Double Dippin’ with MERLE HAZARD

Merle Hazard is the one and only country-music singer writing songs about the Financial Crisis. He’s been on PBS NewsHour with Jim Lehrer; he’s been the subject of articles by The Economist, London’s Financial Times, The New York Times, and Der Spiegel. And by gum, the man can carry a tune! Here’s Merle Hazard performing “Double Dippin'”!

Take Overs, Bond Values, Stock Drops, and BP’s Future

With all this oil in the Gulf, all the terrifying pictures, footage, and reports its easy to forget the real victim here. That’s right, I’m talking about a sensitive affluent little business with a previously bright future, British Petr-  I mean Beyond Petrolium. Once the most profitable company in the entire history of the world, BP now faces stock slides, falling credit and bond ratings, and a possible death by cannibalism.

The downturn began on Tuesday, after BP’s “top kill” plan failed to block a massive leak in the Gulf of Mexico by pumping mud into the well.

But BP’s bonds continued to fall even as its shares recovered on Wednesday.

Meanwhile, rating agency Fitch has cut the firm’s credit rating marginally, and threatens further downgrades if the cost of the oil leak rises further.

Fitch cut BP’s rating by one notch, from AA+ to AA, although this is still one of its highest investment grade credit ratings.

Borderline junk

The other two main rating agencies – Moody’s and Standard & Poor’s – also still rate BP’s creditworthiness highly, at Aa1 and AA respectively.

Yet bond markets are now pricing BP’s debts at levels comparable with much riskier “junk” rated companies.

The oil company’s main five-year dollar bond was trading on Thursday at a yield of 5.5% – some 3.25% more expensive than the interest rate that the US government would have to borrow at.

Yet before the weekend, the same BP bond was trading at a yield of 3.5%, meaning its borrowing cost has jumped by 2% as a result of the failure to plug the oil leak.

One City analyst told the BBC that the bond markets’ fears made no sense, because BP has so little debt.

BP owes £14bn in total debts, whereas stock markets currently value the company at £84bn.

read more at the BBC

With a looming bills, suits, and fines to stack on the one billion dollars the company hs already spent on the disaster, and a 1-5 thousand dollar fine per barrel, one has to wonder how this company could fend off its competitors who would like nothing more to consume their business. Check out their new ad, and take a good look at it’s narratar, BP CEO Tony Hayward, because he might not be the face of the company for long.

An End To Selling Favorable Ratings?

David Lightman and Kevin G. Hall write for McClatchy

WASHINGTON — The Senate took strong steps Thursday to fix a key cause of the recent financial crisis, approving measures to limit the ability of Wall Street firms to shop around for favorable ratings from now-discredited credit rating agencies.

Lawmakers approved two rating-agency amendments to a sweeping overhaul of financial regulation, despite objections from Senate Banking Committee Chairman Christopher Dodd, D-Conn.

Moody’s Investors Service, Standard & Poor’s and Fitch Ratings were all key players in the nation’s financial meltdown, giving blue-chip ratings to complex mortgage-backed bonds that turned out to be junk.

A McClatchy investigation last October revealed how Moody’s and its competitors sold out investors by trading their ratings for huge fees that came from rating complex deals.

Sen. Al Franken, D-Minn., offered an amendment aimed at putting an end to this Wall Street behavior that passed on a bipartisan 64-35 vote.

“They shop around for their ratings. They select those agencies that tend to offer them the best ratings, and threaten to stay away from rating agencies that are too tough on them,” Franken said.

Read more at McClatchy

Trillion Dollar Typo?

Analysts are arguing today as to the cause of a major sell off in the stock market that took place yesterday May 6, 2010. Suggestions range from the Greek debt crisis all the way to a trader mistake who typed B for billion, when he meant to type M for million. At one point DOW had lost nearly 1000 points causing a rush of buyers to move in and snatch up the low prices. Whatever the cause yesterday, The massive movement reminded everyone that the Market is prepared to behave like a swarm of angry bees at the drop of a hat. Here’s some of the buzz from  the trading floor.