Posts Tagged ‘ratings’

Shadow Banking Makes a Comeback

Shadow Banking Makes a Comeback

Oil being poured into water, studio shot

Courtesy of MIKE WHITNEY writing at CounterPunch 

Credit conditions are improving for speculators and bubblemakers, but they continue to worsen for households, consumers and small businesses. An article in the Wall Street Journal confirms that the Fed’s efforts to revive the so-called shadow banking system is showing signs of progress. Financial intermediaries have been taking advantage of low rates and easy terms to fund corporate bonds, stocks and mortgage-backed securities. Thus, the reflating of high-risk financial assets has resumed, thanks to the Fed’s crisis-engendering monetary policy and extraordinary rescue operations.

Here’s an excerpt from the Wall Street Journal:

"A new quarterly survey of lending by the Federal Reserve found that hedge funds and private-equity funds are getting better terms from lenders and that big banks have loosened lending standards generally in recent months. The survey, called the Senior Credit Officer Opinion Survey, focuses on wholesale credit markets, which the Fed said functioned better over the past quarter." ("Survey shows credit flows more freely", Sudeep Reddy, Wall Street Journal)

In contrast, bank lending and consumer loans continue to shrink at a rate of nearly 5 per cent per year. According to economist John Makin, there was a "sharp drop in credit growth, to a negative 9.7 per cent annual rate over the three months ending in May." Bottom line; the real economy is being strangled while unregulated shadow banks are re-leveraging their portfolios and skimming profits.  Here’s more from the WSJ:

"Two-thirds of dealers said hedge funds in particular pushed harder for better rates and looser nonprice terms, and they said some of the funds got better deals as a result….(while) The funding market for key consumer loans remained under stress, with a quarter of dealers reporting that liquidity and functioning in the market had deteriorated in recent months."  ("Survey shows credit flows more freely", Sudeep Reddy, Wall Street Journal)

As the policymaking arm of the nation’s biggest banks, the Fed’s job is to enhance the profit-generating activities of its constituents. That’s why Fed chair Ben Bernanke has worked tirelessly to restore the crisis-prone shadow banking system. As inequality grows and the depression deepens for working people, securitization and derivatives offer a viable way to increase earnings and drive up shares for financial institutions. The banks continue to post record profits even while the underlying economy is…
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A Series Of Lucky Coincidences Involving Goldman Sachs And BP plc

A Series Of Lucky Coincidences Involving Goldman Sachs And BP plc

Courtesy of Tyler Durden

Earlier, when observing the US AG disclosure of a civil and criminal investigation into BP plc, we noted in passing that BP’s former Chairman, Peter Sutherland, who left the firm is a Chairman of Goldman Sachs International. Mr. Sutherland holds some other interesting titles, including a position on the Trilateral Commission, he was a chairman of the London School of Economics in 2008, he is a UN special representative for migration and development; he was the founding director-general of the World Trade Organisation, he had previously served as director general of GATT since July 1993 and was instrumental in concluding the Uruguay GATT Round Negotiations. Needless to say, we focused on the Goldman relationship. When digging deeper, we uncovered some amusing correlations, most notably between the BP plc sellside ratings by Goldman BP analyst Michelle della Vigna and the Goldman Sachs Asset Management holdings of BP plc. These are summarized on the attached chart.

And in case this is not enough, another way to visualize Goldman’s rating history, together with price targets on BP is presented below, straight from GS itself:

As the first chart above demonstrates, there is an "odd" correlation between Goldman’s sellside sentiment on the stock, and the amount of stock held by Goldman’s asset management arm, especially evident in the days between December 31, 2009 and March 31, 2010, when despite a recent Buy rating attached to the firm, GSAM sold off more than 40% of its stake in the name. On December 31, Goldman held 71 million BP shares, and three months later this number went down 42.5 million. Another oddity is that back in 2008, when GS had the stock at Neutral, GSAM doubled its stake in the firm from 28.8 million shares to 57.3 million days before Ms. della Vigna raised the stock to a Buy, albeit if only for just over a month. Oddly enough, in the half year period when Goldman was telling its clients to Sell the stock, between 3/31/2009 and 10/28/2009, GSAM holdings declined by a whopping -3.9%.

