'Black Thursday' for Corporate Bonds After S&P Cuts GM, Ford to Junk

[NNN0LHI]

http://ap.tbo.com/ap/breaking/MGBJX6FLE8E.html

NEW YORK (Dow Jones/AP) - Standard & Poor's sent a shudder through the corporate bond market Thursday when it cut the credit ratings of U.S. auto giants General Motors Corp. and Ford Motor Co. and their huge finance units, which together have combined debt close to half a trillion dollars.

The ratings on GM and General Motors Acceptance Corp. were cut to double-B, or two notches below S&P's lowest investment grade, while the ratings on Ford and Ford Motor Credit Co. were cut to double-B-plus, or one notch below investment grade. The agency assigned a negative outlook to both ratings.

In both cases, S&P cited questions about the strategies the two largest U.S. auto makers are employing to persevere over their sliding sales, particularly in North America.

"After the downgrade there was a few minutes of silence, followed by 15 minutes of mayhem," said Michael Fuhrman, product manager at GFI in New York, an inter-dealer brokerage in credit derivatives.

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[napi21]

1. When I was a little girl, Grandma said if GM goes under, the Country

will too. My grandparents weren't wealthy, but did have about $100,000 in the stock market. All of it was invested in GM stock.

I got a strong shudder when I heard GM rating had been reduced to junk bond status. Grandma died many years ago, and the small amount of $$ each of her decendents inherited is now invested in mutual funds, but her words still live on in my memory. I hope, for the sake of the Country and all of us, she was wrong.

[UncleSepp]

2. I heard almost the same from my grandmother

And I had the same thought, too. GM's bonds reduced to junk status? Hold onto your butt.

[cliss]

3. Look at that sentence.....

"....which together have combined debt close to half a trillion dollars". Half a trillion.

Now think of AIG, which is in the news about corporate malfeasance. Now add FNMA and FMAC (Fannie Mae and Freddy Mac - the mortgage Giants which are teetering as we speak). These two monoliths probably have $3 trillion combined that is at risk.

See what I'm seeing now? I'm seeing a Giant which is reeling. It's swaying from side to side. Everyone is looking up, holding their breath.

What next? The Giant sways heavily to the left......

[Name removed]

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