| ▲ | dofm a day ago |
| Of course. But you have a bond buyer who can put their thumb on the scale, and has shown willingness to do so. That buyer also tried to interfere in (succeeded in interfering in) the business of law firms that worked for anti-Trump causes, has directly interfered in the renewable energy market to benefit its backers, etc. What is to say that SpaceX and Oracle won't get these benefits? (Government buying bonds, trashing ratings agencies, leaning on banks to lend etc.) Nothing obvious, I posit. So what is the value of a bond when a government is increasingly likely to manipulate the market for it? And that is putting aside the second order of government interference: foreign governments putting their thumbs on the scale with their own investment funds and influenceable buyers, to buy influence over a government that favours these firms. |
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| ▲ | hn_throwaway_99 a day ago | parent | next [-] |
| Nobody doubts all this. What the bond market is saying is that even with all of that, there are plenty of viable scenarios where bond holders aren't paid back. After all, if you truly believe what you say with conviction, the sensible thing to do would be to buy up as many SpaceX bonds as you can if you think they're so undervalued. |
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| ▲ | DennisP a day ago | parent | prev [-] |
| Institutional bond traders are pretty sophisticated. They're aware of all the possibilities you mentioned, and pricing the bonds low anyway. |
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| ▲ | dofm a day ago | parent [-] | | > Institutional bond traders are pretty sophisticated. I am old enough to remember Long Term Capital Management. | | |
| ▲ | DennisP a day ago | parent | next [-] | | I'm old enough to remember they weren't just buying and selling corporate bonds like most of the bond market. They were a hedge fund that used massive leverage to exploit tiny arbitrage opportunities between correlated securities. There may be important factors that the bond market isn't aware of, just like most of them didn't know about the problems with mortgage-backed securities in 2008. But anything you and I are aware of, they probably are too. | | |
| ▲ | dofm a day ago | parent [-] | | > But anything you and I are aware of, they probably are too. This is something that seems like it should be true but the subprime crisis (which didn't at all come out of the blue — anyone with any instinct at all should have understood when they first saw someone get given insane mortgages) argues against. | | |
| ▲ | blargey a day ago | parent | next [-] | | The subprime crisis was a story of perverse financial incentives causing the industry to play along with a fig-leaf statistical excuse for overrating derivative products, not bond raters botching ratings or missing "common-knowledge" info about specific mortgages. If you want to suggest the subprime crisis as a mechanism for SpaceX bonds getting mispriced, you need to propose a model for how bond evaluators could be operating under a perverse incentive to under-rate it and somehow reap profits from doing so. | | |
| ▲ | dofm a day ago | parent [-] | | > If you want to suggest the subprime crisis as a mechanism for SpaceX bonds getting mispriced I don't? I'm just observing that the bond market got something wrong — through an absolutely industry-wide blindness - that was indeed observed, years beforehand, by non-experts. Not my example, even. Just responding. |
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| ▲ | DennisP a day ago | parent | prev [-] | | A lot of mortgages were trash but the securities were a new and complicated financial product with a plausible story. A few people figured out the problems, but Michael Burry for example did it by combing through thousands of pages of prospectuses. SpaceX bonds are just plain ol' corporate bonds, the same stuff these investors have been analyzing for a very long time. | | |
| ▲ | dofm a day ago | parent [-] | | Max Keiser of Karmabanque was talking about and writing about it in public more than a year before Burry acted, with pretty solid predictions, without any obvious forensic action. He's quite bonkers, but if it was obvious to Keiser it should have been obvious to these highly intelligent people we're discussing. | | |
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| ▲ | yieldcrv a day ago | parent | prev [-] | | I too can play devil’s advocate and now back to being an adult |
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