Posts filed under “Analysts”

Moody’s, S&P Knew of Ratings Fraud

A quick reminder of the extent of corruption at the ratings agencies: They were well aware of the fraud that was going on, they just elected to ignore it.

Recall this 2010 NYT article:

“In 2004, well before the risks embedded in Wall Street’s bets on subprime mortgages became widely known, employees at Standard & Poor’s, the credit rating agency, were feeling pressure to expand the business.

One employee warned in internal e-mail that the company would lose business if it failed to give high enough ratings to collateralized debt obligations, the investments that later emerged at the heart of the financial crisis.

We are meeting with your group this week to discuss adjusting criteria for rating C.D.O.s of real estate assets this week because of the ongoing threat of losing deals,” the e-mail said. “Lose the C.D.O. and lose the base business — a self reinforcing loop.

In June 2005, an S.& P. employee warned that tampering “with criteria to ‘get the deal’ is putting the entire S.& P. franchise at risk — it’s a bad idea.” A Senate panel will release 550 pages of exhibits on Friday — including these and other internal messages — at a hearing scrutinizing the role S.& P. and the ratings agency Moody’s Investors Service played in the 2008 financial crisis. The panel, the Permanent Subcommittee on Investigations, released excerpts of the messages Thursday.

Understand the litigation against Standard & Poors — and eventually Moody’s and Fitcvh Ratings — is not about “Opinion” — its about knowing, willful fraud.



Documents Show Internal Qualms at Rating Agencies
NYT, April 22, 2010

Category: Analysts, Bailouts, Legal, Really, really bad calls

Wall St. Feeling Better but Far from Bullish

  I have shown this graphic repeatedly in the past, but given today’s rally, we might as well trot it out one more time: The Sell Side Indicator — Merrill’s measure of Wall Street’s bullishness on stocks — rose by 2.8pt in January to 49.8. This is now an eight month high and the fifth…Read More

Category: Analysts, Contrary Indicators, Investing, Psychology

Cred and Credulity: Dylan Grice

Okay, kids, gather round: I have in my hands your weekend reading assignment, and its a doozey: Dylan Grice, former Société Générale strategist (and Big Picture conference speaker) collection of Popular Delusions essays. The work covers the period from 2009 to 2012 and runs 244 pages long. It is chock full of terrific stuff. Topics range…Read More

Category: Analysts, Investing, Markets

Honest Rating Agency Is Punished for Telling the Truth

While Hooey-Peddling Agencies Are Rewarded The big 3 government backed ratings agencies (technically known as Nationally Recognized Statistical Rating Organization) – S&P, Moody’s and Fitch – all committed massive fraud, which was a prime cause of the 2008 economic crash. They took bribes for higher ratings, “sold their soul“, engaged in a “culture of covering…Read More

Category: Analysts, Bailouts, Credit, Think Tank

SEC Bans Wrong Ratings Agency

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,…Read More

Category: Analysts, Bailouts, Credit, Really, really bad calls

S&P 500 Index at Inflection Point

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

Category: Analysts, Data Analysis, Investing, Markets

4 Companies Provided Half of SPX 2012 Earnings Growth

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

Category: Analysts, Earnings

QOTD: Housing Recovery

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

Category: Analysts, Real Estate

Sell Side Indicator Still Shows Extreme Bearishness

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

Category: Analysts, Data Analysis, Psychology

UBS: Not All Municipalities Are the Same

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

Category: Analysts, Credit, Fixed Income/Interest Rates