Etoile Brilliant

Don't Try to Fix the Rating-Agency Model: Get Rid of It

One small problem, Basle II. After 5 years of negotiating and another 5 years of implentation, you can't get away from the fact that ratings underpin the whole concept of bank regulatory capital. Bring on Basle III (2018?)

Earnings Preview: Moody's Corporation

In the long term, their revenue will hold up (Structured Finance revenues must have completely dried up over the last few quarters). Under Basle II, they are almost guaranteed cash flows from issuers requiring ratings. My doubt on this name is the "event risk" of a class action lawsuit. Its' never been successful before but I can't help thinking that the SEC is looking for a fall guy and the rating agencies look good for that role.

Interestingly, with all the talk yesterday regarding the rating agencies getting out of the field of advisory work, I wonder whether Moody's might sell or float KMV. RiskMetrics (which is almost identical) had a very good pop on its open when it launched its IPO last week.

If Warren Buffet really wakes up each morning with a "spring in his step", he going to be reaching for his crutches if this one sinks much further! He's down over $500m on this name alone.