Standard & Poor’s just drove a huge harpoon into the heart of the mortgage credit bubble,

[JWM in SD]

Why do I get the impression that only a handful of regular posters get the significance of this?

[dontfollowtheherd]

Because that’s all that is left. The rest of the herders are in the soup. lol.

[dontfollowtheherd]

Because that’s all that is left. The rest of the herders are in the soup. lol.

[Anonymous]

Did you hear that? They’ve shut down the main reactor! We’re doomed.

— C3FBO

[Anonymous]

Did you hear that? They’ve shut down the main reactor! We’re doomed.

— C3FBO

[rb_engineer]

I hate to break up the bear fest but isn’t this old news? Kind of like an analyst downgrading a stock after it has been beaten down to the ground? I’ve seen S&P do this to stocks many times.

[rb_engineer]

I hate to break up the bear fest but isn’t this old news? Kind of like an analyst downgrading a stock after it has been beaten down to the ground? I’ve seen S&P do this to stocks many times.

[LA_Renter]

No, this is Huge.

“But the bigger news is that S&P isn’t going along with the charade anymore. S&P said it would change its methodology for rating hundreds of billions of dollars in residential-mortgage-backed securities. And it would review its ratings on hundreds of billions of dollars in the more complex collateralized debt obligations based on those subprime loans. A lot of debt will be downgraded to junk status. A lot of that debt will have to be sold at fire-sale prices. A lot of pension funds and hedge funds that once thrived on the high returns they could get from investing in subprime junk will now lose a lot of money.”

Basically they are re-pricing many portfolios due to the Bear Stearns blow up. I found this quote on a chatboard;

“these downgrades will cause a ripple effect in the hedge funds. Even if retail investors don’t care, the fundies have limits based upon debt ratings..and they have been the driving force behind the largest credit and housing bubbles in history. Goodbye mega-liquidity and home refi party”

I guess to answer your question this is old news that wasn’t supposed to come out.

Its late I’m tired i’ll look at this tomorrow.

[LA_Renter]

No, this is Huge.

“But the bigger news is that S&P isn’t going along with the charade anymore. S&P said it would change its methodology for rating hundreds of billions of dollars in residential-mortgage-backed securities. And it would review its ratings on hundreds of billions of dollars in the more complex collateralized debt obligations based on those subprime loans. A lot of debt will be downgraded to junk status. A lot of that debt will have to be sold at fire-sale prices. A lot of pension funds and hedge funds that once thrived on the high returns they could get from investing in subprime junk will now lose a lot of money.”

Basically they are re-pricing many portfolios due to the Bear Stearns blow up. I found this quote on a chatboard;

“these downgrades will cause a ripple effect in the hedge funds. Even if retail investors don’t care, the fundies have limits based upon debt ratings..and they have been the driving force behind the largest credit and housing bubbles in history. Goodbye mega-liquidity and home refi party”

I guess to answer your question this is old news that wasn’t supposed to come out.

Its late I’m tired i’ll look at this tomorrow.

[Anonymous]

“I hate to break up the bear fest but isn’t this old news? Kind of like an analyst downgrading a stock after it has been beaten down to the ground? I’ve seen S&P do this to stocks many times.”

I believe a change in debt ratings has a much bigger impact than a change in a stock’s rating. I’m no expert, and this stuff is pretty complicated, but this article should help you get started on seeing what is happening here (scroll down to the June 1 entry – Banks Sell ‘Toxic Waste’ CDOs to Calpers, Texas Teachers Fund):

http://immobilienblasen.blogspot.com/search/label/clo

excerpt:
“Some public fund investors are forbidden from buying junk- rated or unrated portions of CDOs. Wall Street has come up with ways to sell dressed-up CDO toxic waste so that it qualifies as investment grade. One is called principal protection.”

excerpt:
“Pension fund managers face the same hurdle as all CDO investors: The market has almost no transparency, with both current prices and contents of CDOs almost impossible to find, says ..”

So you have a very risk asset that has just been downgraded by the ratings agencies. Further, no one knows the actual values of these pieces of crap because there is no transparency. The pension funds may be forced to sell because they aren’t allowed to hold junk. Who’s going to want to buy this stuff? How do you value it? It just looks like a huge feces sandwich to me.

Most of my cash is either in my savings account or in a money market. The money market seems to be the safest thing I can invest in through my 401(k) and I hope it is safe (although I’m not sure if that is the case or not).

[Anonymous]

“I hate to break up the bear fest but isn’t this old news? Kind of like an analyst downgrading a stock after it has been beaten down to the ground? I’ve seen S&P do this to stocks many times.”

I believe a change in debt ratings has a much bigger impact than a change in a stock’s rating. I’m no expert, and this stuff is pretty complicated, but this article should help you get started on seeing what is happening here (scroll down to the June 1 entry – Banks Sell ‘Toxic Waste’ CDOs to Calpers, Texas Teachers Fund):

http://immobilienblasen.blogspot.com/search/label/clo

excerpt:
“Some public fund investors are forbidden from buying junk- rated or unrated portions of CDOs. Wall Street has come up with ways to sell dressed-up CDO toxic waste so that it qualifies as investment grade. One is called principal protection.”

excerpt:
“Pension fund managers face the same hurdle as all CDO investors: The market has almost no transparency, with both current prices and contents of CDOs almost impossible to find, says ..”

So you have a very risk asset that has just been downgraded by the ratings agencies. Further, no one knows the actual values of these pieces of crap because there is no transparency. The pension funds may be forced to sell because they aren’t allowed to hold junk. Who’s going to want to buy this stuff? How do you value it? It just looks like a huge feces sandwich to me.

Most of my cash is either in my savings account or in a money market. The money market seems to be the safest thing I can invest in through my 401(k) and I hope it is safe (although I’m not sure if that is the case or not).

[Nancy_s soothsayer]

I apologize for the following rant:

The three rating agencies – Moody’s, S&P, and Fitch – were like the pimps that endorsed “diseased hookers” to pension funds. I can’t wait to see mass lawsuits start to make these pimps pay up for their worthless “investment-grade” ratings. They made suckas out of so many people.

[Nancy_s soothsayer]

I apologize for the following rant:

The three rating agencies – Moody’s, S&P, and Fitch – were like the pimps that endorsed “diseased hookers” to pension funds. I can’t wait to see mass lawsuits start to make these pimps pay up for their worthless “investment-grade” ratings. They made suckas out of so many people.

[donaldduckmoore]

Looks like a tsunami is starting to come to our way!!! But is there any huge impact to the home price? to the lenders?

[donaldduckmoore]

Looks like a tsunami is starting to come to our way!!! But is there any huge impact to the home price? to the lenders?

[Author]

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