2011
Aug 
8

Weekly Market Update and Coaching Report

Filed under: SALES COACHING — Kerry Johnson @ 6:12 pm  

The S&P Debt Downgrade
Last Friday, the S&P on rating service upgraded US sovereign debt from AAA to AA+. This was oneĀ  of the most telegraphed decisions in financial history. During the debt ceiling debate, S&P told lawmakers at least $4 trillion needed to be cut from the federal deficit. Along with a bipartisan plan to make these cuts resistant from repeal. The U.S. Treasury responded by accusing S&P of $2 trillion accounting error. The US is now in the same risk pool as Belgium and New Zealand. Even the UK and Norway have a higher sovereign debt rating than the US.

There are three reasons why the market will see a period of great volatility over the next six months.

1-Italy and Spain are in danger of default. The PIGS nations, Portugal, Ireland, Greece and Spain are now all on the bond default watch list. Spain’s economy is larger than Portugal, Ireland, and Greece combined. What makes matters worse is Italy. Italy is the third largest bond issuer in the world. The European Central Bank (ECB) is the only entity authorized to print euros. It is widely rumored that the ECB will enter a period of monetizing European debt. This means the ECB will print money to purchase sovereign debt much like the Federal Reserve did before June of quantitative easing.

2-The market saw the debt ceiling debacle a long way off. The reason last week’s market decrease 6% last week and 5.5% on Monday was an expectation that nothing substantial would be done to help the US get back to AAA status. The average time it takes for a country to regain the status is 9 to 18 years. An S&P spokesman on Sunday told Fox news there was a 50-50 chance of the US slipping further down to AA status. This decrease in sovereign debt will cause the US borrowing costs to increase. For every 1% more money the US pays an interest, and extra $1 trillion is added to the federal deficit. At $20 trillion deficit, the debt is impossible to pay.

3-The sovereign debt rating decrease is the most impact-full on the 10 year treasury bond. This “long bond” is the benchmark for interest rates on nearly all consumer loans. It will increase the interest rate on mortgages, credit cards and even car loans. Some economists think this hidden tax will plunge the US economy into a double dip recession. Late breaking news also reported that New York Life and Northwestern Mutual because of their Treasury positions were also downgraded by S&P.

Up Selling Clients to Life Insurance
Today on a Peak Performance Coaching conference call, I interviewed Travis Terlau. Travis has sold more than $50,000 in target premium life insurance in the last two weeks alone. He spoke about how he books appointments as well as closes the business. To hear this short 20 min. interview of how Travis works his magic, click on
http://www.kerryjohnson.com/blog This will take you to the link to hear Travis’ interview.

https://www.gatherplace.net/play?73499309

Volatility
we are entering a period of great volatility. Most economists think we are entering a second phase of debt repudiation. This is an era of lower consumer spending as we say more money, as well as a further credit crisis as banks refuse to take risk in lending money. The .VIX, a measure of market volatility, was 80 in 2008. Today it is at 48, a 50% increase. This all until only index is often a warning to move to safety. Many hedge fund managers are currently going to cash or made that move last week.

Kerry

1 Comment »

1

thanks for share!

Adriana @ February 25, 2012 8:35 am

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