One often gets wise after the Event…. but what if one does not !… does not deliberately want to actually!
I don’t want to get into the game of Bashing up the Rating Agencies… but was curious to see how Standard and Poors have rated USA on long term and short term sovereign domestic and fx currency obligations
For Long Term Ratings,Top of the Line is AAA… it indicates extreme strength in meeting obligations…. BBB indicates adequate protection parameters but economic adversity and changing circumstances can weaken the capacity to meet obligations… anything below BBB is speculative in nature
For Short Term Ratings, the highest is A-1 …. while A-3 indicates adequate protection parameters but changing circumstances can weaken the capacity to meet obligations… B onwards are speculative in nature
As of May 17, 2010, USA retains a Top Rating of ‘AAA’ on long term obligations on both domestic and fx curriencies… the outlook is ‘Stable’, indicating that there should not be any ratings revision in the next six months atleast….on short term obligations,yet again USA has retained the top A-1 Rating
It’s Western Ally, United Kingdom has similar ratings… only the outlook here is marked ‘Negative’…. indicating the rating could be revised downward
Amusing really !… Methinks S & P lacks the spunk to downgrade USA…. USA’s Debts and Deficits are larger and more scary going forward than even those of some of the ‘PIIIGS’ Nations in Europe….. and S & P has rated these European nations on Long Term from a High of AA (Spain) to a Low of BB + (Greece) and on the Short Term from a High of A-1(Italy, Ireland & Spain) to a Low of B (Greece)
India has got a S & P Sovereign Rating on Long Term Obligations of BBB- and on Short Term of A-3…with Outlook marked as Stable…… just one rank above being classified as Speculative in nature !…..Really !……we’re more or less been rated on par with Hungary,Iceland,Morroco and Egypt
Just to jog your memories…S & P had continued to rate Lehman Brothers at A+ in early 2008…in March 2008 they merely changed Outlook to ‘Negative’….then beginning June 2008,they actually downgraded Lehman to A from A+….Even in early September 2008,they warned of a downgrade but did not actually make one stating “we continue to view Lehman’s near-term liquidity as satisfactory….”… Lehman collapsed in the same month later in September 2008… yet S & P defended their ‘A’ rating asserting “ We believe the downfall of Lehman reflected escalating fears that led to a loss of confidence — ultimately becoming a real threat to Lehman’s viability in a way that fundamental credit analysis could not have anticipated with greater levels of certainty,”
Wow !…. but I’m not going to get into this Game of Bashing up Credit Rating Agencies !
In India too the game is no different… there will be conflict of interest and therefore softer ratings as long as the Rating Agencies are retained by and therefore derive their bread and butter earnings from the very Corporates and Issuers who are being rated
… and I yet feel USA’s sovereign rating should be reviewed for a potential downgraded…. Atleast mark the Outlook as ‘Negative’ as done for UK….. Some other countries also assigned the top AAA rating are Australia, Canada, UK, France, Denmark, Norway, Finland and Germany….. what do you think ?
In the end the Investor and Lender gets the short end of the stick if he depends wholly on ratings by the agencies !
Oh ! … I see India as a Stable ‘AAA’ Rating 15 years from now… by 2025… Vision 2025