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Strategies & Market Trends : John Pitera's Market Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: nspolar who wrote (9619)	7/8/2008 5:58:12 PM
From: John Pitera	Read Replies (1) \| Respond to of 33421

Thanks TF,SEC Ratings Probe Reveals Conflicts in Grading Debt (Update2) By Jesse Westbrook July 8 (Bloomberg) -- A U.S. Securities and Exchange Commission investigation into credit-rating companies found the firms improperly managed conflicts of interest and violated internal procedures in granting top rankings to mortgage bonds. A 10-month review of Moody's Investors Service, Standard & Poor's and Fitch Ratings found analysts contributed to fee discussions and weighed losing clients over certain ratings, the Washington-based SEC said in a report released today. Employees also cast doubt on the quality of some ratings, the SEC said, declining to link firms to specific findings. ``We uncovered serious shortcomings at these firms,'' SEC Chairman Christopher Cox said today at a news conference. ``When there were not enough staff to do the job right, the firms sometimes cut corners.'' Pension and money-market funds bought AAA-rated securities backed by mortgages to the riskiest borrowers because they offered higher returns than government bonds with the same ratings. In many cases, credit raters were paid by investment banks selling the bonds, prompting regulators and lawmakers to question their independence. The SEC report describes an e-mail in which an analyst refers to the market for collateralized debt obligations as a ``monster.'' *``Let's hope we are all wealthy and retired by the time this house of cards falters,''* said the e-mail, which was sent Dec. 15, 2006, to another analyst at the same firm. Market Share Analysts also weighed the risk of losing market share if they assigned certain ratings, the SEC said. ``I am trying to ascertain whether we can determine at this point if we will suffer any loss of business because of our decision and if so how much,'' said a 2004 e-mail an analyst sent to a senior business manager. The SEC said it found no evidence such considerations affected ``rating methodology or models.'' In another internal communication, two analysts at a rating company discussed whether they should grade an offering. ``One analyst expressed concern that her firm's model did not capture `half' of the deal's risk, but that `it could be structured by cows and we would rate it,''' the SEC said. (editorial note:--- those are some pretty smart cows!!!! -JP) Lori Richards, the head of the SEC's inspections unit, said her office discussed its findings with the agency's enforcement division, which probes and prosecutes wrongdoing. That allows the division to ``come to their own conclusion about whether an enforcement action is appropriate,'' Richards said. Law Violations The SEC can bring cases for law violations, including fraud involved with the sale of securities. It's unclear whether the agency could target credit-rating companies for some of the actions highlighted in its report because it only gained authority to inspect and write rules for the firms last year. S&P, a division of New York-based McGraw-Hill Cos., will ``continue to take any additional steps needed to improve our processes,'' company spokesman Edward Sweeney said. ``Moody's has initiated a wide range of reforms,'' said Anthony Mirenda, a spokesman for the New York-based firm. The SEC hasn't informed Fitch, a unit of Paris-based Fimalac SA, of ``any finding'' that is ``inconsistent'' with the company's code of conduct, spokesman David Weinfurter said. McGraw-Hill rose 56 cents, or 1.5 percent, to $38.53 at 4:01 p.m. in New York Stock Exchange composite trading. Moody's Corp. rose 38 cents to $33.45. Credit-rating companies were criticized by investors and Congress after the collapse of the subprime-mortgage market last year showed flaws in the AAA rankings for thousands of asset- backed bonds. The world's largest banks and securities firms have taken $401 billion in losses and writedowns, forcing them to raise almost $319.7 billion in capital. Curbing Conflicts The SEC report cited ``remedial actions'' credit raters have agreed to such as continually reviewing whether they have enough staff and examining whether internal procedures adequately prevent them from being influenced by underwriters. The firms will also review whether they provide enough disclosure about how they rate mortgage bonds. ``Investors can have confidence that these firms will address the problems that we found,'' Richards said. The SEC recommendations are ``polite bureaucratic prose for saying we're not cracking down on them,'' said John Coffee, a securities law professor at Columbia University in New York. The SEC last month proposed rules and other changes for credit raters, including measures to curb conflicts of interest that Cox today said would also address the regulator's findings. The agency acted to reduce investment firms' reliance on ratings by saying it may stop requiring money-market funds to buy short-term debt carrying a high ranking. SEC commissioners also proposed rules to bar credit raters from ranking a bond if they advise underwriters how to gain a higher rating. Additional rules under consideration include restricting gifts to credit-rating analysts from employees at investment banks and a requirement that companies label asset-backed securities using symbols different from the rankings placed on corporate and municipal debt. To contact the reporter on this story: Jesse Westbrook in Washington at jwestbrook1@bloomberg.net. Last Updated: July 8, 2008 16:38 EDT

To: nspolar who wrote (9619)	7/9/2008 4:21:34 PM
From: morokko65	Read Replies (2) \| Respond to of 33421

Hi Falcon, what do you think of this scenario? Message 24737721 FRE & FNM may be the triggers for a period of more serious capitulation

To: nspolar who wrote (9619)	7/11/2008 8:42:02 AM
From: Roebear	Read Replies (2) \| Respond to of 33421

Falcon, I have noted sometimes in my work that charts and graphs we use of machines and processes sometimes resemble and follow what would be expected were they stock charts. Probably I have just been watching too many stock charts over the years. But indulge me, would you say that possibly this solar irradiance chart has "topped"?? junkscience.com Solar cycle 23 is ending late and 24 is starting late which in the past has indicated a "weak" cycle is at hand which would confound, perhaps eventually or perhaps very soon, those beating the global warming drum so loudly of late. I myself have enough HO to make it through another normal winter, bought previously at prices half of current asking. Based on above, however, I may have to ante up, as the winter ahead may not be normal. Nice moose picture btw, did you take that one? Best Regards, Roebear