--- title: "Meaning & Key Takeaway of: Ratings agencies are highly conflicted…" description: "\"Ratings agencies are highly conflicted, unimaginative dupes. They are blissfully unaware of adverse selection and moral hazard. Investors should never ..." image: "https://sms4smile.com/quotes/i/c73/seth-klarman-1979_adverse_ratings-agencies-are-highly-conflicted-u_248048.png" --- # Ratings agencies are highly conflicted, unimaginative… ![“Ratings agencies are highly conflicted, unimaginative dupes. They are blissfully unaware of adverse selection and moral hazard. Investors should never trust them.” quote by Seth Klarman](https://sms4smile.com/quotes/i/c73/seth-klarman-1979_adverse_ratings-agencies-are-highly-conflicted-u_248048.png) [Download](https://sms4smile.com/quotes/i/c73/seth-klarman-1979_adverse_ratings-agencies-are-highly-conflicted-u_248048.png) [Open image](https://sms4smile.com/quotes/i/c73/seth-klarman-1979_adverse_ratings-agencies-are-highly-conflicted-u_248048.png) > “Ratings agencies are highly conflicted, unimaginative dupes. They are blissfully unaware of adverse selection and moral hazard. Investors should never trust them.” [Seth Klarman](https://sms4smile.com/quotes/author/seth-klarman/) ## About This Quote This interpretation was drafted with AI assistance. It is one reading of the quote, not the author's own explanation. Rating firms face inherent conflicts and often ignore key risks, making them unreliable for investors. **In simple terms:** Rating agencies have conflicts and miss important risks. Key Takeaway Don't rely on them blindly. Themes conflict of interest risk assessment trust Mood cautious skeptical Type analytical critical When to use this quote - investment decisions - portfolio management - due diligence Key Concepts adverse selection moral hazard agency problem Questions to Reflect On - How can investors verify ratings? - What alternatives exist for risk assessment? A Different Perspective Ratings may still provide useful market signals despite flaws. ★ ★ ★ ★ ★ No ratings yet [Customer](https://sms4smile.com/quotes/about/customer/) [Investors](https://sms4smile.com/quotes/about/investors/) [Moral](https://sms4smile.com/quotes/about/moral/) [Moral hazard](https://sms4smile.com/quotes/about/moral-hazard/) ## Related quotes > [Pension funds, endowments, and private investors trust Mitt Romney's former company Bain Capital enough to hand it billions of dollars in assets.](https://sms4smile.com/quotes/ronald-kessler/pension-funds-endowments-and-private-investors-trust-mitt-romney-s/) [Ronald Kessler](https://sms4smile.com/quotes/author/ronald-kessler/) > [The government can always rescue the markets or interfere with contract law whenever it deems convenient with little or no apparent cost. (Investors believe…](https://sms4smile.com/quotes/seth-klarman/the-government-can-always-rescue-the-markets-or-interfere-with/) [Seth Klarman](https://sms4smile.com/quotes/author/seth-klarman/) > [“...the ratings agencies' problem was in being unable or uninterested in appreciating the distinction between risk and uncertainty.”](https://sms4smile.com/quotes/nate-silver/the-ratings-agencies-problem-was-in-being-unable-or-uninterested-in/) [Nate Silver](https://sms4smile.com/quotes/author/nate-silver/) > [“The alchemy that the ratings agencies performed was to spin uncertainty into what looked and felt like risk. They took highly novel securities, subject…](https://sms4smile.com/quotes/nate-silver/the-alchemy-that-the-ratings-agencies-performed-was-to-spin-2/) [Nate Silver](https://sms4smile.com/quotes/author/nate-silver/) > [Ratings agencies are the glue that ostensibly holds the entire financial industry together.](https://sms4smile.com/quotes/matt-taibbi/ratings-agencies-are-the-glue-that-ostensibly-holds-the-entire/) [Matt Taibbi](https://sms4smile.com/quotes/author/matt-taibbi/) > [“The alchemy that the ratings agencies performed was to spin uncertainty into what looked and felt like risk. They took