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Posts Tagged ‘Moody’

JUNE 22, 2012              8:11 PM

When a consumer’screditscore drops, it is hard to recover financially. Wall Street firms could face the same fate.

Goldman SachsMorgan StanleyJPMorgan ChaseBank of America and Citigroup all suffered credit ratings cuts on Thursday. The rating agency Moody’s Investors Service said that, even though these banks had moved to strengthen their operations, their core trading businesses contained structural weaknesses.

In other words, the downgrades reflect the new sober era for Wall Street.

SinceMoody’sput the banks on warning in February, the firms have had time to brace themselves and the immediate impact of the cuts is not likely to be drastic. But banking industry analysts say they think Moody’s actions will cause lasting pain.

“It will make life more difficult for the banks over the long run,” said Andrew Ang, a professor of business at Columbia Business School. “The effect of ratings is pervasive.”

Ratings at Bank of America, which owns Merrill Lynch, and Citigroup, which has a large investment bank, were cut to Baa2. At that level, their creditworthiness is at the lower end of the investment grade, just two levels above junk. Morgan Stanley was downgraded to Baa1, three notches above junk, and Goldman was reduced to A3, four notches above junk.

In many ways, those cuts echo investor sentiment about banks with large Wall Street operations. The stocks of Goldman, Morgan Stanley and similar firms trade at valuations that are depressed by historical standards, an indication that investors harbor deep doubts about the industry’s long-term prospects.

But the sharply lower credit ratings may cause more stress in the same areas that prompted the downgrades.

One of those trouble spots is short-term borrowing. Wall Street firms need to finance their operations at a low cost to make profits, so they make heavy use of short-termloansthat last from a few days to a few months.

Since the financial crisis, banks have made great efforts to make this critical financing source safer, partly by backing this debt with higher-quality assets.

Even so, the downgrades could push up the costs of these loans. With a lower credit rating, lenders might think there is a higher probability that the banks won’t repay the money.

“These firms have large amounts of debt that they have to keep rolling over, and they will have to pay more to do that,” Mr. Ang said.

They could also feel the pain in theirderivativesbusiness. Derivatives, financial instruments whose value is linked to prices of bonds and stocks, can be a lucrative for banks, especially when they are specially tailored for the customer on the other side of the trade.

But these clients, to protect themselves, may now demand better terms with downgraded banks, like increased collateral. Wall Street firms would then have to decide whether to give up the business, or go along with client demands and face weaker profits.

“Some banks may have to relax their terms in order to win business,” said Paul Gulberg, a brokerage analyst at Portales Partners.

The downgrade could also widen the chasm in the industry. While most big banks were downgraded, some got hit harder than others. At the high end of the rating spectrum is JPMorgan Chase. Citigroup and Bank of America fall much lower down.

“The downgrades will change the competitive dynamics of Wall Street,” said Mr. Gulberg, who said JPMorgan had been steadily increasing its market share in important businesses over the last several years.

The situation could be especially acute in the derivatives.

To help insulate their profits from a downgrade, many Wall Street firms locate derivatives trades in bank subsidiaries backed by government-insured deposits. As a result, these subsidiaries have higher credit ratings than the parent companies.

Citigroup, Bank of America and JPMorgan Chase have more than 90 percent of their derivatives in such subsidiaries. Morgan Stanley only has 5 percent.

Notably, Moody’s didn’t warn of possible future downgrades for these subsidiaries. But it did say the parent companies had a “negative outlook,” the agency’s way of saying it still had doubts about their creditworthiness.

Given that threat, the banks may try to do as much business as they can in these higher-rated subsidiaries. That could face resistance, especially if bank regulators think it is risky business.

“The banks already have every incentive to use their bank subsidiaries, but it’s even greater after the downgrades,” said Dennis Kelleher, president of Better Markets, a lobbying group that is pushing for stricter financial regulations. “That’s why regulators need to be on guard and scrutinize everything the banks are doing, or moving into, these subsidiaries.”

The downgrades may also intensify competition from outside the traditional players on Wall Street. Asset managers like BlackRock are making inroads, sometimes bypassing Wall Street in the process. Bond trading, a huge source of revenue for firms like JPMorgan, is especially vulnerable.

The downgrades will only help the insurgents. For instance, Moody’s rates BlackRock A1, two notches above Goldman, and one level higher than JPMorgan.

from:  http://dealbook.nytimes.com/2012/06/22/a-sober-new-reality-in-credit-downgrades-for-banks/

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Larry Fink was born on November 2nd, 1952 according to http://www.astrotheme.com/astrology/Larry_D._Fink

November 2nd, 1952

11 + 2 +1+9+5+2 = 30 = his life lesson = Blessed.  Living a life of luxury.

Four of Wands Tarot card

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November 2nd, 1952

November 2nd

11 + 2 +2+0+1+1 = 17 = his personal year (from November 2nd, 2011 to November 1st, 2012) = Being realistic.

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comprehensive summary and list of predictions for 2012:

http://predictionsyear2012.com/

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Sex Numerology available at:

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May 25, 2012, 12:17 p.m.

