Posts tagged Moody’s
October 13, 2008
· Filed under business, economy, investing, money, politics, stock market · Tagged ABK, ambac, dow closed, Henry Paulson, interbank lending, MBI, MBIA, Mitsubishi, Moody's, Morgan Stanley, MS, Radian Group, RDN, SCA, stimulus package, stocks, Syncora, wall street
Forget Prozac, the market needs lithium. After last week’s worst week, today marked the best day in Wall Street’s history and the biggest one-day percentage gain since 1933. Stocks rallied all across the board. The Dow closed up 936 points, or over 11%, to $9,387, and the Nasdaq and S&P also gained over 11% each. Morgan Stanley (MS) traded like an OTC today, gaining 86% from its close of $9.68 on Friday after Japan’s Mitsubishi UFJ Financial Group invested in it $9 billion. Will it stick? Maybe. Countries all across the globe are now jointly focused on fixing their banks to stave off a worldwide recession, so if this doesn’t work, what will?
By the way, sometime over the weekend the plan changed from “buying toxic mortgage-backed assets” to “let’s follow Great Brittan because they seem to know how to deal with this crisis, so let’s pump money into a few good banks like they’re doing over there across the pond”. So that’s what we’re doing. And the figure is now $250 billion instead of $700 or $850 or whatever it ended up being once al the rum and wooden arrow makers across the nation were settled up.
The credit markets were closed today because of the holiday, but they open back up tomorrow. Analysts are now looking to see if the interbank lending rates, or the rates banks charge each other to borrow each other’s money (think what needed to happen but didn’t when people ran IndyMac) will come down so that banks will again lend to each other. Until banks again start covering each other, no one who missed one electric bill will be able to get a loan.
The only stocks I’m ahead in right now are Radian Group (RDN), MBIA (MBI), and Syncora (SCA); the rest are one big hemorrhage. Moody’s still hasn’t lifted their threat of downgrade of Ambac (ABK). But to stay positive after such a positive day, at least I’ll be able to average down. And average down I definitely will!
Word that a second stimulus package may be on its way may have also helped boost the markets today. Crude oil followed the rest of the market today, closing up $4.14 to $81.84.
The #1 movie in America is Beverly Hills Chihuahua.
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September 29, 2008
· Filed under business, economy, investing, money, politics, stock market · Tagged ABK, ambac, C, Citigroup buys Wachovia, dow closed, downgrade, economy, Etrade, Mary Caraccioli, Moody's, Nancy Pelosi, NYSE, opening bell, reverse stock split, September 29, stock market, Sydney Morning Herald, Thornburg Mortgage, TMA, Wachovia, WB
Holy Moly, who saw that one coming?! The House of Representatives voted down the bailout 228 to 205, and it’s being blamed on a “too-partisan” speech made by the Democratic speaker of the House Nancy Pelosi. Whether her speech was partisan or not, someone’s head had to roll.
Hindsight is 20/20, and looking back to last night, there was a clear signal the bill wasn’t going to pass: after an initial positive response, the Asian markets began to slide into red. Real money movers always know things ahead of time, and the Asian markets’ slip was a sure signal that our bill was not going to pass. I should have seen it, and maybe subconsciously I did, but it seemed too unbelievable that the bailout would not pass given its enormity and all the long days and weekends Congress had put into it. But as we’ve seen with IndyMac, Fannie and Freddie, and Washington Mutual, nothing is too big to fail.
Lawmakers are headed back to the drawing board to draft up a new version of the plan, but won’t meet again until Wednesday because tomorrow is Rosh Hashanah.
I’m more of an observer now than an active player. I’m in too deep to do anything except wait, so all I can really focus on is the day to day with the stocks I own and the stocks that those stocks are absorbing. Citigroup (C) bought Wachovia (WB) today for $2.2 billion, or $1 per share.
Two funny computer errors happened today: Thornburg Mortgage (TMA) put through a 10:1 reverse stock split this morning, but not before they multiplied the share price by 10. So during today’s premarket, it looked like I had 3K extra in my account! But the quirk was soon fixed and so was the overinflated share price. By close, TMA was down to $1.15, which would have been 11.5 cents on Friday before the reverse split. To buy back the preferred shares, Thornburg needs to raise more capital. You’re welcome, TMA.
