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Comment by aynyc | Hacker News Reader

This is about their bond, not that share price. If you are in the US, it's like having low credit score, everything you want to do financially such as leasing or financing a car, buying a house, etc.. will be more costly (higher interest rate) from the lender.

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Except that it's not clear really that lenders will be able to judge on that basis alone. SpaceX is a different kind of unicorn: it's a government contractor run by the richest man in the world who controls a media echo chamber and gets people elected.

That article compares them to Oracle. Who are, as it goes, pretty similar: run by rich people with a media empire who have their teeth deep in government systems.

These bonds could get worse and worse but if US state and federal governments continue to put thumbs on scales it doesn't matter. The US free market isn't uniformly free.

He's only the "richest" man in the world because of the inflated valuations of his companies. At some point the market looks like a dog chasing its own tail:

Q: Why is this stock so valuable? A: Duh, because Musk is worth a kajillion dollars and everything he touches is gold!

Q: Why is Musk worth a kajillion dollars? A: Because he holds so many shares of extremely valuable companies, silly!

There is this, but he is also a quasi-government figure. As Trump weakens he will reappear in that sphere.

you’re right, the bonds of this overlevered money losing enterprise AI and space cargo conglomerate should be trading at a premium

The bond price is an outcome of lenders judging, not a cause. Lenders have already judged.

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.

Institutional bond traders are pretty sophisticated. They're aware of all the possibilities you mentioned, and pricing the bonds low anyway.

> Institutional bond traders are pretty sophisticated.

I am old enough to remember Long Term Capital Management.

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.

> 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.

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.

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.

Economists predict 500 out of every 10 recessions.

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.

> 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.

I too can play devil’s advocate

and now back to being an adult

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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