Insanity: Getting Worked Up Over One Company's Slight Change Of Opinion In The Creditworthiness Of The US
from the it's-an-opinion dept
We've discussed this before. For absolutely no good reason, the US government decided to put the opinion of various rating agencies into law, requiring certain institutions to maintain certain percentages of "highly rated" bonds in order to engage in certain activities. The insanity is that it effectively forced the world to think about ratings from S&P and Moody's as if they were fact, even though they're really just opinions. And to do all of this even if their ratings go against one's own opinion. And, of course, we all know that the ratings agencies are far from perfect, and have an unfortunate history that suggests that, at times, they've succumbed to pressure.
So, even if you believe that the US government's financial position is a disaster (and, again, a case can be made for that), it's crazy to pretend that one company changing its opinion (just slightly) has any actual meaning. Most of the market can and does make its own decisions on the creditworthiness of US debt, no matter what S&P says. In other words, the (slim) risk of the US actually defaulting is already priced in. The S&P saying what people are already thinking doesn't mean that anything fundamental changed... other than its opinion.
Markets are made based on the interaction of buyers and sellers. Not the (sometimes questionable) opinions of just a few firms.