> Bankers for Anthropic and rival OpenAI have lobbied the largest rating agencies to grant the AI labs investment-grade ratings once they go public. Investors expect the initial public offering this year to hit a valuation of more than $2tn.

Let’s be clear about what this means: it gives them access to the corporate bond market. What they’re lobbying for is that pension funds, life insurance, etc., can take exposure to these companies. Suddenly the everyman, your mom and dad, have significant exposure to these companies and their circular financing deals without even knowing it. This is disgusting.

What a lot of people fail to realize is that the rules around IPOs changed since the dot com bubble. Previously, employees counted as shareholders and companies above a certain threshold of shareholders were required to IPO. This is why companies like Microsoft, Amazon, etc., had the majority of their growth while being publicly traded. This allowed the everyman with a brokerage account to participate in these gains.

These rules were essentially removed by Obama in 2012 through the JOBS act. What this means is that companies can stay private for a majority of their growth phase, which is why we’re seeing IPOs being floated with $2T dollar amounts on them. They’ve privatized the gains, and they only IPO once they want to cash out.

So let’s understand clearly what’s about to happen: early VC investors in oai/ant are going to make billions selling dogshit to your parents pension funds, your parents pension funds are run by idiots who will gleefully take the AI exposure and are legally allowed to take that AI exposure because the AI companies lobbied the credit rating agencies to allow it, and when the bills come next year and these companies are completely unable to meet their liabilities, your parents have to postpone their retirements or come back out of retirement to make ends meet.

It’s truly evil. I hope the employees at these companies with dollar signs in their eyes awaiting their multimillion dollar payoff understand the system that they’re participating in and how evil it is.

Point blank: 2008 was about manipulation of the credit rating agencies. This bubble will also be about manipulation of the credit rating agencies. Absolutely deplorable.

And no, just to nip this in the bud, AI isn’t a fad. It’s the most transformative technology of our lifetimes. It’s going to change everything. But that doesn’t have anything to do with chaos in financial markets or malinvestment during the gold rush. It has to do with whether these companies have any kind of moat and whether the billions being poured into current generation chips are going to depreciate over the timeframes that investors think they will.

I don't understand your position.

First you say you don't like that they're accessing the corporate bond market, which is something all public companies can do.

Then you say they should've IPO'd earlier when they were even earlier stage and riskier .. which would allow them to issue bonds even earlier?

What is your position? Or are you complaining for the sake of complaining?

Its rated as junk.

And if default risk rises, yes the value of those bonds will get crushed. But Id argue the value of equity will be more so - since they are not A) positive EBIT B) EBITDA

Those two numbers are variables that compose measures of default risk.

Calm your panties down. Kroll != S&P.

> Let’s be clear about what this means: it gives them access to the corporate bond market. What they’re lobbying for is that pension funds, life insurance, etc., can take exposure to these companies. Suddenly the everyman, your mom and dad, have significant exposure to these companies and their circular financing deals without even knowing it. This is disgusting.

What's the problem? Fund managers—who are in a position to understand the risks more than your everyday investor—can decide if they want buy these bonds or not, just like any other public corporate bond.

I just wish we could invest in the Chinese companies without the USG coming in later and claiming it's illegal to invest in them and seize the investment. It's clear when the US models financially crumble, everyone will jump on the Chinese models. (https://www.foxrothschild.com/publications/investments-in-ch...)