Eigen, asked whether buyers of credit protection on hyperscalers really expect a default, says probably not, but points to the huge off-balance-sheet obligations and collapsing operating cash flow behind the data center build-out. He compares it to the telecom bubble he saw up close.
…for every dollar I'm long, I'm roughly, you know, 30 cents short, a combination of credit default swaps on the investment grade indices, the high yield indices, and then actually a couple of, you know, and I say some individual names as well that I think are very, you know, very vulnerable here.
…obviously Oracle is sort of in its own thing because it's so exposed. Are people buying that because they really think that there is an X percent chance that Meta defaults on the debt? Or is this just a way to express a trade that you think that you're just going to make money on this?
…you know, back in 99 when I was Fidelity from the global crossings of the world, the Quest Communications, the GDS uniphases, Nortel Networks, all of them telling me there's this insatiable demand for fiber networking equipment that's never going to go away. And silly you for even questioning us. You're dumb. You're short-sighted. You have no idea. You don't know what you're talking about. That's the same thing I hear now when I bring up the fact that I think this data center craziness is not going to end well. No one wants to hear it.
So it is interesting to think about the fact that many of these tech leaders have never really dealt with debt of this size before, obviously. But what would you put the probability of, if you're looking at this in terms of baselines, what is the probability that they do thread the needle here? And…
I mean, if you asked me that question six months ago, my answer would be different. But what I've seen over the, I'd say, well, I don't really know. But now there's been so much debt issues, so much, so many off-balance sheet obligations. Many RPOs. I don't see how these AI labs who are…
So Bill is very bullish, obviously.
