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Remember 2008 and the bond rating agencies

Unemployment is down to 5.3%. Employment is up. We’re doing fine. Focus on U.S. stocks and pray Greece gets a quick (albeit temporary) fix.

Why, Harry, Moodys rates this bond triple A plus. It’s yielding 4% triple tax-free. You should buy some.

The fact that it was from some tiny little place in the boonies was irrelevant.

The fact that it was due 2044 was irrelevant.

And the fact that Moody’s had given it a great rating…. well that was The Big Flag!

From Business Insider this morning:

Puerto Rico was downgraded at Moody’s. The rating agency cut the rating on Puerto Rico’s general obligation bonds to Caa3 from Caa2. Moody’s suggested, “Governor Alejandro García Padilla’s declaration that the commonwealth cannot pay its debt, the suspension of a law requiring monthly general obligation debt service deposits and the decision to devise broad restructuring plans are clear signs that holders of even those Puerto Rico securities with strong legal protections face significant loss.” The outlook for Puerto Rico remains negative.

I’ve written about the bond rating agencies before and what I think of their ratings — zero. Rating agencies are paid by the borrowers. Hence the ratings are always great — until it’s so bleeding obvious that the bond is in big dog do-do.

Heck, if I pay the appraiser, he’ll tell me my hovel is a castle, and worth millions.

My friend Max Nissman warned me about Puerto Rico bonds months ago. I dumped the few I had and didn’t buy more, saving me oodles. Thank you, Max. I owe you a big one.

My friend Todd blames 2008-2009 squarely on Moody’s and S&P. They rated single sub-prime mortgages as drek. But when all the drek got joined into one big pile of drek, they rated it as triple-AAA. A magic trick beyond anything you’ll ever see at the circus. And one that was incredibly dishonest. But guess, who paid them?

Todd believes Moody’s and S&P are 100% the culprits of 2008-2009.

As interest rates rise, bond salesmen are coming out of the woodwork.

When some deep-breathing, heavily-panting bond salesmen reaches you with news of a great new bond, rated triple A by Moody’s, remember 2008-2009.

More on Greece. I’m annoyed that a little country smaller than the metropolitan area of my New York City can mess up my life.

My smart Australian friend John Whittle weighs in:

The problem all along has been that the Greek government debt can not be repaid in full. When the first debt crisis occurred in 2012, private lenders were compelled to take a substantial haircut, both as to interest in arrears and principal, and to accept a considerable lengthening of maturities for the principal remaining. However, debts owed to various European institutions and governments were kept entirely on foot. Obviously, if those debts were partially written off, it would set a precedent that would only encourage other heavily indebted euro area countries, like Portugal, to seek similar deals.

The other substantial creditor who came on board with rescue funds in 2012 was the IMF. The IMF now regrets that step as it now realises that what it was really did was to step into the shoes of European creditors who could well afford to take a loss, if push came to shove, and that it put itself in the position of a relatively minor lender by value amongst a consortium of lenders over which it had very little leverage. This is a position a good banker should never allow himself to be placed in.

Pausing there, It should be said that the weakness of the euro as a currency was held up for the world to see, in that, when an economically minor player in the Europe area  got into trouble, the euro area had to appeal to the IMF for help not just for the country in question, but to “save” the euro “project”. That was the phraseology used at the time. By using this language, the most ardent pro-European basically conceded that this new “reserve” currency was, in important ways, unable to stand on its own two feet.

Now there has been a default to the IMF. That’s something the Fund can not allow, or else it becomes a global “soft touch”. So that problem will have to be dealt with first. Then there still remains the rest of the debt, which, as I said above, can not be serviced by Greece, even with the severest belt tightening. If the European powers “solve” that problem without substantial write offs, it will not be a solution but just another deferral, with another crisis on the cards sometime in the not too far distant future. However, a write off basically means that the governments of the creditor countries have to explain to their various parliaments how this loss has occurred. There is a large reservoir of pent up fury in the various creditor countries waiting to greet the ministers who draw the short straw amongst their colleagues, and have to make the necessary explanations.

The greatest invention since sliced bread. It’s called a Verizon Network Extender.


Let me explain. This thing acts as a mini-Verizon cell tower. It figures where you are and routes your mobile calls — not through the air — but over the Internet. Note the place to plug in an Ethernet cable.

This thing is magic. My reception went from minus 120dB to minus 60dB, which is like saying it went from one bar to six.

If your cell phone service at home or in the office is awful, intermittent and drops calls, get this thing. Place it near a window, plug it into your Internet service and wait. It can take as long as overnight before it syncs up. But when it does and the all the lights are bright blue, you’re a new person. Trust me on this.

Buy it here for $249.99 on Verizon. Click here. Or buy one on eBay for, maybe cheaper.

There is a rumor that if you bitch about your cell service enough to Verizon, they’ll send you one of these things for free.

Wimbledon Tennis continues. It’s on ESPN, ESPN2, The Tennis Channel and later ABC.

Harry Newton who asks the question , “Is there any way to fix Windows when it starts going awry?”  There is only way way: Get your working stuff off it instantly. Move to the cloned back-up you had made a week ago, If that doesn’t work, write down all the software you had installed, start with a clean drive (presumably the clone you made of the drive as it came from the factory) and re-create the whole thing. Boring and time consuming, but sh*t happens. Sorry. Lesson: You need at least two clones of your working Windows (or Mac) drive.

Real jokes tomorrow. Yesterday was busy with family getting-ready-for-July 4 Honey Dos.

A Honey Do, is “Honey Do this that. Honey Do that.” The secret to a happy marriage is completed Honey Dos.