What happens when a bank has to accept the collateral posted for loans? Well, in Russia, it's like the punchline to a bad Yakov Smirnoff joke. "In Russia, when a bank takes collateral, it has to set up a pigpen!"

Well, this is exactly what happened to Alexander Lebedev's OAO National Reserve Bank. It wound up with 40,450 of them. As Russian banks are coping with the financial crisis, they are finding themselves with a variety of hard goods that they never expected to receive.

A lot of people I talked with during the financial crisis thought that something seemed amiss as brokerages and credit-ratings services were issuing, what I liked to call, "happy thoughts" about the economy even though it sure seemed that we were headed over the falls in a thimble.

Among the upbeat outlooks were the ratings of complex debt securities, which quickly deteriorated and led to billions of dollars of investor losses. According to The Wall Street Journal and former Moody's analyst, Eric Kolchinsky, Moody's gave high ratings to complicated debt security in 2009 with knowledge that it would downgrade assets that backed the securities.

Late Wednesday, Blockbuster Inc. (NYSE: BBI) scored a ratings upgrade from Standard & Poor's. The ratings agency raised Blockbuster's corporate credit rating from "CCC" to "B-" with a stable outlook. S&P commented, "The stable outlook reflects our belief that liquidity will remain adequate over the near term despite continued operational weakness and moderate deterioration of the company's credit protection metrics."

S&P's new rating is still six notches into junk territory, but the upgrade is nevertheless a vote of confidence in Blockbuster's refinancing efforts. On Monday, the video rental firm announced plans to offer up to $340 million in senior secured notes due 2014, and yesterday, Blockbuster said it would close up to 40% of its brick-and-mortar stores during the next two years.

Moody's (NYSE: MCO) closed down $1.84 to $24.26. A U.S. District Court judge declined to reject a lawsuit against Moody's (MCO) and McGraw Hill's (NYSE: MHP) Standard & Poor's, according to Bloomberg. MCO September and October option implied volatility of 58 is near its 26-week average according to Track Data.

McGraw-Hill closed down $3.30 to $29.01. MHP September and October option implied volatility of 44 is below its 26-week average of 50 according to Track Data, suggesting decreasing price movement.

Option Update is provided by Stock Specialist Paul Foster of theflyonthewall.com.

The DJIA went above 9,000 today. The NASDAQ posted its twelfth consecutive rise. Existing home sales showed a gain and the massive army of the jobless got smaller again. Earnings came on strong, and only the short sellers weren't happy at the end of the day.

Here are today's unofficial closing bell levels:

Dow 9,069.29 +188.03 (2.12%)
S&P 500 976.29 +22.22 (2.33%)
Nasdaq 1,973.60 +47.22 (2.45%)

Top Analyst Calls

Late Thursday, Moody's Investors Service announced that it might downgrade its credit ratings for Southwest Airlines Co. (NYSE: LUV). In a statement, the ratings agency said the airline's Baa1 senior unsecured rating is at risk, due to the likelihood of weak demand trends persisting into 2010.

The downgrade warning comes shortly after LUV slashed airfares dramatically to remain competitive, with some one-way flights running as low as $30 during a recent promotion. "Even with the benefits of Southwest's advantageous cost structure, the current yield environment is likely to challenge Southwest to restore credit metrics to levels supportive of the current rating," said Moody's in a statement.

In addition to the fundamental concerns cited by Moody's, LUV is also facing some challenges on the charts. The stock has shed 52.8% during the past 52 weeks, and long-term resistance from its 10-month moving average looms directly overhead. This trendline hasn't been toppled on a monthly closing basis since September 2008.

The shares of E*Trade Financial Corp. (NASDAQ: ETFC) took a dive this morning after the online brokerage house announced plans to boost its balance sheet. The company will sell $400 million in common stock, and launch a debt exchange worth more than $1 billion. In a statement, E*Trade said its capital-raising initiatives "will significantly reduce the company's debt service burden."

Back in April, the cash-strapped brokerage was instructed by the Office of Thrift Supervision to quickly raise new capital and reduce its leverage. Today's newly announced share offering and debt swap are expected to bring in at least $1.2 billion, although the transactions are expected to dilute the investments of current ETFC shareholders by about 40%.

TiVo (NASDAQ: TIVO) closed at $6.98. The Federal district court for Eastern Texas upheld TIVO patents and said Echostar (NYSE: DISH) is infringing on them. TIVO June option implied volatility is at 87; July is at 81; verses its 26-week average of 88, according to Track Data, suggesting non-directional near term price movement.

