Business Investment Question:
Explain How often have you found that the S & P rating was totally wrong?
Answer:
Within the Brainwashing book methodology, there are management controls (checks and balances) that warn of problems at the companies we invest in. Specifically, a cut in or elimination of the dividend, and an S & P downgrade of the stock below investment grade. Rarely is there a situation where serious trouble won't come to our attention in time through one of these mechanisms.
I can think of only three glaring instances over the years where an Investment Grade Rating held up to the very end: Ames, Enron, and Friedman's. But, and key to the overall methodology, major individual portfolio disasters were avoided because of individual security % of portfolio diversification rules that must never be violated and which must always [absolutely always] be calculated using The Working Capital Model.
Also, in each instance, profits had been made on the security more than once prior to the disaster.
I can think of only three glaring instances over the years where an Investment Grade Rating held up to the very end: Ames, Enron, and Friedman's. But, and key to the overall methodology, major individual portfolio disasters were avoided because of individual security % of portfolio diversification rules that must never be violated and which must always [absolutely always] be calculated using The Working Capital Model.
Also, in each instance, profits had been made on the security more than once prior to the disaster.