Comment by jinpan
3 days ago
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?
I don’t like that they’re fleecing the corporate bond market after privatizing the majority of their upside. Yes, I wanted them to issue their junk bonds even earlier.
What I really want above all else is for credit rating agencies to not face pressure to rerate them favorably because they’re deemed too big to fail.
If people are getting 'fleeced' in the corporate bond market, they deserve it because they should know better. Corporate bonds are traded mainly by institutional investors and professionals, not retail like shares are.
This is the kind of wisdom that caused the great financial crisis. Funds are limited in what they can invest in. Institutional investors don’t see high returns. They’re under a lot of pressure to maximize returns within the bounds of what they’re allowed to invest in. There’s a reason they’re risk restricted: they are responsible for a lot of money and society puts a lot of trust into them to not piss away their pension funds.
We learned this lesson the hard way twenty years ago. If we let them invest in dogshit, and the credit rating agencies allow them to, they will.
When institutional investors lose, they’re not really risking their own money. They’re risking yours, or at least your cousins or your neighbors.
How are they fleecing anybody if their rating is junk?
They can lobby all they want but until we see ratings agencies bending to their lobbying in the face of extreme scrutiny from anyone who would buy these corporate bonds I wouldn't go about worrying too much.
Why would you tell people to wait to worry about it until it's happening? What more use would it be to worry about it then?
Now is when you make sure that the agencies are scrutinized before they give out inflated ratings, and make sure that this nobody agency's ratings aren't enough to get the stuff sold where it could do real damage.
You don't wait until the baby is drowning to worry, you worry when he's stumbling around next to the pool. Even then, you've gotten involved way later than you should have been.
Because for a pension fund the exposure will be much smaller if they're an early investor in a 100m Business than being a late investor in 2T business.
Basically when you invest at the peak of the bubble you're going to be hosed.
The point is that John Everyman is assuming this risk transparently by way of retirement funds. Pre-IPO companies are (ab)using lobby pressure to grant them access to these retirement funds without having to face the wrath of public markets.
If they IPO'd earlier, they'd have to show clean books much earlier