Sour Grapes S&P Style

Just as I was publishing yesterday’s post, Standard and Poor’s released a statement that foreshadowed a ‘selective default’ for any Greek Bonds that get rolled over under the French plan….But wait!!! The new bonds will attract S&P’s new, and higher, Greek credit rating. So investors suffer neither loss of capital nor coupon, they voluntarily subscribe to new Greek Bonds with credit support and S&P provides a comfortably higher credit rating. Where’s the default in all this?

What a farce! S&P should be saying ‘…sorry, we were wrong, there will be no default and our C-rating is unjustified…’. Instead, like kindergarten bullies they are insisting they are correct and intend to argue with anyone who disagrees. The shocking part of the situation is that there are still investors/governments who pay attention to the ramblings of the credit agencies despite their inability to judge both credit risk and market valuations. Worse still, S&P’s sour grapes act may derail the Greek bailout package.

When will this all end? Investors, trustees, issuers, index providers and governments need to club together and expunge any reference to ratings criteria from their guidelines. This historical practice is the reason the ratings agencies make money as well as the reason their credit judgments distort markets. Its time to ignore them…

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