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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
by AnimalMuppet 3mo ago
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 nobody should be investing in such bonds.
- muellero 3mo agoIf big tech bonds are a terrible deal for investors at 8%, then Google or OpenAI is getting a screaming deal by raising debt at that rate. Saying nobody should be investing in these bonds is very similar to saying that big tech should raise more debt.
- AnimalMuppet 3mo agoYes, they should, if they can. But on the other side, life insurance companies and pension funds should not be buying it.
- muellero 3mo agoAgree with you on that. I just wanted to point out that Big Tech debt being a bad purchase for things like pension funds means its a good deal for big tech. Everyone else in the thread seems very negative on big tech debt for some reason. You can't have it both ways.
- FabHK 3mo agoFWIW, a firm can go bankrupt and the stocks be worth zero with the bond holders being paid 100%. In fact, that's sort of the goal and "ideal" scenario (ideal given bankruptcy, of course, which in turn is not ideal). 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.