Why #Smart #Investors Are Not Fooled By Credit #Ratings

Why credit rating agencies are still getting away with bad behavior

 By Misheck Mutize 

International credit rating agencies have had their fair share of controversies over the years. They have been at the centre of the major financial crises from the financial markets collapse of New York City in the mid-1970s, the Asian financial crisis of 1997 – 1998, the Enron scandal of 2001, to the global financial crisis of 2008. All of these cost investors globally billions. 

Rating agencies are meant to give comfort about an issuer’s ability to repay debt. Ratings are essential in determining the level of interest rate that a borrower must pay. Inaccurate ratings therefore distort both the prices of debt instruments and the interest rates payable on them. As history has shown, this creates asset bubbles that eventually burst, disrupting the functioning of financial markets.

The three dominant international credit rating agencies – Standard & Poor’s, Moody’s and Fitch – have been accused of many faults including:

• false ratings;
• flawed methodology;
• encroaching on government policy;
• political bias,
• selective aggression;
• and rating shopping.

These shortcomings originate from their ‘issuer-pay’ business model. The institution being rated pays for the rating which is used by investors. This means that the model has an inherent conflict of interest.

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THE POWER OF CREDIT AGENCIES

#IAE Non-OPEC Supply Could ResolveTight #OIL In 2020

"On the one hand oil demand growth for 2019 has been downgraded for the second month in a row and the IEA notes that "world trade growth has fallen back to its slowest pace since the financial crisis ten years ago"

 

Tighter oil market could be 'short-lived' on 2020 non-OPEC supply: IEA

Paul Hickin 

IEA cuts 2019 oil demand growth again to 1.2 mil b/d but remains upbeat

 

IEA sees stronger 2020 oil demand growth of 1.4 mil b/d on petrochemicals

IEA calls on OPEC crude to fall 650,000 b/d in 2020 from May levels

 BUT TENSIONS ARE MOUNTING

 

Singapore — OPEC will have an uphill battle if it wants to keep oil markets balanced next year as a potentially tighter oil market in the second half of 2019 starts to wash away on a wave of non-OPEC supply.

The International Energy Agency's June Oil Market Report predicts a surge in US shale next year along with strong crude oil contributions from Canada, Brazil and Norway. This translates to non-OPEC supply growth accelerating from 1.9 million b/d this year to 2.3 million b/d in 2020.

"A clear message from our first look at 2020 is that there is plenty of non-OPEC supply growth available to meet any likely level of demand, assuming no major geopolitical shock, and the OPEC countries are sitting on 3.2 million b/d of spare capacity," the IEA said.

Indeed, the IEA has called on OPEC crude to drop to 29.3 million b/d in 2020, 650,000 b/d below the May output level. OPEC's May supply fell to its lowest since 2014 as Iranian supply plunged to 2.4 million b/d due to sanctions -- a number not seen since the late-1980s and on lower Saudi Arabian as well as Nigerian output.

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LOOMING OIL CRISIS 

 

 

HUGE #Concern As #Atmospheric #Carbon Levels Still Leaping

"Each year of high emissions adds to the stock of carbon in the air, bringing us closer to catastrophe"

Atmospheric carbon levels are leaping 

We can't afford more years like this...

 By Fiona Harvey

One of the many ironies of the climate crisis is that as temperatures change and extreme weather becomes more common, we need more energy to maintain comfort. Hotter summers have driven an increase in power-hungry air conditioning and cooler temperatures in some places – which may be driven by the melting Arctic – raise demand for heating.

BP’s report that carbon emissions from energy use have risen at the fastest rate in nearly a decade reflects those forces, as well as continuing demand from a rising global population and expanding industries.

The effect is already discernible in the atmosphere. Last week, the Scripps Institution of Oceanography reported that carbon dioxide levels in the air leapt this year by the second highest amount in their records, to 414.8 parts per million, at the famous observatory in Mauna Loa where CO2 has been measured continuously since 1958.

We cannot afford many more years like this. Every year of high emissions adds to the stock of carbon in the air, bringing us closer to the 450ppm of carbon dioxide that scientists warn could tip us into catastrophe. The IPCC’s stark warnings last year showed how dangerous a rise of 1.5C would be, and on current terms we are headed for an even bigger rise.

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 A DEAD PLANET HAS NO JOBS, AND...