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Yes of course life insurance and pension funds are going to buy this debt. This is the highest quality debt that's out there. If you don't want life insurance a

Yes of course life insurance and pension funds are going to buy this debt. This is the highest quality debt that's out there. If you don't want life insurance and pension funds to buy debt from big tech companies because you believe it's too risky, then you believe that bonds are just too risky in general.

hvb2 2mo ago
> buy debt from big tech companies because you believe it's too risky, then you believe that bonds are just too risky in general Uh, no? Ignoring the rating, I think there are plenty of other bonds to be found that are less risky. Dutch government bonds just to name one? The yield wont be the same but that's probably a good indicator?
AnimalMuppet 2mo 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 2mo ago
  If 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 2mo ago
    Yes, they should, if they can. But on the other side, life insurance companies and pension funds should not be buying it.
    - muellero 2mo ago
      Agree 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 2mo ago
  FWIW, 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.

hvb2 2mo ago

> buy debt from big tech companies because you believe it's too risky, then you believe that bonds are just too risky in general Uh, no? Ignoring the rating, I think there are plenty of other bonds to be found that are less risky. Dutch government bonds just to name one? The yield wont be the same but that's probably a good indicator?

AnimalMuppet 2mo 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 2mo ago
If 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 2mo ago
  Yes, they should, if they can. But on the other side, life insurance companies and pension funds should not be buying it.
  - muellero 2mo ago
    Agree 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 2mo ago
FWIW, 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.