Moody's, S&P, Fitch & ... are doing good job of managing sentiments in markets in balance for benefit of all. But an improvement is required so that the bubble busts , which are more frequent now, could be managed properly and in a more timely manner. Also the corrective response is also required for making the market navigation less riskier.Do you think so?Please provide your views.Thanks

Moody's Valued Share More Than Law, Kolchinsky SaysThe only one I trust in the rating business is Egan Jones and even they have a slight positive bias because not even the buyer wants to be told the truth about a dog investment.

You could hire me. I'll tell you the real credit. But I don't think you would know the real credit if I told you, I don't think you would believe me over some idiot charging half as much. So fuck you.

QuoteOriginally posted by: farmerYou could hire me. I'll tell you the real credit. But I don't think you would know the real credit if I told you, I don't think you would believe me over some idiot charging half as much. So fuck you.Grumpy, farmer?

QuoteOriginally posted by: Traden4AlphaGrumpy, farmer?Geez, it's not about me, it's about the credit.Leave the personal attention to Marsden and trackstar. And bad waiters.

Here is a girl that could provide farmer with some personal attention. We'd have to work out the compensation arrangement.

On second thought, just leave out the personal attention altogether. I am just a prop (in a tragedy). The point is that it is not a quant problem - a "rating methodology" - but a much higher level management problem, and information problem, and an incentives problem.It's not like you can't buy better credit analysis. And it is not like you can't perform your own analysis, to determine over a period of time if you are getting your money's worth. But it becomes even more difficult to achieve a consensus with other parties, such as investors, what is the quality and consistency of your proprietary credit analysis. The simplest rating product will most closely correlate with market prices, and have the most consistent and consensus long-term brand reputation.To achieve any improvement in this information problem, your better course of action is to change the topology of intermediation. Recent changes in the US, where responsibility for analyzing coupon risk has basically moved to the voter in national elections, have made the problem worse. The problems are inherent in your approach; once your ambition becomes to have a single, universal rating system, for use by laymen, you doom yourself to a rating system that is not very smart or nimble.One characteristic of an improved system, might be that the costs and rewards of a better or worse analysis would be suffered and enjoyed by the person or institution performing the analysis.

QuoteOriginally posted by: trackstarWe'd have to work out the compensation arrangement.On third thought, since you are offering - and since it is 3AM and I am kinda drunk - I'll give you $50 for a quick you know what.

$50. Hmmm. Obviously she would take quite a bite out of the old government subsidy, among other things.

Farmer,You raise some interesting issues and I do agree about the problems in management, information, incentives, and the structure of the intermediaries.At least some of the problem could be reduced by forcing a relative rating system in which constant fractions of credit fall in each of a set of relative risk categories. Currently, each credit instrument is independently rated which allows for rampant ratings inflation -- all the rated instruments end up being above average to please the clients and ensure their future business. But if a rating agency were forced to down-grade one AAA bond for every new bond it wished to give a AAA rating, or the agency were restricted in the numbers of new high ratings it could issue relative to lower-rated issues, then it can't hand-out high ratings like lollipops. I'm not entirely convinced that consistency is a good trait in a rating methodology although I can see why most people would want that. The insistence on consistency would seem to present a systemic risk on two levels. First, if the methodology is consistent and wrong, it will fail to properly rate 100% of instruments. Second, consistency is actually more dangerous than systemic bias. Every rating methodology will be blind to some existing or novel sources of credit risk. Whether intentional or not, credit issuers will find those blind-spots and issue growing amounts of credit that look low-risk on the methodology's observed dimensions of risk but that are high-risk on the blind-spot dimensions. At the very least, methodologies cannot be consistent in time because they must continually seek-out and re-weight the evolving sources of risk. I'm not even sure that should be consistent at any instant, either. Perhaps each agency should employ multiple methodologies and produce multiple rating scores on each instrument.Finally, I'm not sure one can determine the quality of a rating system due to the relative rarity of default events versus dynamic changes in the economy. If the economy changes in multiple ways over a period of 10 years (e.g., increasing global coupling, the rise of securitization, the advent of unstable monetary unions, increasing mobility of consumer deposits into foreign banks, etc.), then any given rating methodology will have too short a tenure to generate enough history to judge once-in-a-century defaults. At some level, the recent crisis is either evidence of a gross failure of the rating system or it's just a normal event in which AAA-rated instruments do fail in X% of the years.

