Morgan Stanley (MS) and the rest of Wall Street needs to go on another massive capital raising binge and lower credit ratings will translate into a higher cost of capital.
The short covering bounce in financials should be just about over.
It’s Time To Go Ultrashort, Again.
Wachovia's Second-Quarter Loss Widens on Legal Costs (Update2): “Wachovia Corp., the fourth-largest U.S. bank, said its second-quarter loss was bigger than reported in July because of costs to settle a probe of auction-rate securities sales. It also increased planned job cuts.
The bank revised the loss to $9.11 billion, or $4.31 a share, from $8.86 billion, or $4.20 a share, according to a regulatory filing today. The Charlotte, North Carolina-based bank now plans to dismiss 6,950 employees later this year, 600 more than previously disclosed. The new job cuts will come from Wachovia's mortgage operations, spokeswoman Christy Phillips Brown said.”
Expect more of this as the legal “bubble” is just getting started…
Argentina's Debt Rating Cut to B by Standard & Poor's (Update2): “Argentina's foreign debt rating was cut by Standard & Poor's on concern slowing economic growth will crimp tax revenue while mounting investor mistrust in inflation data erodes confidence in the government.
S&P lowered Argentina's rating to B, five levels below investment grade and in line with countries including Jamaica and Paraguay, from B+.”
Argentina has been faking it’s inflation statistics like you wouldn’t believe. The world ignored this when credit was cheap and plentiful, buying into the emerging market miracle story. Now that credit is neither cheap nor plentiful, the market has taken notice. Argentina will find it very very difficult to raise funds from abroad going forward.
I bring this up because the U.S. too has been faking it’s inflation statistics. Nobody is fooled by ‘core’ and ‘headline’ CPI numbers that bear no relation to reality. Should the budget deficits get large enough, and I believe they will, then the world’s
Bond Vigilantes will wake up and lay down the law.
