Moody's Bottom Rung
03-12-2009, 01:55 PM
#1
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Thread Starter
Joined APC: Jul 2006
Position: Boeing Hearing and Ergonomics Lab Rat, Night Shift
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Moody's Bottom Rung
Moody's has published a list of bottom rung corporations based on their rating system.
Take this with a grain of salt, Moody's (along with others) rating system rated all of those subprime mortgages and their derivatives AAA which is why the economy is in this mess in the first place.
Here's some Aviation related companies:
AirTran Holdings, Inc
AMR Corporation
Arinc Incorporated
DAE Aviation Holdings, Inc
Evergreen International Aviation, Inc.
Hawker Beechcraft Acquisition Company LLC
JetBlue Airways Corp.
Landmark FBO, LLC
Orbitz Worldwide, Inc.
Pegasus Solutions, Inc.
Synchronous Aerospace Group
UAL Corporation
US Airways Group, Inc.
Cheers
George
Take this with a grain of salt, Moody's (along with others) rating system rated all of those subprime mortgages and their derivatives AAA which is why the economy is in this mess in the first place.
Here's some Aviation related companies:
AirTran Holdings, Inc
AMR Corporation
Arinc Incorporated
DAE Aviation Holdings, Inc
Evergreen International Aviation, Inc.
Hawker Beechcraft Acquisition Company LLC
JetBlue Airways Corp.
Landmark FBO, LLC
Orbitz Worldwide, Inc.
Pegasus Solutions, Inc.
Synchronous Aerospace Group
UAL Corporation
US Airways Group, Inc.
Cheers
George
03-12-2009, 02:36 PM
#2
APC co-founder
Joined APC: Feb 2005
Position: B777
Posts: 5,853
For context on Moody's list, and other credit rating agencies, check out this article from Wired Magazine.
Recipe for Disaster: The Formula That Killed Wall Street
In short, the article describes the "designer math" used to rate credit risk. The author quotes many industry insiders who claim using a financial Copula function is "charlatanism".
While the rating agencies didn't create the [Li's] Copula formula, they gave it credibility and provided risk assessment based on a faulty model.
So, back to the Bottom Rung list above -
While all of the companies listed are facing debt and liquidity issues, I think the risk for Moody's is credibility. Without publishing the basis of their assumption, and a recent history of using a faulty model, what is the value of a Moody's rating?
Recipe for Disaster: The Formula That Killed Wall Street
In short, the article describes the "designer math" used to rate credit risk. The author quotes many industry insiders who claim using a financial Copula function is "charlatanism".
While the rating agencies didn't create the [Li's] Copula formula, they gave it credibility and provided risk assessment based on a faulty model.
So, back to the Bottom Rung list above -
the Bottom Rung, which details which companies the ratings agency says are most likely to default on their debts.
03-12-2009, 02:59 PM
#3
With The Resistance
Joined APC: Jan 2006
Position: Burning the Agitprop of the Apparat
Posts: 6,191
Aside from the math used, there is the conflict of interest between those doing the rating/ stock analysts and their level of involvement with the companies that pay for their services. Recent meltdowns have brought about a wave of honesty as if by magic.
Bottom line real world sales of some "toxic" debt have been running about twentyfive cents on the dollar. You can bet the guys buying this stuff have a very good handle on the valuation, those holding it may try to fluff the numbers to make their books look better.
Bottom line real world sales of some "toxic" debt have been running about twentyfive cents on the dollar. You can bet the guys buying this stuff have a very good handle on the valuation, those holding it may try to fluff the numbers to make their books look better.
