Well, they did it, they did the impossible. After 94 straight years of AAA rating, S&P downgraded the U.S., as per the rumor about the downgrade after the close.

http://www.zerohedge.com/news/sp-downgrades-us-aa-outlook-negative-full-text

Read all the posts on ZH about this. Now, many have said it doesn't mean anything, but what it does mean, by every source I've read, is that pension funds, a huge part of the money market (which, recall, was teetering on a massive problem), and many other funds can no longer hold the trillions they have. They will all have to dump it, ASAP, at the same time. Many muni's will also have to dump lots of stuff.

Now, maybe nothing happens, like Y2K. I don't see how that's possible, but you never know. We may have just seen the most important thing we will witness in our lifetimes, maybe even in human history. If this is the seminal event that kicks off the implosion of the $1.6 quadrillion house of cards in derivatives, no amount of FED printing can save it. Unless you think the FED could actually print $1.6 quadrillion to cover it, and there still be some semblance of the world as we know it.

Now, for me, I will be dumbfounded, flabbergasted, if the Dow is down any less than 1,000 on the open on Sunday, and I would expect gold to open at $2,000+. No, no sarcasm, I said I was going to lay off that for awhile. Again, maybe the market opens up. Who can tell given how insane things have been since the free market was replaced by the centrally planned market. But, if there is any rationality to the market and the world, this should be the trigger for Armageddon. No exaggeration. I'm just concerned the dollar will be zero in short order. Bank runs, bank holidays, currency collapses, it may all be started already...

Everyone needs to pray I'm wrong... Pray hard.

the RTH certainly thiks so

I think "Truth In Sunshine's" response scenario (25 posts down the list)is close to what's going on.

Al Kamego

Here's a direct link to the comment Al mentioned above.

http://www.zerohedge.com/news/sp-downgrades-us-aa-outlook-negative-full-text#comment-1529682

A move to that lower // on the higher timeframe chart would line up with my doomsday scenario that I'll try to post this weekend. But, for that to happen, we'd need big-time deflation, and although many say we must deleverage, and it will lead to that deflation, I don't see it. I see hyperinflation and deflation at the same time. This can happen.

Deflation happens when we deleverage and the prices actually fall a bit. Hyperinflation happens when the currency is no longer trusted, and its purchasing power drops like a rock. So, we could see a situation where you can buy more goods next month for your salary than you can this month, but your salary next month may be 100X what it is this month. Effectively what this does is wipe out savers, trading accounts, retirement accounts that hold cash or cash equivalents, and so on.

Those who owe money on say a house, they basically get the house paid off for free (well, they pay off a 30-year mortgage with an hour of work). Same with student loans. It would be curious, though, if the government creates an after-the-fact 'gold clause' for those mortgages. In 'the old days' mortgages and other loans had 'gold clauses' that say you really owe this much gold, so that if the currency is devalued the gold clause kicks in, and the lender gets the same value in goods in return.

I doubt the big banks would allow everyone to pay off their houses with an hour's work. So, they would enact a 'currency equivalent' payment requirement i.e. if your yearly payment was 25% of the average yearly salary for your profession, it will be 25% of the current salary on any given day. That way it's 'fair' to the banks. Watch and see. They get all the benefits of hyperinflation, but, as usual, they legislate out the bad effects for the bank (and, coincidentally, the good ones for you and I). Just some thoughts.

Originally posted by roofer

the RTH certainly thiks so

Click image for original size

Click image for original size

Here's a very curious thing to ponder. For the most part, on the 'blogosphere', there is little talk from anyone about anything big happening Sunday night/Monday. Zero talk, even among those in the know, that pension funds, money markets, etc. will have to dump because their charters don't allow holding non-triple A.

This was all I heard about before, now not even a mention anywhere. The talk is it is all priced in, nothing will happen, the market may even be up a bit. This doesn't jibe with my understanding at all. I heard a little bit about how nothing is affected until all of them downgrade from AAA.

Now, here's the point. To me, as I posted, sanity would only be evident if we saw the moves I posted. But, here's how I checked this concept. If gold was going to open up at $2,000, you would not be able to buy gold right now at Friday's spot price. I checked all the big dealers, and not only are none of them even having special phone support over the weekend (they are all 'closed'), they all have tons of gold and silver coins available online at Friday's price.

If there was going to be a gold pop I would think all the 'smart money' would have bought every ounce available from every dealer, since they can sell Monday at $2,000 (or whatever the big pop would be). That tells me gold is not going up any substantial amount. I find that unfathomable.

You mean to tell me the dollar is not going to take a hit on this? Or gold is going to decouple from the dollar? This makes no sense to me. So, I'm ready for an up stock market and a down gold market come tomorrow night. And to me, that's the marker for total insanity...

On the other hand, the Saudi market trades on Saturday, I guess, and it plunged 5.46% on the downgrade...

http://www.telegraph.co.uk/finance/financialcrisis/8686045/Saudi-stock-market-first-to-plunge-on-SandP-downgrade.html

And I just talked to a 'local' dealer and he said his wholesaler is charging about $30 over Friday's price until the market opens tomorrow and he see what happens, to cover himself. So, he can see a $30 pop at most. (And the dealer said he'll sell me all he has on hand at Friday's price.) Interesting, but not earth shattering. Can't wait for tomorrow.

http://slopeofhope.com/2011/08/the-globalist-take-charge.html

This lines up with what roofer just posted in his topic based on the 60-min charts.

U.S. gets downgraded, common sense says down 1,000, centrally planned markets: up. Yep, makes sense.

Well, at least one big dealer, APMEX, closed down sales until the gold market open:

http://www.zerohedge.com/news/apmex-hiatus-until-asia-open-or-why-you-better-already-have-your-physical

So, the Israeli market traded already (they trade Sunday through Thursday!), a delayed open, finished the day down about 7%. This is after the Saudi market finished down 5.46%. So, although many are predicting an 'up' or flat market in the S&P today, wouldn't it be the coolest thing ever if the S&P dropped say 8% or 10%, given that the 'negative' news is about this market, so it should fall more than the peripheral markets.

Ah, to see the S&P staring down the barrel of sub-1000, that would please me immensely. Sure would do well for my intermediate-term bearish bias. But, alas, I truly expect 'they' will try to run it up. Maybe it drops 1%-2%, and they either come right in for it, or they chop it around until the RTH open, and then do their famous straight up ramp. I can't wait to see. I have my 'fingers crossed' big-time for the 8%-10%. Ah, let me dream...

Yep... That sums it up perfectly.