It’s not looking good for the Spanish banking system. Standard & Poor’s just slashed the credit ratings of five banks and said the country is headed into a double-dip recession. One of them, Bankia, just asked the government for 19 billion euros in aid – a roughly $23.8 billion boost.

That makes it the largest bank bailout in Spain’s history. Combined with escalating concerns that Greece is about to execute its so-called Grexit from the euro currency, the news is doing nothing to alleviate the heightened anxiety in the euro zone.

Standard & Poor’s, which caused market shockwaves last summer when it downgraded U.S. debt, said the Spanish banking sector was vulnerable to turbulence in capital markets because it relies heavily on foreign funding.

The ratings agency dropped Bankia, Bankinter and Banco Popular Espanol into junk status, all with a BB+ score. Banca Civica and Bankia’s parent company, Baco Financiero y de Ahorros, also were lowered.

S&P downgraded ratings on 11 Spanish banks in late April, not long before Moody’s did the same to 16 banks in the embattled country.

The mass slashing is based on S&P’s concerns “that the correction of the economic imbalances accumulated during the boom is still underway and will have a very high impact on the financial system.”

With real estate week and private companies paying down debt rather than expanding, Spain’s growth potential will suffer, according to S&P.

Bankia, asked the Spanish government late Friday for 19 billion euros in rescue funds to supplement its existing 4.5 billion euro emergency loan.

Earlier this month, Spain agreed to nationalize Bankia after top-level turmoil. Now, the BFA-Bankia Group, citing fears of “potential deterioration of the macroeconomic environment,” will restructure and recapitalize.

“Bankia’s customers can be absolutely certain that their savings are safer and more secure than ever,” said Chairman José Ignacio Goirigolzarri in a statement.

from:  http://www.latimes.com/business/money/la-fi-mo-spain-bankia-20120525,0,267898.story

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Ángel Ron was born on July 24th, 1962 according to http://es.wikipedia.org/wiki/%C3%81ngel_Ron

July 24th, 1962

July 24th

7 + 24 +2+0+1+1 = 35 = his personal year (from July 24th, 2011 to July 23rd, 2012) = Weary.  Forewarned is forearmed.

Nine of Wands Tarot card

35 year + 5 (May) = 40 = his personal month (from May 24th, 2012 to June 23rd, 2012) = I could use some help.

Page of Cups Tarot card

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comprehensive summary and list of predictions for 2012:

http://predictionsyear2012.com/

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discover some of your own numerology for FREE at:

http://numerologybasics.com/

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learn numerology from numerologist to the world, Ed Peterson:

https://www.createspace.com/3411561

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Sex Numerology available at:

https://www.createspace.com/3802937

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Thu May 17, 2012 6:02pm EDT

(Reuters) – Spain’s borrowing costs shot up at a bond auction on Thursday and its troubled banks suffered a double blow, with shares in part-nationalized Bankia diving and 16 lenders – including the euro zone’s biggest – having their credit ratings cut.

Official data confirmed Spain was back in recession and a newspaper reported a big outflow of deposits from Bankia, but the government said it had taken a fundamental step to strengthen Spain’s credibility by agreeing big budget cuts with the country’s free-spending regions.

Moody’s Investors Service cut the long-term debt and deposit ratings of the 16 Spanish banks, including Banco Santander, the euro zone’s largest, saying the government’s ability to support some banks had weakened.

Spain’s banks, saddled with bad loans after a property boom collapsed, lie at the heart of the euro zone crisis as markets fear any major rescue would strain Madrid’s already stretched finances and possibly require an international bailout.

Gary Jenkins, credit analyst at Swordfish Research, said Spain had problems which went beyond the risk of contagion from the crisis inGreece, whose future in the euro is in doubt

“Whilst the attention of the world is on Greece, the fact is that Spain faces many challenges irrespective of how the Greek situation is finally resolved,” he wrote in a note.

Moody’s cut the rating of BBVA, Spain’s second largest lender, as well as Santander even though both are generally regarded as sound, unlike some of their smaller peers.

Nicholas Spiro of Spiro Sovereign Strategy said the government of Prime Minister Mariano Rajoy was not handling the crisis well. “Sentiment towards Spain is deteriorating with each passing day, mainly because of a loss of confidence in the Rajoy government’s approach to tackling the problems in the banking sector,” he said.

ATTRACTING BUYERS

At Thursday’s debt auction, the Treasury had to pay around 5 percent to attract buyers of three- and four-year bonds. The latter sold with a yield of 5.106 percent, way above the 3.374 percent the last time it was auctioned.

“This … fits the pattern of recent sales, with the Spanish treasury successfully getting its supply away but at ever-higher yields,” said Richard McGuire, rate strategist at Rabobank in London. “This unfavorable trend looks set to remain firmly in place … Ultimately, this ratcheting up of yields will likely require some form of outside intervention.”

Spain officially slipped into recession in the first quarter this year, final figures confirmed on Thursday, leaving the country threatened with a prolonged slump as the turbulent euro zone struggles to balance austerity with growth.

