Enviado: 6/5/2005 14:18"No Surprise in Ford, GM Debt Slash"
By James J. Cramer
RealMoney.com Columnist
5/6/2005 8:57 AM EDT
"Sometimes I am overwhelmed by the stupidity of the system. Here we are, falling all over ourselves that the rating agencies have taken the debt of Ford (F:NYSE - commentary - research) and General Motors (GM:NYSE - commentary - research) to junk status. Shocker! Stop trading!
Did anyone think that they weren't junk? Does anyone think that GM 7.125% paper, due in 2013 that is trading at 77 and yields 11% needs someone from Standard & Poor's to tell us it is junk! I would say, no more than we need a sportscaster to know that we are watching a blowout. No more than we need someone from ESPN to say, "How about those last-place Yankees?"
To me, the bigger outrage isn't that the downgrades happened sooner than expected, as the papers write today, but that it didn't happen as soon as it was obvious that both companies had lost control of their health care benefits and obligations and weren't taking any action to solve the problem. To me, the absolute outrage is how GM has stood by its dividend at a time when bond holders deserve better.
Worse, the ratings agency analyst blamed the downgrade on declining sales of SUVs. Give me a break! The Fed's rate hikes coupled with the health care and benefits trap has so much more to do with the declines than the SUV market. In fact, cars, incredibly, mean almost nothing to these guys! They've been major, albeit crummy, finance companies with minor car businesses for years. The cost of prescription drugs means more to these companies than SUV sales.
Pathetic.
I have watched credit for years and have always been amazed at the seriousness with which the press takes the ratings agency nerds.
But I am always impressed at how accurate the market is itself in assessing these woes. While the market may get beaten now and then by frauds like WorldCom, it's not easy to fool all those buyers and sellers. They've been telling us that GM and Ford are junk for months now.
You want to listen to someone? Listen to the bond market. It knows whereof it speaks. "
(in www.realmoney.com)
By James J. Cramer
RealMoney.com Columnist
5/6/2005 8:57 AM EDT
"Sometimes I am overwhelmed by the stupidity of the system. Here we are, falling all over ourselves that the rating agencies have taken the debt of Ford (F:NYSE - commentary - research) and General Motors (GM:NYSE - commentary - research) to junk status. Shocker! Stop trading!
Did anyone think that they weren't junk? Does anyone think that GM 7.125% paper, due in 2013 that is trading at 77 and yields 11% needs someone from Standard & Poor's to tell us it is junk! I would say, no more than we need a sportscaster to know that we are watching a blowout. No more than we need someone from ESPN to say, "How about those last-place Yankees?"
To me, the bigger outrage isn't that the downgrades happened sooner than expected, as the papers write today, but that it didn't happen as soon as it was obvious that both companies had lost control of their health care benefits and obligations and weren't taking any action to solve the problem. To me, the absolute outrage is how GM has stood by its dividend at a time when bond holders deserve better.
Worse, the ratings agency analyst blamed the downgrade on declining sales of SUVs. Give me a break! The Fed's rate hikes coupled with the health care and benefits trap has so much more to do with the declines than the SUV market. In fact, cars, incredibly, mean almost nothing to these guys! They've been major, albeit crummy, finance companies with minor car businesses for years. The cost of prescription drugs means more to these companies than SUV sales.
Pathetic.
I have watched credit for years and have always been amazed at the seriousness with which the press takes the ratings agency nerds.
But I am always impressed at how accurate the market is itself in assessing these woes. While the market may get beaten now and then by frauds like WorldCom, it's not easy to fool all those buyers and sellers. They've been telling us that GM and Ford are junk for months now.
You want to listen to someone? Listen to the bond market. It knows whereof it speaks. "
(in www.realmoney.com)