News is out that Bloomberg is now going to start with U.S. corporate debt ratings and then look at international issues. This follows a roll-out at the end of 2009 from Morningstar Inc. (NASDAQ: MORN) on covering the top 100 companies corporate credit ratings. How that effort is progressing is still too soon to make a final determination.
At the meeting of holders, Buffett did defend holding a stake in Moody’s. Too bad. What Buffett did not say was that he was about 18 months late in recognizing that the investment in a ratings agency on a pure-play basis was a flawed business model. Buffett noted that ratings agencies still have wonderful businesses with significant pricing power.
The McGraw-Hills Companies, Inc. (NYSE: MHP) at least has many publishing operations that offset the impact the company will take over its ownership of Standard & Poor’s. If Buffett was holding that company, he could at least say it has other diversified operations.
Buffett also much more strongly defended Lloyd Blankfein and Goldman Sachs Group Inc. (NYSE: GS), and this was not exactly met with shareholder enthusiasm. It is far too soon to know if Buffett has been in denial about the Goldman Sachs case or not. Either way, that notion may test his ‘political backing’ based upon his pocketbook.
We originally noted during the period when Buffett was gobbling up BNSF that Moody’s was one of many stakes that Buffett should have eliminated entirely. The SEC news against Moody’s this week only adds more fuel to this fire. If Buffett wants to hold this position, it should at least be with a far smaller stake than that of the largest shareholder.
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JON C. OGG
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