Today, just a day after I wrote an article supporting the purchase of US banks (see below), Standard and Poor's downgraded several of America's largest financial institutions, including Citigroup, Goldman Sachs, Morgan Stanley and Wells Fargo.
At first I was taken aback by the move, and even - just for a minute - slightly concerned. Standard and Poor's said it had changed its ratings system ("with new criteria") for banks, resulting in the sweeping downgrades.
I thought, "Standard and Poor's changed its rating system, and downgraded the US banks? What if their ratings system is actually correct now? That's not good."
Then I read that Standard and Poor's had actually upgraded its rating for the crappy China Construction Bank - an overextended lender in a grossly overpriced market. My concerns melted away.
Generic formulas still can't rate risk.
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"If merely looking up forward financial data would tell you what the future holds, the Forbes 400 [richest people list] would consist of librarians."
Warren Buffett
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See also:
Forget Greece and Italy
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