Yet while the fact that GSAM did not follow the recommendations of its very own analyst is not peculiar. We have long pointed out that Goldman does precisely the opposite of what it advises its "clients" to do. What…
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The Silver Curtain

The Silver Curtain

Courtesy of Marla Singer, Zero Hedge 

On the 5th of March in 1946, in Fulton Missouri, at Westminster College, Winston Churchill delivered an address (since christened the "Sinews of Peace") lamenting the burgeoning power and influence being slowly but surely gathered up by the Soviet Union.  Perhaps the address will be familiar to some of you owing to its most famous passage:

From Stettin in the Baltic to Trieste in the Adriatic, an iron curtain has descended across the Continent. Behind that line lie all the capitals of the ancient states of Central and Eastern Europe. Warsaw, Berlin, Prague, Vienna, Budapest, Belgrade, Bucharest and Sofia, all these famous cities and the populations around them lie in what I must call the Soviet sphere, and all are subject in one form or another, not only to Soviet influence but to a very high and, in many cases, increasing measure of control from Moscow. Athens alone — Greece with its immortal glories — is free to decide its future at an election under British, American and French observation.

Ironic, as I will address, that he should mention Greece.

Much less well known perhaps is this later passage:

Our difficulties and dangers will not be removed by closing our eyes to them. They will not be removed by mere waiting to see what happens; nor will they be removed by a policy of appeasement. What is needed is a settlement, and the longer this is delayed, the more difficult it will be and the greater our dangers will become.1

The "Iron Curtain" came, of course, to signify the cavernous ideological, and eventually concretely physical, divide between East and West.  It took some 43 years before it was lifted once more, first and haltingly, in the form of the removal of Hungary’s border fence in mid-1989 and then, of course, finally via the fall of the Berlin Wall in November that same year.

Not to be compared with a production of Italian Opera, the Iron Curtain did not describe a sudden, smooth, abrupt descent over the stages of Eastern Europe.  Quite the contrary, its drop was in stutters of discrete, fractional lowerings, such that it was a full fifteen years after Churchill used the term before its ultimate expression, the Berlin Wall, was finally…
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S&P: Whoops, We Wildly Overestimated Junk Bond Default Rates

S&P: Whoops, We Wildly Overestimated Junk Bond Default Rates (HYG)

Courtesy of Joe Weisenthal at Clusterstock

This once again goes to show that the ratings agencies like S&P aren’t biased in one way or another — they’re just behind the cycle. Case in point: S&P has just slashed its expected default rate on junk.

Reuters: S&P said it now expects defaults to decline to 6.9 percent a year from now from a September rate of 10.8 percent. On Oct 2, it had said it expected defaults to escalate to 13.9 percent by August 2010.

Of course, this is hardly news to the market, which has been bidding up junk like crazy for months now.

Here’s a pretty chart on the iShares iBoxx High Yield Corporate Bond ETF (HYG)

chart on the iShares iBoxx High Yield Corporate Bond ETF (HYG) - tbi

See Also:

Will The Junk Bond Shortage Help Business Credit Lines Open Up?

 


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EXCLUSIVE: Former Moody’s Insider Says “Moody’s Should Be Liquidated”

EXCLUSIVE: Former Moody’s Insider Says "Moody’s Should Be Liquidated"

Courtesy of Yael Bizouati at Clusterstock

riot police, liquidating moody's, tbiSylvain Raynes, an ex- Moody’s vice president of the ABS group, agrees with the agency’s whistleblower Eric Kolchinsky, who said that Moody’s is still issuing inflated ratings.

In an exclusive interview with The Business Insider, Raynes said that Kolchinsky is right on the money, and this pattern of behavior has been going for years at Moody’s. 

Raynes was fired from the firm for raising concerns about ratings on several deals.

“Moody’s should be liquidated right now. They need to be put out of their misery, and the CEO should resign now,” he says.

Talking about the deal Kolchinsky raised questions about, Raynes qualifies it as “bullshit” one.

"They needed a Baa2 rating to sell it--no one would buy a deal like that right now," he said.

