Thursday, February 23, 2012

The IO Abbatoir

As we noted in December, Moody's decided to catch up to the rest of the rating agencies (who did the same thing 2 and 3 years ago) and the rest of the market, which apparently understood IOs eons before the rating agencies by publishing a new opinion and methodology piece and downgrading 530 IOs (almost all were WAC IOs).

If you missed the Moody's report, Nomura published a great paper this morning that sums it up neatly in 2 pages.


[sarcasm>The WSJ has been closely following the coming WAVE of downgrades, so we look forward to their coming article on the subject.

14 comments:

R said...

sarcasm hints are supposed to go at the end of sentences with a /s

see below:

It was easy to follow your sarcastic sentence./s

Concrete Jungle said...

I concur - and it was that way, but blogger.com interpreted it as a real tag and hid it... I tried to mess around with it and repost, but gave up after a grueling 10 - 15 seconds.

R said...

lol, I just love being an anal jackass sometimes - hope you took no offense - silly blogger.com

crabsofsteel said...

any rating agency which rates senior AAA and junior AAA is telling you they don't know what they are doing. If AAA means as solid as a rock, how can there be more than one kind? yet that's what they're all doing.

Concrete Jungle said...

That's a very good point CrabsofSteel

R said...

I know how maybe they're both precieved to be solid as a rock - go back and revisit your logic there it doesn't hold up.

AAA is a threshold. It is the agencies perception that both the senior and junior positions are both AAA. One may be more AAA than the other but it doesn't preclude inclusion assuming the threshold is met.

crabsofsteel said...

You bought their shtick! Does AAA mean good as gold, German govt, no worries? It always should, otherwise it is meaningless. So, how can German govt quality be better than German govt quality?

R said...

I'm not buying anybody's anything. I think the ratings agencies are BS just like everyone else. I'm simply defying the logical argument that there can only be one level of AAA and that only one thing can be AAA - your distinction is German Gov't bonds (ha I.O. USA) but that's not how AAA is defined. Maybe there should be a AAA+ or some BS but it really doesn't matter.

Moral of the story is that nothing is AAA unless someone else thinks it is. Doing your own analysis is the only to operate lest you expose yourself to others poor judgement/collusion.

They're just selling the illusion of security and everybody's buying because nobody wants to music to stop all over this F-ed financial world.

Anonymous said...

^

*This dude is an MD @ S&P

Dark Space said...

I've devised a test to weed out any S&P MD viewers in my next post... ;-)

R said...

Ha - I can assure you I'm not a managing director anywhere - I wouldn't be posting online if I was getting paid that much

Dark Space said...

My sarcasm tags were broken again.

Actually even S&P employees are welcome here ;-). I'm just trying to get people to click on the next post so I can imagine them scrolling down, seeing the picture, scrolling up real quick and checking over their shoulder, then scrolling back down more cautiously the next time tilting their head the right slightly, like a Labrador trying to figure out what exactly is happening...

We strive to deliver immaturity and CRE news at the same time here at The CRE Review!

R said...

having already stepped through a very similar 'Labrador scenario' with your next post. I feel its working. luckily on our desk no one expects you not to be looking at such things.

Also I really want a cupcake.

Dark Space said...

The trick is to invite everyone over, include them in the viewing, and say something like "can you believe this". That apparently makes it okay.