What is his critical stance on Wall Street analysts and rating agencies?

Warren Buffett's Critical Stance Toward Wall Street Analysts and Rating Agencies

Warren Buffett has repeatedly expressed strong criticism of Wall Street analysts and rating agencies in his letters to shareholders. He believes these institutions are often profit-driven, plagued by short-termism, and lack independence and reliability. Below are his main critiques:

• Short-Termism and Inaccurate Forecasts: Buffett criticizes analysts for excessively focusing on quarterly earnings predictions and short-term market fluctuations while neglecting companies' long-term intrinsic value. He often states that analysts' forecasts are "as reliable as fortune-telling," citing examples of frequent errors that nonetheless remain popular in the market.

• Conflicts of Interest: He points out that Wall Street analysts are often employed by investment banks, driven by profit motives rather than objective analysis. This leads to biased stock recommendations aimed at generating commissions through trades, rather than providing genuine value assessments for investors.

• Failures of Rating Agencies: Buffett holds a scathing view of credit rating agencies (such as Moody’s and Standard & Poor’s), particularly for assigning high ratings to risky subprime mortgage products during the 2008 financial crisis, which led to catastrophic consequences. He sarcastically notes that these agencies are "overly optimistic in bull markets and overly pessimistic in bear markets," questioning their independence since they are paid by the companies they rate.

• Encouraging Independent Thinking: Buffett advises investors to ignore analyst reports and ratings, instead conducting their own research into corporate fundamentals. He emphasizes: "Never hand your money to those who profit from your ignorance."

Overall, Buffett’s critiques aim to remind investors to avoid blindly following Wall Street "noise" and instead focus on the principles of value investing.