highly novel securities, subject…](https://sms4smile.com/quotes/nate-silver/the-alchemy-that-the-ratings-agencies-performed-was-to-spin/) [Nate Silver](https://sms4smile.com/quotes/author/nate-silver/) > [Embryonic stem cell research is at the leading edge of a series of moral hazards.](https://sms4smile.com/quotes/george-w-bush/embryonic-stem-cell-research-is-at-the-leading-edge-of-a-series-of/) [George W. Bush](https://sms4smile.com/quotes/author/george-w-bush/) > [How about we all stop paying our mortgages! It's a moral hazard.](https://sms4smile.com/quotes/rick-santelli/how-about-we-all-stop-paying-our-mortgages-it-s-a-moral-hazard/) [Rick Santelli](https://sms4smile.com/quotes/author/rick-santelli/) > [Moral hazard is something I don't take lightly.](https://sms4smile.com/quotes/henry-paulson/moral-hazard-is-something-i-don-t-take-lightly/) [Henry Paulson](https://sms4smile.com/quotes/author/henry-paulson/) > [Market discipline can only limit moral hazard to the extent that debt and equity holders believe that, in the event of distress, they will…](https://sms4smile.com/quotes/ben-bernanke/market-discipline-can-only-limit-moral-hazard-to-the-extent-that-debt/) [Ben Bernanke](https://sms4smile.com/quotes/author/ben-bernanke/) > [Those with health insurance are overinsured and their behavior is distorted by moral hazard. Those without health insurance use their own money to make…](https://sms4smile.com/quotes/malcolm-gladwell/those-with-health-insurance-are-overinsured-and-their-behavior-is/) [Malcolm Gladwell](https://sms4smile.com/quotes/author/malcolm-gladwell/) > [I'm interested in the limits of personality, in the possibility of change, and the saving power of art. Do powerful works of art raise…](https://sms4smile.com/quotes/adam-ross/i-m-interested-in-the-limits-of-personality-in-the-possibility-of/) [Adam Ross](https://sms4smile.com/quotes/author/adam-ross/) > [As we try to make the financial system safer, we must inevitably confront the problem of moral hazard.](https://sms4smile.com/quotes/ben-bernanke/as-we-try-to-make-the-financial-system-safer-we-must-inevitably/) [Ben Bernanke](https://sms4smile.com/quotes/author/ben-bernanke/) > [Large credit guarantees also impede optimal allocation of financial resources and increase moral hazard.](https://sms4smile.com/quotes/urjit-patel/large-credit-guarantees-also-impede-optimal-allocation-of-financial/) [Urjit Patel](https://sms4smile.com/quotes/author/urjit-patel/) > [There is a major disaster when a person allows some success to become a stopping place rather than a way station on to a…](https://sms4smile.com/quotes/bill-vaughan/there-is-a-major-disaster-when-a-person-allows-some-success-to-become/) [Bill Vaughan](https://sms4smile.com/quotes/author/bill-vaughan/) ## More by Seth Klarman > [Unlike return, however, risk is no more quantifiable at the end of an investment that it was at its beginning. Risk simply cannot be…](https://sms4smile.com/quotes/seth-klarman/unlike-return-however-risk-is-no-more-quantifiable-at-the-end-of-an/) [Seth Klarman](https://sms4smile.com/quotes/author/seth-klarman/) > [Because investors are not usually penalized for adhering to conventional practices, doing so is the less professionally risky strategy, even though it virtually guarantees…](https://sms4smile.com/quotes/seth-klarman/because-investors-are-not-usually-penalized-for-adhering-to/) [Seth Klarman](https://sms4smile.com/quotes/author/seth-klarman/) > [Value investing is risk aversion.](https://sms4smile.com/quotes/seth-klarman/value-investing-is-risk-aversion/) [Seth Klarman](https://sms4smile.com/quotes/author/seth-klarman/) > [Be focused on process and not outcome](https://sms4smile.com/quotes/seth-klarman/be-focused-on-process-and-not-outcome/) [Seth Klarman](https://sms4smile.com/quotes/author/seth-klarman/) > [There is an old saying, "How did you go bankrupt?" And the answer is, "Gradually, and then suddenly." The impending fiscal crisis in