Thread by @Sanjay__Bakshi

On the behavior of auditors and credit rating companies:

You would've noticed frequent downgrades by credit raters and promptness displayed by auditors in qualifying financial statements and sometimes even refusing to sign them.

This is a sign of the times we are living in..

After a long a period of over-accommodative behavior by both auditors and rating companies, we are now seeing the pendulum swing the other way.

The frequency of downgrades will ACCELERATE not just because reality commands it, but also because the rating companies are shit scared

They are shit scared for the right reasons. The environment has changed. The media has become much more vigilant. And stories about accommodative behavior not only travels fast, it also attracts the attention of Regulators.

What will be the implications?

For a while, the pendulum will stay here. It will become increasingly difficult for companies to "shop" for a better credit rating. And there will be more honesty in accounting.

The companies that are perceived to be honest will command even higher premiums and the crooked ones will become increasingly untouchable. This is happening right now.

Then, after a few years, memories will fade and animal spirits will be back. And slowly the pendulum will swing the other way.

A new generation of crooks will emerge to part fools from their money. And they will be helped by over-accommodative rating companies and auditors.

And then there will be another crisis...