Posts filed under “Analysts”

Rating Agencies: Debt Police Go Rogue

How did a bunch of unelected corporate suits get the power to wreck the global economy?

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Yesterday, I taped an interview with Canadian TV, where the question of the rating agencies came up.

I stated my long held views about them: That they were a prime enabler of the credit crisis; that they were one of the most corrupt institutions in the United States, and had sold their ratings to the highest bidder. That their senior executives were criminally liable and deserved jail time. That S&P, Moody’s and Fitch themselves deserved to be executed — the same corporate death penalty that Arthur Anderson received. I stated I was perplexed as to why they were not put down like rabid dogs.

So with that modest position, you can imagine how pleased I was to see Zachary Karabell’s piece this morning in the Daily Beast:

“As the debt-ceiling storm intensifies, some reports indicate that the White House, and perhaps the global financial markets, are less concerned with paying bills after Aug. 2 than with credit-rating agencies imposing their first-ever U.S. government downgrade, from AAA to AA+.

How did it come to this—that a trio of private-sector companies could wield such enormous influence? More specifically, a trio that has proven chronically behind the curve, analytically compromised, and complicit in the financial crisis of 2008–09 as well as the more recent euro-zone debt dilemmas? Somehow, these inept groups again find themselves destabilizing the global system in the name of preserving it . . .

Yet here they are again, threatening to downgrade the debt of the United States—potentially costing taxpayers hundreds of billions, again, in the form of higher interest payments—because they don’t like the messiness of the political process and they don’t approve of the level of debt relative to GDP, so said David Beers of S&P.

But, really—and I mean this in the most respectful way—who the hell is David Beers and who elected him to be the arbiter of the American financial system?”

This issue here is not the debt ceiling or the ongoing deficits — but rather, yet another corporate criminal allowed to roam free.

The entire piece is well worth your time to read.

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Note: You can read my previously run ins with S&P’s parent company McGraw Hill here.


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Source:
Debt Police Go Rogue
Daily Beast Jul 27, 2011 11:40 PM EDT
http://www.thedailybeast.com/articles/2011/07/27/debt-ceiling-unaccountable-credit-ratings-agencies-go-rogue.html

See also:
U.S. Default: Robert Reich Calls S&P Warning About U.S. Credit ‘Height of Hubris’ (ABC)

Category: Analysts, Bailouts, Really, really bad calls

There’s Only One Way to Avoid a Downgrade to U.S. Credit

According to Reuters, a majority of economists now think that U.S. credit will be downgraded. The debt ceiling plans being proposed likely will not avoid a debt downgrade. Indeed, as Zero Hedge notes, the cuts being proposed in the debt ceiling proposals would be offset by the costs of the downgrade: The US downgrade alone,…Read More

Category: Analysts, Credit, Think Tank

When Will Apple Be Bigger than ExxonMobil?

Apple’s blowout numbers this week got tongues wagging about the tech juggernaut. David Wilson at Bloomberg charts the answer to the question as to when Apple Inc. will overtake Exxon Mobil as the world’s most valuable public company. Apple is currently at ~$358.7 billion, a mere 13%behind Exxon Mobil at $410.3 billion. Short answer: At…Read More

Category: Analysts, Trading, Valuation

S&P Threatens To Downgrade Everything

Media coverage of S&P downgrade threat; • Reuters – S&P threatens downgrade of U.S. financial companies Standard & Poor’s on Friday raised the pressure on debt negotiators in Washington, saying it could downgrade insurers, securities clearinghouses, mortgage agencies and a laundry list of other firms without a deal soon to lift the debt ceiling and…Read More

Category: Analysts, Credit, Think Tank

Reporting Season Farce

Albert Edwards is the uber-Bear who sits on the Global Strategy Team at Société Générale. Edwards notes:  “It’s that surreal time of the quarter, just ahead of the reporting season, when US companies cajole compliant analysts into reducing their profit forecasts so that on the day the company can record a positive earnings surprise.” Here’s…Read More

Category: Analysts, Corporate Management, Earnings, Trading

Stock Buybacks vs Insider Buying: 70:1 Ratio

“While insiders are willing to use corporate cash to try to support the value of their stock-based compensation, they don’t seem to think their stocks are attractively priced.“ -Charles Biderman, Trimtabs > Over the years, I have been critical of Trimtab’s Charles Biderman (See this, this, this and this). I suspect much of the visibility…Read More

Category: Analysts, Corporate Management, Investing

Analysts Exist to Make Economists Look Respectable

“The only function of economic forecasting is to make astrology look respectable.” -John Kenneth Galbraith > Regular readers know that I do not hold the economics profession in particularly high regard. These sociologists too often have an unfortunate unfamiliarity with how Human Beings behave in the wild. Forget forecasting — economic theories fail to adequately…Read More

Category: Analysts, Really, really bad calls

Are Economists Now Too Pessimistic?

Société Générale has a very interesting piece out this morning looking at the notion of economic surprises and a double-dip scenario: “The economic surprise indicator has returned to very low levels, indicating that a lot of negative surprises are now discounted. We don’t believe that the indicator will remain low for long as the drop…Read More

Category: Analysts, Psychology, Really, really bad calls

Blackberry vs Apple vs Droid

About 6 months ago on CNBC Fast Money, I discussed why Blackberry was toast (cant find the video, but it may been this). I was astonished anyone would even defend RIMM against the Apple onslaught. To be blunt, i am surprised RIMM is a still a double digit stock. This was one of the cases…Read More

Category: Analysts, Really, really bad calls, Technology

Time Running Out?

A mention by David Rosenberg in a recent note sent me scurrying to find this report from the San Francisco Fed in August of last year.  The report — remember, it was almost one year ago — used the Leading Economic Indicators to assess the probability of another recession within the next 24 months (from that date,…Read More

Category: Analysts, Cycles, Data Analysis, Economy, Research