DegenerateGambler

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?

You have nearly 60% of your capital in LQDA, how is this one so much better than the rest of your picks? Does it have much more upside than say AI names like COHR and SNDK?

I'd agree with this take mostly. The problem with puts is the time constraint on it. If you want to short Tesla, just short TSLL - it went from a high of 22.5 to 13 now. It has no time limit you can keep on waiting. I do believe TSLA is a short anywhere from 400-450 - their revenue is stalling and they need way more capital to compete on AI/Robotics against the competition.

SNDK MU NVDA are all fairly reasonable. The name I have my eyes on is ZM (Zoom) who owns a 1% stake in Anthropic. I believe Anthropic will be worth 2 trillion in 2 years, meaning the stake will be worth 20 billion (and ZM market cap is 30 billion with 7 billion net cash). So you are paying something like 3 billion for 2 billion in free cash flow each year.

I was very young (in my 20s) and did not realize anything about gaining a board seat. I just thought it was super cheap and was gonna 12-15x my investment. I was too much of a simp back then.

Shorting leveraged short ETFs is a way to capture beta slippage if you are right on the overall trend. You still have to be right on the overall trend with the math working for you due to the way the leveraged ETFs are calculated.

You are right - except he was trying to raise cash in the US at 8 times earnings to purchase another coal mine, and he didn't see the need to be listed in the US anymore since his stock tanked. It was just a double whammy type of situation. I wish it turned out otherwise but it was still a poor decision on my part to put 80% of my net worth into it.

I believe we are 2-3 years away from the "mania" stage as well.

I put 80% of my net worth into that 0.7 PE stock since i visited the company and met the CEO personally. I never would have thought there was contagion risk from other companies. I think this is a lesson we all could learn - and I paid it the hard way.

Hi All, It has been a while. Some of you remember me as Yu Deng who bought call options on Fairfax during the financial crisis along with Ericopoly and profited majorly (I got up to 40x on my investment). I flew to Toronto to meet the Fairfax management to ask about their CDS positions and how could the financial crisis NOT HAPPEN (risk to the trade) and I vividly remember Sam Mitchell telling me that unless the Fed injects another shot of Heroin, it was not gonna prevent the collapse. Since then, I have unsuccessfully invested in Chinese microcaps - I bought a Chinese coal company trading at 0.7 times earnings, visited the company, confirmed all profits were true, met the CEO, and believed it was severely undervalued. Then it turned out most major Chinese microcaps were frauds on the OTC exchange - except the one I did due diligence with me physically visiting the company. And as these frauds were exposed, the shares of my company went down 90%. The CEO of the company did not know what was going on as his shares crashed in price and simply offered to buyout the shares at 0.25 times earnings. So I lost majorly on that one, I literally thought it would go to 10 times earnings and net me a 12x. After that debacle, I am trying to get back in the game over the past few years. Over the past 2-3 years, I have done these trades/investment: Longed BIDU at 87 Longed BABA at 70 Shorted CAR at 669 Shorted GDXU at 400 Shorted PLTU (2x PLTR) at 90 Shorted RDDT at 208 Longed EWY leaps at 122 Longed HIMS leaps at 21 Shorted ASTS at 95 Shorted 2x Tesla (TSLL) at 20 Long SLRK at 12.5 (a small bank in Denver trading at less than 5 times earnings) Shorted BE at 195 - this one was not one that worked out well for me I am currently trying to get back into the game of making asymmetrical bets. I have a net long position via shorting the 2x short ETF on SNDK (SNDQ) and am also net short oil produces via the 2x oil producer index (GUSH), while holding a 2 year leap in Duolingo (DUOL). I am also thinking of going long ZM - since it has a sizable investment in Anthropic and when Anthropic IPOs I believe ZM will benefit in share price appreciation. I am looking to short the AI Bubble in 2-3 years or when I feel the mania gets to extremes on first glance (first glance meaning no deep research required, just basic economics screaming too obvious as short opportunities). It feels good to get back in the game after the debacle I had with the Chinese microcap (even thought the company was real and the earnings were real as I visited it personally and saw the mines, met the CEO, saw the trucks and the equipment). I hope to share more ideas here with asymmetrical bet ideas here and hopefully it helps me get back into the game as well. After a few years, I hope to start an investment business and see where it can take me as this is my natural passion. As some of you may be wondering - I forgot my username/pw combo of my previous account. So I created this parody account to remind myself that investment/trading has risks and never gamble. Hope to contribute and learn more, as I am passionately trying to get back into the process.

I found the way to profit from these scenarios is to "shoot fish in the barrel" which means DON'T DO TOO MUCH DUE DILIGENCE like a traditional value investor. Because the more due diligence you do, the more you become married to an idea. Wait for an idea to scream at you "this is too easy, why isn't everybody doing this?" type of scenarios. Buffet is from the Ben Graham school of thought where you have to dig deep into these quarterly reports instead of just waiting for an idea to scream at you - for example shorting CAR when it went from 90 to 800 (I shorted it at 669). Buffet is very traditional - it would be hard for him to pull the trigger to short internet companies with zero outlook.

Well this year my short ideas produced way more gains than longs, but those were some things that were easy to value, for example: GDXU short at 400 PLTU short at 90 RDDT short at 208 CAR short at 669 But I feel the AI bubble is not as easy to measure. As for TSLA - it is indeed overvalued by 10x, and they have declining revenue and increasing capex to bet on something others are also competing against them on - self driving. And a human-shaped robot may or may not even be the optimal way to do things since many tasks require specific-shaped robots. Again, I think it's worth it to consider how to measure "ridiculousness" to profit from the eventual (almost certain) collapse in share price from mania. I guess am trying to gain the skill George Soros would describe as "reflexivity" which somehow he found a way to have a magic touch on how to identify boom-bust cycles. But probably you are right, this does sound like trying to be too smart.