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...

The Remote Control Presidency

I think the current healthcare debate reveals we may have a problem ourselves. Could it be that too much reward relative to the effort for too many of us has eroded the culture of the people? Indeed, how else could the current disenchantment with, say, Obama be justified if not by the fact that many think they must have voted for the remote control presidency? Such arrangement, ideally, requires little engagement, lest commitment for action, other than the equivalent of operating a remote control button.

Assuming that a good man can make all the needed difference by himself, even if he inhabits the residence at 1600 Pennsylvania Ave., is oversimplifying, if not outright delusional. For one, insurance companies are one of the capitalism pillars, by supplying investment capital (together with banking, retirement funds and the state itself). Then, proving commitment in terms of some sort of action is the best way to be taken seriously.

Yukio Hatoyama
The New Prime Minister of Japan

We are currently standing at a turning point in global history, and therefore our resolve and vision are being tested, not only in terms of our ability to formulate policies to stimulate the domestic economy, but also in terms of how we try to build a new global political and economic order. I would like to conclude by quoting the words of Count Coudenhove-Kalergi, the father of the EU, written 85 years ago, when he published Pan-Europa.

"All great historical ideas started as a utopian dream and ended with reality".

"Whether a particular idea remains as a utopian dream or it can become reality depends on the number of people who believe in the ideal and their ability to act upon it."

Excerpted from “My Political Philosophy”, by Yukio Hatoyama, Prime Minister of Japan

The above excerpt, as well as the entire text, would not mean much unless Mr. Hatoyama were not the head to the government whose country is the 2nd largest buyer of US treasuries.

Popular Posts