Moody’s Ratings Increasingly Ignored by Investors

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Moody’s Ratings Increasingly Ignored by Investors

 

Moody’s Corporation (NYSE:MCO), a pioneer in the business of ranking companies according to their abilities to pay debt, has since assumed a ‘prophet of doom’ disposition. At the onset of summer last week, Moody’s was noted for spreading a shroud of gloom over investors when it lowered the credit ratings on 15 global banking heavyweights.

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Several days down the line, its dim foresight has failed to materialize. In fact, every measure of risk used in the credit market shows that banks are currently enjoying unprecedented levels of confidence from investors.

In an interview conducted by Bloomberg television’s “surveillance” some days back, June 22 to be exact, Richard Bove shared his insight on the contentious issue. Bove, an analyst at Rochdale securities, openly remarked that the dreaded Moody downgrades were by far one of the most obscene acts he had ever seen; moreover from an upstanding institution. He further exclaimed that the prevailing trend in the banking sector was laudable and particularly highlighted the coherent increase in price of bank debt and uniform dip in yield. Moody’s timing has been terrible as it has come at a time when investors are welling with the desire to purchase.

This news has stirred a lot of debate among investors. Could it be a sign of eroded confidence in rating firms’ ability? The conflict between investors and Moody’s suggests that confidence in rating firms has hit rock bottom. Mind you this is the third time that investors have turned their back on credit-rating companies in a time frame of less than one year.

Even the great Moody’s Corporation (NYSE:MCO) has not been spared. This could be the beginning of a new chapter in contemporary investing-a chapter where investors are motivated by their self inspired interests and give little or no regard to the so called professional outlook.