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The United States my lose its AAA rating if it can not control its deficit hike, rating agency Moody’s Investors Service warned on Thursday. Steven Hess, Moody’s lead analyst for the United States, said in a TV interview that the AAA rating of the United States is “not guaranteed.” He said if the US deficit does not drop to a sustainable level in the next three to four years, the US rating will be “in jeopardy.” The US government posted a record deficit of US$1.417T in the FY ended Sept. 30. Stimulus package to combat the severe recession and a series of bailout rescues to banks and automakers have put a heavy burden on government spending. The Obama Administration has predicted that deficits would top US$1T through FY 2011. Currently Moody’s has a stable outlook on the US rating, an indication that there will not be a change in the next 18 months. Read more

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Growing confidence that the US economy is putting the worst recession in decades behind it has pushed the index known as Wall Street’s fear gauge to its lowest level since just before Lehman Brothers collapsed last September. The CBOE Volatility Index .VIX, known as the VIX, provides investors with portfolio insurance against fluctuations in the S&P 500 index .SPX. It soared to historic highs in the weeks after Lehman’s rapid failure pushed financial markets to the brink and left an already crippled economy in tatters. But amid numerous signs the economy is on the edge of a recovery, coupled with the best quarter for stocks in more than 10 years, the VIX has begun to look like its old self again.”Investors see a lesser need for protection going forward; it looks like they don’t see a revisit to the March lows,” said Andrew Wilkinson, senior market analyst at Interactive Brokers Group in Greenwich, Connecticut. The VIX, which is calculated from Standard & Poor’s index options, tracks the market’s expectations of volatility over the next 30 days. It often moves inversely to the S&P benchmark and goes up as options premiums are raised. The S&P 500 .SPX hit a more than 12-year low on March 9, 2009, down more than 57% from the record high it set in October 2007, after the bursting of the housing bubble spiraled into a credit crisis and then into a global recession. The VIX hit an intra-day record high of 89.53 in late October, but yesterday it closed at 25.35, its lowest level since September 11, 2008, before the weekend when Lehman collapsed.”The path forward appears a less treacherous one according to what the VIX is telling us,” Wilkinson added. Stabilization of key economic indicators such as payrolls, home prices, bond yields and consumer confidence, as well as the Obama administration’s plan to reactivate the recession-hit economy, have boosted bets on the economy’s outlook. Investors are looking forward to this week’s key housing and job market data on expectations that it will show further signs that the worst is over. “I think (the VIX) is down primarily because the expectation is the economy is going to recover and we’ve started a bull market,” said Hugh Johnson, chief investment officer of Johnson Illington Advisors in Albany, New York. The S&P 500 has risen + 40% from its March 9 low, and is on path to close its best quarter since the fourth quarter of 1998. But even as some market players expect a correction in the near term, the reading of the VIX suggests that the correction may not happen. “The bears are beginning to throw in the towel on expecting a substantial stock market decline, so investors are beginning to sell implied volatility,” Wilkinson said. “Investors do not perceive there’s going to be another big crash.” But although the VIX has returned to levels similar to those seen before financial markets imploded, analysts said that does not mean the economy has recovered from the hit it took last year. “We’ve gone through such a change in the economy that has required such drastic steps from both the Federal Reserve and the government that it is going to create a very different landscape going forward,” added Wilkinson. “We can’t relate (today’s) VIX measures to were we’ve come from.”

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Last week, US President Barack Obama thanked everyone from unions to executives for working to keep Chrysler LLC alive while blaming “a small group of speculators” for forcing the automaker into bankruptcy. “A group of investment firms and hedge funds decided to hold out for the prospect of an unjustified taxpayer-funded bailout,” Obama said yesterday in Washington before Chrysler filed for bankruptcy protection last Friday. Now, the US government and Chrysler plan to use bankruptcy to compel the dissidents, all secured creditors, to go along with a plan to create a more viable carmaker in partnership with Italy’s Fiat SpA. In lashing out at the holdouts, Obama is attempting to rally the public behind his efforts to rescue the automaker, said Stuart Rothenberg, a Washington-based political analyst. “In the real world, you have good guys and bad guys, and at the moment, auto executives, hedge-fund managers and bankers are all in the bad-guy category,” said Rothenberg. “He wants to be the guy who’s solving the problems and wants to make it clear who’s causing the problems.”

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US President Barack Obama warned credit-card issuers they will face new regulations and scrutiny to keep consumers from being hit by “unfair” rate increases and abusive fees and penalties. Obama said he told 13 executives from the industry, including representatives from Charlotte, North Carolina-based Bank of America Corp. and New York-based American Express Co. that while credit cards are an important source of finance for families and small businesses, consumers too often must negotiate confusing terms that end up costing them more money than they expected. “The days of any time, any reason rate hikes and late fee traps have to end,” Obama said after meeting with the executives yesterday at the White House. “No more fine print, no more confusing terms and conditions.” Card issuers are under fire for policies that impose large late fees and boost interest rates on delinquent customers amid higher unemployment and a recession. The Federal Reserve already has issued new rules, due to take effect in 2010. Lawmakers in the US House and Senate also are considering legislation to provide more consumer protections. American Bankers Association President Ed Yingling, who was among those at the meeting, said afterward that Obama was “very clear” about his desire to make disclosures easier to understand and about the practices he wants ended.

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US President Barack Obama said last week that the recession-hit US economy was showing “glimmers of hope” despite remaining under strain and promised further steps in coming weeks to tackle the financial crisis. “We’ve still got a lot of work to do,” Obama told reporters after a meeting with economic and regulatory teams plus Federal Reserve Board Chairman Ben Bernanke. But he added, “We’re starting to see progress.” Obama spoke a day after encouraging trade and jobless figures pushed stocks higher, and White House economic adviser Lawrence Summers predicted the economy would emerge from a sense of “freefall” by the middle of the year.

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At the end of Obama’s press conference following the Group of 20 Summit last Thursday, a large crowd of journalists did something journalists never do: they gave a politician a standing ovation.

In a week that began with a flurry of meetings between the US president and his counterparts from China, Russia, India, Saudi Arabia, Britain and others, and ends with Saturday’s NATO summit, the media’s uncharacteristic behavior might easily be forgotten. However, it will likely linger because it matched a sincere response over and above the supplication shown towards any occupant of the White House by the leaders of the G-20 countries.

The same cerebral and low-key approach used by President Obama in dealings with fellow leaders came out in often lengthy, but nuanced, answers to questions. “He actually answered the questions he was asked,” says one startled Asian reporter. President Obama he is being accorded high ratings from almost every quarter barring his conservative critics in the USA. In part, this comes because of the contrast Mr Obama strikes with the widely derided George W. Bush. Partly it has been prompted by the celebrity cult the new leader has generated in the US. But most of all, it is about Mr Obama’s unusual approach to foreigners. “I have come to listen, not to lecture,” he said several times this week.

Much of the time he appeared to mean it. The least expected endorsement came from Russia’s president Medvedev, who until he met President Obama had developed a taste for rubbing Americans the wrong way. But last Wednesday the Russian president unexpectedly invited him to visit this July, observing that Moscow’s warm weather that month would reflect the new warmth in US-Russian relations, Mr Medvedev said: “After this meeting, I am far more optimistic about the successful development of our relations and would like to thank President Obama for this opportunity.” Mark-to-Market Rule Gives More Clarity

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