Asked about why Moody’s-–which has come increasingly under fire in recent weeks--is still in business, Raynes says: "It’s like prostitution. It’s a crime but it’s feeding a need."

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S&P To Downgrade Most Of 2005-2008 CMBS Classes, Derails TALF For CMBS

Courtesy of Tyler Durden at Zero Hedge

S&P To Downgrade Most Of 2005-2008 CMBS Classes, Derails TALF For CMBS

The lives of the CMSA and Chris Hoeffel are about to get a whole lot more complicated. In a report issued today by S&P, titled "U.S. CMBS Rating Methodology And Assumptions For Conduit/Fusion Pools" Standard & Poors is issuing a Request For Comments on ‘its proposed changes to its methodology and assumptions for rating U.S. commercial mortgage-backed securities." Aside from the RFC, S&P goes into detail what the changes to its rating methodology will be, and the impact from these on CMBS. The latter will immediately cause many headaches for all who rode the CMBS AAA train from 1,200 bps to 600 bps, and potentially start a selling puke shortly. In S&P’s own words:

Impact On Ratings

It is likely that the proposed changes, which represent a significant change to the criteria for rating high investment-grade classes, will prompt a considerable amount of downgrades in recently issued (2005-2008 vintage) CMBS. Classes up through the most senior tranches of outstanding deals (so-called "A4s," "dupers," or "super-duper seniors") are likely to be affected. Our preliminary findings indicate that approximately 25%, 60%, and 90% of the most senior tranches (by count) within the 2005, 2006, and 2007 vintages, respectively, may be downgraded. We believe these transactions are characterized by increasingly more aggressive underwriting than prior vintages. Furthermore, recent vintage CMBS, particularly those issued since 2006, were originated during a time of peak rents and values, and as such, may be more affected by the proposed rental declines discussed in this RFC. We are currently evaluating the impact of the potential criteria changes on conduit/fusion CMBS transactions from all vintages. Once we evaluate the potential impact on existing ratings, we expect to issue a follow-up publication to this RFC.

And all this just days after the government had finally drafted what it hoped was the last and final version of its TALF term sheet. Lets rewind: in the May 19th version of TALF, in order the be eligible, CMBS "must not have a rating below the highest investment-grade rating category from any TALF CMBS-Eligibile Rating Agency." Throw in a downgrade of 90% of the 2007 vintage and it’s time to go back to the drawing board.

Basically, the impending


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Zero Hedge

John McCain Kills GOP's Last Ditch Efffort To Repeal Obamacare

Courtesy of ZeroHedge. View original post here.

Third time turned out to be unlucky after all.

Earlier today, Sen. Susan Collins said that she has serious concerns about the latest GOP bill to repeal and replace ObamaCare as Republicans prepare to vote on the legislation next week, adding that she was "leaning against the bill... I’m just trying to do what I believe is the right thing for the people of Maine."  And with Collins voicing against the bill, it ...



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Phil's Favorites

The Race For The "Holy Grail" Of Renewables

Courtesy of Irina Slav, OilPrice.com

In February, AES Energy’s Escondido battery storage facility in California was hailed as the largest one to date, with a capacity of 30 MW/120 MWh. Now, Tesla is building a bigger one—100 MW/129 MWh—in Australia. On the face of it, it’s a race for the bigger battery storage system. But there’s much more to it than that.

The race is on for increasingly reliable, grid-scale, quick-to-install energy storage solutions that will make the shift to all-renewable power much more realist...



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ValueWalk

Dotard Vs. Madman: The Linguistic War Between Trump And Kim

By Polina Tikhonova. Originally published at ValueWalk.

The war of words between the leaders of the U.S. and North Korea has escalated… again. North Korean leader Kim Jong-un threatened to “tame with fire” U.S. President Donald Trump, whom he referred to as “mentally deranged U.S. dotard.”

Gage Skidmore / Flickr

An official statement released by Kim on Thursday came as an apparent response to Trump’s newly announced eco...



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Insider Scoop

AMD Sells Off As Tesla Rumor Cools Down; Analyst Calls Partnership 'Completely False'

Courtesy of Benzinga.

Related TSLA AMD, Anadarko, Raytheon, Tesla: Fast Money Picks For September 22 Tesla's Cheapest Model S To Be Discontinued ...

