?”

LOM: “No sir. Something about the messy Separation of Powers gets in the way.”

POTUS: “And then what should I do?”

LOM: “Propose a true compromise. In exchange for closing corporate loopholes, you should offer true entitlement reform for Social Security, Medicare and Medicaid, which represent 60 percent of the budget. Exempt everyone over 50 years of age from these changes, and then apply means testing and raise the age limit to at least 67 for all of those under 50. All additional revenue will be used for deficit reduction. Wall Street will be happy, and maybe Standard & Poor’s will restore the nation’s AAA bond rating.”

POTUS: “You mean be a leader instead of a campaigner. I am really great on the stump…Do you really think I should hack off Harry and Nancy?”

LOM: “Have you ever heard the German word, ‘Schadenfreude?’

POTUS: “Schadenfreude?”

LOM: “When Harry and Nancy are unhappy, I am happy and a whole lot of other people too, especially in the swing states.”

POTUS: “Sounds like a great strategic communications strategy.”

LOM: “Thank you Mr. President. Can I get off the bus now?”

The conventional wisdom is the media seizes on bad news, much like sharks thrashing to the scent of blood in the water, and virtually ignores good news.

But what if GOOD news happens to individuals and affiliations NOT in accord with the prevailing philosophy of the media? Think of it this way: If a tree falls in a forest, does it make any sound?

And if BAD news happens to individuals and affiliations IN accord with the prevailing philosophy of the media? Hmmm…does the tree metaphor still apply?

What am I babbling about?

What if Standard & Poors Corp., Moody’s Investor Service or Fitch Investors Service, Inc., (or any combination thereof) choose to withstand the intense behind-the-scenes lobbying from the White House and/or Treasury and actually downgrades federal debt from its hallowed Triple A bond rating?

Will the media cover the story? Sure.

Will the media bludgeon the president and Treasury? Not so sure.

That means the bad news/good news tendencies of the media don’t always apply.

If the downgrade does occur, you can be certain that Mitt Romney, Rick Perry (assuming the Texas Governor chooses to run) and presumably other Republican contenders will use this subject in political “comparison” ads. The question remains how will the media view these ads? Will they rally around President Obama?

Alas, this subject is not new to me. I was still-green-behind-the-ears as an assistant press secretary when California first lost its vaunted Triple A credit rating in 1983. The resulting media coverage was in a word: explosive.

And when California regained its best-possible credit rating three years later, the coverage from the exalted members of the Fourth Estate was almost non-existent.

Will that be the case this time around if the US loses its Triple A credit rating a little more than 12 months before President Barack Obama goes before the voters?

Not necessarily.

Naturally, there is a difference between Washington D.C., the Citadel of Infinite Wisdom, and California, a mere state.

There is also a difference between a Republican governor, a Democratic president and the treatment of the two by the political media, especially the elites.

As a rookie press assistant back in 1983, I found out all about Moody’s, Standard & Poors and Fitch’s ratings on the credit worthiness of California debt. It’s analogous to credit ratings for individuals.

California had a new governor, my boss George Deukmejian. He inherited a $1.5 billion deficit (almost sounds quaint by today’s standards), a post-recessionary economy and Democrats dominating Sacramento.

And then came the thud of the credit downgrade. Screaming headlines and editorials demanded a tax increase making the government bigger, to restore California’s Triple A bond rating. The governor refused, used his veto pen, and insisted on a $1 billion reserve for emergencies.

The Triple A bond rating was restored three years later, but it was a non-event for California’s political media, the very same crowd that was attempting to dance on the governor’s political grave upon the downgrade just 36 months or so earlier.

One Democrat in particular noted the glaring discrepancy in the coverage, California state Treasurer at the time, Jess “Big Daddy” Unruh. It was also no secret of the animosity between Unruh and the Democratic nominee for Governor, LA Mayor Tom Bradley. Unruh sent the signal that he was open to a bipartisan media gathering celebrating California’s return to a Triple A bond rating.

And on July 30, 1986 there was an extraordinary news conference in the state Capitol with Republican Governor Deukmejian standing beside Democratic Treasurer (and former Speaker of the Assembly) Unruh extolling the return of California’s Triple A bond rating. They also reminded the media of the discrepancy in attention between when California lost the highest bond rating in 1983 and the dearth of coverage three years later.

After Unruh praised California’s “fine” governor, he was asked who he was supporting for California’s top job. He replied: “Who’s running?”

Certainly, no one should be rooting for the country to lose its Triple A bond rating for paper issued by the government. The result would be an international loss of prestige as well as taxpayers paying more for the government to float bonds to pay for its operations. And today, Fitch indicated that a downgrade may not be in the cards. However, Fitch made no long-term guarantees. And what about the other bond rating houses?

A downgrade between now and November 2012 could be politically devastating to the re-election prospects of Barack Obama . . . or maybe not. A lot depends on the media. After all, they set the agenda for how we think and act in America. Right? Err . . . Correct?

http://en.wikipedia.org/wiki/Bond_credit_rating

http://finance.toolbox.com/blogs/credit-eyes-thoughts/californias-credit-rating-four-decades-of-momentum-based-credit-analysis-43704

http://articles.latimes.com/1986-07-31/news/mn-20318_1_fiscal-health

http://finance.yahoo.com/news/Fitch-US-Debt-deal-alone-wont-apf-48023357.html?x=0&sec=topStories&pos=6&asset=&ccode=

http://latimesblogs.latimes.com/money_co/2011/08/fitch-reaffirms-us-triple-a-rating-after-debt-deal-approval.html

http://thehill.com/blogs/on-the-money/801-economy/174943-geithner-congressional-spectacle-has-damaged-nations-reputation

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