Investment Outlook - The Risks Ahead
John W. Rodgers Jr.: My Favorite Indicator
During the economic crisis we often found that these markets were ahead of the rating agencies—and even the stock market—in seeing signs of credit trouble. For example, the credit default swap market could be pricing $10 million of default insurance on Company A at $250,000. Our analysis might show the company's implied credit rating at B3 even if Moody's gives it a higher rating at Baa3. The idea is to monitor multiple sources of information for early warning signals.