Simplicity and consistency are key to lengthening the evolutionary epoch. And a long history is key to enabling decisions by unsophisticated parties.QuoteOriginally posted by: trackstarI will give *you* 50 bucks.I'll cream every hole in your body for $9000. Don't worry, those goosebumps aren't permanent...

One of the secrets to entrepreneurial success is "Listen to the customer and give him or her what he or she wants."Not what you want, not what your last customer wanted, and not your perverted fantasy of what Tiger Woods wants.So, no, farmer, I will not pay $9,000 for your personal attention, however therapeutic that might be. (Clinical studies have shown... )But thank you.(Maybe ask ppauper? He is Canadian, after all.)

Everyone knows roots of the problems with rating agencies. Many problems have been researched, documented, and published for decades before the crisis. For example, there is nothing worse, more delayed than the signal from Moody downgrade. It comes months after news, months after the Fitch downgrade, months after market price reaction, anyone who is able to read can do a better job at timing the downgrade than Moody. It's not because people at Moody are that exceptionally stupid and lazy, it's because of the importance of their institutional involvement. Problems occur from two sources1. Mainly it is caused by government-mandated use of particular rating agencies ratings. Half the answer to why ratings are stupid is government mandates certain rating thresholds on holdings of pension funds, Central Banks and all other regulated entities. Moody downgrade below threshold causes avalanche. It also may cause lawsuit against Moody, loss of revenue and clients, and potentially actual ruin of the company or even a country which is what we see with Greece now. Most of the problem disappears if regulation to use rating from a particular company disappears and rating agencies are not government-approved corporations. 2. Rating agencies are paid by sellers of ratings, by investment banks, corporations, countries looking for high ratings. Surely ratings are inflated. Crooks from IBs are coming up with complicated securities, disclose non public information to Moody only, receive the sacred government required rating, and use it as a marketing tool to stuff it to pimpled morons who are called bond managers at pension funds and happy to make their $80K for doing nothing. The ball is completely in the hands of the government. It must take away any requirements for any particular rating from any particular rating agency. It must make it illegal for agencies to get paid by ratings sellers, only by rating buyers. Doing just that would drastically cut down on the number of fantom securities that are just vehicles of theft from removed principals by various dumb and crooked agents. There are no buyers who would come up with a 50,000 page CDO prospectus, come to Moody and ask to rate it. Only robust, simple products that have a real demand and a real market get rated this way, the rest just are offered without ratings, if at all. It's like the market on sexual services from trackstar or farmer, that goes in this thread. There appears to be some resemblance of market forming, one might say think of buying futures on trackstar given quant forum gender assymetry, but there is no need for Moody to get involved .

Since the early 1990s, I have been very impressed by the speed and acumen with which Russians have embraced entrepreneurial capitalism. Call it black market, shadow market, crony capitalism, Wild West, or just plain gangsta, some of those Ruskies really know how to spin straw into gold. And Palladium...I am also aware that we are in the Economics Forum at the moment and some parts of this conversation would be best situated elsewhere.So here is my latest IPTO (Initial Public Thread Offering):Heavy-weight TitlePerhaps zerdna would care to serve as referee.

Statisco Model is based on micro-economic and projects status for Macro-economy.Statisco model is based on Balance sheets of public companies. When you do multi-variate analysis for all balance sheets and integrate you will get a much better picture of economy. And that too, LIVE.I hope it solves the problems with current rating system and adds value for day to day investors. I would invite your views on this open forum.thxsumi