Another blip came to Wachovia’s share price today. At one point, it listed on Google finance at $500! Message boarders were going nuts, and that error put the financial sector up 7% and made it look like the only sector in the green. But that error was also soon fixed, and everyone who owns WB fell back into reality.
One last computer oddity happened at the New York Stock Exchange today: because of a glitch, the morning bell never rang. Mary Caraccioli said she’s never seen that happen.
People are still sweating a Moody’s downgrade to Ambac (ABK). I really hope not. Of all problems that could happen, that one tops my concern. Just about a month ago, I was up over 100% on ABK and now I’m in the red. If a Moody’s downgrade comes, it’ll destroy Ambac, especially after today.
The Dow, which opened down over 100 points in seeming anticipation, dropped 777 points today- the greatest one-day decline in its history and even greater than the drop after September 11, 2001- to close the say at $10,365. However to see the glass 1/10 full, this was the 17th worst daily drop percentage-wise, so not quite the worst. Crude oil fell $10.52 to close at $96.36.
The Sydney Morning Herald reported tonight that “online broking portal Etrade ground to a virtual halt this morning [Tuesday September 30] as it struggled to cope with massive trading volumes.” Is this a hint of more blood to come? Damn sure it is!
September 28, 2008
· Filed under business, economy, investing, money, politics, stock market · Tagged $250 billion, $700 billion, ABK, ambac, bailout plan, Banco Santander, bankruptcy, Ben Bernanke, Citigroup, CNNMoney, credit crunch, economy, Henry Paulson, Moody's, Nikkei, S&P, SEC, STD, Wachovia, wall street, WB, Wells Fargo
Early this morning, Congress finally agreed on the wording of the bailout. CNNMoney.com reported the following provisions attached to the way the money is spent:
*The $700 billion would be disbursed in stages, with $250 billion made available immediately for the Treasury’s use. (After the initial $250 million, an additional $100 million can be released by the President. If after that more money is needed, Congress can re-vote on release of the remaining $350 million.)
*Curbs will be placed on the compensation of executives at companies that sell mortgage assets to Treasury. Among them, companies that participate will not be allowed to offer golden parachutes to executives; they will not be able to deduct the salary they pay to executives above $500,000.
*An oversight board will be created. The board will include the Federal Reserve chairman, the Securities and Exchange Commission chairman, the Federal Home Finance Agency director and the Housing and Urban Development secretary.
*Allow for the Treasury to receive the option to take ownership stakes in participating companies under certain circumstances.
*Treasury may establish an insurance program – with risk-based premiums paid by the industry – to guarantee companies’ troubled assets, including mortgage-backed securities, purchased before March 18, 2008.
Congress wanted to get the bill together before the opening of the Asian markets tonight. The Nikkei 225 opened $10 lower than Friday’s close, but then began a slightly hesitant ascent. How the bill’s finalization will affect our market’s opening tomorrow, or if anymore bankruptcies or downgrades will occur, is still up in the air. My guess is that there will be a sigh of relief across all sectors tomorrow but any real change will only happen after the bill is signed, sealed and the money is delivered.
Will Ambac (ABK) avoid a Moody’s downgrade before the relief comes through, and when the relief comes through, will it help ABK? Message boarders seem to think the price of ABK will skyrocket tomorrow, and the very late-day increase in ABK’s share price on Friday may have hinted belief that a weekend deal would in fact help ABK come Monday. But the “Moody Monster” is still lurking in the woods. Analysts are blaming a lot of the financial crisis on these ratings agencies for rating companies way higher than they deserved, therefore needing to make drastic corrective downgrades. On March 20, 2001, Frank Raiter, Standard & Poor’s former top mortgage official, said he was asked by S&P to rate a real estate investment he had never even reviewed. He told Bloomberg that he was told to “just guess” because the S&P was in competition with other ratings companies (possibly Moody’s?) for fees on a $484 million deal. It’s good that ratings are being revealed as little more than smoke and mirrors, but people still take ratings seriously, and a Moody’s downgrade of Ambac would devastate the company and its stock price.
