Thursday, March 12, 2009

Five Companies and the U.S. Government All That are Still Rated AAA…

The ratings companies and their fee for rating business model are broken and need to be overhauled, if not eliminated entirely so that new rating businesses can be started that receive their income from those needing to use the ratings instead of from the rated themselves.

GE AA+… are you kidding me? Do we know what their assets are worth? How much do they hold? How much level 3?

While the U.S. government may be the last to hold a triple A rating, we certainly don’t deserve it either… take a look at our debts - Death by Numbers.

Ranks of AAA Companies Thinning After GE, Berkshire Downgrades

By Erik Holm

March 13 (Bloomberg) -- The credit crisis is thinning the ranks of AAA companies, after General Electric Co. and Warren Buffett’s Berkshire Hathaway Inc. lost top-level debt ratings on concern about losses on financial instruments.

Fitch Ratings yesterday stripped Berkshire of its AAA grade, citing risks stemming from derivatives holdings and Buffett’s role as chief investment officer. Hours earlier, GE lost the top rating at Standard & Poor’s that it’s held since 1956. S&P and Moody’s still rate Berkshire triple-A.

The downgrades underscore how the credit seizure is hurting perceptions of even the strongest companies, said Michael Yoshikami, chief investment strategist at YCMNet Advisors. Five non-financial U.S. companies, including Microsoft Corp., now hold S&P’s AAA grade, down from more than 60 in 1982, according to the ratings firm.

“Triple-A in the end is probably going to be left for the Treasury when it’s all said and done,” said Yoshikami, whose Walnut Creek, California-based firm oversees $800 million and owns Berkshire Hathaway shares. “You’re seeing the rating agencies taking an abundance of caution at this point.”

U.S. companies aren’t alone in losing triple-A status, as the weakest world economy in six decades strip them of sales.

Toyota Motor Corp., the Japanese company that ended General Motors Corp.’s 77-year reign as the world’s largest carmaker in 2008, had its credit rating cut to Aa1 from Aaa on Feb. 6. Toyota is forecasting its first loss in 59 years as auto sales slump.
Rating agencies “taking an abundance of caution at this point?” Give me a break. Even when a 2 year old knew that the monocline insurers where broke they still carried AAA ratings. These are the same companies who’s method of operandi is to downgrade companies AFTER their stock has fallen 80% or more.

No, the ratings agencies are a huge part of the problem… they obscure risk and cause distortions in the economy. They need to be dismantled and restarted. Will it happen? Doubtful, they rate the Treasury AAA.