Widespread confusion appears to exist among the investing public as to the potential distinction between ratings and valuations. Are they the same? If not, how exactly are they different, and is one more “useful” than the other as a financial measure? Even the SEC is now confused, something quite surprising in light of the fact that they are supposedly regulating rating agencies. Given the importance of this practical distinction, it’s worth spending a few minutes dispelling rumors, lies and innuendos. At a fundamental level, both ideas are identical and the issue of their supposed kinship or difference makes no sense at all. It is equivalent to asking about the difference between degrees Fahrenheit and degrees Centigrade: both are temperature-measurement systems. The only difference is that one system is used in America while the other one is used in Europe and elsewhere. (Should we call this “l’exception Américaine?”) If someone now living in Paris suddenly woke up in New York, confusion would reign only until he learned the new system, which would take less than a day, or even faster if he headed to the beach when the thermometer read “30 degrees.” The point is that a self-consistent system is always usable but only makes sense within its own context. No harm will be done by using either system as long as it is used appropriately. Since a simple transformation function exists between them, any confusion on the part of a user can be cleared up immediately with a mapping function.

An article in the current issue of Corporate Board Member quotes R&R Consulting principals Sylvain Raynes and Ann Rutledge on the effects new corporate strategies can have on credit ratings. Read the full article by Sharon Kahn, "Why Risking a Lower Credit Rating Can Make...

Naked Capitalism's Yves Smith makes a compelling case for the need for structural reform. She is spot-on about the significance of disintermediation for the banking industry and the need to decouple risk. Her lament—"I see perilous little grappling with the problem that [Bank of England's...

The revealing and esthetically pleasing chart that R&R's Ann Rutledge produced to illustrate asset-backed bond default rates is featured by Felix Salmon in his Reuters blog. Reflecting the value of analyzing the past in dealing with the future, Ann's presentation on the development of the...

It wasn't Dr. Krugman's hate-mail treatment of securitization that made my brain go tilt.(I say this even though we concur with Barry Ritholz’s reasoning in his blog article, "Paul Krugman is Wrong About Securitization." )What really got to me was the reference to toaster...

R&R's Ann Rutledge contributes to "House of Cards," David Faber's definitive report on how a subprime credit crunch turned into what may be the most severe worldwide economic crisis in a century.The program, initially aired on CNBC on February 12, will be repeated over the...