Vultures

First, Pimco. Run by the notorious Bill Gross and other reputed portfolios managers, it owns the world's largest bond fund. According to a Bloomberg report, "Bill Gross' PIMCO Total Return Fund made a $1.7 billion gain after the U.S. seized control of mortgage finance companies Fannie Mae and Freddie Mac (...) the fund's assets rose 1.3% to more than $134 billion (...) About 65% of Gross' holdings were mortgage backed securities (...) mostly debt guaranteed by Fannie, Freddie or government agency Ginnie Mae".

Let's be clear. There's no problem on putting in a big trade. That's how large profits are made. However, when you're carrying a 65% concentrated bet on your portfolio and it starts moving against you, even if you disclose your trade to the all world, it is unethical to cry for help and to pressure a bigger player to come in for the rescue. Unfortunately, that's what Mr. Gross did in the past week just a few days before the government bailed out Fannie and Freddie. His media high profile paid off well and the timing was perfect.

Second, Moody's. It's a top tier credit rating company, together with S&P and Fitch. These institutions are expected to quantify and qualify the default risk of any given company, asset or instrument traded in public and private markets. They are supposed to be independent. And their reports are useful if provided before a perceived element of risk impacts the future value of the company, asset or instrument which is being rated. On the contrary, their opinions are useless if given after the fact. Hindsight is always 20/20. It's also irrelevant for future investment decisions.

Yesterday evening, Moody's issued a warning targetting Lehman Brothers after the company announced its biggest ever quarterly loss. According to Bloomberg, Moody's said that "Without a strategic arrangement in the near term Lehman's rating may be downgraded". Wow! From Monday to Wednesday, Lehman Brothers' stock had plummetted over 50% from $17 to $7 a share. And then came Moody's with its obvious and useless piece of information that could only add insult to injury. In fact, this morning's Blomberg report was entitled "Lehman pushed to fire sale after Moody's warning". How meaningful.

(Personal disclosure: I do not own Lehman stock or any of the GSE's mentioned in this post).