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How ironic is it that the S&P downgrade of the US has caused so much money to move out of the market and into treasuries. Of course the other side of the coin is that the counter-parties to these trades probably pulled their money out of treasuries (at least under the covers) to buy equities.

Hedge
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Some would say the counter party in all those sales is the US Treasury, which needs every penny to cover the huge deficits.

The market is telling us it fears a recession. Hence, the safe move is out of equities and into safe bonds.
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The market is telling us it fears a recession. Hence, the safe move is out of equities and into safe bonds.

But my point was that the guy who bought the equities got his cash from somewhere and the proceeds went somewhere, and that somewhere was probably a sweep account, which in turn is in T-bills. For all practical matters, I don't see a lot of new investment in T-bills from this crash, since trades are zero-sum, unless the big traders are buying T-bills directly. And even they have to wait the 3 days for clearing, don't they? Or do I have this all messed up?

Hedge
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>> The market is telling us it fears a recession. Hence, the safe move is out of equities and into safe bonds. <<

Perhaps, but if investors are determining Treasuries are the "safe haven" then the S&P downgrade (from the folks who brought you all those AAA-rated toxic MBS garbage) wasn't really the reason for the sell-off but was just a convenient excuse for increased jitters.

#29
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When the US stock market makes headlines for days on end, individual investors everywhere call their brokers and often make the wrong decision: to sell rather than take the chance.

But this is global news. So I suspect the first round of selling was investors in Europe and Asia. Many of them probably own Dow stocks or even Dow Index funds, because that is the easiest index of US stocks for unsophisticated investors to follow.

They sold their Dow stocks. But it would be interesting to learn if their money markets are in US dollers and treasuries or if they have a whole series of currency choices and money markets in each.

Of course the initial moves attracted much attention and resulted in a broader rout.
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