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Idiot of the day: S&P

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November 24, 2010 – Comments (2)

Interesting. So, during the whole last week, when Irish debt traded at 9% yield like a junk bond, the analysts from S&P believed that Irish debt deserved AA- rating. Then the news came that EU would bail out that bankrupt government. The financial geniuses from S&P thought about it and concluded that Irish bonds are now less safe than they were before the bailout announcement. I am wondering if anyone is still taking these clowns seriously. 

http://online.wsj.com/article/BT-CO-20101123-715892.html 

"Standard & Poor's Ratings Services lowered its ratings on Ireland and will continue to watch for more downgrades, saying the country's borrowing to bail out banks exceeded its previous projections.

The Irish government is trying to stem its losses from the banking sector, which are largely the result of lending too much during a decade-long property boom that crumbled in the financial crisis.

On Sunday, Ireland applied for a bailout in the tens of billions of euros from the European Union and the International Monetary Fund to stabilize the banking system and state finances.

On Tuesday, S&P said it lowered its long-term sovereign rating on Ireland to A from AA-, a two-notch drop. It cut its short-term ratings a step to A-1. It put both on CreditWatch with negative implications, raising the possibility of further downgrades." 

2 Comments – Post Your Own

#1) On November 24, 2010 at 8:32 AM, Mary953 (66.50) wrote:

Are we absolutely certain that this is not a rehearsal for the Comedy Channel of Irish TV?  After all, the joke would be on everyone other than the Irish!

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#2) On November 24, 2010 at 12:12 PM, rfaramir (29.57) wrote:

The cuts in spending they announced (and the rise in taxes) are going to be difficult to actually go through with. The spoiled brats will wail and possibly punish the elected politicians. Or, the agency stupidly believes in the Keynesian lie that government cuts are bad in principle. So either good news is being reasonably discounted, or they're idiots and think it's actually bad news.

The austerity commitment was necessary to get the bailout money. Now, taking out bigger loans because you've overspent is NOT fiscally sound. They instead should make their banks take their losses, settling in bankruptcy courts if necessary. Only this would respect private property, honor contracts, and assign blame where blame is due. The added debt is real (not just likely, like the cuts) and is probably the cause of the downgrade.

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