AAA Credit Rating of U.S. Slashed by Standard & Poor's

In an unprecedented move, Standard & Poor's slashed the AAA credit rating of the United States from AAA to AA-plus.

The refusal by the government to cut spending was citing as the reasoning behind the decision, which had been expected for some time.

While Obama touted and signed the deficit reduction bill recently, it was all smoke and mirrors, as the cuts were fake, only targeting additional spending that hasn't been implemented yet.

So when the legislation was signed, the appearance of $2.1 trillion in cuts over 10 years was only an illusion, as it relates to existing debt - because the cuts are for future spending - not current spending.

The S&P said they were looking for a minimum of $4 trillion in savings as the starting point to getting America's financial house in order.

Now U.S. Treasuries are considered to be less safe than countries like Canada, Germany, France and the United Kingdom.

The eventual fallout will be the boost in costs associated with borrowing. Not only for the government of the U.S., but for businesses and consumers as well.

Also of note will be the response of China and other countries holding significant amount of U.S. debt, which remains under a negative outlook from S&P, meaning there could be another downgrade within 12 to 18 months.

That would definitely be interesting as the presidential election approaches.

As usual, the Obama administration is trying to demonize what it perceives as its opponents, castigating S&P's research, saying their numbers are off by trillions. No Mr. President, it's your debt imposed on the U.S. people that is too high by trillions.

Gold could get a nice bump from this as the U.S. dollar should come under short-term pressure.

Toyota's (TM) Credit Rating Downgraded by Standard & Poor’s

Toyota (NYSE:TM) has made improvements in recovering from the recall crisis of 2010, but it is still paying a stiff price when it comes to the bottom line, according to Standard & Poor’s.

The agency on Friday cut its credit rating on Toyota to AA- from AA, citing profit concerns. At the fourth-highest level, that’s still a strong debt rating, especially compared with Toyota’s car-making rivals, but it seems like a long way off from the bulletproof AA+ Toyota enjoyed in 2009. See report on S&P action.

“Because the company’s profitability is still weak, its pace of recovery is slower than those of Japanese peers, and its profitability might remain under pressure from higher raw material prices and gasoline prices as well as the strong yen,” analyst Chizuko Satsukawa said.

Both the cost of steel and rubber, obviously key materials in manufacturing cars, are projected to surge this year, gnawing away at profits of not only Toyota, but also the rest of the industry. And the price of gasoline moving above $4 a gallon will likely cut into truck and car sales.

Toyota was trading at $90.25, down $1.94, or 2.10 percent, as of 2:09 PM EST.





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