the…](https://sms4smile.com/quotes/seth-klarman/there-is-an-old-saying-how-did-you-go-bankrupt-and-the-answer-is/) [Seth Klarman](https://sms4smile.com/quotes/author/seth-klarman/) > [In a rising market, everyone makes money and a value philosophy is unnecessary. But because there is no certain way to predict what the…](https://sms4smile.com/quotes/seth-klarman/in-a-rising-market-everyone-makes-money-and-a-value-philosophy-is/) [Seth Klarman](https://sms4smile.com/quotes/author/seth-klarman/) > [Ultimately, nothing should be more important to investors than the ability to sleep soundly at night.](https://sms4smile.com/quotes/seth-klarman/ultimately-nothing-should-be-more-important-to-investors-than-the/) [Seth Klarman](https://sms4smile.com/quotes/author/seth-klarman/) > [The best protection against risk is knowing what you are doing.](https://sms4smile.com/quotes/seth-klarman/the-best-protection-against-risk-is-knowing-what-you-are-doing/) [Seth Klarman](https://sms4smile.com/quotes/author/seth-klarman/) > [Warren Buffett once wrote that value investing is like an inoculation--it either takes or it doesn't--and when you explain to somebody what it is…](https://sms4smile.com/quotes/seth-klarman/warren-buffett-once-wrote-that-value-investing-is-like-an-inoculation/) [Seth Klarman](https://sms4smile.com/quotes/author/seth-klarman/) > [It is important to remember that value investing is not a perfect science. It is an, with an ongoing need for judgment, refinement, patience,…](https://sms4smile.com/quotes/seth-klarman/it-is-important-to-remember-that-value-investing-is-not-a-perfect/) [Seth Klarman](https://sms4smile.com/quotes/author/seth-klarman/) > [Value investing is at its core the marriage of a contrarian streak and a calculator.](https://sms4smile.com/quotes/seth-klarman/value-investing-is-at-its-core-the-marriage-of-a-contrarian-streak/) [Seth Klarman](https://sms4smile.com/quotes/author/seth-klarman/) > [The avoidance of loss is the surest way to ensure a profitable outcome.](https://sms4smile.com/quotes/seth-klarman/the-avoidance-of-loss-is-the-surest-way-to-ensure-a-profitable-outcome/) [Seth Klarman](https://sms4smile.com/quotes/author/seth-klarman/) > [Do not suffer interim losses, relish and appreciate them](https://sms4smile.com/quotes/seth-klarman/do-not-suffer-interim-losses-relish-and-appreciate-them/) [Seth Klarman](https://sms4smile.com/quotes/author/seth-klarman/) > [It is crucial to have a strategy in place before problems hit, precisely because no one can accurately predict the future direction of the…](https://sms4smile.com/quotes/seth-klarman/it-is-crucial-to-have-a-strategy-in-place-before-problems-hit/) [Seth Klarman](https://sms4smile.com/quotes/author/seth-klarman/) > [Having great clients is the key to investment success.](https://sms4smile.com/quotes/seth-klarman/having-great-clients-is-the-key-to-investment-success/) [Seth Klarman](https://sms4smile.com/quotes/author/seth-klarman/) [Explore all 193 Seth Klarman quotes ](https://sms4smile.com/quotes/author/seth-klarman/) ## More Adverse quotes > [A common fallacy in much of the adverse criticism to which science is subjected today is that it claims certainty, infallibility and complete emotional…](https://sms4smile.com/quotes/cyril-norman-hinshelwood/a-common-fallacy-in-much-of-the-adverse-criticism-to-which-science-is/) [Cyril Norman Hinshelwood](https://sms4smile.com/quotes/author/cyril-norman-hinshelwood/) > [Truth emerges from the clash of adverse ideas.](https://sms4smile.com/quotes/john-stuart-mill/truth-emerges-from-the-clash-of-adverse-ideas/) [John Stuart Mill](https://sms4smile.com/quotes/author/john-stuart-mill/) > [People frequently ask me if adverse criticism bothers me. I've had a lot of it, and I have been able to shrug most of…](https://sms4smile.com/quotes/warren-giles/people-frequently-ask-me-if-adverse-criticism-bothers-me-i-ve-had-a/) [Warren Giles](https://sms4smile.com/quotes/author/warren-giles/) > [A society in which conjugal infidelity is tolerated