Standard & Poors convicted of huge miscalculation

[sabaku_no_gaara]

S&P Verdict: Big Blow to Rating Agencies
By Michael Hedtstück

S&P is being held liable for an inaccurate AAA rating in Australia. If the courts in Europe and the US reach the same verdicts in similar cases, this will have serious consequences for more than just the rating agencies. This could lead to new rules for investors and issuers in the capital markets worldwide.

http://www.cfo-insight.com/markets-e...ting-agencies/


A good thing if you ask me, they are taken so seriously that they can hold countries at ransom but back when there where hearings about their tripple A ratings for complex derivatives and Credit default Swaps etc... they suddenly said: what we say is our opinion don't take it so seriously...


I hope they get convicted in Europe and the us aswell, I read in the paper today that several traders in Belgium have aproached lawyers about suing S&P for their losses based on the unjustified tripple A ratings for crap investments.

Wonder if they'll eventually be fined and sued to bankrupcy?

[Stavroforos]

I would hope so, answering your final question.

[Jom]

There's a bit of a problem here, in that the world of finance does need ratings agencies as each individual bank just doesn't have the time to do the in-depth research required before they decide whether they're going to buy bonds or otherwise invest in a country, so they're very useful for at-a-glance barometres of a country's financial health. At the same time, they can be open to political influence and can abuse the influence that they have themselves, which is the issue here. So the world needs ratings agencies, but they can't have too much power, which is a very difficult balancing act, as it's their credibility which lends them power, but what's the point in having a ratings agency which isn't credible (and by implication powerless)?

[Thorn777]

They are also useful to cheat Europeans banks to buy American garbage, and then they are also useful to take the pressure of an American economy in free-fall by redirecting market-scare elsewhere and causing bond dropping wholesales since pension and insurance funds need to adhere to their A-rating, otherwise the same funds would not be allowed to trade on wallstreet(btw).

So I guess Goldman & Sachs and DC wont let them go bankrupt or be hindered from what they are in any substantial way.

[Hekko]

Hopefully not. People make their own analyses when investing, and if you stare on the S&P rating until your eyes bleed when investing you had it coming. Hell, assuming efficient markets you can calculate the beta off stuff quite easily using CAPM and other risk should be diversified away anyway.

[Slaytaninc]

The problem is if S&P says "Hey, things are great" and they aren't they will get just as lambasted.

[Thorn777]

Which really hurt them in the past...All those words people where calling them.

They actually got more powerful and more profitable than ever. Ugh people and their superficial understandings of dynamics...

[Condottiere 40K]

We need the Google of ratings agencies.

[Col. Tartleton]

We need the Google of ratings agencies.

ie. We need Google to start a rating agency.

[Condottiere 40K]

They will only be too pleased to give both personal, corporate and national ratings.

[Hekko]

Who needs a rating agency anyway? If the expected return is higher than the riskfree interest rate the investment is risky.

[Thorn777]

Its a tool for both DC and the big boys on wallstreet, carrying vast amount of influence over the global financial system. Thats why its needed. But go ahead, dont believe in this stuff because it sounds conspiratorial.

[Hekko]

Its a tool for both DC and the big boys on wallstreet, carrying vast amount of influence over the global financial system. Thats why its needed. But go ahead, dont believe in this stuff because it sounds conspiratorial.

I know why it's useful and why it's used (it's easy to present to shareholders for instance). But the power and the influence comes from people actually listening to them, and as such ultimately to break their power is, to become more catious and thinking some on your own.

As I said if the expected return is higher than the risk-free interest rate the investment is risky (sure there might be some illiquidity premium, but on a personal level illiquidity is a risk as well). If S&P starts giving AAA ratings to stuff that has a lot higher ER than the german government bonds of the same duration you can be fairly sure S&P has made a mistake.

[Svaline]

So wait...you can be sued for being wrong now?
Whether their opinion is actually listened to or not is ultimately irrelevant.

[Condottiere 40K]

Collateral damage.

[Sogdog]

Sue them sue them!!!