Quoted from HarryP

Moody’s Investors Service has revised its outlook to positive for the city of Schenectady, citing the future revenue from the Rivers Casino and Resort at Mohawk Harbor. Moody’s attributed the positive outlook to the city’s improving finances through cost containment, conservative budgeting and fully funding pension payments, according to a report released on Friday. The outlook is also based on the development of the old Alco site off Erie Boulevard, renamed Mohawk Harbor

http://www.dailygazette.com/news/2016/jan/16/0116_Moodys/

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All of those are very good reasons for Tim to pay more for his bonds than Chris paid for his. But all of them are explicitly ignored by S&P. S&P doesn’t put itself forward as some kind of investment-advice company: it takes no position on which bonds are good buys and which ones should be sold. All it does is try to rate credits on the basis of how likely they are to default.

Moody’s, by contrast, appreciates that bonds are investment instruments, and tries to build into its ratings the likelihood that investors will end up getting all their money back at the end of the day, rather than simply measuring how likely it is that there might be a default.

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Silver’s main thesis seems to be that the markets are a better guide to the markets than the credit rating agencies are. Which is true as far as it goes, but misses what it is that the ratings agencies in general, and S&P in particular, actually do. They’re a datapoint, not a financial advisor: ratings are more of a constant, in contrast to bond prices, which are highly variable. If you want a guide to bond prices, look at bond prices. If you want a guide to default probabilities, however, then the ratings agencies are still a good place to start.