Friday, September 04, 2009

Warren Buffets Eulogy for Moody's

Berkshire Hathaway (BRK.A) a.k.a. Warren Buffett continues to sell Moody’s (MCO). Clearly the model is broken and has significant litigation to look forward to. The courts recently ruled that the freedom of speech defence is not acceptable. Bring on the lawsuits. Moody’s does not have the capital to pay the losses. Standard and Poor’s a.k.a. McGraw-Hill (MHP) and Fitch also cannot pay the bill. Charles Gasparino of CNBC in his new book “The Sellout” identifies that analysts working on structured products made more money than analysts working on regular ratings. Good to know we found the thirty pieces of silver.

The market needs to stop identifying pall bearers for the credit rating funeral. Investors particularly institutional investors need to learn how to do due diligence. This is costly, time consuming and unfamiliar. If General Motors can be knocked off its pedestal imagine what can happen to Moody’s and Standard & Poor’s.