• Due to a glitch in the old vBulletin software, some users were "banned" when they tried to change their passwords at the end of February. This does not apply after the site was converted to Xenforo. If you were affected by this, please us viua the Contact us link in the footer.

Moody's gets caught up in an Irish stew!


Shqiptar

Well-known member
Joined
Mar 18, 2012
Messages
6,309
The credit rating agencies - remember them? Once upon a time, their word was Gospel. But, in time, it turned out that their word was made up of some triple-A rated but toxic portfolios and then we hated them. We hated them even more as they downgraded much of Europe's sovereign debt as the eurozone crisis deepened. Here in Ireland, Moody's came in for particular ire as it downgraded Irish sovereign debt to junk status.

To some extent, the precipitate actions of the ratings agencies (where those actions were precipitate) was driven by a need to seize the initiative from the markets. They had lost credibility by rating as AAA all sorts of toxic and subprime loans. Credit rating agencies need to be ahead of the curve. Their job is to tell the markets how it is, not the other way around.

Well, in the case of Moody's and its view of Ireland, they've been badly wrong-footed over the last few months. Clearly, they didn't expect the country to regain market access so quickly and now they find themselves in the laughable situation where they still rate Irish sovereign debt as below investment grade while for several months now, investors have been piling in to over-subscribed Irish auctions. They're being roundly ignored.

Today's Cantillon column in the Irish Times (it's not online for some reason :confused:) makes the point that while Moody's "may evaluate its position [on Ireland] any day now", it does have a difficulty in "how to extract itself without looking as if it is just following the market".

An upgrade from Moody's would mean yet more investors for Irish bonds since the mandate of many funds precludes them from holding bonds rated as junk by one of the big three credit rating agencies. So, until Moody's unhoist themselves from their own petard, we'll have to wait.... and suppress the urge to smile.

Moody's wrong to have a negative view on Ireland - Irish Independent
 


Dublin 4

Well-known member
Joined
Feb 6, 2011
Messages
12,993
That muted Irish Bank recap is an issue... :|
 

Shqiptar

Well-known member
Joined
Mar 18, 2012
Messages
6,309
That muted Irish Bank recap is an issue... :|
You know, I was thinking about you as I was hitting [Submit]. petunia

Give the Moodsters a buzz. They'll need a few pointers to explain themselves.
 

sport02

Well-known member
Joined
Sep 25, 2010
Messages
19,641
That muted Irish Bank recap is an issue... :|
Is Moodys listening to Peter Mathews or should they take into account the latest stress tests. Noonan says we have the best capitalised banks in europe.
Peter is at the other end of the scale with 60 billion more Irish recaps needed.

@Shqiptar, Moodys yesterday put out a note that Irish bond sale was credit possitive, they could go further though.
 

Dublin 4

Well-known member
Joined
Feb 6, 2011
Messages
12,993
As linked yesterday the Mortgage Maelstrom is hitting Balance Sheets very hard now.

Matthews was vindicated somewhat as the consensus was that some type of recap will be need now.
 

ManOfReason

Well-known member
Joined
May 24, 2007
Messages
4,328
Moodys don't know what the are doing. The markets don't know what they are doing either. One is just covering its ass, the other just gambling. They are all idiots - that is why we got into this mess in the first place.
 

firefly123

Well-known member
Joined
Dec 8, 2009
Messages
28,165
It's all a load of **** really isn't it. The whole thing is just lads guessing.
 

seabhcan

Well-known member
Joined
Sep 3, 2007
Messages
14,327
Moodys don't know what the are doing. The markets don't know what they are doing either. One is just covering its ass, the other just gambling. They are all idiots - that is why we got into this mess in the first place.
Decades ago, then this system was built, the average hold on an investment was 4 years. Now the average is 22 seconds. No one can know whats going on when things are moving that fast. They need to slow it all down to the pace of the real economy.
 

gerhard dengler

Well-known member
Joined
Feb 3, 2011
Messages
47,523
Decades ago, then this system was built, the average hold on an investment was 4 years. Now the average is 22 seconds. No one can know whats going on when things are moving that fast. They need to slow it all down to the pace of the real economy.
This.

Also one would assume that with more access to information, and with access to that same information being faster, that more certainty would derive in terms of investing.
Instead the exact opposite is the case.
 

Shqiptar

Well-known member
Joined
Mar 18, 2012
Messages
6,309
Moodys don't know what the are doing. The markets don't know what they are doing either. One is just covering its ass, the other just gambling. They are all idiots - that is why we got into this mess in the first place.
But I remember lurking here a few years ago (2010) and seeing some people claim that the country's borrowing costs didn't reflect the fundamentals of the Irish economy. Others basically said that the markets couldn't be wrong on this. I don't know where you stood on that debate but sometimes it seems that many people only believe the markets when they're taking a dim view of the Irish economy.
 

Shqiptar

Well-known member
Joined
Mar 18, 2012
Messages
6,309
The fact that many funds, by law, must blindly follow the whim of the rating agencies is a huge problem.

When the rating agencies handed out AAA rating to any old sludge, the funds poured in the money without thinking. When the ratings were withdrawn, those funds had to pull their money out enmass, which was a huge factor in the crisis.
Very true. Mind you, another factor was that when the downturn hit, many big sovereign borrowers such as the UK and France found themselves with huge deficits. This allied with a general lessening of appetite for sovereign bonds meant that borrowing rates would probably have gone up for many weaker countries anyway.
 

seabhcan

Well-known member
Joined
Sep 3, 2007
Messages
14,327
This.

Also one would assume that with more access to information, and with access to that same information being faster, that more certainty would derive in terms of investing.
Instead the exact opposite is the case.
No real economic factor changes faster than a few days. Nothing real changes on the timescale of seconds - yet most financial trades change hands - and prices - many times per second.

Thats not real. Its just noise and chaos and totally disconnected from any real economy. When this kind of chaotic speculation dominates the market and drives pricing, it actively prevents real investment. Real investment takes time, yet such things are actively punished by 'the market'.

Information on chaos doesn't help, because its noise - there is no pattern. You can't predict it.

If they banned or taxed high frequency trading it would make the market safe again for real investors - and would profoundly help the real economy. 'Market information' would have meaning again.
 

Shqiptar

Well-known member
Joined
Mar 18, 2012
Messages
6,309
It's all a load of **** really isn't it. The whole thing is just lads guessing.
I didn't know you could write that c--k word without having it festooned with asterisks. My P.ie lexicon has a new entrant. Yay.

Anyway, what you say is true. There is an element of gambling and of course, much of it is driven not by reality but by the expectation of how the market as a whole will react. Nevertheless, I'll take these low yields even if they might be overly optimistic (and I'm not saying they are). Low borrowing costs have massive benefits for the economy.
 

Shqiptar

Well-known member
Joined
Mar 18, 2012
Messages
6,309

Boy M5

Well-known member
Joined
May 20, 2010
Messages
21,729
As linked yesterday the Mortgage Maelstrom is hitting Balance Sheets very hard now.

Matthews was vindicated somewhat as the consensus was that some type of recap will be need now.
Plus the negative wealth effect on households
 

Iphonista

Well-known member
Joined
Jun 6, 2012
Messages
4,200
The end result of this will be the breaking for ever of the power of the big three credit rating agencies. I for one would welcome a more diversified field with new entrants such as Dagong. We also need a European credit agency.
 

New Threads

Popular Threads

Most Replies

Top