When did I seriously advise anyone to dump? Do you not understand sarcasm?
As for "long way from junk," it's simple - the ratings agencies were burned by Enron and other collapses they didn't see coming and are letting stock market action affect their judgement of credit issues. It's kind of a "maybe we missed something, so we should downgrade just to stay ahead of the game" reaction. Actually, this shouldn't come as a surprise, come to think of it. In exuberant markets, they tend to let the general optimism rub off on their credit outlook just as the pessimism is now.
To see how fear-driven and subjective Moody's, in particular, has become, look at how they're treating the energy sector. They've downgraded or threatened downgrades of all the energy marketers (MIR, for example), yet can't (or won't) explain to anyone the criteria they are using to determine credit ratings in the sector. They can't say what it will take to restore MIR's credit rating because they have no objective criteria they are willing to stand behind. And they won't be willing to give objective criteria until the general fear level of investors subsides. They are following the fear.
S&P is no better. The removal of WCOM from the S&P 500 is proof of that. "Not representative," they say? Well, all they've accomplished is swapping in a high-PE (53x) stock for a low-PE one (about 3x based on current consensus for '02). They do this enough and the S&P will soon have a PE like that of the Naz.
Still, double-B "junk" is, in normal market environments, also know as "near investment grade" debt. Half empty or half full? |
