who thinks Moodys should just go away? They’ve lost all credibility in my books…
in comboination with the corporate talk thread… “They have value-add services” Just don’t ask me to explain which ones…
It is called anchoring.
All credibility? Hmm. So, lets say your car breaks down on the side of the road. Do you just leave it there and buy a new car, or do you fix it? What if the car performed near perfect for the prior 3+ decades and, cars exactly like it, will last another 100 years? Yeah, better yet, just torch it. It’ll be fun to watch it burn! It’s amazing to me how many people who claim to be charterholders are so neanderthalic in their viewpoints, naive in their thinking, and utterly short-term in their plans. I guess that’s why the failure rate is so high among test takers.
More Corporate talk–many funds and investors still need to “paper the file”. To simplify further into one word, lawyers.
spierce Wrote: ------------------------------------------------------- > All credibility? Hmm. > > So, lets say your car breaks down on the side of > the road. Do you just leave it there and buy a > new car, or do you fix it? > > What if the car performed near perfect for the > prior 3+ decades and, cars exactly like it, will > last another 100 years? > > > Yeah, better yet, just torch it. It’ll be fun to > watch it burn! > > > It’s amazing to me how many people who claim to be > charterholders are so neanderthalic in their > viewpoints, naive in their thinking, and utterly > short-term in their plans. > > I guess that’s why the failure rate is so high > among test takers. Which rating service do you work for? you obsolete drone.
They need to move away from the business model that the rating is paid by the benefactor of the rating (strong conflict of interest). I don’t know how they are addressing this, the most serious issue.
> > Which rating service do you work for? you obsolete > drone. I don’t work for any but I do work on the street, unlike you. How many ratings downgrades did you see, as a percentage of each rating category, before the CDO/CLO/RMBS/CMBS fiasco? How many AAA downgrades and eventual defaults? Not a whole fricking lot. Why? Because they were pretty good before. They blew it in the last 5 years but that doesn’t make the *WHOLE* model obsolete. It just means they blew it and need to refine their methods and perhaps change the way they do business. However, throwing the baby out with the bathwater is a retarded thing to do. Enjoy taking the exams multiple times.
storko Wrote: ------------------------------------------------------- > who thinks Moodys should just go away? > They’ve lost all credibility in my books… They’re failures were in the more exotic instruments. WHy should they lose credibility with to traditional debt issues?
If my car performed perfectly for decades, than caused one of the biggest accidents in the world, maybe its time not to drive that car anymore. The taking the exam multiple times, great insult. I am guessing, your mid 30s, single, workoholic. Gave up trying to find a girl, but still think you have mad game. Whenever you follow your coworkers out for drinks, you end up being the sleazy, balding, badly dressed guy that eveyone makes fun of. Why are you taking this so personally? And how does this opinion relate to the exam writing?
Getting back to my point, and avoiding handbags at 10 paces, what is the better alternative? I am 50/50 here. Model broken, but need to replace with new model. What is the new model?
Yields determine ratings; ratings don’t determine yields.
The problem in my mind isn’t the rating agencies themselves, although theirs was a colossal screw-up. The problem is that investors in many took these ratings as gospel without performing any additional analysis. Throw in complex instruments, things like mandates to invest in only AAA paper and you have a recipe for disaster. Now, I work as an equity analyst and I use sell-side research to supplement what I do. Let’s say JP Morgan initiates coverage on a stock with a buy rating and a $100 target (stock currently at $50). I wouldn’t just say, “Wow, that’s 100% upside, I had better buy a lot of this stock right now.” No, I actually read the report, look at the analyst’s assumptions, decide whether or not I agree with those assumptions, perhaps build my own model, listen to conference calls, talk to other analysts, talk to industry contacts, read trade publications, talk to the recommended company and their competitors, etc. You know, like, actual analysis. Were the rating agencies late with their downgrades? Sure. But the writing was on the wall about a lot of these instruments for anyone who was willing to do the work. If you don’t believe me, ask John Paulson.
Why are they still around? Not sure, might have something to do with the fact that their ratings are written into probably 90%+ of financial contracts, not mention investment memorandums and a variety of laws and regulations as well.
storko Wrote: ------------------------------------------------------- > Why are you taking this so personally? storko Wrote: ------------------------------------------------------- > Which rating service do you work for? you obsolete > drone.
Nah, he started first
NakedPuts is right. The Debt Ratings can be, and in many cases are, written into financial contracts. I wouldn’t say they’ve lost all credibility. While I don’t think the best and brightest are attracted to working for the rating agencies, I don’t think their reports are altogether useless either. You can actually get some pretty decent information if you actually read through them. I’m not saying I’d put a significant amount of faith in the analysis and findings, but that could be said for pretty much any second-hand research available. They might have dropped the ball somewhat recently but that could be said about a lot of professionals/institutions. Please note: I am in no way affiliated with any rating agency.
How long it take to replace “must be AAA rated” with “must be within 100 bps of the fed funds rate.” Playing devil’s advocate here. The AAA standard is all over the place in financial contracts and any changes to it are as likely as a complete overhaul of of the US tax code.
These guys are a joke. As an analyst you gotta think for yourself, they are useful as long as you don’t take them too seriously.
LBriscoe Wrote: ------------------------------------------------------- > How long it take to replace “must be AAA rated” > with “must be within 100 bps of the fed funds > rate.” Playing devil’s advocate here. The AAA > standard is all over the place in financial > contracts and any changes to it are as likely as a > complete overhaul of of the US tax code. That’s such a silly way to set ratings. You seriously think the market can determine the correct price even 60% of the time versus using historical loss rates (maintaining consistent underwriting) and statistical modeling of events? Keep in mind, the “market” thought companies like eToys were worth far more than they were.