'AAA' Rated Companies: And Then There Were Six 28 comments
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This morning, Standard and Poor's came out and surprised no one when it lowered General Electric's (GE) credit rating one notch from 'AAA' to 'AA+'. With this downgrade, only six publicly traded US companies now hold the coveted status of a AAA rating:
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This article has 28 comments:
I'm nonetheless afraid the company has squandered their competitive advantage by losing that AAA. If this increases their cost of capital by even 0.2%, the hit will cost them billions. This comes at a time when new Chinese competition with $1/hour workers, no unions, and no pensions is finally getting the abilility to provide ultra-cheap customer financing. I hope those dividends were worth it.
Jeff Imelt could take a few bucks out of the petty cash drawer and buy S & P!
All along he said that the AAA rating was very important to their business. Now that the cut has come, Immelt says that it will not impact the business negatively.
Even though GE has a lot of good businesses, it is hard to believe anything Immelt says. I won't repurchase this stock while he is the CEO or at the very least, he apologises to shareholders, promises to talk straight to us and begins to establish a record for doing this.
They were downgraded, not by Standard & Poor's, but by Moody's.
If there were Unions in China, no American business will go there. China knows that.
If there were no unions in America next year, the business will be back. Or won't move away.
economy. GE will return someday. The housing mess will
clear, and the underlining strenght of the company will
return to historic levels.
- I'll go out on a limb here, Freddie MAC is not AAA. In fact it and Fannie Mae are virtually insolvent save for Government support. You may be looking a certain trenches of their securitized debt which may be rated AAA. But the company is not, unless you think the US Gov will support all its paper.
- If Moodys downgraded Pfizer, then they ain't AAA anymore. I think you need both to be in the club. They took a big bite with Weyth
- Note that Fitch downgraded Berkshire from AAA
Honest question, outside of individual investors, are banks really just looking at these ratings when considering loans ? "Oh GE is AAA they can get all the money they want." I really hope that is not the case, but I wouldn't be surprised. Hopefully there is alot more scrutiny than that.
Wouldn't a better practice be to just for banks to do their own balance sheeet due diligence based off of their own inhouse criteria? Who cares what some external agency says.
On Mar 13 12:19 PM notsosmart wrote:
> who cares what the phony rating agencies do? i just bought more GE
> last week. nice gain in one week.
I mean,BRK has almost $25 billions in cash,I fully understand GE's downgrade because it is flooded by debts and eventually in capital needs but not BRK's
how do they rates companies ???
After all, lets call a dog a dog shall we, their ratings are issued to determine the risk premiums of these firms debt in percentage terms anyway. They are not some impartial news service commited only to noticing some potential bad things that can happen to a company and providing an early warning balance sheet notification.
Because ratings agencies are so intertwined by financial self interest to debt issuers you really need some sort of balance. The best thing would be to require them not to take debtholder listing fees. Since that would kill their market cap if not their business, it would also be good if they were beholden to actually put skin in the gaame and make bets at those percentages each time they issue a ratings. I don't think this would happen either because they would probably be bankrupt by now.
I think everyone knows if the ratings agencies were an animal it would probably be a slug: not backbone, slow as hell, and enjoys eating easy meals on things that don't bite back (overcharging on municipal and revenue bonds).
AAPL MSFT
Cash & ST Investments 26 21
Total Liabilities 20 31
MSFT has the AAA rating, Apple doesn't. AAPL has no long term debt at all (MSFT does).
And then we remember - thse are the agencies that thought collateralized subprime mortgages walked on water. Of course.
However, having a AAA rating is essentially the same as AA+, with the exception of bragging rights. There is really not much difference between the two.
For a more detailed analysis on GE see:
valuehuntr.com/2009/03.../
They committed fraud when they gave AAA ratings to all the bum mortgage securities. They only did so because they were paid enough to do it.
Where's the credibility and integrity all of a sudden? Or did GE and BRK not pay them enough to keep their AAA ratings?
That will make more sense too.
however cnbc has a guy called cramer who tries to "rate" CEO's, but it is hit and miss [e.g. aubrey mcClendon]. probably because cramer is a loonie tune, it is more miss than hit.