Investors flee stocks for bonds on U.S. downgrade

Fear is a horrible thing, and fear is what this is all about. We can fix our credit problems if only we elect the right people to Congress and the Presidency. Many people now believe that Obama is following the teachings of Alinski and Cloward-Piven and is intentionally destroying the American economy so that it can be reinvented as a country where all wealth is distributed by the government equally.

Looking at the results for the past two and a half years and the Democrats refusal to cut spending and bring our finances in order, it is hard to visualize them being on the side of fiscal responsibility and order.

Excerpt: U.S. stocks plunged on Monday, racking up their biggest losses in almost three years as investors fled to the safety of gold and bonds after the downgrade of the U.S. credit rating by Standard & Poor's stoked fears the country is powerless to stop another recession.

Wall Street ended down more than 6 percent while European stocks hit a two-year low as investors saw no solution to the twin debt crises on both sides of the Atlantic.

A favored gauge of investor anxiety spiked to its biggest one-day gain since February 2007, a sign investors are afraid of more declines to come. The CBOE Volatility Index .VIX surged 50 percent to end at 48.

The selling came in heavy trading, with volume of 17.5 billion shares on the New York Stock Exchange, NYSE Amex and Nasdaq, the busiest since the day after last year's "flash crash."

Ironically, investors took shelter in the one asset that was directly affected by the downgrade -- U.S. government bonds. Benchmark 10-year Treasury notes, held widely for their perceived high quality, rallied, the yield dropping to 2.32 percent.

Investors struggled to discern the effects of the U.S. credit rating downgrade to AA-plus from AAA, which could hit various components of the vast U.S. financial sector, from mortgage lenders to municipal issuers and insurers.

"It is a panic, and almost by definition it doesn't have an issue. It wouldn't matter what it was," said James Paulsen, chief investment strategist at Wells Capital Management, with over $340 billion in assets under management.

Read full Reuters report here.