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The beast's privilege

In last month’s column, this dark monster attacked America for producing dodgy accounting and dishonest businessmen, not to mention obesity, flatulence, and Californians. Some might think the troubles at an Italian milk company, where millions appear to have gone walkabout, were a message from God that it is not only Americans who cheat investors.
Will the Beast apologise for his attack? Not a chance. It is his privilege to rant and rave and scream and shout. If you want calm considered wisdom, go and read another column. Read Trevor Cook.
Speaking of the subject of rants and raves, this dark monster remembers well when a respectable broker – if that’s not an oxymoron – came by to say what a well run company Parmalat was. Give him a few drinks and the Beast might even admit to having bought the story, and the bonds. Of course the bond sales firm was American, but this dark monster will admit that other breeds of broker deserve a place in his dungeon too. Will analysts ever learn that their job is to spot badly run companies, not to promote firms paying the largest corporate finance fees?
There are some especially dark damp cells waiting for the rating agencies too; they downgraded Parmalat from near ideal to pretty damn awful after the story came out. Rating agencies seem to think it is not their job to catch fraud: What can they do if a company lies? Like hell it isn’t their job; if they won’t and can’t spot cheating, it’s time the world got some new rating firms!
Are rating agencies in the business of just copying some numbers from the annual report, tossing in some figures graciously granted by the firm paying a fat fee, and adding two plus two to get AAA? They ain’t. It is long past time that they were more inquisitive and proactive not reactive. It’s too late to tell us a company or country is bad after we read about it in newspaper headlines.
You would think the world might have learned when the agencies discovered that Finland was next to Russia, or that Korean companies had a bit of debt, or that California couldn’t easily borrow and wouldn’t raise taxes or cut spending. And didn’t any analyst at either a broker or a rating agency think to ask to see the fine print in the well known partnerships supposedly buying Enron risk? It is time the raters did some work for their living.
So rating agency and broker analysts be warned: this Beast won’t stop ranting, and has devised some particularly nasty tortures for you, as for any actuaries, accountants, or regulators that stray into the dark forest below his castle!

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