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Chart School

Tech Trades Squeeze Stops; Russell 2000 Approaches Resistance

Courtesy of Declan.

There is a bit of an overreach on today's action as the level of loss was light. However, the much-anticipated breakouts in the Nasdaq and Nasdaq 100 look like they will have to wait a little longer. Both Tech indices saw the squeeze put on tight long stops, but not enough to suggest a panic sell-off is imminent. However, any sell-off has to be watched; losses below the 50-day MA would be concerning.


The Nasdaq 100 is looking a little more vulnerable with the MACD trigger 'sell' and +DI/-DI sell' trigger. Look to this index for leads.
...

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Digital Currencies

Jamie Dimon Faces Market Abuse Claim Over "False, Misleading" Bitcoin Comments

Courtesy of ZeroHedge. View original post here.

A week after Jamie Dimon made headlines by proclaiming Bitcoin a "fraud" and anyone who owns it as "stupid," the JPMorgan CEO faces a market abuse claim for "spreading false and misleading information" about bitcoin.

Unless you have been living under a rock for the past week, you will be well aware of JPMorgan CEO Jamie Dimon's panicked outburst wi...



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Members' Corner

"Citron Exposes Ubiquiti Networks" But TNN Says "Not So Fast"

What do you think? (There's a comment section below )

"CITRON EXPOSES UBIQUITI NETWORKS" 

Does Ubiquiti Networks (NASDAQ:UBNT) actually have real products that sell to consumers? Of course! So did Valeant and WorldCom, but that does not stop its financials from having every indication of being completely fraudulent.

Citron will detail a series of alarming red flags and detail how Ubiquiti Networks is deceiving the investing public.

Read the full report here.

******

Rebutal by The Nattering Naybob, ...



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OpTrader

Swing trading portfolio - week of September 11th, 2017

Reminder: OpTrader is available to chat with Members, comments are found below each post.

 

This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current  trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).

We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options. 

Please feel free to participate in the discussion and ask any questions you might have about this virtual portfolio, by clicking on the "comments" link right below.

To learn more about the swing trading virtual portfolio (strategy, performance, FAQ, etc.), please click here ...



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Biotech

Can low doses of chemicals affect your health? A new report weighs the evidence

Reminder: Pharmboy and Ilene are available to chat with Members, comments are found below each post.

 

Can low doses of chemicals affect your health? A new report weighs the evidence

Courtesy of Rachel ShafferUniversity of Washington

Assessing the data. LightField Studios/shutterstock.com

Toxicology’s founding father, Paracelsus, is famous for proclaiming that “...



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Mapping The Market

The App Economy Will Be Worth $6 Trillion in Five Years

Courtesy of Jean-Luc

This would be excellent news for AAPL and GOOG to a lesser extent although not inconsequential:

The App Economy Will Be Worth $6 Trillion in Five Years 

In five years, the app economy will be worth $6.3 trillion, up from $1.3 trillion last year, according to a report released today by app measurement company App Annie. What explains the growth? More people are spending more time and -- crucially -- more money in apps. While on average people aren't downloading many more apps, App Annie expects global app usership to nearly double to 6.3 billion people in the next five years while the time spent in apps will more than double. And, it expects the...



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Promotions

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We have a great guest at today's webinar!

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Kimble Charting Solutions

Brazil; Waterfall in prices starting? Impact U.S.?

Courtesy of Chris Kimble.

Below looks at the Brazil ETF (EWZ) over the last decade. The rally over the past year has it facing a critical level, from a Power of the Pattern perspective.

CLICK ON CHART TO ENLARGE

EWZ is facing dual resistance at (1), while in a 9-year down trend of lower highs and lower lows. The counter trend rally over the past 17-months has it testing key falling resistance. Did the counter trend reflation rally just end at dual resistance???

If EWZ b...



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All About Trends

Mid-Day Update

Reminder: Harlan is available to chat with Members, comments are found below each post.

Click here for the full report.




To learn more, sign up for David's free newsletter and receive the free report from All About Trends - "How To Outperform 90% Of Wall Street With Just $500 A Week." Tell David PSW sent you. - Ilene...

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Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...

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