News Flash...Again!

by Larry Levin


Equities are on a hair trigger these days: even when seemingly old news hits the tape, it is read as new. The first time this happened was the Friday Gasparino-rally and the second time was today's S&P-ratings-rally. Neither "news flash" contained news...that is to say, something new.

Last week's tape was about to close out on or near its low - until reporter Charlie Gasparino came on CNBC with a "news flash." His so-called newsworthy story that broke into regular programming was that Ambac was working with a consortium of banks to secure financing, stop me if you've heard this one before, and may...may...finalize it "soon." No definition of "soon" was given by Ambac. This so-called nugget of special information rocketed the market into Friday's close.

What happened to the prior 2-week deadline these companies had to secure financing? Oh right, nothing.

Today's massive move higher was basically a carbon-copy of Friday's specious rally. Mr. Gasparino, however, did not deliver the match to the pile of debris - Standard & Poor's flicked the match this afternoon. S&P affirmed MBIA and Ambac's AAA-ratings, yet still said they are on the chopping block for downgrades in the future. Ummm, wasn't that the case last week, and the prior week, and the prior week?

I have written in the past that Wall Street is like a spoiled brat in a checkout line, screaming expletives at his mother for denying him a candy bar - until she relents. The analogy is not over the top, it is right on the money. Either Wall Street is damn lucky, or it gets whatever it wants - period.

"We want rate cuts!" --- OK is the answer.

"Hey, Bernanke - jump!" --- Ben replies "How high?"

"Don't downgrade MBI & ABK. It's bad for our business." --- OK is the answer again.

Look folks, if you think this is a "free market" I personally think your deluding yourself. It is a naïve notion to be sure. Why would I say such a thing?

MBIA lost 91.1% of its entire market cap (high to low) while Ambac had lost 95.3%, yet both continue to garner AAA ratings? How can this be, you might wonder? The real question is which government agency or official demanded that NO action be taken to lower their ratings. How can it be anything else, unless S&P is no longer a worthy ratings company? I'd like to know where that government agency or official believes it derives such power. Surely they were told not to lower the ratings "to help the economy"...free market and all be damned. Oh, and if S&P didn't listen, I'm sure they were reminded how culpable the ratings agencies were in the whole CDO mess. They were then reminded how the FBI & SEC could be dispatched to its door overnight!

So S&P played ball.

Implied ratings for these firms, found on moodys.com, seem to be some 15-notches below a real AAA rating, at b3. It's nice to have friends in high places, eh?

Here's a thought...can any of you get that kind of consideration with your credit scores? You've been salivating at buying your neighbor's run-down shack for "just" $4-million, but you came back from Las Vegas a little light: you lost 91.1% or 95.3% of your net worth. You can't remember yet, as your brain cells are still in recovery mode.

Would your credit score still be in the top 1% or so? I highly doubt it. You see, you are not part of the Wall Street fabric that demands - then receives - whatever your little heart desires.

If the b3 "implied" rating on moodys.com is indeed correct, Standard & Poor's should be sued for dereliction of duty, or failed fiduciary responsibility...or something.

Real Time Trading Signals*for

Trade Date: 2/25/07

E-Mini S&P Trades*
(before fees and commissions):


1) B/Away buy @ 8:35am at 1355.00 = -1.50 (1 lot)

2) FT buy @ 9:45am at 1357.25 = +5.00 (1 lot)

3) Engf sell @ 11:35am at 1352.75 = -2.25 & -2.25

4) FT sell @ 11:55pm at 1356.75 = -1.75 (1 lot)

5) OTF buy @ 12:35pm at 1352.75 = -1.25 & -1.25

6) Engf buy @ 1:15pm at 1355.50 = +9.25

7) FT buy @ 1:45pm at 1360.00 = -1.75 & -1.75...+.50 points

E-Mini Russell Trades*
(before fees and commissions):


1) Sell @ 8:48am at 695.0 = +1.0 & +2.00

2) Sell @ 9:05am at 695.9 = b/e & -1.1

3) Buy @ 9:33am at 701.6 = +.5 & b/e

4) Buy @ 10:42am at 699.9 = +.5 & +2.8

5) Sell @ 11:05am at 698.3 = -.6 (1 lot)

6) Buy @ 12:23pm at 698.6 = b/e & b/e

7) Sell @ 12:45pm at 696.1 = -.9 (1 lot)...+$420.00


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