Corner of Berkshire & Fairfax Message Board

General Category => Berkshire Hathaway => Topic started by: Parsad on March 12, 2009, 04:18:43 PM

Title: Fitch Takes Away Berkshire's AAA Rating!
Post by: Parsad on March 12, 2009, 04:18:43 PM
One of the dumbest things I've seen in the last year (and that says alot), including their reasoning for doing so!  Cheers!

http://www.marketwatch.com/News/Story/Story.aspx?guid=%7b8684919A-8A3A-406D-A69E-0EF5A50A4170%7d&siteid=yhoof2
Title: Re: Fitch Takes Away Berkshire's AAA Rating!
Post by: Partner24 on March 12, 2009, 04:48:51 PM
I think that cartoons have a better credibility than Fitch.
Title: Re: Fitch Takes Away Berkshire's AAA Rating!
Post by: oldye on March 12, 2009, 04:51:31 PM
The sec should be investigating the connection between short selling funds and Fitch.  This is financial terrorism. 
Title: Re: Fitch Takes Away Berkshire's AAA Rating!
Post by: oldye on March 12, 2009, 05:06:41 PM
"Buffett’s role as chief investment officer also puts the company at risk if he becomes unable to do the job, Fitch said in a statement."

http://www.bloomberg.com/apps/news?pid=20601087&sid=ajBmZZIBU9Vk&refer=home
Title: Re: Fitch Takes Away Berkshire's AAA Rating!
Post by: nodnub on March 12, 2009, 05:25:34 PM
I think that cartoons have a better credibility than Fitch.

you're right...   and the cartoons in the newspaper aren't nearly as funny as this  :)
Title: Re: Fitch Takes Away Berkshire's AAA Rating!
Post by: EdWatchesBoxing on March 12, 2009, 05:29:06 PM
I don't know what's worse: the article or some of the stupid comments left by some of the readers.
Title: Re: Fitch Takes Away Berkshire's AAA Rating!
Post by: Partner24 on March 12, 2009, 05:37:42 PM
Do you remember the Fitch ratings in the Fairfax case a few years ago?
Title: Re: Fitch Takes Away Berkshire's AAA Rating!
Post by: link01 on March 12, 2009, 05:56:41 PM
this is absolute lunacy!

i dont know what's worse: the rating agencies' decade long slumber thru the bubblefication of housing & credit, or their clueless attempt at a majorly symbolic mea culpa now.
Title: Re: Fitch Takes Away Berkshire's AAA Rating!
Post by: cheapguy on March 12, 2009, 06:21:35 PM
What does this mean.

Does Berkshire has to post collateral/deposit money for any of the derivatives or puts it has written ?
Title: Re: Fitch Takes Away Berkshire's AAA Rating!
Post by: rmitz on March 12, 2009, 06:29:18 PM
What does this mean.

Does Berkshire has to post collateral/deposit money for any of the derivatives or puts it has written ?

This, I think, is the big question.  It may not mean that much since the credit spreads were already going up on Berkshire's debt anyway, so I don't think they were going to be interested in issuing more.  I don't know about the financial covenants, though. 

Will it cause problems?  Nothing insurmountable, I'm sure, but it could hurt other opportunities.
Title: Re: Fitch Takes Away Berkshire's AAA Rating!
Post by: oldye on March 12, 2009, 06:30:15 PM
Do you remember the Fitch ratings in the Fairfax case a few years ago?

 two agencies have to downgrade before the official rating is changed

 Congress should subpeona every employee at Fitch so that when an investigation is launched they'll have plenty of perjury charges to doll out.  
Title: Re: Fitch Takes Away Berkshire's AAA Rating!
Post by: Parsad on March 12, 2009, 06:31:21 PM
What does this mean.

Does Berkshire has to post collateral/deposit money for any of the derivatives or puts it has written ?


Probably not.  Financing costs for businesses like Clayton Homes and Mid-American may be higher.  Although AM Best, Standard & Poors, DBRS will probably not do such a stupid thing and downgrade Berkshire, so I'm not sure exactly how much more in interest they would have to pay for any debt they issue.  Going from AAA to AA+ isn't going to be detrimental, but it does take away Buffett & Munger's ability to say they are AAA-rated by every rating agency.  I bet Munger has some choice words for Fitch...like Fitch-off!  Cheers!  
Title: Re: Fitch Takes Away Berkshire's AAA Rating!
Post by: Santayana on March 12, 2009, 06:40:21 PM
I don't know.   I think the case could be made that nobody really deserves a AAA right now, and that could include the US govt. as well.   Whether or not you believe we are headed for a depression, one has to recognize that there is a great deal of uncertainty in the financial markets these days.   

How many AAAs are still out there? 
Title: Re: Fitch Takes Away Berkshire's AAA Rating!
Post by: scottyjukebox on March 12, 2009, 07:33:46 PM
Wow..gee thanks for the heads up Fitch.
Title: Re: Fitch Takes Away Berkshire's AAA Rating!
Post by: Mungerville on March 12, 2009, 07:55:56 PM
What a joke.  They must be retarded.  In what circumstance will Berkshire not be able to pay its debt as it comes due?

Fitch was in bed with the bad guys a few years ago.  We all saw it. 

So it looks like some of them are crooked and some of them are retarded.




Title: Re: Fitch Takes Away Berkshire's AAA Rating!
Post by: oldye on March 12, 2009, 08:14:15 PM
It used to be that AAA meant 0.02% chance of default.  Of course Berkshire and hell the U.S government aren't really AAA.  They have 0 chance of default, let me rephrase that, in the event of a default there would be no one around to rate them or care.   
Title: Re: Fitch Takes Away Berkshire's AAA Rating!
Post by: Rabbitisrich on March 12, 2009, 08:30:19 PM
The downgrade also recognizes that even the most senior obligations at the holding company level are deeply subordinated to policyholder obligations at the regulated insurance and reinsurance company subsidiaries. Fitch notes this point is not new, but rather reflects Fitch's view on appropriate weighting given to this risk in the current environment and at the current rating level.

