Sunday, April 24, 2011

The Credit Ratings of The Credit Agencies of United States of America

Before starting this post, can someone tell me How are the ratings made and are they influenced, or biased or unbiased or they are just RATINGS.

Let me be specific with what i want to achieve. Its simple, if i am not wrong, these are the agencies who said, those mortgages are so good, BUY THEM.... AAA Rated Bonds and assets, in 2007 become junk. Now can we derive that subsequently, AAA rated bonds mean that they are bonds, that are going to become junk and will be worth pebbles. And thus, before going any forward, i can conclude that AAA ratings by S&P means that they are junk bonds and those who have invested in them should be ready to see them get sunk.

Now the rating agencies and The all powerful, United States of America, the bearer of Dollar. The US Dollar, which is the base currency and a benchmark for every country. Oil, Gold, Profit and Loss, everything is denoted with a $ sign before it. You all would have had known by now that our dear $ has been given a "NEGATIVE OUTLOOK" by Standard's and Poor's. 

Now what is Standard and Poor's? It is a rating agency with two other counterparts Fitch and Moody's. 

What work they do? They before the subprime crisis of 2007, or should i say, when the world was a happy place, used to give ratings to subprime mortgagees, and CDOs and ABSs, Sovereign Debt, Commercial Papers, Fized Income Securities, Corporations, Financial Institutions, Countries and all kind of derivative, that can be sued to be termed as the Weapons of Mass Destruction or in simple language, can be exchanged for a paper known is currency. 

Who gave them work? Too Big to Fail Banks and Financial Institutions such as Lehman Brothers, that ended while taking the world with it in 2008, Goldman Sachs, that made record Profits in 2009 when the financial markets were in turmoil, Bank of America that tool over Meryll Lynch, and many more.

What are the ratings? Ratings are alphabets and numbers and symbols, that are used to denote which country or instrument or asset is at which stage of getting termed junk. AAA means the best asset that will get junk, D means, the asset is a junk.

So now when you know all the details in simple words, we are going to see what the AAA ratings means in and for USA.

In USA AAA rated bonds are requirements by the pension and retrement funds to invest in, in order to make sure a steady return is generated on assets that will yeild enough returns that might not be termed risky. The same AAA rating is for Germany who is in surplus and the same AAA rating was for iceland which had debt many times its GDP. The same AAA rating was for US Treasury bonds, termed as the safest investment in the world, and yet again AAA was also rated for the next to burst subprime and leveraged bonds and debts.

US being downgraded to negative, is of in my opinion not a indication of what USA hold behind the enormous $14 trillion debt ceiling, if anyone is aware of this, might say that USA cannot default, how can the super power dry out of cash. But S&P issued this outlook as a bell for Mr Obama to think on thier rising debt, that is now from public to private. In all, USA might say that, so what, you downgraded us, we can print and print and we will pay it all, not to worry at all. 

I read the Fox Business reporter Peter Barnes interview at Bloomberg on thursday, see what Treasury Secretary Tim Geithner has to say, while asked a few questions regarding USA being downgraded by credit agencies.
Tim Geithne
Peter Barnes: Is there a risk that the United States could lose its AAA credit rating? Yes or no
Tim Geithner: No risk of that
Peter Barnes: No risk?
Tim Geithner: No risk

Tim Geithner: he chance of a downgrade is zero. S&P says the odds it will cut its rating might be greater than one out of three

Think again, who to trust now. Rating agencies who ahve rated more than 200 countries in this wold, making sure that the general public knows it all, if only they were correct in 2007-2008, or the governments. This is What the credit rating agencies of United States of America Are.

I can guarantee, that no politician is going to say that the government is going to default or the government is thinking of a debt restructure, or a government is under immense pressure, it is not just their style. Then Whats the point of going through such lengthy reports.
Mr Barrack Obama

We are not yet out of the dark shades of the credit crisis, which has now become debt crisis. Its all a parable now, on who we can turn to the correct information. But things are not good in relation to the reports that US dolalr is under pressure and it is at its record three year lows against the basket of currencies, moreover, it needs spending cuts and much support and thinking from the people, knowing that Mr Obama's administration can't just sit on ben Bernenke's QE and still hope of an economic revival. Time to wake up!!!

Transfer & Convertibility Assessment
RatingsRating DateRegulatory IdentifiersLast Credit Rating Action/
Local Long TermAAA01-Nov-2005--
Issuer Credit Rating
RatingsRating DateRegulatory IdentifiersLast Credit Rating Action/
Foreign Long TermAAA01-Jan-1941--18-Apr-2011
Outlook Negative
Foreign Short TermA-1+01-Jan-1981--
Local Long TermAAA27-Jul-1992--18-Apr-2011
Outlook Negative
Local Short TermA-1+27-Jul-1992--
Source S&P website
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