DownEscalator (< 20)

Is there any reason to listen to S&P?

August 05, 2009 – Comments (1) | RELATED TICKERS: WYE.DL , AMZN , KSS

I stand by my assertion that ratings agencies are getting less of the blame for the financial crisis than they deserve.  Looking at old S&P ratings today, I'm reaffirmed in that belief.  These are supposed to be companies "inside" who know when something is overbought.

4- and 5-Star S&P Investments w Prices, September 2007

C  $40-50
BAC $45-52
AIG $60-65
RF $28-31
FNM $60-65
FRE $58-62
HIG $85-90
KEY $32-35

It gets better.

4- and 5-star S&P Investments w/ Prices, August 2008

X $130-150
FCX $85-90
AA $29-32
NUE $48-53
GE $28-30
NOV $68-75
POT $165-180
RIG $125-130
GNA $13-14
STLD $24-28

In both of these cases, S&P was advising everyone to buy into bubbles (even after they showed signs of bursting).  Following S&P's advice would have put you in the poor house.

If their track record is this bad on bubbles, why should you ever read their ratings to find out when the next one is?

Keep this in mind the next time you hear a stock has been upgraded or downgraded by S&P.

As an aside, here are some stocks that were rated 3-stars or less in Aug 08 and their performance since.

WYE +16.45%
AMZN +6.76%
KSS +9.67%
MFE +17.49%
SHW +8.87%
CTXS +26.32%
CHKP +15.11%
PCLN +10.29%
NLY +14.36%
FIS +27.68%
WTR +6.62%