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Accurate version: Goldman finances its operations through debt rather than equity because of it's explicit federal backing. The risk capital it is investing in
by spinlock 16y ago
Accurate version: Goldman finances its operations through debt rather than equity because of it's explicit federal backing. The risk capital it is investing in Facebook is therefor debt rather than equity. Facebook is so hot right now that it is probably overvalued. This leads to a debt bubble - rather than an equity bubble - which is much more painful for the economy.
- kragen 16y agoHas someone actually made the case that Facebook is overvalued? My calculations suggest that its valuation is reasonable: http://news.ycombinator.com/item?id=2062222 http://news.ycombinator.com/item?id=2062222 That isn't to say, of course, that it's reasonable to finance buying its stock with implicitly-taxpayer-guaranteed loans. The calculations I linked above suggest that Goldman thinks there's a very large chance that this investment will turn out to be worthless.
- 3pt14159 16y agoBy definition any investment that is subsidized is overvaluing the base asset.