“Accept the ratings agencies for what they are: stupid. Don’t beat up on [S&P and Moody's] for doing what they have an incentive for doing. Don’t curb it, change it.” And, at the very least, replace all their employees with particularly, or even marginally, talented cows. I promise you, the effect will be palpable.
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- Use the Bloomberg command
NH BLG_DEALBREAKER <GO>
to access Dealbreaker
Ratings agencies are stupid, sure. And Jay Dhru got steamrolled on CNBC. But he made a good point at the very end: “A lot of things were attributed to the ratings that it didn’t apply to.”
Ratings are stupid, so why are they being used as triggers for so many different things? Repo lenders were pulling their credit long before the ratings agencies downgraded. The things that actually hinged on ratings were the other stuff, for which -all things considered- the ratings really shouldn’t have been relevant.
Sean Egan has some nerve claiming the other agencies are stupid. Wasn’t he the one all over CNBC a week or so ago claiming Morgan Stanley would need $30BN to remain in business? Then THE VERY NEXT DAY he changes his number to $60BN!?!?! Sounds like he should apply for a job at S&P or Moody’s; he would fit in perfectly.
While the ratings agencies are at fault for the obvious, the various investors and other parties who depended on the ratings as if they were the be-all, end-all final say on the default (or other?) risk on a particular product are retarded.
Hell, even that schmuck Cramer reminds people to ‘do their homework’ every episode, institutional managers and high-net worth individuals deserve to get burned if they relied on Ratings as a proxy for the safety of any particular investment without conducting their own diligence.
Isn’t Sean Egan the annoying goody tushu that probably always got beat up in high school?
@4 I’m quite certain that the phrase you were so blindly grabbing for was “goody two shoes” Tushu sounds like something you’d get at a sushi bar in the wrong part of town.
Ratings analysts are, at the end of the day, analysts. They have no ability to see the future. So their ratings are only as good as their financial analysis.
The analysts were also the worst paid in the securities markets. So they probably weren’t the most talented of the group. (and I’m not necessarily saying any sell-side analysts are smart).
They were also hugely incented to look on the sunny side of life. This is especially concerning since fixed income only has downside. You ain’t ever gonna get more than par at maturity.
Finally, the ratings process should already have been suspect, given their exceptional foresight in the little Enron / Worldcom affairs.
Anyone who didn’t realize all that deserved to get screwed.
Hey @ 5. Why don’t you pour yourself a tall glass of shut the fuck up!
@prgy
I feel sorry for your mother..
-Guest
Tushu sashima needs to merge with tofu derivatives in order to remain palatable.
@prgy
I feel sorry for your mother..
-Guest
@10
I feel sorry for your mother for being violated by prgy
- prgy’s son
Hey @8 your mom said the same thing to me last night.
at 8 and 10 mother jokes??wtf ?and to post it twice. What are you stuttering.
The real issue is the mismatch between what investors expect and what rating agencies seem able to do as “agents of record.” See http://researchpuzzle.com/blog/2008/10/20/agents-of-record/
Who is this
paging me at 5:46 in the mornin
Crack of dawn in
wipin the coal out my eye
see whos this pagin me and why
ratings agencies have the problem of serving one master, when they should be serving two. unfortunately for the investors at large, rating agencies are for profit entities (unlike the “free” research at sell side houses).
most clients complain that the rating agencies send a different analyst each time they issue new securities (why? low pay perhaps). as a result, the person covering the company doesn’t know the business. when they go back to the shop, they drop a bunch of numbers into a rigged model and all of the sudden, poof! you’ve got an “a” rating. now please pay our fee. see the model does work (until it doesn’t)!
Damn, why they want to stick me for my paper?
http://www.urbandictionary.com/define.php?term=Goody%20Tushu
@14, basically what #1 said. Nice article.
Snap. http://en.wikipedia.org/wiki/The_History_of_Little_Goody_Two-Shoes
15/17 – You know it’s all about the benjamin’s…
@prgy – Perez Hilton wants his top poster back, please go.
NO BitchASSness!
- Diddy
Snap. http://en.wikipedia.org/wiki/The_History_of_Little_Goody_Two-Shoes
@11 – Guest
We supposed to be brothers. Get.Off.The.Pole.
-Guest
@18 – You use urbandictionary.com as your vocabulary source? Is that because you only communicate with credit rating analysts and crack whores?
Web 2.0, my ass.
@24 … are you Sean Egan’s son?
hey Diddy that’s the pot calling the kettle black. no pun intended. you pickle licking cum sponge.
the rating agencies flawed in their compensation structure (getting paid for # of successful deals rated) and backwards looking models, but anyone that tells you its their fault is lying. a AAA rated structure giving you a 200 bps coupon and a AAA rated structure giving you a 400 bps coupon are fundamentally different. The 400 bps is obviously riskier, regardless of the identical ratings.
-X-Bear
@27 again showing that price mechanism, when unfettered by government interference, is the best communicator. for everything. (cue the pencil czar anecdote)
I didn’t see any of this stuff, only reading about it here. But Dylan and Najarian were discussing an email in which one of the writers said he hoped he be old and rich when this stuff mattered. I was half listening but dylan seemed pretty miffed. Were the guys from these places making money on the ratings somehow?
Cluzo:
“ratings agencies have the problem of serving one master, when they should be serving two. unfortunately for the investors at large, rating agencies are for profit entities (unlike the “free” research at sell side houses).”
Sorry, but this implies that sell-side research is more reliable than rating agencies’ — and we all know that ain’t the case.