Does anyone else have trouble understanding the last sentence? Is Fitch saying that their ratings mean different things at different times?
Title: Re: Fitch Takes Away Berkshire's AAA Rating!
Post by: oec2000 on March 12, 2009, 09:25:56 PM
Look for the silver lining. We will know the bottom has been reached when Moody's and S&P also downgrade BRK. ;D
Title: Re: Fitch Takes Away Berkshire's AAA Rating!
Post by: netnet on March 12, 2009, 10:02:59 PM
Wow,

Let me get this straight.  These are the same guys (and gals) who rated the CDO and CDO squared paper AAA, the paper whose best use is in the financial outhouse.
Title: Re: Fitch Takes Away Berkshire's AAA Rating!
Post by: scorpioncapital on March 12, 2009, 10:25:36 PM
Let's see if every company is downgraded in a proportional fashion from AAA to AA, from AA to A, etc..what does it mean - nothing! AA is the new AAA!
Title: Re: Fitch Takes Away Berkshire's AAA Rating!
Post by: arbitragr on March 13, 2009, 02:08:52 AM
Look for the silver lining. We will know the bottom has been reached when Moody's and S&P also downgrade BRK. ;D

... Moody's wouldn't do it ...  ;)
Title: Re: Fitch Takes Away Berkshire's AAA Rating!
Post by: StubbleJumper on March 13, 2009, 03:29:51 AM
WEB should take a page out of Prem's book, and simply ask Fitch to stop rating Berkshire.  There is no substitute for integrity, and it sometimes appears to be lacking at Fitch.

Maybe next we'll see an article from some two-bit analyst proclaiming that BRK is truly $80b under-reserved?

History doesn't repeat, but it does rhyme!

SJ
Title: Re: Fitch Takes Away Berkshire's AAA Rating!
Post by: arbitragr on March 13, 2009, 04:54:24 AM
WEB should take a page out of Prem's book, and simply ask Fitch to stop rating Berkshire.  There is no substitute for integrity, and it sometimes appears to be lacking at Fitch.

Maybe next we'll see an article from some two-bit analyst proclaiming that BRK is truly $80b under-reserved?

History doesn't repeat, but it does rhyme!

SJ

... truth be told ... Fitch probably has had more integrity than Moody's and S&P throughout this crisis ...
Title: Re: Fitch Takes Away Berkshire's AAA Rating!
Post by: SharperDingaan on March 13, 2009, 05:50:19 AM

Keep in mind that Fitch is in a lose/lose proposition, & needs to minimize damage.

They are not seen as credible as if you have to have a rating you go to Moodys or S&P, or you don't sell/roll the bond. A Fitch rating is an admission that you're desperate, & couldn't get what you wanted - & therefore of minimal use.

Realistically it is hard to see how anyone other than a sovereign could have a AAA rating.
The rating can also only set the base credit rate in that country, and a AAA rating across sovereigns is not comparable. ie: A US Fed AAA rating is clearly not the same as Chilean Central Bank AAA rating, yet they are both sovereigns, & they are both the best credit quality in each of their countries. The best public rating should really be no more than AA+

The best Fitch can do is come up with a new rating system,
& take some hits along the way to re-establish credibility in how they get there.

SD



 

     
Title: Re: Fitch Takes Away Berkshire's AAA Rating!
Post by: woodstove on March 13, 2009, 07:42:04 AM
Probably should structure a company so it is robust enough to survive with BBB rating.  Else don't deserve A or higher.

Rating change should be non-event operationally to Berkshire, or there is something wrong with design of the enterprise.

Sure a bit higher cost on some borrowings, but nothing worse than decline in economic activity.

An aside ... Russel Metals is saying they are seeing 40 pct decline in demand for steel products.
That is worse than the 30 pct decline I had previously heard quoted for steel consumption.

So the context reallly does matter.  Nothing is AAA in current environment.

Not to worry.  Berkshire is among the best, maybe the best of class where it is participant.
Title: Re: Fitch Takes Away Berkshire's AAA Rating!
Post by: Stove on March 13, 2009, 10:52:37 AM
Woodstove - excellent name if I do say so.

I don't see why the US Gov shouldn't have a AAA rating, as long as it can create the means to pay back its debts out of thin air.  Can I borrow someone's wheelbarrow to carry all of my dollars?
Title: Re: Fitch Takes Away Berkshire's AAA Rating!
Post by: bookie71 on March 13, 2009, 11:10:01 AM
If Berkshire is downgraded, what is the "true" rating for the USA and all the debt we (and our kids, grand kids, and great grand kids) have taken on.  When the foreign investors decide that they don't want these debt instruments, we will get the "most unfair" tax of all = inflation.
IMHO
Title: Re: Fitch Takes Away Berkshire's AAA Rating!
Post by: pohick on March 13, 2009, 12:22:49 PM
the last shred of credibility gone.

(note GE rallied on the same downgrade by all)

i think you could make a lot of money analyzing bonds, and arbitraging the nonsense ratings.
(i.e buy BBB that are better than AA) hold for convergence
(just don't borrow like LTCM)

WEB should be having a field day
Title: Re: Fitch Takes Away Berkshire's AAA Rating!
Post by: Hoodlum on March 13, 2009, 02:17:29 PM
The markets are comparing BRK to Turkey, Peru and Colombia.

Berkshire credit costs trade like Turkey's (http://news.yahoo.com/s/nm/20090313/bs_nm/us_berkshire_1)