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It doesn't freak me out and it's actually completely rational. If both OpenAI and AMZN expect real rates to keep rising while inflation spirals out of control,
by mise_en_place 11mo ago
It doesn't freak me out and it's actually completely rational. If both OpenAI and AMZN expect real rates to keep rising while inflation spirals out of control, this deal makes a lot of sense for both of them. They're just duration hedging.
- JumpCrisscross 11mo ago> If both OpenAI and AMZN expect real rates to keep rising while inflation spirals out of control, this deal makes a lot of sense for both of them. They're just duration hedging It can’t be the same hedge on both sides of the trade.
- mise_en_place 11mo agoCorrect, oAI is short rates vol.
- JumpCrisscross 11mo ago> Correct, oAI is short rates vol Why vol? They're just short rates, which is a silly way to say leveraged. If rates become volatile but halve, OpenAI does fine. If rates stabilise at 10%, OpenAI fails. There is no "duration hedging," which for OpenAI would involve buying duration, i.e. bets that profit when rates go up, going on.