And will the news of consensus on Capitol Hill save Wachovia (WB) from going bust before another bank picks up its fractions? Or will we remember Wachovia as the last big victim of the “credit crunch”? We’ll have to wait to see…
September 21, 2008
· Filed under business, economy, investing, money, politics, stock market · Tagged "Paulson's Monster", $11 trillion, $700 billion, ABK, ambac, bankruptcy, banks, Barclays, Berkshire Hathaway, bond insurer, economy, Google, hedge funds, Henry Paulson, investing, Lehman Brothers, MBI, MBIA, Moody's, SEC, Warren Buffett
“Paulson’s Monster”, as it’s being called, has now proposed the need for $700 billion of taxpayer dollars, raising the US debt limit to $11 trillion, to spin off the bad sectors of the financials into its own entity. Paulson claims his plan will “minimize” the cost to the taxpayer in the long run, but who can really be sure? As part of the plan, Paulson said that he was currently in talks with other countries for help. He wouldn’t disclose which countries.
Back in Ratings land, one ABK message boarder claimed that the Feds raided Moody’s on Friday looking for connections between the ratings company and hedge funds. No link was provided, and given that any Joe Schmo can go on a Google Finance board and post whatever he or she pleases, it could very well be completely fabricated. However, a Bloomberg article titled “Berkshire’s Bond Insurer, Moody’s Stake Face Probe”, reports that one such link may in fact come to light:
“Billionaire Warren Buffett’s Berkshire Hathaway Inc. faces a probe by Connecticut’s attorney general for possible conflicts created by owning almost 20 percent of credit ratings company Moody’s Corp. while also running a new municipal bond insurer.
Moody’s gave its top rating last week to Berkshire Hathaway Assurance Corp., created in December as existing bond insurers struggled to maintain their AAA ratings. A favorable rating for Berkshire by New York-based Moody’s, or a lower rating for competitors including MBIA Inc. and Ambac Financial Group Inc., may give Buffett’s company an advantage.”
So maybe there is truth in rumor.
In other news, Barclays is the proud new owner of Lehman Brothers’s investment banking and trading businesses. The $1.75 billion deal approved yesterday is a definite bargain as compared to the one Barclays would have had to strike last week for Lehman’s entire assets before bankruptcy.
September 21, 2008
· Filed under business, economy, investing, money, politics, stock market · Tagged ABK, AIG, ambac, banks, banned, Barclays, Ben Bernanke, Charles Schumer, economy, financials, Henry Paulson, investing, LEH, Lehman Brothers, LEHMQ, MBI, MBIA, Moody's, Moody's Ratings, short selling, stocks
Whoa mama. I was definitely wrong about the profit-taking. The US market rallied harder in the last two days than it has in 38 years- longer than I’ve been alive! Lehman Brothers, now on the OTC board as LEHMQ, gained 313% on rumors that it would sell parts of itself to foreign banks. Barclays is back in the running. In just the last two days of trading, I made up almost all of what I had lost in the last week and a half.
The SEC banned ALL short selling- regular and naked alike- of 799 financials for the next 10 days. The United Kingdom temporarily halted short selling yesterday, and the US did the same. This is a huge step from just banning naked shorting; this is a total ban on betting that stocks will lose value, essentially disqualifying half of the game. Hillary Clinton and Charles Schumer, both New York Senators, proposed the ban. Critics say this ban will warp the market, making it seem as if the financial stocks are worth more than they are. But when naked shorting was banned in July, the effect lasted long after the ban was lifted. In fact, it lasted right up until last week when AIG teetered and fell and dragged the entire sector along with it. So in a market that is so emotionally driven, a little banning may do the trick to snap the depression (no pun intended).
