251–260 of 407 posts
Earlier quoted context omitted.
brother read those numbers out loud If I make $200k I do not have $400k off-balance gambling debt
This "debt" is almost solely rental style deals with datacenter constructors. If you make 200k and have a 400k mortgage youre doing just fine.
Earlier quoted context omitted.
These companies have valuations reflecting a debt light business. At a minimum, 420 billion in debt is enough to change the stock price by 10-20%. If the company plans to add another 400 billion in debt you need to give it the side eye. If 50 billion in revenue is from other companies debt spending… then You have a problem.
> These companies have valuations By the time we're reading headlines about this debt, it has been known to institutional investors for a long time. The debt is priced into the valuation.
Here is the link (oddly I could not find it with HN Search): https://news.ycombinator.com/item?id=48917135
Earlier quoted context omitted.
i dont think you want to ever be in a position where you arent making money and your net worth could drop 50% in a year. but hey, if you want the risk go for it i guess.
It literally doesn't matter if drops 50% in a year. That is a paper loss and you have years worth of cash you can spend while waiting for it to recover. If you panic-sell at the bottom of that market then that's on you. It isn't necessary in order to pay the bills. What you propose takes on a huge amount of inflation risk. How are you hedging that risk? A guaranteed yield doesn't mean you aren't getting poorer. Obses…
not if you're 80 dude...
Earlier quoted context omitted.
I'd content that homeowners' insurance is quite cost-effective, because there isn't a cheaper alternative to hedge your risk. I'm saying that for the cost of buying puts to hedge against equity downside in a retirement portfolio, for any given level of risk, you'd probably be better off just selling some of the equities and buying bonds instead. e.g. try and find any equity-focused ETF with downside protection that g…
I think the risk for increasing your bond exposure as compensation would be if instead of a low growth/low inflation scenario (Bonds do well) there's a low growth+high inflation scenario (1940s, 1970s, 2022) and the negative correlation between stocks and bonds doesn't hold.
And more specifically, it's not low growth/high inflation that kills bond portfolio returns, it's interest rates increasing that devalue bonds, i.e. the transition from low inflation to high inflation. So yeah, you can construct a portfolio that hedges against that... but I'd be surprised if you can do it without decreasing your risk-adjusted expected returns below a plain stock/bond index fund - whatever hedging method you use is either going to increase your interest-rate risk (bonds), or your inflation-rate risk (cash), or is going to limit your upside (buffer etfs), or is just going sap your upfront returns (protective puts).
This is the tech industry's version of 2008.
A predictable reset schedule with refinancing ("valuations"). Loose money leading to debt obligations to be paid in the future. Circular financing.
And what's funny, is it's precisely the off-book debt that will make the compression happen slowly. There's no bailouts this time.
Earlier quoted context omitted.
> (supposing that they had their investments in stocks, I wouldn't consider that any retiree would have all their money in stocks but there have been some other comments which show a sizable amount, @kipchak's comment shows 50% stock for retirement. so a 50% shock on top of that could lead to a wipe out of 25% of your retirement fund which is honestly still pretty crazy.) What do you think the cost would be for prote…
Take SPY at a strike of $738, per lot of 100 that's $73 800. Take 14 lots, give or take, to make a cool million. SPY260821P00738000 (OCC symbol: PUT on SPY expiring the 21th of August 2026 at a strike of $738) is $12.20 as I type this, so $1220 per lot. So $16 800 to protect for a month. So $200 K per year. A solid 20% yearly, unless my math is way off. Now of course you can buy, instead of a PUT, a PUT debit spread,…
ATM options cost approximately 0.4 S sigma T^0.5 (do a Taylor expansion of the "N"s in the Black Scholes formula), so indeed, for current index vols of about 16% we are talking 0.4 * 16% * (1/12)^0.5 = 1.85% for a 1 month option, and 12 of them indeed cost 22% of your portfolio. Not a good idea.
However, if you hold the options only half the way to expiry, you lose only 1/4 of the time value. And if you buy OTM, you have convexity coming your way on the way down.
Lastly, index vols were very low (until yesterday, ha), as so many firms entered the dispersion trade: they wanted to go long dispersion (some firms do well with AI, some lose out), so short correlation, therefore long single stock vol and short index vol. Which means you could buy index vol (ie protection) quite cheap.
Earlier quoted context omitted.
Wouldn't improving LLM efficiency make them even more useful across the board, then they can enjoy the nice economies of scale? The plan is to have LLM working completely autonomously, in that case, the more resources you have, the better. Perhaps people will use local LLM to ask questions, or coders use them for their personal projects, but that's not where the real money is.
If it's efficient enough you just run it all locally & screw all the rent seekers who want to tell you how you can't use their model & who will sell and misuse all your data they capture.
Earlier quoted context omitted.
It's not hidden at all. Financial blogs very accessible to laymen like Matt Levine's Money Stuff have talked about this structure months ago. If you are an investor and surprised by this news you weren't sufficiently prepared and shouldn't have been investing in the first place.
What's the purpose of keeping it off the balance sheet if not to hide it?
Generally speaking after commencement the former will become both liabilities (for a smaller amount than the number they listed due to discounting) and an asset (representing the asset of the right to occupy the lease)
The latter will generally become some sort of asset
I have no idea what the people going on about subsidiaries could even possibly be referring to as it relates to this article, this is just lease accounting
Would have been nice if the article had any substantive facts in it
Pretty much Buzzfeed level doomscroll slop
Earlier quoted context omitted.
Yes of course life insurance and pension funds are going to buy this debt. This is the highest quality debt that's out there. If you don't want life insurance and pension funds to buy debt from big tech companies because you believe it's too risky, then you believe that bonds are just too risky in general.
OK, wait a minute. Elsewhere in this discussion, people are saying that only a few of these AI companies are going to survive. For stocks, that can still be a reasonable investment - low odds, but still a positive expectation value - but for bonds, it's terrible . You're paying me single-digit interest when there's only a 20% chance that you live long enough to give me my principle back? Get outta here. Literally nob…
In the real world, recovery rates for corporate bonds are between 30% to 70% or so, depending on the seniority of the debt and the collateral.