All pun is intended from today’s title to Moody’s (MCO, $22.20, up $0.43) since the company received a “Wells Notice” from the SEC on Monday. Shares fell 7% yesterday but have bounced back a little today as the SEC plans an administrative review of Moody’s ratings procedures.
Finally! Somebody in the SEC is getting it. Here were our thoughts on March 15, just under two months ago (quotes from that day):
“Moody’s (MCO, $28.22, down $0.04) said the risks are growing for some of the world’s largest triple-A-rated countries: Germany, France, the U.K. and the U.S.
Moody’s has gotten everything wrong, and we honestly don’t know why anyone would care what the firm has to say. They missed so many calls during the subprime and financial crisis that it’s hard to believe the company is still in business. Even harder to believe is the fact shares are trading near $30…” (END)
Moody’s played a major role in the housing bubble and was a walking zombie when it came to reviewing mortgages adequately. SEC investigators are calling some of the company’s procedures on its debt ratings “false and misleading”…two words you don’t want on your right and left shoulder.
We mention these things not to toot our horn but to show you possible trade setups for the future. We took our eye off the stock for a moment and it cost us a sweet put option trade.
It has been hard to short Moody’s because it is a government sponsored entity and seems to have staying power in the $20’s. However, these latest developments are serious and we wouldn’t be surprised to see shares trade into the teens over the next month or two. We have listed a trade on our Watch List in the Members Area that we have ready to deploy should shares bounce back up to $23-$24.
As we head to press, the market has rebounded off this morning’s lows and is in positive territory. The Dow is up 48 points to 10,833 while the S&P 500 is higher by 6 points to 1,166. The Nasdaq is showing a 21 point pop and stands at 2,395.
BTW, Gold is at a new high and is trading at $1,220/ ounce, up $20. Also, shares of Walt Disney (DIS, $35.82, up $0.53) are trading higher ahead of the company’s second quarter earnings release, expected after the market closes today.
We will be back in the morning with another full update.