Thoughts & Comments
‘WHY DO THEY EVEN RATE GOVERNMENT DEBT AT ALL?’
Quote of the Day: at the Daily Beast, Zachary Karabell wants to know who the rating agncies think they are rating sovereign debt.

Matt Stichnoth
Posted 01/13/2012
bankstocks.com
mstichnoth@bankstocks.com

Quote of the Day: at the Daily Beast, Zachary Karabell wants to know who the rating agncies think they are rating sovereign debt.      

There is only one rational solution to the looming threat posed by the ratings agencies: they should stop rating sovereign debt. Cease and desist. A self-imposed restraining order. Why do they even rate government debt at all? The finances of governments are hardly secret. Anyone with a mind, an interest, or a need can do their own due diligence and analysis about whether the finances of Greece, Italy, the United States, Brazil, India, France, or any other of the nearly 200 nations in the world are too risky or safe or somewhere in between. There is no reason to pawn off that task to a few employees of three private companies, and doing so creates a ticking-time-bomb risk if those agencies act too quickly, allow their own biases to color the analysis, or act too late. [Emph. added]

This is all so blindingly obvious that it speaks badly of the financial markets (and fixed-income investors in particular) that anyone pays any attention to what the agencies have to say regarding sovereign debt. As Karabell sensibly points out, the agencies don’t know anything the markets already know, and they certainly aren’t any smarter. And yet when sovereign downgrades occasionally occur, havoc can ensue for utterly no reason. It’s insane. These fools must be stopped. . . .


  Add your comment

 

 
Ad for inter-arch
Ad for Bankstocks
 

     Bankstocks.com is a public web site operated by individuals who also operate investment advisory firms that serve as investment advisers to hedge funds (the "Firms"). Some articles are authored by employees of the Firms while others are authored by third parties. Under no circumstances does any article posted on Bankstocks.com represent a recommendation to buy or sell a security. This article is intended to provide insight into the financial services industry and is not a solicitation of any kind. The Firms do not vouch for the accuracy of any information contained in any article posted herein and the views expressed in any article herein do not necessarily reflect the views of the Firms. The Firms buy and sell securities on behalf of their fund investors and may do so, before and after any particular article herein is published, with respect to the securities discussed in any article posted herein. The Firms’ appraisal of a company's prospects is only one factor that affects the Firms’ decision whether to buy or sell shares in that company. Other factors might include, but are not limited to, the presence of mandatory limits on individual positions, decisions regarding portfolio exposures, and general market conditions, and liquidity needs. As such, there may not always be consistency between the views expressed in this article and the Firms’ trading on behalf of their fund investors. There may be conflicts between the content posted on Bankstocks.com and the interests of the Firms. For an explanation of these conflicts, including an explanation of our trading policy, and how we resolve them, click here.

Neither the authors nor any Bankstocks.com team members can provide investment advice or respond to individual requests for recommendations. However, we encourage your feedback and welcome your comments on any of the articles on this site. Neither the authors nor Bankstocks.com has undertaken any responsibility to update any portion of this article in response to events which may transpire subsequent to its original publication date.