DegenerateGambler

Originally people had the idea that money will rotate back into software and that has been reversed the last few weeks. Money just flows into AI-related names nonstop right now, probably will be a while before a rotation happens. If I were to to guess, could even rotate back to BRKB.

Inflation could derail this semi-bubble (I say semi-bubble because there are real profits and real earnings going around). I for one hope it gets bigger so we can bet on the downside with higher conviction. Right now it's hard to see the market correcting more than 20%, If we get a 40% correction it'd be epic, but markets needs to go higher for a 40% correction.

With inflation being persistent, I wonder if a hawkish Fed will eventually pop this bubble. Margin Debt is now at 94% of Dot Com peak relative to total money supply. When the AI trade unwinds we could see names down 30-50% if not more. POET was at like 2000 times sales or something. SpaceX IPO is at 100x times sales, maybe will mark market top moment.

For straight forward businesses, you can use the PEG ratio (PE/Growth), the lower the better. I mean only for straightforward businesses that doesn't change much, for tech obviously you have to be astute about future prospects.

You hit the nail on the head - multiple expansion is what has happened. I feel like COST is like KO in 2000 when it traded over 50 PE and Warren Buffett did not sell (and later regretted not selling it). Price/Free cash flow yield is also very high for COST as well as price/sales while revenue is growing like 9-12% per year. It's a quality business - but rings the same ring as KO in 2000. I also feel this late surge in COST has been algo-driven, since WMT and SFM also traded up a lot. It would be hard pressed to say COST has been bought from 850 to 1100 by "value investors" who are looking for bargains or even paying a fair price for a great business.

By 2 measures, we are 94% of the way there to the dot com bubble but I feel this one could still get bigger 20-30% if not more due to the AI buildout. First is total market cap / total money supply is now at 94% of the dot com bubble peak Second is total margin debt / total money supply is now at 93.5% of the dot com bubble peak. Right now we have been seeing rotation from AI into beaten up software, who knows if this trend will continue or not.

Yeah I feel the same, there will be some correction in some sectors but hard to fathom it falls 78% like the Nasdaq did during the dot com crash. Meanwhile Costco is at 56 times earnings, higher than the Mags... But people are also auto-buying the market indices ETFs in their 401k monthly program, so I can't really see a "crash" of some sort. Margin Debt as a percent of M2 (total money supply) is now at 93.5% of dot com peak, but i don't think margin unwinding will have nearly the same effect as the dot com crash. On one hand, it won't hurt as much as these margin or overcrowded trades unwind, but on the other hand one cannot make generational wealth on the way up and on the way down then on the way up again picking up quality companies for peanuts on the dollar neither. So for the average, there will be some pain as some sectors correct, but for the astute, this time it won't offer nearly the same opportunities ala Fairfax 2009 or dot com crash.

Costco is selling at 56 times earnings, just FYI, so it's kind of hard not to call this a bubble. But it could go on for a long time.

Total Margin Debt as a percent of total money supply is at 5.74%, at the dot com bubble peak it was 6.14%, so we are 93.5% there in terms of speculation on margin relative to the dot com bubble. Now, this speculation could get much bigger than the year 2000 tho, so I wouldn't short this yet. If this number increases to 8-9% it would be way bigger than the speculation of 2000. I would say with inflation being persistent and fed likely to raise rates, at 8-9% margin debt to M2 money supply ratio, the market will become a good shorting opportunity. Remember Fairfax made a boatload of money by shorting the market via CDS during the GFC, and generational wealth will be made by traders who can catch the downside of the burst of the great AI bubble.

By the measure of total US stock market capitalization / total US money supply, we are now at 94% of the dot com bubble. But this one does not feel as outrageous as that one for some reason.

There is a bubble in some categories of AI (POET) and Space (ASTS, even SpaceX at their valuations), but the market as a whole is not exactly a huge bubble like the dot com bubble.

I used to be a software developer and now started to use Cursor to code with AI. I have not written a single line of code yet and it was all written by AI. I would say it has increased my productivity by 20-30x at least, with some stuff I used to put off because i didn't want to write it and now I just ask the AI to write it. The stuff is like magic.

Anything outside of straightforward value investing becomes very very hard to do well very quickly. If you already own FFH (which is a great compounder given their float), you are more than fine. I feel if you are looking at the returns of the index this year it's largely driven by the AI mania so you have to know when to get out of that one when it tops. With FFH you might even be rewarded with gains while the market pulls back or during a bear market. So I think this year is not a good barometer for how good your allocation actually is.

Sold my SNDK, will buy back if there is a pullback.

That makes sense. LQDA going to 500 per share seems pretty nuts tho, what do you think of their lawsuit situation?