Moody's is doing all kinds of stupid things which put it in the limelight. The obvious is the horrendous misjudgement of risk on mortgage-related securities which has caused everything from insurance companies to teachers pension funds to lose plenty in their midguided un-researched speculations. While I don't blame Moody's like the rest of the world, that's a minority view. The madness of the crowd wants blook apparently. Moody's stands as the marquee brand name taking all the poop in the face, so they are at the forefront of the public focus. With all the negative headline risk, you'd think they'd start acting better. But it seems they are now just acting in favor of the government and Goldman Sachs... read this...http://ftalphaville.ft.com/blog/2009/07/22/63136/sps-cmbs-flip-flop/ Sure seems like another area of trouble. As if this weren't enough, you still have the looming government default risk ahead. Everything from foreign nations debt, California, Counties, bridges and tunnels. They seem safe now, but what about in the next 5 years? Lastly, Mr. Buffett is slowly renegging on his vote of confidence by selling shares. He has to pick his battles after all. He obviously won the battle to save his hide in banks; he's perhaps the single biggest benefactor from the government tax money bailing out giant balance-sheet-poor banks which had severe counterparty risk-- rightly so-- in Fall 2008 and Winter 2009. It makes sense he might move out of the government's way on Moody's. While he stands on "high moral ground" in his defense of his bank investments along with our taxmoney-spending government, this is NOT true of his Moody's investment. For the reason above, but ALSO because it's a severe conflict of interest. Moody's gives Mr. Buffett AAA ratings, which allows him to slowly monopolize the municipal bond insurance market while the other insurance companies are on life-support. So while Buffett enthusiasts may defend his share sales of Moody's by saying he's simply reducing his position below the regulatory 20% (it gets bigger when Moody's mgt buys-back shares), and Buffett can use this as an excuse to bail, he will likely eventually use the excuse of "conflict of interest" to get him out entirely. This would be politically safe for him, because it will look like a grand gesture, instead of what it really probably is (in my opinion)-- which is getting out of the way of a regulatory frieghttrain. If you want bond insurance exposure, I suggest AGO or Berkshire itself. Berkshire enjoys government support with our tax money, and AGO is probably just a "clean" operator backed by big money-- it's just risky is all. As for Moody's stock, it just seems like quite a speculation for anyone who doesn't have inside information from the government about how or if they will prosecute-- otherwise known as "witch trials". Now it's entirely possible Moody's gets away from all this mess scott free, but I wouldn't count that as an investment at this point, more like a blatant speculation. Warren ought to agree-- at least at $26.59.
$25.82 (07/24/09)