Moody's (NYSE: MCO) closed at $28.64. MCO is hosting an investor meeting on June 4. MCO June option implied volatility is at 57, July is at 55; below its 26-week average of 71, according to Track Data, suggesting decreasing price movement.

Option Update is provided by Stock Specialist Paul Foster of theflyonthewall.com

Despite Moody's claiming the US's Triple-A rating was stable, the markets sold off today. The markets tried to hold up but the afternoon session was marked by selling as bond yields rose on the long-end of the curve. The 10-Year Treasury yield was up 20 basis points to 3.697% and the 30-Year Treasury yield was up 16 basis points to 4.60%.

Here were the unofficial closing bell levels:

Dow 8,300.98 -172.51 (-2.04%)
S&P 500 893.13 -17.20 (-1.89%)
Nasdaq 1,731.08 -19.35 (-1.11%)

Top Analyst Upgrades
Top Analyst Downgrades

Moody's cut Sony Corp.'s (NYSE: SNE) long-term ratings from A2 to A3 today. Slowing growth, price declines, and a strong yen were given as the reasons.

The company expects a second consecutive year of losses and is getting ready to kick off a restructuring plan. Nonetheless, the credit rating agency doesn't expect the Japanese electronics firm to overcome the effects of the global financial crisis -- especially for high-end, high-margin products.

It has been a while since I have had the pleasure of discussing Starbucks (NASDAQ: SBUX) and its business issues. That changes today, as Moody's Investors Service downgraded Starbucks' $550 million senior unsecured notes to 'Baa3' from Baa2.'

The move takes into account what the ratings house sees as challenges lying ahead for the coffee company. In addition, Moody's cut Starbucks' short-term commercial paper rating.

An analyst with Moody's stated that the "downgrade reflects Starbucks challenge of refocusing the business without significantly damaging its brand, as well as weaker than anticipated operating performance" over the intermediate term. The biggest problem facing Starbucks is seen as weakness in consumer spending and increased competitive pressures.

Do you remember the Lehman Bankruptcy? Well it seems that Ron Grassi is suing the three credit rating agencies for negligence, fraud and deceit. Mr. Grassi invested $40,000 in Lehman bonds because they had an A rating. With this small but significant lawsuit Grassi could blow the lid off the bogus ratings given out by rating agencies over the past several years. Mr. Grassi feels that more than anything else, the false ratings were the cause of the financial meltdown.

Practically everyone in the financial industry depends on the big three: Fitch Rating, Moody's Corp (NYSE: MCO) and Standard and Poor's for making their financial decisions. This includes mutual funds, hedge funds, insurance companies and even the Federal Reserve. Credit agencies helped create $3.2 trillion of subprime mortgages.

In what surely must be the PR move of the decade, Moody's Corp. (NYSE: MCO) has downgraded Berkshire Hathaway (NYSE: BRK.A) from AAA to AA2.

Why is this a great PR move? Well, Berkshire owns 20% of Moody's. And what could be a better demonstration of Moody's independence and objectivity than its decision to downgrade the financial strength of its biggest shareholder?

Pretty clever, no? Sure -- unless you start to consider that Moody's and the other ratings agencies gorged on fees from investment banks to rate toxic waste for years -- using their AAA credit ratings to convince investors to buy the securities. Now that the ratings agencies have no fees to earn from rating toxic waste, they are studiously trying to rebuild their reputation for objectivity.

Today saw a monster rally brought on by Tim Geithner's Treasury plan to rid banks of toxic assets. Then a much "less bad" bit on the existing home sales showed a gain of more than 5% because so many are distressed house sales. And now there is a new issue to consider: The bears have to be worried as key upside technical resistance levels were taken out in the last hour of trading.

Here are the unofficial closing bell levels:

Dow 7,775.86 +497.48 (6.84%)
S&P 500 822.92 +54.38 (7.08%)
Nasdaq 1,555.77 +98.50 (6.76%)

Top Analyst Upgrades and Downgrades

After a long six months of watching retail sales continue to slip, we get a bit of good news today, as January retail sales actually moved a bit higher.

Before today's announcement, analysts had been expecting that January would be the seventh straight month of falling retail sales, and the consensus was that we would see around 0.8% in the month. The good news is that retail sales were indeed higher in January, with a reported 1% jump during the month.