skippy the bush kangaroo

Friday, March 21, 2008

if a rating falls in the market and no one's there, does it make an impact on the economy?

forbes tells us that even tho the markets are closed today, bad things can still happen, especially to goldman sacks and lehman bros:

standard & poor's analysts tested the tree-falling-in-an-empty-forest scenario, as it lowered the outlooks for goldman sachs and lehman brothers to negative while markets were closed.

standard & poor's analysts scott sprinzen and diane hinton affirmed their aa-/a-1+ rating for goldman sachs group (nyse: gs - news - people ) and a+/a-1 rating for lehman brothers holdings (nyse: leh - news - people ), pointing to strong underlying businesses and acceptable first-quarter earnings. but s&p also lowered the companies' outlooks to "negative" from "stable" on expectations of 20%-to-30% drops in net sales after write-downs going forward.

the analysts also revised their outlook for the u.s. securities industry at large to "negative," meaning there is a one-in-three chance that there will be a rating change in the next two years.

goldman shares closed thursday ahead by $13.14, or 7.9% , to $179.63 and lehman stock added $6.42, or 15.2%, at $48.65…

the slashed outlook may be especially difficult for lehman brothers to stomach. the financial services firm, whose business mix most closely resembles that of virtually collapsed bear stearns (nyse: bsc - news - people ), has dismissed recent rumors that it's headed down the same ditch as bear (see: financials fall into bear pit). analyst sprinzen says lehman has done a better job managing its liquidity than bear. as of feb. 29, the firm's excess liquidity structure was $34 billion.
calculated risk has already suggested lehman bros. may be next.

meanwhile, the economist's view tells us massive lay offs (defined as 50 or more from a single firm) were announced today; naked capitalism asks why bear stearns didn't use its credit line; roubini's global economonitor reports that the worst financial crisis since the great depression is getting worser; and paul krugman sez we're all partying like it's 1929:

contrary to popular belief, the stock market crash of 1929 wasn’t the defining moment of the great depression. what turned an ordinary recession into a civilization-threatening slump was the wave of bank runs that swept across america in 1930 and 1931.

this banking crisis of the 1930s showed that unregulated, unsupervised financial markets can all too easily suffer catastrophic failure.

as the decades passed, however, that lesson was forgotten — and now we’re relearning it, the hard way.
we're taking dave johnson's advice and moving our cash out of money market funds.

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posted by skippy at 5:55 PM |

1 Comments:

hey skip,

did you see robert rubin on the newshour tonight?

the idea that rubin - for pete's sake's rubin, the most connected financial guy west of dubai - admits he doesn't understand what's going on - freaks us out!

JUDY WOODRUFF: How bad off is the U.S. economy?

ROBERT RUBIN: You know, I think it's very hard to judge, Judy. I've been around these things for a long, long time. And I think this is an extraordinarily, even by past standards, extraordinarily uncertain and complex.

....

My own view is that it's hard. I don't think there's a basis for making a probabilistic judgment amongst the three, so the way I think about it is to think of a one-third chance of each. But if you take that view, it takes you to two conclusions, at least in my view.
Number one, as an investor, which I am, I would be weighing those risks in a very cautious kind of way. And, number two, I believe that policymakers should be highly proactive and seek and do everything they can that's sensible, that's sensible to reduce this risk to the economy.

we are all so screwed.
commented by Blogger Pudentilla, 6:47 PM PDT  

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