I am on fire today!!! Must read, if you can't access it, delete your WSJ cookies. WSJ exposed Credit Agencies https://www.wsj.com/articles/inflat...cial-crisis-theyre-back-11565194951?mod=rsswn All six main ratings firms have since 2012 changed some criteria for judging the riskiness of bonds in ways that were followed by jumps in market share, at least temporarily, a Wall Street Journal examination found. These firms compete with one another to rate the debt of borrowers, who pay for the ratings and have an incentive to pick rosier ones. The problem is particularly acute in the fast-growing market for “structured” debt—securities using pools of loans such as commercial and residential mortgages, student loans and other borrowings. The deals are carved into different slices, or “tranches,” each with varying risks and returns, which means rating firms are crucial to their creation. The Journal analyzed about 30,000 ratings within a $3 trillion database of structured securities issued between 2008 and 2019. The data, compiled by deal-tracker Finsight.com, allowed a direct comparison of grades issued by six firms: majors S&P, Moody’s Corp. MCO 0.12% and Fitch Ratings, and three smaller firms that have challenged them since the financial crisis, DBRS Inc., Kroll Bond Rating Agency Inc. and Morningstar Inc. MORN 0.46% The Journal’s analysis suggests a key regulatory remedy to improve rating quality—promoting competition—has backfired. The challengers tended to rate bonds higher than the major firms. Across most structured-finance segments, DBRS, Kroll and Morningstar were more likely to give higher grades than Moody’s, S&P and Fitch on the same bonds. Sometimes one firm called a security junk and another gave a triple-A rating deeming it supersafe. “The victims are the investors,” says Marshall Glick, a portfolio manager at investment firm AllianceBernstein LP. He was among a group of professional investors who in 2015 complained about inflated ratings to the Securities and Exchange Commission and asked the agency to make it harder for issuers to cherry-pick the best ones, internal SEC memos show. The SEC didn’t implement their recommendations, multiple meeting participants say
I'm only going to believe the systematic risk is being worked out when SPX hits 2000. Until then, they're just corrections.