Matt Wirz’s Article, Essay Example

Matt Wirz’s article, “Debt Investors Aren’t Just Waiting For the Next Downgrades in Europe” from the September 19th, 1012 edition of the Wall Street Journal Online probes the connection between an impending credit downgrades for Spain and Italy by Moody’s Investors Service Inc. and the status of global debt and investment opportunities associated with international debt-trading.   The article concentrates on bond-trading and on the early reactions of investors to a possible credit downgrading.

The article also explores how the downgrading of a nation’s credit rating influences the values of its bonds,and , in turn, the value of companies associated with that nation. For example, Wirz reports that certain “investors take issue with Moody’s policy, arguing that it forces them to sell out of even strong companies with limited exposure to their governments” (Wirz).

This point is very important in regard to doing business in a global environment. The Telefonica company is referenced near the end of the article as a company who may see tremendous loss with a potential credit downgrade of Spain, despite having only slightly over a third of its assets in that nation.

I feel that the article is important in regard to global business because it highlights the tenuous and complex nature of how international debt and trade interact. It also shows that opportunities exist even in economic downturns. I also think that the article shows how specific events in global business create a “ripple” effect that goes through the entire system.

One of the most obvious impact of the looming credit downgrade fro Italy and Spain is that “junk” bonds will proliferate in the countries. Also, a decrease in previously held bonds will occur. Money will shift in and out of the these downgraded markets as some try to create wealth by buying cheap bonds and others sell off in fear. The beginning of this ripple impact was described in the article, as previously mentioned.

I chose to share this article because I think it is very important to consider the double-edeged sword of living in a global economy. On the one hand,the opportunities that are afforded by a global economy are tremendous. On the other hand, the regulation of such a complicated

economy is a delicate business. The article shows the inner-workings of business on a global scale because it deals directly with the value of currency and International finance in  a way that ultimately connects to all businesses in the world.

Reference

Wirz, Matt. Debt Investors Aren’t Just Waiting For the Next Downgrades in Europe. WSJ Online; 9-19-2012; accessed 9-19-12; http://online.wsj.com/article/SB10000872396390443890304578006702026974538.html?mod=WSJ_hp_LEFTWhatsNewsCollection