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October 24, 2011

Comments

Casparhenderson

Fascinating post. An aspect perhaps worth exploring: what happens when regulators fail to recognize risks in which scientists express a fairly high degree of confidence?

Take the case of climate change. A recent report, 'Unburnable Carbon': http://www.carbontracker.org/carbonbubble , starts from the estimate that to reduce the chance of exceeding 2°C warming to 20%, the global carbon budget for 2000-2050 is 886 GtCO2. The conclusion is that large fossil fuel assets can actually be liabilities.

Of course the profile of risk will change with innovation, improvements in climate science etc., but a regulator informed by the science would be incoherent if it did not recognize that there are real risks not currently accounted for.

Could the creation of a regulator with credibility in this area actually be relatively non-contentious?

Dick Pountain

Gret post. I love the idea of betting against the rating agencies - shorting S&P.

justaposter

@ Dick - investors already arbitrage the ratings agencies, that's why they like the system the way it is.

The performance of ratings is already done internally and provided to clients. It's pretty good for both Moody's/ S&P/ Fitch.

Free Credit Score

I couldn't agree more, we really need to start rating these guys.

Will Davies

Despite the comment above being quite evidently spam, I have decided to leave it in place, for showing a sharp level of irony. That's the way to do it, all you Nigerian viagra diploma pyramid scheme guys!

In other news, this is rumoured to be the first potlatch post to have been linked to and translated into French. Mais oui. Can it really be the case that the French for 'junk' (as in junk bonds) is 'poubelle'?

Litmusman

@justaposter is absolutely correct. In fact the statistical performance of the major rating agencies through the last 5 years has been exceptional, with Gini coefficents exceeding 90% in a number of cases.

Will Davies

sadly for the entire Western world, analysis of sub-prime mortgages appeared to buck that particular 'exceptional' trend...

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