Well if these institutions don't have AAA ratings their products are not sold in some market space, e.g. affects the insurance side of the business.
Well, maybe their products should not be sold in some markets, if they aren't safe enough to be sold in those markets.
The financial section is a heavy weight in the market,
Too much so. I would argue that the financial sector represents too big a chunk of the economy for the services that they provide, relative to other sectors.
these ratings tell on the stock prices, and it affects the entire global economy.
The global economy is affected by many things. It'll survive a credit downgrade on a couple banks, I'm sure.
Recently, BAC (trading just around $5 was $19 not so long ago), GS (now $89, year ago $175), CITI (reverse split their stock now trading in the $20's) stocks have been sliding downwards in the past year. Seems to me this is bad news for the banks.
Bad for those banks, good for some of their competitors. BAC is losing market share to other banks and credit unions. No big deal there, except for BAC shareholders I suppose. Hopefully those investors knew to diversify and/or hedge and/or limit their losses. If not, sucks to be them, maybe they won't make the same mistake next time.
Brace yourself for some not so good news.
What's to brace for? Stock prices go up and down on a daily basis, driven by all kinds of news, general sentiment, economic data, and many other factors. People make money when the markets go down just as they do when the markets go up. The markets have gone down many times in the past, and will again many times in the future. I'm not worried.
Edited by Bonam, 29 November 2011 - 11:48 PM.