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The heart and soul of banking is supposed to be credit (worthiness) analysis. If bankers and credit investors could be bothered to do their jobs, there would be no need for rating agencies.
If you need a credit rating agency to tell you what the risk is on a piece of paper, then you don't want to buy that piece of paper. It really is that simple.
Friends come and go. Enemies accumulate.
And at any rate, the people you need to talk to in order to evaluate the risks isn't the bean-counters, it's the engineers. The bean-counters have to rely on the engineers for their uncertainties anyway, so you might as well cut out the middleman.
You need both, because engineers don't have ways of thinking how the financial world, which is a social model not a physical one. They just have the hard data and knowledge about how to manipulate and analyze it.
If you have enough money to worry about it losing value due to inflation, then I really can't get worked up about you losing some of it to the capital market piranhas.
Which is why I keep arguing that the credit crisis is mainly a problem for the rich.
The credit crisis should have been mainly a problem for the rich. The problem is that the rich are being allowed to strangle the real economy to make up for the shortfall in their fictitious funny-money returns.
As long as you vest political control of the production process with the people who make money, rather than the people who make goods, a crisis in the monetary system will be a problem for the poor.
And if you can't decide what the risk of bankruptcy is because the company has some complex or convoluted business model, don't buy the bond. There are lots of other fishes in the sea.
Peak oil is not an energy crisis. It is a liquid fuel crisis.
Yes, but that doesn't always help answer the question of whether Bond A, which looks pretty safe by your own detailed analysis, is better or worse than Bond B.
Why do you want to know that? If Bond A is an acceptable investment, then take it. A bird in the hand, and all that...
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