The 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

It 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.

It’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.

We are better now that we learned from the first time.

make the point directly - you are just avoiding further justification

it'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.

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Well, 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.