from Hacker News

There are only two asset classes: ownership and debt

by hhs on 10/26/24, 3:55 PM with 39 comments

  • by neonate on 10/26/24, 6:04 PM

  • by reese_john on 10/26/24, 5:30 PM

    Note: the article seems like a subtle ad for the booming industry of private credit.

    The author is the co-founder of Oaktree Capital, which has been raising capital for one of the largest private credit funds ever[0]

    https://www.bloomberg.com/news/articles/2023-08-10/oaktree-t...

      "Moving on to the real world, I note that following a sea change in interest rates, non-investment grade public and private debt now offer prospective returns that are competitive to those historically seen on equities. I believe investors should consider shifting capital to this area if they are (a) attracted by returns of 7 to 10 per cent or so, (b) desirous of limiting uncertainty and volatility, and (c) willing to forgo upside potential beyond today’s yields to do so. For me, that should include a lot of investors, even if not everyone."

  • by NoboruWataya on 10/26/24, 6:22 PM

    I feel like I am the exact kind of person who should enjoy reading the ruminations of a private capital manager published on the FT, but like others I am really struggling to find any interesting or meaningful point in this. The points discussed in this article aren't even finance 101, they are somewhat more basic than that. I can only assume it is an advertisement for Oaktree, but even then, given their target audience of sophisticated investors I don't know who they expect to impress with this.

  • by WalterBright on 10/26/24, 5:55 PM

    The fundamental accounting equation is:

        Equity = Assets - Liabilities
    Borrowing (i.e. liabilities) is a way of adding leverage to your investments. This makes higher returns possible, but correspondingly higher risk of losses.

    In my experience, people often do not understand the latter point. They will say it is unfair that Bob made a lot of money, but discount the risk Bob took to enable those returns. Lots of investors go bankrupt.

  • by jameslk on 10/26/24, 5:25 PM

    I’m not sure what the supposed takeaway of this article is. I guess the author is pushing debt at the end of the article? Regardless, trying to look at investing through the lens of “it’s either ownership or debt” is a very narrow view of all the ways an investor can invest. I don’t find it terribly helpful

  • by __MatrixMan__ on 10/26/24, 5:59 PM

    I don't think debt should be transferrable (same with intellectual property). If it is you end up with a tumor on your economy dedicated to shuffling it around in ways that prevent change and which crank out analysis like:

    > The only two things that matter are these ones which we made up.

    This may or may not be good advice, within its sector, but I question whether its sector is worth keeping around.

  • by wizzard0 on 10/26/24, 5:04 PM

    that article is suspiciously quiet on commodities (and their derivatives, in case you don't want to sign up for storage/delivery/etc etc).

    commodity derivatives are kind of a debt of a physical operator though

  • by spyckie2 on 10/26/24, 6:31 PM

    I would be a lot more interested in the article if argued that debt at 1-6% and 7-10% is the same asset with the same risk spread but making that the assumption is more than lazy, it’s offensive.

  • by dehrmann on 10/26/24, 6:47 PM

    > non-investment grade public and private debt now offer prospective returns that are competitive to those historically seen on equities

    Be sure to hedge this against inflation.

  • by nivertech on 10/26/24, 5:41 PM

    In the modern world there is no 100% ownership (unseizable bearer assets), as there is no 100% debt (enslavement in case of default).

  • by dartharva on 10/26/24, 6:05 PM

    The comments on that article are ripping it and the author apart, and not without good reason.

    Reading this made me learn absolutely nothing new.

  • by tsunamifury on 10/26/24, 5:17 PM

    Ok … so what?