Rating agencies

Are ratings agencies credible? Why have they downgraded India? Should we be alarmed by these stats? some of these agencies had got it completely wrong in the U.S leading up to the 2008 crisis.

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Absolutely. If you were to go by rating agencies and their rating methodology you would have bought every junk bond that was sold by sales people from the Investment Banks…because junk was being sold by reputed IB’s with decent credit rating even the bonds that they were packaging got highly rated…which is not supposed to be!

If you appreciate the working of a CDS or CDO instrument you would how easily a rating agency can be fooled. Of Course with a hindsight bias it all looks clear now…but then it gives you a sense.

So my suggestion, always read the markets because the markets know the best…rating agency is just like any other corporation!

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Going by the fact that rating agencies have never had the ability to anticipate recessions/ crashes etc with any real consistency, i do not believe them to be credible…


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