08:14 – Interesting article in the paper this morning about cable/dish cutters. Last quarter, cable TV and satellite companies showed a net loss of between 380,000 and 450,000 households. The article attributes most of that to people cutting back because of the poor economy, including kids who’ve moved back in with their parents no longer needing their own subscriptions. It claims that on-line viewing is a minuscule factor in the falling number of cable/satellite subscribers. Of course, it also says that people can watch TV episodes on Netflix for free.
What’s never reported is the number of people who’ve downgraded their cable/satellite subscriptions. Barbara and I fall into that category. We cut back several years ago to the minimum cable TV level, which gives us only local stations for something like $10/month. We use Netflix, both disc and streaming, for nearly all our viewing. Many of our friends have also cut back their service levels, albeit often not as dramatically as we did. But many of them who were paying $100+ per month for TV service are now paying half that or less, and using Netflix for a large percentage of their viewing. This phenomenon is probably more of a threat to cable/satellite providers and networks than those who out-and-out cut the cable.
I finally saw an article yesterday that mentioned the dirty little secret of ratings agencies. The truth is that few investors pay any attention to anything they say, particularly about sovereign and large corporate debt. In fact, many investors have made lots of money by adopting contrarian strategies, buying instead of selling when one of the Big Three ratings agencies downgrades a country or corporation. When S&P downgraded US debt, investors ignored them in droves. Investors remember that these agencies were rating junk mortgages AAA right up to the moment they collapsed, and that these agencies are paid by those who they’re rating. Even a cursory look at how the market rates sovereign debt tells you just how far from reality these agencies’ ratings are, and just how little attention the market gives the ratings.
Based on yields and the free-market price to insure sovereign debt, for example, Germany is a worse risk than the UK, which in turn is a much worse risk than the US. In fact, based on market behavior, US debt is the only major sovereign debt that should rate AAA, with Germany and the UK two or three steps below that, and France lower still.