Thursday, June 11, 2009

Credit rating agency upgrades town

One of the credit rating agencies visited Cheshire and just gave us an upgrade. And now the emails are starting... talking about how wonderful the upgrade is.

From a certain perspective I understand why some people think this is a good thing. But by the same token, I also feel there is a certain degree of intellectual dishonesty here.

As I've explained before, the ratings agencies were at the heart of the current economic meltdown. And other people agree:

“Ratings agencies just abjectly failed in serving the interests of investors,” SEC Commissioner Kathleen Casey says.

To speak of the benefits of a rating upgrade, while ignoring the fact that the ratings agencies said the MBS' and CDS' were good... and Lehman was an A company on September 15, 2008... is to say people love the pool.

Sure, some people do love the pool. But it's also got some pretty big problems associated with it.

Tim White


Anonymous said...

the credit rating companies were not the only reason of our economic woes.. commodities rapidly increasing prices put a major strain on consumers and homeowners wallets. We are looking at the same sitsuation starting again as more hedge funds and retirement funds view petroleum as a money making market to recoup the losses felt earlier in the year. At this time, there is no fundamental reason for prices to be increasing as we are at near capacity for supply storage. As long as the government allows paper trading of commodities, this recession will not end and may infact worsen.

Anonymous said...

Yes there is one fundamental reason for oil prices to be increasing: the dollar index is dropping.

Anonymous said...

When the oil producing country's switch from the dollar to the Euro then we will see it all. The US dollar will be devalued in order to reset our huge debt and all will be forgiven. This will happen within the next year.

Anonymous said...

As long as oil prices continue to climb, than yes, our dollar will be useless. We need to get the oil price back down to the $30-35 range. That will stimulate the economy, lessen the forclosure rate, reduce repossessions, correct the credit crisis, and help the big 3 recover.
We need our political leaders to make noise about hedge and retirement funds spiking the barrel price.
Can we check to see if our retirement funds are contributing to our economic woes?

Anonymous said...

The price of oil is not going to return to 30 to 35 for any extended period of time; period. There will be no economic recovery; do we return to the ways of consumerism, spending borrowed money. Are banks really going to start lending again to anyone with a pulse. That is what funded our last "economic" expansion.

11:32 please try to uderstand something, the price of oil is going up because our dollars are becoming useless. The US government is now printing money (a.k.a monetizing our debt, QE- Quantitative Easing). The US goverment is devaluing our currency, prices will rise regardless of economic conditions. Inflate or die is their mantra.

Now if oil prices are going to come to 30 to 35 means we have to stregthen the currency. That means no bailouts, no guarantees, no nothing (we do not have the money to do this). This would then lead to the failing of the big 3, big banks, insurance companies, etc. This in turn would set off the OTC derivative market time bomb causing so many more businesses to fail.

And if you think the SEC is going to start going after the group that was responsible for the oil spike; think again: They are too big to be investigated (and it ain't the hedge funds).

Anonymous said...

What group IS responsible? My understanding from the weekly inventory data is that our stockpiles are maxed out and weekly imports are dropping. There are ships waiting off the coast to offload but cannot. Crude oil dropped to $30 per barrel in January as investors bailed out of the market. While it looks like a good deal to get into oil commodities at this time, there is still legislation in the works that would make paper trading illegal. That would leave anyone trading oil needing to take delivery of what they purchase. Anyone investing with a hedge fund or a retirement fund would have a tanker pull up to their house. You buy it, you take delivery. OPEC also announced that if crude gets to $100/barrel, they will ramp up production by 25-40%. That would cause oil to drop to less than todays ($72) price and create another economic meltdown as more people would loose more savings.

Anonymous said...

6:25 figure it out, it was the same group that went short when oil was at $150. Same group the SEC did not allow you to short their stocks last year. Same group that went short gasoline in the run up to the 2006 elections to help the Republicans.

Also what is this about OPEC increasing production 25 to 40 percent; not! First they do not have the capacity to do it; many OPEC nations are in declining production.

It appears you are seeing the effects (volatile oil price) of the problem as the cause. Please compare the oil price with USD Dollar Index over the last few years.

Anonymous said...

think back over the last 2 years. oil prices were "reasonable" and the economy was doing well. oil prices started to creep above the $125 mark and businesses started to have problems. $148/barrel and the banks on wall st. began to fail. people could not afford to continue to pay their mortgage and heat their homes and drive their cars to work anymore. a choice had to be made as to what bills to pay. companies were not giving out raises because they were faced with the same cost increases that the workers were facing. cost of plastic goods (85% of all non-edible products) climbed or manufacturers cut container sizes.

OPEC had cut production 6 months ago when the price was in the low $30's/barrel. this was done to quell the rapid drop in price. OPEC does not want the price to be below $40/barrel but not higher than $65/barrel. temporary spikes above or below these points is tollerable but they will adjust their production as needed.

you stated that OPEC nations are in declining production. Iraq just began delivering crude 2 weeks ago from 1 terminal. other countries had cut production because we (USA) cannot store any more product. when you fill your gas tank and the nozzle automaticly stops, can you put more gas in? that is the problem we are having with our ports. there is no room to put more oil.

Anonymous said...

Stop attributing all this to oil prices. Stop making up facts about OPEC, increase production by 25% to 40%, want an oil price from 40 to 65 dollars. You have this nice story and everything fits and makes sense; if we could just get cheap oil again everything will be OK; all our economic problems will be solved. In your posts you state high oil prices led to failure of banks and then you say that if the price drops that would cause another ecomomic meltdown.

If I look back 2 years I guess we can stay the ecomomy was doing well, all time high in the DOW, home prices at record highs. It was also the time the air began to come out of the housing bubble January 2007. So I do not even know how you can say the economy was good; things were just starting to unravel.

Anonymous said...

nothing was made up. Google opec and you will see what I am talking about