SEC Examines S&P’s Math
Italian Town’s Prosecutors Probe S&P, Moody’s
White House Challenges S&P Decision
—The Wall Street Journal
“The fact is, we didn’t need a rating agency to tell us that we need a balanced, long-term approach to deficit reduction.”
So said President Obama the other day.
Unfortunately, on that matter, the President is dead wrong: the fact is, we did need a rating agency to remind us that 40% of what our Federal Government spends is borrowed; that this is unsustainable; and we better do something about it before it’s too late.
Otherwise, nobody in Washington would have paid attention to that fact until it was too late.
But our point here is not about our Japan-style budget policies, or the 11th-hour budget deal, or dis-function in DC or even the S&P downgrade itself.
It is about the fact that Standard & Poor’s is now being attacked—by Congresspersons who wouldn’t know a balance sheet from a tomato; by White House staffers whose paychecks and generous healthcare benefits are paid by the taxpayers S&P is looking after; and even by prosecutors in the Italian village of Trani, which, as Stacy Meichtry and Nathania Zevi of the Wall Street Journal noted, “hasn’t played much of a role in the global economy since the Crusades”—for merely evaluating what it is paid to evaluate and saying in plain English what it has concluded.
Granted, S&P didn’t cover itself in glory during the downgrade, switching its math at the last minute and rewriting its premise to accommodate the use of a different, less-than-worst-case scenario, and thus opening itself up to political hacks eager to shoot the messenger.
But the message is right: after all, America has, as PIMCO’s Bill Gross points out, $66 trillion worth of entitlement liabilities—and that’s present value—amounting to half a million dollars per household.
Still, that fact won’t stop those who benefit from our lousy, unbalanced budget from screaming the loudest at the downgrade, and using every lever at their disposal—Congressional hearings; lawsuits; bought-and-paid-for “60 Minutes” so-called ‘investigative’ stories—to discredit and disable the folks at Standard & Poor’s.
After all, this is what CEOs do when intellectually honest analysts, short-sellers and just plain folks criticize, publicly, their companies for flaky accounting, serial restructuring charges and worse.
Which is why so few people bother any more.
So welcome to our world, Standard & Poor’s, and keep speaking your mind.
It may be the thing that saves us from ourselves.
Author “Secrets in Plain Sight: Business and Investing Secrets of Warren Buffett”
(eBooks on Investing, 2011) Available now at Amazon.com
© 2011 NotMakingThisUp, LLC
The content contained in this blog represents only the opinions of Mr. Matthews. Mr. Matthews also acts as an advisor and clients advised by Mr. Matthews may hold either long or short positions in securities of various companies discussed in the blog based upon Mr. Matthews’ recommendations. This commentary in no way constitutes investment advice, and should never be relied on in making an investment decision, ever. Also, this blog is not a solicitation of business by Mr. Matthews: all inquiries will be ignored. The content herein is intended solely for the entertainment of the reader, and the author.