Tuesday, October 15, 2013

WHAT THE FITCH (STANDARD & POORS RATING AGENCY)?!? (ORIGINALLY PUBLISHED ON 11/17/11)

Yesterday, November 16th, within five minutes the Dow Jones Industrial Average dropped 200 points after a negative release by the FITCH company concerning the US banking system. Our markets have dropped sharply before based on the antiquated opinions of companies like Fitch, which are no more and probably less capable than anyone of the hundreds of investment firms that provide research on other matters.

You are not going to be able to believe this but I decided to take a look at who owns the FITCH rating service, let alone its record of prediction or the qualifications of its key personnel.

Guess what? This company that drove the market down, with its less than brilliant statements, is primarily owned by a man (are you ready for this) by the name of Marc Ladreit De Lacharriere. We have no idea of what his politics are or whether he even votes in the United States... he seems to be French. Yes, that's right a Frenchman controls one of the three rating services that were approved by the SEC in 1975. That's right, 1975. Something that was sanctioned in 1975 and doesn't seem to have been updated. The whole situation is so absurd that there has to be an immediate investigation of the qualifications, historical accuracy and potential hidden agendas of the people that run these companies. The three rating agencies, in my opinion, are of little value.

There is a better way. Its simply the following...everyone that sells bonds has to release information to bondholders exactly the same as information is released to shareholders. Any money management organization that gets paid to manage bonds for others must be held accountable to do its own research and form their own opinions about the quality of bonds that they buy or sell. If the meaning of this prior comment is not clear to you, at another time I will talk about it again.

The CEO of FITCH holds a BS degree from a poorly rated college. The President of FITCH has a marketing degree from a mid level college in another country. A top managing director at FITCH has a management administration degree from a University in France.

Globalization has distorted human nature. No one would ever dream of having foreigners take control of companies like Boeing, Raytheon, Lockheed Martin, General Dynamics. The rating companies fell off the radar.

Monday, October 14, 2013

THE CURSE OF THE BOW TIE...(JIM ROGERS - ORIGINALLY PUBLISHED 6/7/12)

It was 1987. The book was called "The Great Depression of 1990". It was close to a number one bestseller. The writer was regularly on TV, was left-wing and a major university economics professor.

The Dow Jones was less than 3,000. The book concluded you should sell all your stocks and real estate.

The Dow Jones Industrial Average immediately began an ascent from less than 3,000 to close to 12,000 in the 1990's. Real estate prices doubled and tripled to absurdly overvalued levels.

The sensationalist professor in my views, attempting to become famous with extreme projections and recommendations, fell out of favor.

Today we have other people, mainly professors, often using extreme views to obtain attention. One of them is a man called Jim Rogers who doesn't seem to have managed any publicly recorded money in almost thirty years. He too follows the trampled road using intellect to prepare extremist advice geared towards scaring the average investor into oblivion.

Rogers has created the "Rogers" commodity index which is the kind of thing that can be put together by most anyone with a computer in my opinion.

Just as the Depression of 1990 fell off a cliff in it's timing and significant number of wrong commentary, I think it would be wise to beware of the pundits of either extreme optimism or extreme pessimism.

Please note that Warren Buffet tends to go against the crowd and does not often establish extreme views in either direction. Watch out for marketers wearing the cloak of financial acumen without having any recent or current public investment record.
 

Shepard Osherow. All Rights Reserved