Tuesday, 25 October 2011

Antequera with the I.W.A.

This is our Autumn trip - a 3 and a half bus trip to Antequera, north of Malaga.   Lunch was at 3 p.m. so we had only 3 hours to have a guided tour.   A beautiful city which needs longer time spent there.  Enjoy the small slide show.

Sunday, 9 October 2011

Credit Ratings Agencies, Part 2.


I discovered that John Moody & Company was founded in 1900 but did not survive the stock market crash of 1907. In 1909, Moody's was started and they initially published Analyses of Railroad Investments and then went on to extend coverage to US municipal bonds. In the 70s, Moody's expanded into commercial debt and began charging bond issuers for ratings, as well as charging investors. From 3 countries in 1975, its analyses covered over 100 countries in 2000. Announcements by Moody's of possible or actual downgrades of a country's bond rating can have a major political and economic impact, as we have seen. The irony is that until they went bankrupt in 2008, companies such as Lehman Brothers and AIG had AAA and AA rating.

In the publication “Business Insider”, a former senior analyst William J. Harrington, says that the ratings agency is rotten to the core with conflicts. See here for a full report http://www.businessinsider.com/moodys-analyst-conflicts-corruption-and-greed-2011-8 He describes a culture of conflict that is so pervasive that if often renders Moody's' ratings useless at best and harmful at worst as the management and “compliance” officers do everything possible to make issuer clients happy. Of course they do......they are paying the agency

Here is a telling story about the German insurer Hannover R, who were offered a free rating by Moody's. The insurer refused. Moody's continued with the free ratings but over time lowered its rating of the company. Still refusing Moody's services, Moody's lowered Hannover's debts to junk and the company in a few hours lost $175 million in market value.

Furthermore, as the housing market collapsed in late 2007, Moody's Investors Services, whose investment ratings were widely trusted, responded by purging analysts and executives who warned of trouble and promoting those who helped Wall Street plunge the USA into its worst financial crisis since the Great Depression. A McClatchy investigation has found that Moody's punished executives who questioned why the company was risking its reputation by putting its profits ahead of proving trustworthy ratings for investment offerings.

I see there is a warning on the source of the previous and the following paragraph to the effect that the neutrality of these sections is disputed.

Portugal's foreign debt downgrade to the category Ba2 (junk) has infuriated the European Union and Portugal alike. Moody's has been accused of fuelling speculation and bias towards European assets.

Standard & Poor do not come out any better on closer examination. Credit ratings of AAA were given to large portions of even the riskiest pools of loans. Investors who trusted the low risk profile , purchased large amounts of collateralised debt obligations that later became unsaleable. Those that could be sold often took staggering losses. Companies pay S & P to rate their debt issues and some critics have contended that S & P are beholden to these issuers and its ratings are not as objective as they ought to be. A “paying to play” model makes their ratings meaningless.

Time” magazine wrote “when both S & P and Moody's granted AAA ratings to collateralised debt obligations that were chock-full- of- crap mortgages, thereby helping to precipitate the 2008 financial collapse. The Washington Post said that Standard & Poor didn't just miss the bubble, they helped cause it”.

When the US was downgraded, some have accused S & P of causing further damage for its own agenda. S&P acknowledged making a USD$2 trillion error in its justification for downgrading the US credit rating but stated that it “had no impact on the rating decision”. “A judgement flawed by a $2 trillion error speaks for itself” said a spokesman for the U.S. Dept. of the Treasury.

Finally, this is the bit that leaves me feeling as if I'm living in a global cesspit: an S&P rating, e.g. of the US government or any other national government can have – and has had – a distinct effect on a truly global scale. But the decisions on these ratings are made by the company's employees who are not elected by the public , and are not accountable for their decision-making process. There is no appeals process against a credit-rating decision.

William Harrington's story here bears further reading to discover what goes on behind the scenes.

Credit Ratings Agencies - Moody's, Standard & Poor.

I was startled to read in the Guardian and Daily Mail recently, just after the Governor of the Bank of England said that the world was facing its worst ever financial crisis, that 12 UK banks and building societies had their credit ratings downgraded. The downgrade had seen the share prices of these institutions tumble.

Oh, Lordie, my bank, the Co-op – renowned for its unwavering ethical stance – was included. Those with large amounts of savings were urged to move their money to safe havens amid fears that some banks would go under. Well I don't have large amounts of savings but it would upset me no end if the Co-op went under. I have regarded them as an oasis of rectitude in this snakepit of greed.

So I read on...the Guardian reported that “Moody's said that the downgrade of UK's banks was necessary because the government was stepping back from bailing out bank's when they ran into difficulty. The downgrades do not reflect a deterioration in the financial strength of the banking system or that of the government”.

So I'm asking myself, why downgrade the banks if there is no deterioration in their financial strength. And who are these people who seem to have the power to manipulate and destabililse whole countries' economies, sending share prices up and down with some people undoubtedly cleaning up as a result.

I've been on the hunt for more information about the credit ratings agencies and, if what I read is to be believed, I feel as if I'm living in a global cesspit.

In my next post you will see what I found in my search.

Saturday, 2 April 2011

Spanish bureaucracy

Want a glimpse into the hoops you have to jump through here when dealing with Spanish bureaucracy (although I hear it's very similar in S. France, Italy and Greece), then take a look at this YouTube offering

Monday, 21 March 2011

Low tide, La Barrosa

This was the early morning scene at La Barrosa, near Novo Sancti Petri, last Saturday morning. The moon's proximity to the Earth was hailed as the opportunity to see the lowest tide for ages and, round Cadiz at least, to see the remains of the old Cadiz.

It was a perfect morning, the first after several days of dark skies, rain and storms, so the fact that the tide didn't look any different to me was of no consequence......it was a joy to be out when so few others were.
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Tuesday, 18 January 2011

Cortes de la Frontera lunch

At last we made it up the mountain on the little train from San Roque.   The first time we tried, last year, the company had closed the line for upgrading.   The next time, we arrived way too early and we hadn't made arrangements beforehand to get Yin and Yang fed their supper so we went to Gibraltar instead.   The next two times there were such wild storms there was no point.   So we were delighted when, last Sunday, it was glorious weather and the little train took us up for Sunday lunch with our friends from nearby Sotogrande.

This is the train much loved by  walkers in the Alcornacales National Park - it will go all the way to Ronda but an early morning fast train can take you to Granada.....a trip we will make one day.   Today the train was full of 3-generation Spanish families enjoying a trip together.

We had lunch in the  wonderful setting of the El Gecko hotel and restaurant, whose sun terrace at the back overlooks the river.   Roast beef and Yorkshire pudding is something neither of us has had for many, many years:  fresh veg were beautifully cooked and to top off the meal we had crepe Suzette....all delicious.   Here's a link to their website www.elgeckohotel.com ,   A  British couple, Maxine and Bill, will give you a warm welcome.

And now for the slide show .....I hope