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http://www.streetinsider.com/Analyst...2/5166330.html
December 8, 2009 8:09 AM EST
In a report on Tuesday from Moody's Investors Service, the U.S and U.K. were set apart from other triple-A rated countries as being weaker, calling them "resilient" and "not resistant."
Moody's referred to Canada, France and Germany as resistant, citing that the public finances of these countries are currently in better shape in the report that sought to examine the creditworthiness of the world’s highest rated countries.
The report said that in the worst-case scenario the U.S. could lose its triple-A rating in 2013 if the countries grow slows, interest rates climb and if the government fails to address the national deficit that has substantially grown due to the assistance provided to the financial sector.
"The next year or two will show whether growth potential has been structurally eroded or whether a robust yet sustainable recovery is possible," said Pierre Cailleteau, chief international economist at Moody's.
Cailleteau added that "now the question of a potential downgrade of the U.S. is not inconceivable."
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Einhorn on Moody's and sovereign risk from the Value Investing Congress:
December 8, 2009 8:09 AM EST
In a report on Tuesday from Moody's Investors Service, the U.S and U.K. were set apart from other triple-A rated countries as being weaker, calling them "resilient" and "not resistant."
Moody's referred to Canada, France and Germany as resistant, citing that the public finances of these countries are currently in better shape in the report that sought to examine the creditworthiness of the world’s highest rated countries.
The report said that in the worst-case scenario the U.S. could lose its triple-A rating in 2013 if the countries grow slows, interest rates climb and if the government fails to address the national deficit that has substantially grown due to the assistance provided to the financial sector.
"The next year or two will show whether growth potential has been structurally eroded or whether a robust yet sustainable recovery is possible," said Pierre Cailleteau, chief international economist at Moody's.
Cailleteau added that "now the question of a potential downgrade of the U.S. is not inconceivable."
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Einhorn on Moody's and sovereign risk from the Value Investing Congress:
My firm recently met with a Moody's sovereign risk team covering twenty countries in Asia and the Middle East. They have only four professionals covering the entire region. Moody's does not have a long-term quantitative model that incorporates changes in the population, incomes, expected tax rates, and so forth. They use a short-term outlook – only 12-18 months – to analyze data to assess countries' abilities to finance themselves. Moody's makes five-year medium-term qualitative assessments for each country, but does not appear to do any long-term quantitative or critical work.
Their main role, again, appears to be to tell everyone that things are fine, until a real crisis emerges at which point they will pile-on credit downgrades at the least opportune moment, making a difficult situation even more difficult for the authorities to manage.
I can just envision a future Congressional Hearing so elected officials can blame the rating agencies for blowing it, as the rating agencies respond by blaming Congress.
Their main role, again, appears to be to tell everyone that things are fine, until a real crisis emerges at which point they will pile-on credit downgrades at the least opportune moment, making a difficult situation even more difficult for the authorities to manage.
I can just envision a future Congressional Hearing so elected officials can blame the rating agencies for blowing it, as the rating agencies respond by blaming Congress.
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