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I just want to make the observation that this whole SpaceX IPO is turning out entirely unlike the CDOs that led to the 2008 financial crisis. There's no mixing
by qzw 5mo ago
I just want to make the observation that this whole SpaceX IPO is turning out entirely unlike the CDOs that led to the 2008 financial crisis. There's no mixing of AAA level assets with a bunch of subprime stuff and then getting someone to buy it all as AAA. Not at all similar. Completely different. Will turn out just fine this time.
- itemize123 5mo agomake the point directly - you are just avoiding further justification
- genxy 5mo agoWe are better now that we learned from the first time.
- anonymars 5mo agoLearned how to get the general public to directly put their money into it this time with the ETF shenanigans
- ignoramous 5mo agoInstitutional investors (ex: pension funds) matter more for such mega IPOs than general public, and those probably like SPAC-like supercorps?
- gorgoiler 5mo agoUg wants to borrow ten of my best sticks in exchange for future options to buy berries from his friend Og. Og has a watertight deal with Oog to invest the sticks in a five year mammoth hunting expedition but Oog first needs berries to exchange for sticks to cover his exposure on berry-puts he’s take out against Urrrg’s remortgaged stick pile. Well, I said no. Not getting burned that way again!
- curuinor 5mo agoIt is adversely selected, but it's not debt, it's equity, so price action can go real fast and nobody will be burned except folks who soberly-or-not opted into this. Everyone _knows_ Elon is the way he is, so nobody will be _surprised_ at things. No surprise, no crisis.
- robertjpayne 5mo agoThey're going to force a S&P500 index listing on IPO day so we're all going to be forced to baghold this regardless of if we want to or not unless you've got $0 in any major retirement fund.
- drivebyhooting 5mo agoOh yes, thanks for reminding me. I’m going to cash out the 401(k).
- ambicapter 5mo agoYou’ll pay massive penalties on that, another option is options (heh) but I’m not finance-literate enough to know how to pull it off.
- abtinf 5mo agoYou can just reallocate away from an index fund.
- aaronblohowiak 5mo agoOnly penalties if you withdraw from 401k. Most 401k plans have some kind of moneymarket, bond fund, or similar
- kvuj 5mo agoYou could just buy deep out of money SP500 puts expiring in 1+ year. That way you would be "insured" against the bubble popping. The thing is, every dollar you spend on insurance is a dollar (and its interest) you lose. Furthermore, we don't know when it will pop. 1 year? 5 years? The more reasonable solution is probably gradually reduce exposure to US markets by selling SP500 shares and turning to Europe and emerging markets ETFs. No need to cash out 401k.
- baron816 5mo agoWell, there are some very important differences. 1) It’s super well known what’s going on with SpaceX. Every investor should know that there’s a lot of good stuff along with some steaming hot garbage. 2) SpaceX isn’t systemic to the economy. If SpaceX and all its subsidiaries shut down and its investors got nothing back, it wouldn’t be that big of a deal. This type of bundling is just what conglomerates do. Is it a good thing? Not really. Many investors also hate this kind of stuff and avoid investing in these types of companies.
- robbies 5mo agoOn point #2, they are trying to do that right now. If spacex is fast tracked into the indices, passive investors via index funds will be forced into buying.
- huflungdung 5mo ago[dead]
- bko 5mo agoThe assets weren’t AAA, you’re mixing it up a bond concepts. The deal had bonds that were AAA. And if you’re talking about CDOs then the assets were bonds which were usually BBB or similarly cuspy bonds. You should learn about securitizations. It’s actually interesting. But people talk about it colloquially and so incorrectly that it’s mind dumbing. Here’s a simplified example of how you can take something and turn it into a safe investment: Suppose you have 10 loans and each has a 50% chance of default. Ignore coupon, and say they are $10 each. Expected value is $50 If you were to put this in a deal and cut it up into tranches, say the first tranche gets the first $10, this would be your AAA bond because odds of getting paid out you $10 would be > 99.9%. The equity (bottom tranches) would pay a lot less. For instance the expected value of the bottom half would be considerably less than $50 that is being promised. So there’s upside since you’ll be paying cents on the dollar and even though in the median scenario you’re making nothing, you have to weight the expected values of each scenario to figure out how to price it. The problem w this model is that it only works if assets are relatively uncorrelated which wasn’t true (it was true in the past but ignored systematic risk and adverse selection in originations). What this has to do w musk or spacex I’m still not sure
- bambax 5mo ago> this would be your AAA bond because odds of not getting paid out you $10 would be > 99.9% I think you meant "the chances of getting paid", not of not getting paid.
- bko 5mo agoThanks. Updated
- Avicebron 5mo agoAre you familiar with how crypto tumblers work?
- qzw 5mo ago> The problem w this model is that it only works if assets are relatively uncorrelated (it was true in the past but ignored systematic risk and adverse selection in originations). What this has to do w musk or spacex I’m still not sure What this has to do with with SpaceX is that there's the same blatant disregard for sound financial analysis by the very institutions that were/are supposed to know better. The NASDAQ 100 fast track decision is a similar level of financial malpractice as the ratings agencies slapping AAA on things that they knew were little better than junk. The abuses of the subprime mortgage originators were well known long before the actual meltdown. As were those systemic risks you spoke of. They were ignored by those whose entire job it was to not ignore them, and they sold out their credibility for a quick buck. If you can't see the similarities to the present situation then I can only wish you luck.
- Helloworldboy 5mo ago[dead]
- faangguyindia 5mo agoit's just codex and anthropic rapidly improved their AI when they opened themselves to Developer workflows. Google and others were sitting at the corner, laughing that they gonna burn their money for no reason! they turned out to be wrong. Turns out offering discounted/subsized tokens to developers massively improves your AI compared to just being a talking parrot for normal user workflow where you do not get "instant feedback" on if it worked or not.
- Eufrat 5mo agoIt’s also worth noting that Musk helped successfully lobby the NASDAQ to implement a “fast entry” rule which takes effect at the beginning of May, suspiciously convenient timing for a SpaceX IPO, so much so that I believe it has been derisively called the “SpaceX Rule”. It allows mega-cap IPOs like SpaceX to join the Nasdaq-100 index in just 15 trading days. Now why is this bad? Well, if you invest in a fund that is based off of the indices, you’re going to be investing in SpaceX whether you want to or not and I certainly don’t think 15 days is enough time to sus out whether this is a stable investment worthy of being in the index, but it’ll be great…until it drags a million retirement funds down with it.