Sunday, March 23, 2008

Britney’s Career Placed on 'Celebrity Watch' at S&P: “She May Be Less Popular than We Thought”

S&P Flags Goldman, Lehman
By JED HOROWITZMarch 22, 2008; Page A15

Standard & Poor's, in a continuing sign of loss of confidence in investment banks' profitability, Friday put Goldman Sachs Group Inc. and Lehman Brothers Holdings Inc. on negative outlook, lowering them from stable.

Although S&P didn't change the senior-debt ratings from AA-minus for Goldman and A-plus for Lehman Brothers, it brought its view of the likelihood of a precipitous decline in profits at the Wall Street firms during the next two years to the same negative levels it previously assigned to Merrill Lynch & Co. and Morgan Stanley…

—The Wall Street Journal

Gosh. That’s a shock.

Who would have thought something might be amiss, credit-wise, at two of the nation’s biggest investment banks—besides, oh, every sentient being on Earth including my dog Charlie, I mean.

Does S&P not read the papers?

Do they not know what has been going on for the last fifteen months, since HSBC first signified something might be dreadfully wrong in the mortgage world by writing off billions of dollars of sub-prime loans that it had only recently written?

Apparently they do not, for only now, even as the seeds of a recovery are being planted and watered by an eager Federal Reserve, does this particular rating agency start to worry about what might be lurking inside Goldman Sachs and Lehman Brothers, two of the bigger mortgage players in existence.

Most amusing of all is S&P's excuse for its delayed crisis-response: "the likelihood of a precipitous decline in profits" at both firms...nearly a week after both firms reported a precipitous decline in profits.

Ironically, of course, both Goldman and Lehman's bottom lines were not nearly as bad as Wall Street's Finest had begun to fear. And naturally both stocks rallied.

So what’s next?

Will S&P be putting CIT Group—which hit the fan last week—on some sort of “Companies We Are Feeling Less Optimistic About” List?

Are they going to downgrade Thornburg Mortgage to “Fretful ?

Cut the short-term paper on Countrywide Financial to “Worrisome”?

Slash Enron to “Might Not Survive”?

It’s a good thing S&P doesn’t make its living, say, rating pop stars. Otherwise, the headline of this piece might not be something we here at NotMakingThisUp did, in fact, make up.

Jeff Matthews
I Am Not Making This Up

© 2008 Not Making This Up LLC

The content contained in this blog represents the opinions of Mr. Matthews. Mr. Matthews also acts as an advisor and clients advised by Mr. Matthews may hold either long or short positions in securities of various companies discussed in the blog based upon Mr. Matthews' recommendations. The commentary in this blog in no way constitutes a solicitation of business or investment advice. It is intended solely for the entertainment of the reader, and the author.


Mark said...

Yes, that "Britney headline" *is* one you might FINALLY have been seeing right around now...

Assuming, of course, that it was Britney and/or her record company that had paid S&P to "independently" provide Britney's ORIGINAL rating!

Lyon Jewett said...

How is that the three ratings agencies are in business? These guys should be headed to the can for being complicit in the whole MBS fraud. They rated crap tranches of subprime AAA in order to keep getting business.

I guess they have more pull with THE MAN then Enron or Worldcom had.

Anonymous said...

Jeff - Two comments:

A) I am amazed at how rating agencies like S & P issue downgrades only AFTER damage is done to companies they cover like Bear Stearns. The irony on S & P covering BSC is that back in 08/2007, an analyst at S & P was confident of BSC's "liquidity" to cover a crisis in short term borrowing, and added that the market's reaction to BSC's problems back then was, in his words, "overplayed".

As you like to say, I am not making this up - here's the link to a MartketWatch article on S & P's downgrade of BSC late last year.

On a lighter note, as for Britney Spears and her comeback attempt, I think the country is rooting for her to make it. She's been "through the valley" over the last year and I think she's trying to get "back to the mountain top", if you know what I mean. I wouldn't be surprised if S & P were covering her comeback status, that they'd upgrade her celebrity status to "stable" only after successfully appearing in film and television as a second career.

That's just my opinion and I could be wrong, though.

VennData said...

Look for the agencies to come out on XHB as "rickity," Clear Channel as "staticky," Amgen as a "bruised" and GM as "lemon-scented"