Commentary - 05/30/2008

Moody's AMBAC MBIA Junk

Here's the latest headline:
Moody's Implied Ratings Lab Reveals Ambac, MBIA Turning to Junk

May 30 (Bloomberg) -- Moody's Investors Service has created a new unit that surprises even its own director.

The team from Moody's Analytics, which operates separately from Moody's ratings division, uses credit-default swap prices as an alternative system of grading debt. These so-called implied ratings often differ significantly from Moody's official grades.

The implied ratings frequently show that swap traders think debt is in more danger of defaulting than Moody's credit ratings signify. And here's the kicker: The swaps traders are usually right.

Well, well, well. What we've always suspected is now publicly documented. Insiders get one set of books, the public gets the other "official" set. Ah, the joys of having our country turned into a casino.
The credit quality of bond insurers, which have been at the center of the subprime storm, differ dramatically. The official ratings of these companies say the insurers are in great shape; the alternative ratings say they're in dire danger of defaulting on their debts.
Simply take a look below at the Top 10 Major Holders of each player: Moody's, AMBAC and MBIA. Then notice that Goldman Sachs is a Major Holder, not only in both AMBAC and MBIA, but also in both rating agencies, Moody's and Standard & Poors. Do you think they used the "official version?"

Finally, take a look at the Major Holders of the largest investment banks and the major money center banks. See the pattern? One cozy little financial club.
Perhaps this is why: Sometimes The Dragon Wins

Symbol Name Of Corporation

MBIA Inc. (As of 30-Sep-2007)
Top 10 Institutional HoldersShares2007Value2006
Wellington Management Company, LLP16,931,57713.50%$1,033,672,775-.--%
AXA (Paris, France)12,298,0669.81%$750,796,929-.--%
Goldman Sachs Group Inc7,730,3236.16%$471,936,219-.--%
FMR Corporation (Fidelity Management & Research Corp)7,433,9005.93%$453,839,595-.--%
Third Avenue Management, LLC6,697,2985.34%$408,870,042-.--%
Vanguard Group, Inc. (The)4,852,8183.87%$296,264,538-.--%
Cambiar Investors, LLC4,588,5883.66%$280,133,297-.--%
Cramer Rosenthal McGlynn LLC/adv4,357,9453.48%$266,052,542-.--%
JP Morgan Chase & Company4,304,6603.43%$262,799,493-.--%
Barclays Global Investors UK Holdings Ltd4,045,4663.23%$246,975,699-.--%
% of Shares Held by All Insider and 5% Owners:17%-.--%
Top 10 [2.4%] of 416 Institutional Holders Control58.41%-.--%
Percentage of Barclays and "Associates" Control12.82%-.--%
NOTE: Third Avenue manages a fund that controls 4.37%.
Vanguard manages two funds that control 4.01%.
Fidelity manages two funds that control 3.01%.
Cramer Rosenthal McGlynn manages a fund that controls 1.56%.
Therefore, the TOP 10 control over 71.36% of MBIA.

Symbol Name Of Corporation

Ambac Financial Group, Inc. (As of 30-Sep-2007)
Top 10 Institutional HoldersShares2007Value2006
FMR Corporation (Fidelity Management & Research Corp)10,141,1399.99%$637,979,054-.--%
Goldman Sachs Group Inc7,134,4527.03%$448,828,375-.--%
Davis Selected Advisers, LP6,506,7676.41%$409,340,711-.--%
JP Morgan Chase & Company5,894,7575.80%$370,839,162-.--%
Capital Guardian Trust Company5,489,8965.41%$345,369,357-.--%
Bank Of America Corporation5,174,6545.10%$325,537,483-.--%
Oppenheimer Funds, Inc.4,225,7604.16%$265,842,561-.--%
Barclays Global Investors UK Holdings Ltd4,187,0214.12%$263,405,491-.--%
Vanguard Group, Inc. (The)3,807,7793.75%$239,547,376-.--%
American Century Companies, Inc.3,476,0753.42%$218,679,878-.--%
% of Shares Held by All Insider and 5% Owners:0%-.--%
Top 10 [2.5%] of 401 Institutional Holders Control55.19%-.--%
Percentage of Barclays and "Associates" Control22.05%-.--%
Fidelity manages two funds that control 5.89%.
Goldman Sachs manages a fund that controls 1.98%.
Davis manages a fund that controls 1.96%.
Putnam manages a fund that controls 1.25%.
Waddell & Reed manages a fund that controls 1.05%.
Therefore, the TOP 10 control 65.02%, and
Barclays/Associates control 26.33% of AMBAC.

Rating Agencies

Symbol Name Of Corporation

McGraw-Hill Companies (As of 31-Dec-2007)
Top 10 Institutional HoldersShares2007Value2006
Price (T.Rowe) Associates Inc26,243,6738.18%$1,149,735,314-.--%
Goldman Sachs Group Inc14,710,7784.59%$644,479,184-.--%
Barclays Global Investors UK Holdings Ltd13,724,9114.28%$601,288,350-.--%
State Street Corporation12,083,1993.77%$529,364,948-.--%
Vanguard Group, Inc. (The)9,685,1883.02%$424,308,086-.--%
UBS Global Asset Management (Americas) Inc8,573,9942.67%$375,626,677-.--%
Transamerica Investment Management LLC The Hague, Netherlands8,260,7052.58%$361,901,486-.--%
Sarofim, Fayez8,019,2862.50%$351,324,919-.--%
Bank of New York Mellon Corporation7,309,9412.28%$320,248,515-.--%
Deutsche Bank Aktiengesellschaft (Frankfurt, Germany)6,592,7662.06%$288,829,078-.--%
% of Shares Held by All Insider and 5% Owners:13%-.--%
Top 10 [1.6%] of 614 Institutional Holders Control35.93%-.--%
Percentage of Barclays and "Associates" Control23.10%-.--%
NOTE: T.Rowe Price manages two funds that control 3.92%.
Therefore, the Top 10 Major Holders control 39.85%, and
Barclays/Associates control 27.02% of McGraw-Hill.
NOTE: McGraw-Hill owns these companies and these:

Symbol Name Of Corporation

Moody's Corp. (As of 30-Jun-2007)
Top 10 Institutional HoldersShares2007Value2006
Berkshire Hathaway, Inc48,000,00017.98%$2,985,600,000-.--%
Davis Selected Advisers, LP18,888,0357.08%$1,174,835,777-.--%
Barclays Global Investors UK Holdings Ltd13,749,6855.15%$855,230,407-.--%
Marsico Capital Management, LLC12,695,1114.76%$789,635,904-.--%
Goldman Sachs Group Inc11,992,2474.49%$745,917,763-.--%
Sands Capital Management, Inc.10,554,2523.95%$656,474,474-.--%
Baillie Gifford And Company10,153,3483.80%$631,538,245-.--%
Morgan Stanley6,890,4412.58%$428,585,430-.--%
Vanguard Group, Inc. (The)6,602,9682.47%$410,704,609-.--%
AXA (Paris, France)6,134,4772.30%$381,564,469-.--%
% of Shares Held by All Insider and 5% Owners:0%-.--%
Top 10 [1.9%] of 522 Institutional Holders Control54.56%-.--%
Percentage of Barclays and "Associates" Control12.22%-.--%

2008 by Edward Ulysses Cate
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