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Let's compare the financials of two stocks: MBIA (MBI) which has Moody's top rating of Aaa and Pfizer (PFE), recently downgraded by Moody's to Aa1 and by Fitch to AA-Plus from AAA. Here are two recent downgrades of Pfizer.
December 12, 2007
Pfizer loses top "AAA" rating from Fitch
December 13, 2007
Pfizer's 900 mln eur new senior unsecured notes rated 'Aa1' - Moody's
Pfizer Financials 
MBIA Financials 
What is Moody’s Rating Scale?
Moody's Rating Scale
runs from a high of Aaa to a low of C, and comprises 21 notches. It is
divided into two sections, investment grade and speculative grade. The
lowest investment grade rating is Baa3. The highest speculative-grade
rating is Ba1.
Long-Term Debt Ratings (maturities of one year or more):
Investment Grade
Aaa: “gilt edged”
Aa1, Aa2, Aa3: high-grade
A1, A2, A3: upper-medium grade
Baa1, Baa2, Baa3: medium grade
Speculative Grade
Ba1, Ba2, Ba3: speculative elements
B1, B2, B3: lack characteristics of a desirable investment
Caa1, Caa2, Caa3: bonds of poor standing
Ca: highly speculative
C: lowest rating, extremely poor prospects of attaining any real investment standing
Compare Financials
- Profit margin -61.76% vs. +17.07%
- Return on Equity -35.54% vs. +12.13%
- Revenue $3.12 Billion vs. $48.61 Billion
- Earnings Per Share -$15.22 vs. +$1.20
- Total Cash $5.73 Billion vs. $20.30 Billion
- Total Debt $17.44 Billion vs. $8.69 Billion
Do the finacials of MBIA look "gilt edged"?
Heck, do they look investment grade at all?
With that, I invite you to read two posts I wrote yesterday in regards to MBIA:
Is there any other way to interpret the above ratings other than
incompetence or corruption? If there is, can someone please tell me
what it is?
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As go shipping rates so goes the economy. The Baltic Dry Index has taken a sharp move down while gold has made a new all time high. Where do we go from here?
A look at a 57 year regression line showing that the S&P 500 Index is still above the line
and may not breach that regression line.
How much lower can interest rates go when we see yields approach the levels last seen when the
Federal Funds rate was near the 1% level. Notice that the 30 yr yield is already as low today (while the fed funds rate is 3%) as it was when the fed funds rate was 1%. How much lower can rates
go and how bad would things have to become for rates to go lower.
As they say a picture is worth a thousand words. CRB Index on Left. Goldman Sachs Ind. Metals Index on Right.
Northern Rock Takeover Marks Risky Bet for U.K.
Surprise Move Reveals Global Crisis' Depth; Holders Decry Action
By ALISTAIR MACDONALD and CARRICK MOLLENKAMP
February 18, 2008
LONDON -- The U.K. government has decided to take full control of troubled mortgage lender Northern Rock PLC, in a surprise move that reflects the depth of the global credit crisis and represents an embarrassment for Prime Minister Gordon Brown.
After a tense weekend of last-minute negotiations with two bidders -- a consortium led by entrepreneur Richard Branson's Virgin Group Ltd. and Northern Rock's own board -- the government decided that it could best serve the interests of taxpayers and consumers by "temporarily" nationalizing the bank, Chancellor of the Exchequer Alistair Darling told a hastily called news conference yesterday. He said the government would introduce the necessary legislation this morning, and that a new management team led by former Lloyd's insurance market Chief Executive Ron Sandler would assume operational control of the bank immediately.
"I wanted to see a private-sector solution, but it had to be on the right terms," said Mr. Darling. "Governments have to see these things through." He said the bank would continue to operate as usual, making loans and taking deposits, but that its shares would be delisted before trading opened today on the London Stock Exchange.
Taking full responsibility for one of the country's largest mortgage lenders is a politically treacherous move for the government, which has faced strident criticism for its role in the affair since September, when its announcement of an emergency bailout package triggered the U.K.'s first bank run in more than a century. The decision amounts to a bet that it can manage the lender -- which owes the government some 25 billion ($49 billion) -- and then sell it at a better price sometime later, when financial markets improve. Mr. Darling said he still hopes to find a private owner for Northern Rock as soon as possible, though he declined to set any target dates.
"The government took credit for the economy's strength and now its reputation has been damaged by hasty decisions made on the hoof," said Stuart Thomson, a fixed-income fund manager and economist at Resolution Asset Management in Glasgow. Opposition leaders and analysts said the decision to nationalize could be a prelude to a slow winding down of Northern Rock's business, as loans and depositors are gradually paid off.