Gustavo Ballvé on August 6th, 2013
Food for thought, Home, Mental models, Portfolio Management, Signal or Noise

Two years ago the S&P downgraded the credit rating of the United States sovereign debt, triggering a global equities sell-off and motivating me to write a long post called “Don’t panic“. In it I looked at what had really happened, what the S&P decision actually meant (and what it didn’t) and the incentive systems that sometimes move such agencies. Besides advising people to keep their heads when all about them are losing theirs (and blaming it on… the Fed? Sorry, couldn’t help linking to Rudyard Kipling’s “If”), I also mentioned the power of cash for those situations and the possible choice of inaction.

If excessive pessimism brought on by third-party “research” was unwarranted, excessive optimism is too. There will certainly be a large number of articles saying how bad the S&P screwed up – first one right here – and, again, read them with the necessary pounds of salt. I haven’t done, and won’t do, the research on the current state of the US economy to say anything about it. I’m still qualified enough to say, again, don’t panic – but don’t believe the hype either.

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