Reality speaks - 1/22/2026 13:41

here is what a value investor that I follow; said about AI

But that's not what worries me most. Here's what worries me:

I read about Meta's data center in Louisiana—$26 billion cost. You won't find that $26 billion as a liability on Facebook's balance sheet. They created a special purpose entity, put in a few billion, and it became someone else's problem.
There's a debate about GPU useful life—some say two years, some say three, some say six. Can we agree it's not 24 years? Well, that data center has been financed with 24-year debt. Of that $26 billion, I promise you $20 billion or more is not concrete—it's GPUs going to Nvidia, financed with 24-year debt. A lot of it comes from private credit.

This looks very bubbly. There's a debt issue coming.

In plain Mid west English. Meta is hiding 24 billion of liabilities. Of the capital costs of $26 billion the vast majority of that is equipment that has a very short life span and its being financed for 24 years (how many of you have financed that combine over 24 years?)


One more take on AI using Oracle:

Let me walk through Oracle's numbers. Market cap: maybe $600 billion. Free cash flows: roughly $12–15 billion. Net debt: about $80–90 billion. And they just committed to spend hundreds of billions on the OpenAI deal.

Remember: $15 billion in free cash flows. A lot of debt already. And now hundreds of billions in commitments. Larry Ellison is making an all-or-nothing bet. He's borrowing, Meta's borrowing, everyone's borrowing—that's what's happening.

I just finished reading Andrew Ross Sorkin's book on 1929. Highly recommend it—great insight into people. One character reminded me of someone today: William C. Durant. He started General Motors, got kicked out, co-founded Chevrolet, merged it with GM, got kicked out again. A brilliant businessman who started two auto companies.

But he speculated in 1929, got wiped out, and died destitute, managing a bowling alley in the middle of nowhere.

You look at him—brilliant, very smart—and yet he still did these dumb things and got wiped out. I keep thinking about Larry Ellison. I don't think he'll end up managing a bowling alley on his private island in Hawaii. But—coming back to your earlier question—you want to say, "Well, if he's smart here, he must be smart there." I've found it often doesn't work that way.

What concerns me is that this behavior can last a long time before it ends. And I'm concerned about the financial consequences for pension funds and others doing private credit with very little thinking or underwriting. I'm also concerned about the health of the overall economy once you take away AI spending.

Tulip Mania anyone? The Railroad panic of 1873.. Stock Market crash of 1929, Dot.com Bubble History repeats itself folks.

They are betting on the come folks, Every cattle feeder knows what I mean. Its a rich mans game and most who play get burnt.