remember that time Facebook spent $10s of billions on the metaverse?
What's your point with this comment? How can we ever hope for another Bell Labs if we decry companies taking risks on things no one even asked for?
Credit report shows Meta keeping $27B off its books through advanced geometry
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Re: Credit report shows Meta keeping $27B off its books through advanced geometry
#112Re: Credit report shows Meta keeping $27B off its books through advanced geometry
#113> This treatment is considered acceptable because the people who decide what is acceptable have accepted it. Wasn't that the root of the 2008 crash? The debt spiral was acceptable because people were making enough money in the present that regulators were powerless to advise against it. In a sane world people often go to jail for decades when doing this at pennies on the dollar.
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Yep any day now!
Re: Credit report shows Meta keeping $27B off its books through advanced geometry
#114even a really strong shot of cafe bustelo failed to make this an interesting read.
Re: Credit report shows Meta keeping $27B off its books through advanced geometry
#115Earlier quoted context omitted.
Still too verbose. Here's a TL;DR. Meta is borrowing a whole lot of money and they're lying about it to investors.
No one is lying or deceived here.
Investor: Is this your debt, Meta?
Meta: (hiding debt behind its back) No. It's Jimmy's.
Investor: Now Meta, you know lying is wrong.
Meta: No it's not. All the kids do it so it's OK.
Re: Credit report shows Meta keeping $27B off its books through advanced geometry
#116Serious questions: won't banks and ratings agencies simply treat this as Meta's debt since it it effectively Meta's debt? What changes if this was on their "official balance sheet"? How does playing with the wording actually help Meta overall?
The crux of this article is that they won't treat Meta's debt as debt, because Meta intentionally structured this debt to circumvent the agencies' definition of "debt." Should they change their definition of "debt?" Maybe, but what incentive do they have to do that, is any formal definition bulletproof to circumvention, etc.
What's very interesting to me is what happens when Meta doesn't exercise those lease options. If there isn't some kind of penalty for declining the option, well...
Re: Credit report shows Meta keeping $27B off its books through advanced geometry
#117LOL "The entity is named “Beignet,” presumably because “Off-Balance-Sheet Leverage Vehicle No. 5” tested poorly with focus groups."
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Re: Credit report shows Meta keeping $27B off its books through advanced geometry
#118> This treatment is considered acceptable because the people who decide what is acceptable have accepted it. Wasn't that the root of the 2008 crash? The debt spiral was acceptable because people were making enough money in the present that regulators were powerless to advise against it. In a sane world people often go to jail for decades when doing this at pennies on the dollar.
The 2008 crash was in part caused by inaccurately rating synthetic bundles of subprime mortgage debt as extremely low risk (e.g. AAA). Subprime borrowers had a much higher risk of defaulting than a AAA rating implied. On the other hand, Meta has great creditworthiness. And guarantees this vehicle. So... it's not the same.
That's not accurate.
This is debatable but subprime loans were mostly accurately rated. They were rated very low. That low rating was the ultimate precursor to the crash, because it means banks carrying those poorly rated vehicles needed to balance them with different highly rated vehicles to keep their own rating high enough to qualify carrying and lending other financial assets on their books. There were so many of these shitty loans that they had to repackage them to dilute their value/rating against their other highly rated assets, because there are limited number of highly rated assets any given bank could acquire at a moment.
That dilution was called a credit default swap, which is bundling under the guise of an insurance vehicle. This magnified the problem for two reasons: First these shitty assets can now be traded in large bulk and secondly any given bank can now carry more of them before further eroding their value. That proved catastrophic because this toxic debt could not be moved fast enough by anybody that held them. Its like hot potato or musical chairs, like Bitcoin. The only real difference between those credit default swaps and Bitcoin is only that everybody knows Bitcoin is intrinsically worthless and only exists as an instrument of speculation while many people actually thought these credit default swaps were real financial assets and that they were insured.
Re: Credit report shows Meta keeping $27B off its books through advanced geometry
#119Earlier quoted context omitted.
The liability I’m shielded from is not debt I specifically requested. I’m shielded from unknown events.
Why would the CEO have the personal liability here and not the board? Does Sundar Pichai have to personally guarantee loans for Google? That would be weird since the CEO could be fired.
No, but this person’s LLC is not capitalized quite as well as Google, and the bank is adjusting the loan to account for that fact.
Re: Credit report shows Meta keeping $27B off its books through advanced geometry
#120Earlier quoted context omitted.
banks are not stupid… you can’t just open LLC, borrow billion bucks, spend it and then be like “oops, LLC mates, not liable”
You can if you are Meta and are willing to litigate the hell out of it.
More like if you are Meta and are viewed as a lucrative business opportunity by the bank.