Moody's warning on sovereign debt

I,_Brian

Interesting article on the Telegraph this week - looks like the official expectation is of a double dip recession, one that leaves the UK and others in a situation akin to Japan:
http://www.telegraph.co.uk/finance/economics/7950775/Time-is-running-out-for-the-West.html

Also book marked this, again from the Telegraph, pointing out that filing's show George Soros has slashed his investments in equities:
http://www.telegraph.co.uk/finance/markets/7950771/George-Soros-slashes-exposure-to-US-equities.html

More to add to the warning signals we're seeing.

Reaper

As far as I can see the first article says nothing about a double dip, it is purely concerned with high levels of debt.

As for the second article although we know Soros is pulling out of US equity we don't know if he is pulling out of other countries too. It is possible he is staying invested in other markets. If so I would agree with him as I am bearish on the US economy at the moment.

System

I am puzled why anyone continues to buy Greek debt at any price.

Supposing you thought there was a 50% chance of a country defaulting. What yield would an investment have to pay for you to be happy to invest having regard to that risk?

A man in a pub asks to borrow a fiver. He sounds honest, but you assess his likelihood of ever coming back at 50%. What rate of interest would persuade you to give him the money?

If I was a real gambler, and rich enough for a total loss not to matter to me, I might settle for 100% interest.

Reaper

I guess it depends on what you think default involves. If you thought the man in the pub might end up having to postpone interest payments for a while but you would get your capital back in the end you might accept lower rates. Likewise if he owes money to lots of people but doesn't have enough to pay them all back he may still be able to pay back the majority.

hallmark

Moodys. That'd be the lot that were dishing out gold-plated A ratings left right & centre prior to the credit crunch, to countries & companies that turned out to be so hopelessly in debt they should be chucked in Newgate Gaol.

Utterly discredited joke of an organization, can't believe they still exist. Can't think of many other jobs where u can call a situation that's supposed to be your speciality utterly, completely, abysmally, disastrously wrong & still be thought of as an authority on the subject.

Was it really only March 2008 when Moody's affirmed it's A1 rating on Lehmans?

http://www.marketwatch.com/story/moodys-affirms-lehman-debt-but-trims-outlook

Six months later Lehmans didn't even exist.

Disband Moody's & replace them with a dart-throwing monkey. Worst case is he'll be just as good. Chances are he'll be better. Plus, unlike Moodys, you can pay him peanuts.

slinga

Agree totally with hallmark but would add S & P and the others to the list.

Because of the rubbish they issue many individuals and also many countries have to pay greater interest etc than they would/should IF the rating agencies had a clue what was going on.

If they use the same info why can't the ratings agencies agree on the ratings they give companies and countries.

It's despicable what they come out with and what they are allowed to get away with with absolutely no recourse.

I can see the need of a ratings agency but only one.

At the moment they are similar imo to all the different Boxing titles.

And as much use.