When action speaks louder than words, yet the message remains... oracular

Here's an interesting comment on a recent decision of Warren Buffett to sell Moody stock:

Rob G
Niskayuna, NY

Buy low, sell high depends on the QUALITY of information one receives from reputable sources.

Over the past decade or so, there's been a disturbing decrease in the quality and clarity of reporting from organizations normally tasked to report fundamentals. Where are all the big accounting houses that used to audit and certify financial statements? What happened to responsible, effective government oversight? Why is everyone keen on moving to the "mark to model" securities valuation methods when those models are NOT PUBLISHED and therefore not critically scrutinized?

That Buffett is divesting Moody's should sound alarms everywhere. Moody's makes money publishing quality research. "Moody's Investors Service is among the world’s most respected and widely utilized sources for credit ratings, research and risk analysis," its website reads. If Buffett sees no future (especially in light of the recent past) in that critical and iconic institution, what is he thinking?

Without quality and clarity of information, effective financial transactions become the domain of large investors who have access to inside, non-public information - that being the only way left to accurately judge risk. Smaller investors, who have no such access, shut themselves out for their own good.

Buffett may have trusted public sources before, and that may have contributed to his losses. But his methodology of using fundamentals to gauge risk remains valid. The real question is, can we trust the fundamentals?
In other words, is the world of rating agencies as we know them over? If so, what does it mean? For Buffett it means at least the chance for lower income. That lower income may be the result of a loss of market--outside US capital markets may come up with their own rating mechanisms, and/or the revenue model will be impaired by regulatory constraints placed on rating agencies. For the rest of us it changes the way we get our information about capital and its working. Rob G. seems to think we'll enter an even darker age...

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