David Callaway: Wall Street’s giving tips again; time to worry

David Callaway: Wall Street’s giving tips again; time to worry

One sure sign that the markets may be getting ahead of themselves this summer: Wall Street banks are recommending each other’s shares again.

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Bill’s take on this: Yes, we should all be very, very afraid. It always bugged me that banks recommended banks, the “watchdog” SEC and Moody’s, S&P, and other rating agencies not only didn’t “get” the economic downturn we’re all living in, but they showed a complete negligence about the disaster. Further, they all have conflicts of interest.

For example, the rating agencies. Take S&P. (Please!) They “rate” securities, presumably on risk. The riskier the underlying securities, for example, on a bond, the riskier the bond, the lower the rating. (First off, does anybody understand the rating system? Why can’t it simply be A-F? Why quadruple double-A, which means, not so good? I made that up, but you know what I mean.)

However, the S&P benefits by giving good ratings. If a company gets poorly-rated, they don’t do ANY business with S&P, which has a whole host of business services it sells Wall Street firms.

In the interest of “transparency,” then, a rating agency really should have no other duty. I don’t know how they’d make money, but that’s for them to figure out.

You cannot tell me that the “risk” side doesn’t take the potential lost business into consideration. I bet the “risk” side even takes some heat from the revenue-generating side.

Used to be, investing in an index was a sound investment idea. Now that all the parties are having affairs and inbreeding, I’m not so sure.

billspaced

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Film İzle - July 6, 2009 Reply

I will feed your RSS after this useful article. Thanks a lot.

forum - July 7, 2009 Reply

Used to be, investing in an index was a sound investment idea. Now that all the parties are having affairs and inbreeding, I’m not so sure.

Police Exam - July 7, 2009 Reply

I wouldn’t listen to anyone’s investing advice now. Considering that none of the so called issues that got us into this mess have been addressed, I have no idea what direction things could possibly go.

I’m more likely to just sit on the sidelines. Do my own independent research into businesses I think have a good outlook, decent cash flow and little debt.

Greenville SC Photographer - July 9, 2009 Reply

I think if everyone got back to the basics. Do the research before throwing money at companys.Remember if it sounds to good to be true then it probably is.

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