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AI Companies Are Trying to Hide a Staggering Amount of Debt

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Re: AI Companies Are Trying to Hide a Staggering Amount of Debt

#301

Post by bacchusracine »

LadyCailin wrote: post #299
michaelt wrote: post #290

Earlier quoted context omitted.

In many historical societies, religious prohibitions on usury meant the charging of interest of any kind . Jump in a time machine to 1515 and ask Martin Luther, or to 1260 and ask Thomas Aquinas, they'd tell you it's sinful. And in the present age, a fair number of Islamic folk consider interest against their religion's rules. So there's a Halal finance industry where, for example, you can get a "murabahah contract"…

I love when religions have rule lawyers like this. It readily discredits the religion. As if their all powerful god can be fooled by fancy paperwork or legal loopholes.

They’re not trying to fool God, they’re trying to fool you into going along with it. They don’t care what God thinks and may not even believe in Him at all, but unless they can convince you of the loophole they’re stuck with the rules themselves.

Re: AI Companies Are Trying to Hide a Staggering Amount of Debt

#302

Post by logicallee »

jraph wrote: post #203
logicallee wrote: post #187

They're obviously not taking on enough debt because I'm paying $200 per month for one AI, $100 per month for a second, a $20 "donation" to Gemini[1] paying for a service I never use just to fund its development, and yet here I am doing my own laundry, making my own damn breakfast, lunch, and dinner and manually tracking my Calories and macros, I'm putting my own damn dishes away, racking and unracking my own damn wei…

You are donating money to Google, one of the richest companies in the world? It really doesn't need your help, and it's already way too powerful. If you have money to spare, can't you give to good causes instead?

I also give to good causes.

Re: AI Companies Are Trying to Hide a Staggering Amount of Debt

#303

Post by beloch »

abernard1 wrote: post #255
rvz wrote: post #225

This is the tech industry's version of 2008.

It is. 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.

Given that AI exec's have been careful to lavish praise (and cash) on Trump for the last few years, I suspect bailouts will not be off the table.

Re: AI Companies Are Trying to Hide a Staggering Amount of Debt

#304

Post by aurareturn »

lumost wrote: post #64
wongarsu wrote: post #53

Do they? Is a company with $200 billion annual revenue and earnings (EBITDA) of $100 billion having $420 billion of off-balance-sheet debt really staggering? In many other industries that would be a perfectly normal amount of debt to have. It's only unusual because we are used to tech companies having so much cash on hand they don't know where to put it

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 reflecting a debt light business.
It's more to do with growth rate in my opinion.

Re: AI Companies Are Trying to Hide a Staggering Amount of Debt

#305

Post by alex43578 »

HDBaseT wrote: post #287
LargeWu wrote: post #243

Earlier quoted context omitted.

Last week I was at the bank in my hometown, a small rural community. The teller took a phone call, and I overheard her say "You have $1.53 in your checking account, and $150 in savings". Presumably this is their total net worth. I think this is way more common than people on this type of forum realize. Most will work until they literally can't anymore, then scrape by on social security until they die. I think it's im…

It is either that, or they have tons of debt. (Sometimes both!) The average person is struggling in modern America.

Because the average person also makes a litany of poor financial decisions. $100K student loan balances for an state school arts degree, forgoing health insurance but expecting to receive $200K in care for free, or buying that $80K F150 on a 12.5% loan and rolling in negative equity.

The US is second in the world for median equivalised household disposable income, second only to Luxembourg and 10%+ above Norway. For daily median per person income after taxes and transfers, we're only behind Norway, Switzerland, Luxembourg, Qatar, and the UAE. Outside of petrostates, microstates, and Switzerland, no country has richer "average" people.

The US certainly doesn't have the safety net of some of these other states, but these aren't holes you're being thrown into by society: they're pits you've deliberately jumped into in 99% of cases.

Re: AI Companies Are Trying to Hide a Staggering Amount of Debt

#306

Post by mancerayder »

Terr_ wrote: post #276
MattGrommes wrote: post #166

Earlier quoted context omitted.

One of the big issues with this is sequence of returns risk. If you retire and rely on your portfolio but the market dives for a year or two right after you leave the workforce, your total portfolio value is screwed because you were selling at a low point.

Tangentially: I think a lot of people forget/underestimate the degree to which the industries behind their job are ones that they need to diversify away-from. In other words, a programmer should invest a bit more away from software than average, a realtor should invest a bit more away from properties than average, a coal-miner should invest a bit more away from energy and mining, etc. If you have your job, you can we…

That makes sense, and it probably should be said more. It's probably just because we invest in what we know. If you're a real estate broker, you have an interest in properties, you think about it all the time, so you'll buy your own properties, or invest perhaps in builder stocks. If you're in tech, well, I don't need to say it because that's most of us. If you work in the energy sector, I imagine you know a thing or two about transport and esoterica of speculative miners or drillers, etc.