Henry Paulson, our Treasury Secretary, and Federal Reserve Chairman Ben Bernanke proposed the idea to spin all bad parts of financial institutions into its own entity- a black hole of badness. This idea reminds me of that story I had to read in high school about the utopian society that was only a utopia because of the little girl who lived in a cage in the basement of someone’s house. Remember that one? I was never big on reading, so titles slip my mind. I just remember the girl in the cage and the annual field trip every schoolkid would take to see the girl in the dirty dark cage dungeon as a reminder of why they lived as perfectly as they did. I wonder if part of the Paulson and Bernanke plan will have the American people visiting the dark entity once a year. Oh wait, now I get it. We will be visiting once a year- at tax time. Seems these two guys kept up on their high school reading.
Meanwhile in Ratings Land, Moody’s threatened to downgrade Ambac (ABK) and MBIA (MBI), which dropped ABK 42% and another 27% in afterhours, and MBI 8% and another 8% in afterhours. The ABK message boards caught fire, and it seems Moody’s may catch some of it by Monday, if not sooner.
Do you know the name of that book yet? Maybe it was a short story.
September 11, 2008
· Filed under business, economy, investing, money, politics, stock market · Tagged BAC, Bank of America, Fitch Ratings, Galveston Texas, Hurricane Ike, LEH, Lehman Brothers, Moody's, WaMu, Washington Mutual, WM
Lehman Brothers (LEH) again dragged down the entire market for the great majority of the day. The stock closed last night’s afterhours at $7.25, and was trading below $5 by today’s 8am premarket. By 8:30, the stock was below $4 and by the opening bell, the stock was already down 38%.
But in the last half hour of today’s trading, Bank of America stepped in to stop the hemorrhage. This large bank, who earlier in the year bought Countrywide, announced a possible purchase of Lehman Brothers. The announcement did little to the common share price of LEH, maybe because no one believed them, and the stock closed down 41% to $4.22. Later in the night, the Federal Reserve announced that they would step in and help Lehman sell itself, and Bank of America started to sound like it was having second thoughts.
The Bank of America announcement seemed to kick Washington Mutual from red to green and the Dow to skyrocket. Both WM and the Dow took a sharp turn north right afterwards. In premarket trading, WM stock had slipped below $2, but turned around in the last half hour of the trading day to close at a 22% gain to $2.83.
After the closing bell, Washington Mutual released an updated third quarter expectations report, which included a focus to build reserves, an unchanged long-term credit outlook, a stable $50 billion of liquidity, and an updated projection of loan losses in the third quarter- from $5.9 billion to $4.5 billion.
But then a few minutes later, Fitch Ratings threw a wrench in the works, as they seem to enjoy doing, and “downgraded” the company. Fitch is the fingernail in the birthday cake. Fitch is the hair in the risotto. A few hours later, Moody’s Investors Service, another ratings company, jumped on the bandwagon and downgraded WaMu too. Who are these people? I’d like to see what their stock would do, if they had any. A MarketWatch article that my friend sent me earlier in the day, before all the stories and ratings hit, stated that Washington Mutual is currently trading at just 17% of its book value, so I’m hanging on. If WM crawls back, I think it will pull my other financial stocks back up with it.
In today’s afterhours, WM broke $3 a share. Sure I’m seeing the glass half empty, but in this bear market, there are only two possible scenarios: go bust or get up. I’m betting on my stocks getting up.
In much graver news than losing money, Hurricane Ike is headed straight to Galveston, Texas. This island was completely wiped out on September 8, 1900 by an unnamed hurricane that killed an estimated 10,000 to 12,000 people, and which made the storm the deadliest natural disaster the Unites States has ever seen. Today, the mayor of Galveston ordered a mandatory evacuation of the island. The National Weather Service stated that staying in Galveston would bring “certain death” as a storm surge of 20 feet is expected to blanket the island and the hurricane is expected to morph into a category 3 by the time it makes landfall tomorrow night.
Despite the impending storm, which some are already predicting to be “catastrophic”, crude oil lost $1.71 to close at $100.87, nearly breaking the $100/barrel psychological barrier. The Dow gained 164 points, all of which were tacked on between 3:30PM and 4PM, and closed the day at $11,433. The dollar hit a year-high; it would now take just $1.39 to get one euro. Thanks to WaMu, I closed the day up $37.
