Whether it was the heat from global lawmakers, the angry mob at CalPERS, or divine intervention, S&P has done some soul searching and concluded that blind faith in a Monte Carlo model for CDOs may not have been the way to go.
The ratings firm will introduce tests — both quantitative and qualitative — to supplement its default-simulation model. S&P will also adjust its models to target AAA default rates it believes are commensurate with conditions of extreme macroeconomic stress, such as the Great Depression, as well as BBB default rates consistent with the highest actual coproate (sic) defaults over the past 28 years.
The result of all this good news? A cool half trillion spread across close to 5,000 CDO tranches is on downgrade watch. While super senior tranches may see a shoulder shrugging two to three notch downgrade, more junior AAAs could lose two As before the carnage is over. Given the level of potential damage, it almost provides credence to ‘better never than late’.
Greg, I am going to strategically placed 5 stray cats with unclipped claws throughout your studio apartment.
1) Behind the milk that is set to go sour by September 19th
2) In your toilet (I gave him a wet suit because the little fella HATES water)
3) On your ceiling fan
4) Behind your blinds in your living room (the cute little thing stares between them)
5) Won’t tell, can’t tell, its a surprise!!
-Jeff Macke
WAIT!!! NO!!! I can’t do my job if it involves more than pressing a button.
Jorge Jetsen
This won’t hurt a bit…now bend over and relax
When giving AAA rating was the fad, the ratings agencies blindly gave away AAA ratings (for a small fee, wink, wink) as if they were candy. Now that downgrades are all the rage, the ratings agencies gleefully jump on the bandwagon. Monkey see, monkey do. Just make sure you do that same as the other monkeys.
/Quit giving a crap about what the ratings monkeys were saying years ago.
hey greg, why don’t you (sic) my dick you glorified gay office clerk
-jc
@4
Wow. Thanks for reiterating that. I’m sure most of us never thought of that. Very Insightful.
How are peep show performers like sellers of Monte Carlo risk quanting?
They both see you coming.
That is one regal motherfucking light bulb up there. Holy shit.
The angry mob at CalPERS – bite them – they might want to dim the bulb on the anger deflected to the CDO mess; it might just shine the light on the billions being run from CalPERS to Altura Capital which funnels it to unqualified managers, called “emerging managers” (the new euphemism for one particular minority) who are given 51% of an established underfunded HF/FOF/PE fund, for the promise of what … hundreds of millions from CalPERS. Staggering losses? Who cares? Lather, rinse, repeat.