The European Commission warned last week that high debts of the 17 regions, which account for about half of overall public spending, and the welfare system would prevent Spain meeting its goal of cutting the budget deficit to 5.3 percent of gross domestic product this year from 8.5 percent in 2011.

However, the government said the regions – most of which missed their deficit targets last year – had agreed to cut their spending by 13 billion euros and increase revenues by 5 billion euros.

After weeks of negotiations, Treasury Minister Cristobal Montoro approved the plans presented by every region except for the small northern one of Asturias, which will have to produce a new budget within 15 days. “We’ve taken a fundamental step for Spain’s credibility,” Montoro told a news conference.

Overspending by the regions caused Spain to miss its deficit reduction target badly last year. Moody’s agency downgraded on Thursday its ratings of four regions including two of the biggest, Catalonia and Andalucia.

Regions which meet their targets will get help from the state to cover their financing needs through a new mechanism which will be introduced by July. The government has been working for weeks on a new instrument called “hispanobonos” allowing the regions to issue debt underwritten by the Treasury.

WORRY LIST

Spain’s 10-year debt yields have risen back above 6 percent, which investors view as a pivot point that could accelerate a climb to 7 percent, a cost of borrowing widely seen as unaffordable even though Madrid has raised well over half its needs for this year.

Prime Minister Mariano Rajoy said on Wednesday his government could soon find it difficult to fund itself affordably on the bond market unless the pressure eases.

However, the government source said the Treasury could refinance itself at the current high yields for several months, although the country saw it aiss vital that funding costs fall.

Top of the country’s worry list is a banking sector beset by bad loans, the result of a property boom that bust in 2008.

El Mundo newspaper reported that customers at Bankia had taken out more than 1 billion euros, equivalent to around 1 percent of the lender’s retail and corporate deposits, over the past week. The government denied there had been an exit of funds, but the bank’s shares closed down 14 percent on Thursday on top of steep losses over the past week.

“It’s not true that there is an exit of deposits at this moment from Bankia,” said Economy Secretary Fernando Jimenez Latorre. Bankia itself said that deposit activity was normal.

The government last week took over Bankia, the fourth-largest lender which holds around 10 percent of Spanish deposits, in an attempt to dispel concerns over its ability to deal with losses related to the 2008 property crash.

“The majority of outflows came after the chairman resigned last week, but I think once the bank was taken over by the government, depositors calmed down a bit,” said one Madrid-based trader. “The share price fall has to do with disappointed retail investors dumping the stock.”

Some savers were reassured by the deposit guarantee fund which covers 100,000 euros per customer.

“I have two accounts with Bankia and up to now I have not closed them. I’m not even considering it,” said Jose Ignacio Gonzalez, 42. “It must be more secure with the backing of the state, it has a guarantee.”

The problem for Madrid is that the property losses which banks face are not yet quantifiable, as prices are likely to fall further.

The government told the banking sector last week to set aside another 30 billion euros in provisions, prompting some analysts to say much more would need to be done.

RECESSION AND CONTAGION

While Greece, facing fresh elections which could hasten its exit from the euro zone, has dominated headlines, uncertainty over the final cost of Spain’s banking reform has raised the prospect that it could also require an international bailout, a bill the euro zone would be stretched to cover.

Official data confirmed the Spanish economy shrank 0.3 percent in the first quarter, putting it back into recession. Unemployment is already running close to 25 percent, rising to around 50 percent among the young.

Even if it puts its house in order, Madrid faces the threat of contagion from Greece if it elects an anti-bailout government next month, a move which could hasten a hard default and exit from the euro zone.

“It’s not Greece leaving the euro that is the major issue,” said John Bearman, chief investment officer at Thomas Miller Investment, which manages roughly 3 billion pounds ($4.8 billion) of assets. “It’s the domino effect.”

from:  http://www.reuters.com/article/2012/05/17/us-spain-economy-idUSBRE84G0CK20120517?feedType=RSS&feedName=topNews&rpc=71

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using the number/letter grid:

 
1      2      3       4       5       6      7      8      9
A      B     C       D       E       F      G      H      I
J      K      L      M      N       O      P      Q      R
S      T      U      V      W      X      Y      Z

Where:

A = 1              J = 1              S = 1

B = 2              K = 2             T = 2

C = 3              L = 3             U = 3

D = 4              M = 4            V = 4

E = 5              N = 5            W = 5

F = 6              O = 6             X = 6

G = 7              P = 7             Y = 7

H = 8              Q = 8             Z = 8

I = 9               R = 9

 

 

Fernando Jimenez Latorre

6                                   5

 

how he loses his heart’s desire = FE = 65 = Banks.  Big business.  Corruption.

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comprehensive summary and list of predictions for 2012:

http://predictionsyear2012.com/

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discover some of your own numerology for FREE at:

http://numerologybasics.com/

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—————————————————————————————–

learn numerology from numerologist to the world, Ed Peterson:

https://www.createspace.com/3411561

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Sex Numerology available at:

https://www.createspace.com/3802937

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