Posts filed under “Analysts”
Throw back the little ones
And pan fry the big ones
Use tact, poise and reason
And gently squeeze them
-Steely Dan, Throw back the Little Ones
The WSJ is reporting that the Securities and Exchange Commission has suspended small ratings firm Egan-Jones from issuing any “official ratings” on bonds issued by countries, U.S. states, or local governments. They also were suspended from rating securities backed by mortgages. The ban will last the next 18 months.
The basis of the regulatory punishment was negotiated agreement between the SEC and Egan-Jones regarding the filing of “inaccurate documents with the regulator in 2008,” mislead investors about their expertise, and violating conflict-of-interest provisions.
No word on when similar conflict of interest charges are coming for Standard & Poor’s Ratings Services or Moody’s Investors Service for similar misleading, conflicted and otherwise compromised ratings.
The major credit rating agencies were the prime enablers of the credit crisis. They put Triple-AAA ratings on securitized sub-prime mortgage bundles, primarily because they were paid by the underwriters to do so. But for those actions, much of the securitized junk would not have been able to be purchased by the many bond funds, pensions and other large institutional investors mandated to buy only Investment grade paper. (The bond markets eventually figured this out and has learned to ignore the ratings agencies commentary as conflicted and corrupt). Thus, what should have been a tiny, high risk corner of the mortgage market instead became an enormous, A-rated, mainstream asset class for yield hungry fixed income managers. This is why S&P and Moody’s are thus amongst the prime causes of the financial crisis of 2008-09.
It is a damned shame the SEC has to to figure this out and act on it . . . .
Ratings Agencies Still Broken (May 24th, 2010)
Surprise! Ratings Agencies Still Suck! (January 5th, 2011)
SEC Reins In Ratings Firm
By JEANNETTE NEUMANN
WSJ, January 22, 2013
Dr. David P. Kelly of JP Morgan Asset Management quarterly deck is out. Its a regular favorite of mine, laden as it is with great charts that look at the very long term. You can download the entire 69 page deck here. click for ginormous chart Source: JP Morgan Funds
Source: Adam Parker, Morgan Stanley Today’s absurd datapoint comes from Slate’s Moneybox: 88% of the S&P500 earnings growth for 2012 came from just 10 firms. Just four companies—Apple, AIG, Goldman Sachs, and Bank of America—together provided a majority of overall earnings growth among large-cap companies. Source: Four Companies That Together Provided Most of…Read More
I moderated a few panels at the PEW conference in DC this summer with Sheila Bair — and the stand out to me was Laurie Goodman. I think this quote today sums up the Housing recovery meme perfectly: “While we have seen many dramatic headlines touting the housing recovery over the past 3.5 years,…Read More
Wall Street pays QE3 no mind Source: Merrill Lynch Merrill Lynch’s Equity & Quant Strategist, Savita Subramanian, notes that Wall Street is still excessively bearish, and that this remains a reliable contrarian indicator: The Sell Side Indicator is based on the average recommended equity allocation of Wall Street strategists as of the last business…Read More
In light of the California bankruptcies and the usual belated downgrades comes this nice overview on Municipalities from UBS analysts Thomas McLoughlin and Kristin Stephens, titled Municipal Bonds: City credit quality reconsidered. They did a screen of credit quality via the Merritt Research database of 284 cities, and note come to the oft overlooked conclusion…Read More
Two reports from different wirehouses caught my eye yesterday due to their amazing Yin and Yang nature. First up, the always excellent Equity & Quant Strategist at BAML, Savita Subramanian (the Yin), issued a report titled Wall St. Proclaims the Death of Equities. The report discusses the firm’s proprietary sell-side indicator, which has reached near…Read More
Equity prices & bond yields since 1900 I don’t often give props to big Sell Side firms, but today I must make an exception. Merrill Lynch’s Equity Strategy group put out The Longest Pictures: Picture Guide to Financial Markets Since 1800 this week. Its a 102 page doozy looking at every asset class and country going back…Read More
6 Buys, 3 Neutrals Average Price Target = $39 BofA/Merrill – Neutral – $38 PT Goldman Sachs – Buy – $42 PT Oppenheimer – Outperform – $41 PT JPMorgan – Overweight – $45 PT Piper Jaffray – Overweight – $41 PT Wells Fargo – Outperform – $37-$40 Range Credit Suisse – Neutral – $34 PT…Read More