Moody's Blues: Time to Short the Agency?
The only real risk: System may come to the defense of agency - and Warren Buffett.
He's absolutely right, of course.
In this space, I've been writing for months now about the flaws of the rating agencies. I'm short both Moody's and McGraw-Hill (MHP), parent of Standard and Poor's. McGraw-Hill is nominally a cheaper stock than Moody's, but its other business -- traditional publishing -- is also heading down the tubes, thanks in part to my beloved Amazon (AMZN) Kindle.
The only real problem with being short Moody's is that you're short "the man." By that I mean not so much Warren Buffett himself, who owns 20% of Moody's via Berkshire Hathaway (BRK-A), but the whole system that's conspiring to cover up unpleasant facts - such as the quality (or lack thereof) of the work Moody's has been doing for years.
It's hard to know where to start when finding fault with Moody's:
- Changing rating standards to fit a model's output after discovering flaws in the model?
- Having 20% owned by one of the biggest clients you're supposed to somehow be rating objectively?
- The fact that coming into today, the stock was trading at nearly 20 times this year's projected earnings, even though major regulation that could (and should) crush those earnings, may be on the way soon?
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.
Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
Daily Recap Newsletter