Blog: Ratings agencies - trust 'em?
Dave Leggett | 28 September 2011
The credit rating agencies have quite a bit of power. They can change their ratings on companies and indeed whole countries, with pretty big implications for the future borrowing costs of those concerned. Fitch has taken a look at the European auto industry and concluded that things aren't as bad as in late 2008. The industry is in better shape and is prepared for choppy waters. That's kind of reassuring; if things get worse for the global economy this has at least been a 'double-dip' (or worse) that has been endlessly debated and discussed by the key actors and a million pundits.
Business planning is - at the moment - taking place on the basis of a continuing low-growth demand environment, the need to contain costs and keep inventory down. Fair enough. But, I believe, the ratings agencies did not exactly cover themselves in glory with their assements of the state of the banks and their balance sheets back in pre-crisis '08. Hey, we all mistakes.
The business news seems to be very fluid lately, with some good news and some not so good and a general sense of a precarious global economy still ticking over, but in danger of falling over soon, but not quite yet. Fitch, at least, seems to be fairly upbeat, or as the financial types love to say, 'sanguine' about things. We do believe 'em kids, don't we?
For those in the more gloomy camp, there was a trader who popped up on TV here in London yesterday who not only believes that the worst is inevitable, but appears to be actually relishing the prospect. And he thinks that Goldman Sachs has more power than the world's political leaders. Hmm. Maybe he got a bit excited in the studio.
There's been a bit of a shocked reaction to his remarks in some quarters, but really, he's a trader driven primarily by pecuniary reward. His job is to make money and be pretty single-minded about the pursuit of that by buying low, selling high and not worry too much about other stuff going on. If the eurozone collapses there will likely be general financial chaos, a deep recession and many people out of a job, as well as - on the 'upside' - opportunities for some people like matey boy in the below clip to make some money because they are smart enough to have read some history books about the 1930s. Does he sleep well at night? Sounds like it. Takes all sorts...
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