must always be in the long run a society adverse to women.](https://sms4smile.com/quotes/c-s-lewis/a-society-in-which-conjugal-infidelity-is-tolerated-must-always-be-in/) [C. S. Lewis](https://sms4smile.com/quotes/author/c-s-lewis/) > [Receive, dear friend, the truths I teach, So shalt thou live beyond the reach Of adverse Fortune's pow'r; Not always tempt the distant deep,…](https://sms4smile.com/quotes/horace/receive-dear-friend-the-truths-i-teach-so-shalt-thou-live-beyond-the/) [Horace](https://sms4smile.com/quotes/author/horace/) > [I see in him (Dr. Max Gerson) one of the most eminent medical geniuses in the history of medicine...he was greatly impeded by adverse…](https://sms4smile.com/quotes/albert-schweitzer/i-see-in-him-dr-max-gerson-one-of-the-most-eminent-medical-geniuses/) [Albert Schweitzer](https://sms4smile.com/quotes/author/albert-schweitzer/) > [If you will call your troubles experiences, and remember that every experience develops some latent force within you, you will grow vigorous and happy,…](https://sms4smile.com/quotes/john-heywood/if-you-will-call-your-troubles-experiences-and-remember-that-every/) [John Heywood](https://sms4smile.com/quotes/author/john-heywood/) > [“I didn’t like the play, but than I saw it under adverse conditions – the curtain was up. ”](https://sms4smile.com/quotes/george-s-kaufman/i-didn-t-like-the-play-but-than-i-saw-it-under-adverse-conditions-the/) [George S. Kaufman](https://sms4smile.com/quotes/author/george-s-kaufman/) > [Our actions today will protect children from the adverse effects of exposure to pesticides commonly used on foods. The agency also is on schedule…](https://sms4smile.com/quotes/carol-browner/our-actions-today-will-protect-children-from-the-adverse-effects-of/) [Carol Browner](https://sms4smile.com/quotes/author/carol-browner/) > [I have just been conversing with one man, to whom no weight of adverse experience will make it for a moment appear impossible that…](https://sms4smile.com/quotes/ralph-waldo-emerson/i-have-just-been-conversing-with-one-man-to-whom-no-weight-of-adverse/) [Ralph Waldo Emerson](https://sms4smile.com/quotes/author/ralph-waldo-emerson/) > [There are a lot of people in Milwaukee who have had adverse impacts from Scott Walker. He's managed to mess over everyone in Milwaukee.](https://sms4smile.com/quotes/gwen-moore/there-are-a-lot-of-people-in-milwaukee-who-have-had-adverse-impacts/) [Gwen Moore](https://sms4smile.com/quotes/author/gwen-moore/) > [In the ending the king is a powerful piece for assisting his own pawns, or stopping the adverse pawns.](https://sms4smile.com/quotes/wilhelm-steinitz/in-the-ending-the-king-is-a-powerful-piece-for-assisting-his-own/) [Wilhelm Steinitz](https://sms4smile.com/quotes/author/wilhelm-steinitz/) > [Safe care saves lives and saves money. Adverse events like high levels of infection, blood clots or falls in hospital, emergency readmissions and pressure…](https://sms4smile.com/quotes/andrew-lansley/safe-care-saves-lives-and-saves-money-adverse-events-like-high-levels/) [Andrew Lansley](https://sms4smile.com/quotes/author/andrew-lansley/) > [Equally inured by moderation either state to bear, prosperous or adverse.](https://sms4smile.com/quotes/john-milton/equally-inured-by-moderation-either-state-to-bear-prosperous-or/) [John Milton](https://sms4smile.com/quotes/author/john-milton/) > [In the area of trading, it is now an academically demonstrated fact that women tend to be a little bit more risk-adverse. They don't…](https://sms4smile.com/quotes/christine-lagarde/in-the-area-of-trading-it-is-now-an-academically-demonstrated-fact/) [Christine Lagarde](https://sms4smile.com/quotes/author/christine-lagarde/) Browse all 190 Adverse quotes ```json { "@context": "https://schema.org", "@graph": [ { "@type": "Quotation", "text": "Ratings agencies are highly conflicted, unimaginative dupes. They are blissfully unaware of adverse selection and moral hazard. 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