It is Insane

Constellation Energy Down on Possible Rating Change

The rating agencies have totally discredited themselves. First they rate subprimes as 'ultra-safe'. And only after the CDOs, super-senior CDOs, were trading 50c on the dollar, they downgrade. They said Frannie Preferreds were 'AAA'. Of course they downgrade after the fact when it was clear to everyone else who were dumping them on the market for 35c on the dollar. Gee thanks for the warning. Buying only AAA rated securities really kept people's money safe.

Unfortunately, and sad to say, these rating agencies still have a lot of clout because many companie's access to short term credit is based on their 'credit worthiness' as determined by Stupid&Pitiful.

Now I know why Morgan Stanley is very scared of falling stock prices. Falling stock prices by themselves do nothing much.. except when S&P comes in and uses falling stock prices as 'crisis of confidence' downgrades the firm, which leads to increased collateral requirements, which leads to further 'crisis of confidence' and on and on.. because you know, rating agencies' financial models consisting of 150,000 data points, 2000 formulas, ran by super computers and computed by Harvard MBA grads are now determined to be as good as reading tea leaves to predict risk of default...

Knowing about the insanity of S&P and how they have gone totally insane and using tea leaves to now assess level of risk and credit worthiness, I stayed away from this insanity as far as possible by buying royalty trusts which has no debt (such as SBR). This didn't prevent me from being hit with the market insanity as yesterday, I believe a lot of mutual funds sold their positions in 'good' assets to get quick liquidity and meet redemption demands due to 'crisis of confidence' in the whole market!. URGHHH