in the middle of the night

The ratings agency downgrades of Warren Buffet’s Berkshire Hathaway after the company recently reported some large paper losses for 2008 remind me of the old joke about the job of an auditor -

he’s the guy who comes in after the battle to shoot the wounded.

Throughout the financial crisis, the ratings agencies (Fitch, S&P, Moody’s) have been more than a few days late and a lot of dollars short. They have been just one more cog in Wall Street’s investment banking black box.

That banking black box has worked much like the chicken pie machine in the children’s movie, Chicken Run (“chickens go in; pies come out”) until the machine broke down and its owners had no idea what to do to fix it.

Ratings and default insurance have allowed investors to avoid doing their own homework much to their current dismay. If you don’t know what you are buying and why, you are a chicken waiting to be plucked.