Re: AI Companies Are Trying to Hide a Staggering Amount of Debt

#307

Post by mancerayder »

alex43578 wrote: post #305
HDBaseT wrote: post #287

Earlier quoted context omitted.

It is either that, or they have tons of debt. (Sometimes both!) The average person is struggling in modern America.

Because the average person also makes a litany of poor financial decisions. $100K student loan balances for an state school arts degree, forgoing health insurance but expecting to receive $200K in care for free, or buying that $80K F150 on a 12.5% loan and rolling in negative equity. The US is second in the world for median equivalised household disposable income, second only to Luxembourg and 10%+ above Norway. For…

Your error here, or the missing piece if we're generous, is what people are spending money on. Health care is astronomically more expensive here. Schooling isn't free after high school. Day care isn't free. Hell, even property taxes are simply 'not a thing' in France or the UK, where the taxes and Council Tax, respectively, are a tiny fraction of what Americans pay in property taxes ---- which, of course, pay for the 'free public schools.'

Now, let's talk about insurance, that's also much higher. In states like California and Florida, home insurance is through the roof, in some states like NJ and NY, car insurance is through the roof. Both going up way above inflation (like the items in my first paragraph).

You might counter with energy costs are much higher in these European countries (and similar ones like Germany, Benelux, etc), and the purchasing power might be higher, but the wages are so so much lower.

That said, this trope of people misspending their money needs to consider this outrageous costs of things that many people around the world never need to think about. The shitty wages in France are overshadowed by so many essentials being available without a high cost or any cost in some cases.

Re: AI Companies Are Trying to Hide a Staggering Amount of Debt

#308

Post by maroonblazer »

hualapais wrote: post #300
rocho wrote: post #267

Earlier quoted context omitted.

Why do you consider bonds usury?

Because bonds involve interest. Per Summa Theologica: > To take usury for money lent is unjust in itself, because this is to sell what does not exist, and this evidently leads to inequality which is contrary to justice. https://www.newadvent.org/summa/3078.htm …Aquinas expands the analysis but it is relatively straightforward: all interest is usury. Personally, I find it helpful to imagine two hypothetical persons re…

>in effect asking for more units of money than actually exist in the whole system.

Depends on how you define the 'whole system'. If I borrow $100 and make $110, the latter didn't appear out of nowhere. The lender, too, could have turned that $100 into $110.

Why shouldn't they be compensated for that opportunity cost?

Re: AI Companies Are Trying to Hide a Staggering Amount of Debt

#309

Post by abernard1 »

beloch wrote: post #303
abernard1 wrote: post #255

Earlier quoted context omitted.

It is. 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.

Given that AI exec's have been careful to lavish praise (and cash) on Trump for the last few years, I suspect bailouts will not be off the table.

I suspect bailouts will be off the table. Simply because the people who support OpenAI and the tech industry are on the same side of the political aisle as the people protesting data centers.

"Big Tech" as a pejorative started on the Right. That never changed.

Remember the hubbub about companies having "free speech" while they deplatformed and censored critics? That never sat well with a certain group of people. And they're the kind of people with long memories, that might have guests entertained as a visible sign of submission, and not as friends.

The more interesting revelation will be if certain persons can psychologically come to admit the people they are against are politically aligned with them, and their opponents are more intelligent than they are willing to let on.

Re: AI Companies Are Trying to Hide a Staggering Amount of Debt

#310

Post by Terr_ »

mancerayder wrote: post #306
Terr_ wrote: post #276

Earlier quoted context omitted.

Tangentially: I think a lot of people forget/underestimate the degree to which the industries behind their job are ones that they need to diversify away-from. In other words, a programmer should invest a bit more away from software than average, a realtor should invest a bit more away from properties than average, a coal-miner should invest a bit more away from energy and mining, etc. If you have your job, you can we…

That makes sense, and it probably should be said more. It's probably just because we invest in what we know. If you're a real estate broker, you have an interest in properties, you think about it all the time, so you'll buy your own properties, or invest perhaps in builder stocks. If you're in tech, well, I don't need to say it because that's most of us. If you work in the energy sector, I imagine you know a thing or…

> It's probably just because we invest in what we know.

I'm mostly thinking of folks that will passively invest in a big broad index fund, and then assume they've reached the end in terms of balancing industry/sector risk.

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