On Wednesday investors were thrown for a loop, when after hours, Moody’s put US debt on review for a possible downgrade.
In a nutshell the agency, threatened to reduce the nation’s tiple-A bond rating citing concerns that lawmakers may not reach an agreement to raise the debt ceiling by the August 2nd deadline. Click here to read more about the Moody's note.
That thought that lawmakers would put the nation's pristine debt rating in jeopardy has left Wall Street stunned.
Perhaps Ben Bernanke summed it up best when he said, “If we went so far as to default on the debt it would be a major crisis because the Treasury security is viewed as the safest and most liquid security in the world and is the foundation for much of the financial system.”
”The notion that it would suddenly become unreliable and illiquid would throw shock waves through the entire global financial system.”
On the news the US dollar sold off and S&P futures slipped suggesting the Moody’s note had send investors running for the exits. But if you're running scared, all Dennis Gartman can do is shake his head in disgust.
”Anyone who doesn’t think Congress will wait until the 11th hour before striking a deal is naïve,” he scolds. “Am I surprised by this? No. This is to be expected.”
In fact, he thinks the sell-off in the US dollar presents a buying opportunity. ”I’m buying dollars and selling euro on the news,” Gartman says.
To support his thesis, he points to the action in the dollar versus the euro after the Moody's headline crossed the wires. “You’d think by all the attention this is getting the dollar had gone into the dinger but it hasn’t.” Looking at the dollar's euro cross, “the euro hasn’t even gained (versus the dollar) to the highs of a week ago,” he says.
In fact, Gartman thinks the Street's focus on the debt ceiling is completely misplaced. "I think it's terribly overblown."
He thinks the financial woes of Europe are far worse. “Europe has so many more problems. The union is breaking apart,” he says. “California will still be part of the US but Greece won’t be part of the ECU in the not to distance future and I think that’s far more important.”
* you can find our conversation with Gartman about 12 minutes into the video clip above.
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