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August 15, 2007


Stock Du Jour (MCO) & Random Observations

Selling from the get-go, accelerated in the afternoon again as it’s wont to do of late.

Notable New Lows: Jamba (JMBA), NetEase (NTES), UBS (UBS), KKR Financial (KFN), PMI (PMI), Moody’s (MCO), and Thornburg Mortgage (TMA).

Notable New Highs: Absolutely NONE.

I’ll feature a monthly chart of Moody’s (MCO) … where are the ratings agencies in this mess? Do they have any legal liability? Are the sharkskin shoe lawyers circling?

UPDATE: In Wednesday’s WSJ is this page A1 article: How Rating Firms’ Calls Fueled Subprime Mess … a key line that makes one shake his head in disgust:

“In the second half of 2006, Mr. Kornfeld at Moody’s noticed a troubling trend. In an unusually large number of subprime loans, borrowers weren’t making even their first payments.”

MCO

This entry was posted on Wednesday, August 15th, 2007 at 7:53 am (utc+8) and is filed under Trading and Investing.

8 Responses to “Stock Du Jour (MCO) & Random Observations”

  1. Hugh said:
    August 15th, 2007 at 9:55 am

    TMA is a very interesting case study. The company buys only the highest quality (high FICO, low LTV, private banking-type clients) paper. Why are they getting crushed then? Simple, the market is penalizing firms that rely upon the commercial paper markets for liquidity. ABCP issuers are on the cutting edge of risk repricing — which means tentative liquidity. No funding; no solvency. Simple. TMA will not get hurt by subprime per se, but by the dearth of liquidity that inevitably is its by-product. Classic issue with overtones of the S&L crisis. What about the rating agencies? They hold no paper and fund themselves in the term market. Legal risk has a slow-burn fuse compared to that of liquidity risk. Just ask the tobacco companies.

  2. C. Maoxian said:
    August 15th, 2007 at 11:28 am

    Hugh: Thanks for another of your informed and insightful comments.

  3. Born2Code said:
    August 15th, 2007 at 1:02 pm

    TMA’s CEO was on cnbc this evening. He said they had less than 38 defaults out of 38,000 serviced mortgages. He also said that there is absolutely no liquidity to sell their mortgages in any market. Whether asset-backed mortgage markets, bond markets, or otherwise.
    he looked pretty stressed out.

  4. Todd said:
    August 15th, 2007 at 2:33 pm

    “He also said that there is absolutely no liquidity to sell their mortgages in any market.”

    Sounds like we had this conversation a couple of days ago. It’s difficult to raise cash or mark to market when there aren’t enough/any bids.

    The liquidity added by the central banks recently may not be enough to induce confidence in this sector. More may need to be done.

  5. C. Maoxian said:
    August 15th, 2007 at 3:49 pm

    Todd: Nothing needs to be done, folks just need to get a grip.

  6. bbc said:
    August 16th, 2007 at 2:32 am

    Hello CM, I dropped you a bit of money in exchange for your stock list, thanks.

  7. C. Maoxian said:
    August 16th, 2007 at 6:52 am

    bbc: Yes, thanks, did you get my email yet? (I sent the list to your hotmail address.)

  8. bbc said:
    August 16th, 2007 at 7:10 am

    Yes, I received it, thanks.

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