Yesterday, the Motley Fool website ran an interesting article by Nick Kapur titled “Why do we still listen to the ratings agencies“.  The general premise of the article is that the ratings agencies are either unable or unwilling to provide an accurate assessment of a company’s financial strength.  The author goes on to contemplate what role the ratings agencies played in the recent financial meltdown and how much responsibility we should assign them.

“The line here between ignorance and dutiful compliance is thin and not meaningful. Though many have alleged that the ratings agencies were on the take outright, it doesn’t really matter if they were or weren’t. Essentially, the ratings agencies were either crooked or they were stupid. Either way, they’re guilty.”

The article raises an interesting question of what role should a Moody’s or S&P rating play in an investors analysis?  Should they still be trusted, or have they lost all investor confidence?  Finally, is there an opportunity for a new player to emerge as a truly unbiased opinion, and what would that new player have to do to earn the respect of the investing community?

I believe there is an opportunity, but the road to respect will be a long one.  Thorough, independent analysis will always be worth much more than a 3rd party report from a vendor whose motivations may be cloudy at best.