Elon Musk takes over Twitter

On how to make money, it's still an advertising and /or subscription business, and the use of the platform was pretty static. He has talked about morphing the business into an "everything app" but until I see it, it's just the usual bullshit and bubblegum from him. That works when he is getting billions of dollars of subsidies for a business or when a zero interest rate environment enabled him to borrow endlessly and / or continually dilute the existing equity in the business to raise capital without being punished. But that world has been brought to a standstill by the Fed and honestly Ben Bernanke, Janet Yellen and Jay Powell were really what explained 95 percent of his genius.

On the bank loans, they are almost definitely going to end up losing money, but that has less to do with Elon Musk or Twitter and everything to do with the landscape having changed. When the Fed had interest rates pinned at zero for a decade, there was so much appetite for any yield that the banks could package any kind of dog crap and there was a line of credit investors willing to buy it.

Assuming the Fed hikes another 75 basis points at 2 pm today, the Fed Funds rate will now be up to 4 percent, and and even though rates are still negative in real terms, the risk appetite has fallen off a cliff and led to a sharp sell-off in credit markets that has left those same banks with somewhere between $30 billion and $100 billion of "hung" debt from takeovers and mergers and leveraged buyouts that they can't find buyers for.

That market dried up almost overnight, and the banks had committed to so much financing that they are a bit stuck. It goes way beyond Musk and Twitter. Right now, they are stuck holding on to a lot of debt that they had intended to repackage and sell. In the case of Twitter, they now will wait into next year to see what he does with the company and based on that and how credit investors perceive it, the banks are going to have to figure out how much they are going to have to discount the debt in order to sell it. It could end up amounting to a significant loss for them.