Castanza

Explains why you horde cash and are constantly paranoid about financial Armageddon.

Bread & Circuses

Word of advice....if you find yourself taking the opposite with just as firm of a stance you're likely just as bad of a rational thinker as the ones you're criticizing.

There are opportunities now!

How are you using the models?

Very true! But there is still a lot more nuance. It’s possible good enough is simple good enough though.

Yup, so far AI is probabilistic where human coders are deterministic. That difference is a glass ceiling for how far AI generated code can go. Still a very useful tool though especially when developed for specialized tasks. It gets you closer quicker.

Can't speak to whether AI pulled forward this trend, but companies SaaS companies have been switching their pricing model from per seat to usage since 2018. Many of them offered the choice for some time so it may not have been as obvious that this trend had already started. I deal with quite a bit of licensing fee bullshit and this for sure predates the AI boom. Same for PaaS and IaaS. I can see the token model accelerating this though. Covid was also a big driver of the shift.

Good luck with that when those "contracts" get canceled.....

I trimmed a bit of my GOOGL position yesterday. The BRK side of things doesn't make sense to me (agree with you)....but GOOGL signaling they have to raise cash in order to fund AI development doesn't sit right with me. The whole narrative last year was these companies will fund build out with fcf...now here we are one year later and the only Mega Cloud company sitting with a net cash position is Microsoft. Still a large position for me...but I can't help but think we are at the beginning of the debt funding spiral and at the end of all these buildouts there is always bag holders....

Yup, it's a known fact that too many business decisions creates a lot of drag on underlying performance. I mentioned in another thread, but good operators are going to be more and more important. Just because something can be done, doesn't mean it should be done. This whole AI boom has primarily been pitched from the engineer's perspective (we can do all these things!) but it's hardly been analyzed from the functional business perspective. General Magic (spin off of Apple in the 90's) had amazing ideas, top tier talent and almost no guardrails on development. It ended with products that were ground breaking. But they were too complicated, had too many features, lacked focus, missed deliverable dates because of complexity etc. There are already dozens of stories coming out of how companies aren't really sure how to effectively use tokens and "ration" them for productivity. Burnings a lot of tokens on rabbit trail ideas that ultimately don't pan out sounds expensive. IMO all AI is really doing is pulling forward the product development cycle while simultaneously increasing the complexity of sound business decisions. I come back to the book Thinking, Fast and Slow by Daniel Kahneman....there is a balance to be had and right now we are all gas.

Based on?

Right direction of what exactly?

I must have missed the post where you shared why the business will not perform well for the next 5+ years.... As I said, angry old man....Are you not happy with your return since 2021 and continue to complain about a lack of PR?!?

Exactly, he sounds like an angry old man shaking his fist at the sky because price discovery at this specific point in time does not match his expectations. The question makes no sense to me. One much of the market has dumped and there are many companies not priced correctly. Two, past performance is not indicative of future performance. FFH is a different company. Seems this guy wants to gatekeep as if we all have to cut our teeth the same way he did. I’d wager we see a few more 20% down years in FFH so again idk what he’s talking about.

How about you tell us what we should be doing. You’re unhappy with the answer of Hold, and buy more so that leaves sell. How about you justify why we should all sell FFH because of the second coming of “seven lean years”.

What's your point? You're asking the board to make a personal finance decision for you. The question you pose in short is not only asking people to forecast the future share price, but also asking whether you should hold, buy, or sell. That's a personal question based on personal finances. As someone else mentioned up chain, all equities are subject to this. If you want some steady reliable income stream then move funds to t-bills etc. Are you investing (looking at the Intrinsic value of said company vs the share price and hoping for price discovery) or are you simply looking at the share price? Just being blunt, but you're sort of letting the tail wag the dog with this framework. End of day I don't think it's valuable to hold any equity unless you're consistently looking out 5+ years (voting machine vs weighing machine). You can't apply the logic of bonds (duration and expected return) to equities.

You have the answer to the test but choose to ignore it....You can't time it so why are you trying? For simplicity sake, say you sat on 100k cash the last 10 years. You would have to average almost ~17% annually for the next 35 years just to break even with average market returns (10% annual). I know there are some astute investors on here (cough gfp) who have averaged better than that. But why the Hell would you want to make that your minimum required hurdle rate? Further, every year you're between 0 - (10%) that adds an additional ~.5-1.5% required annual return increase moving forward to break even at year 35 (rough math). Food for thought.

Famous last words but I think and I've heard others discuss this (eg. Michael Batnick), that the market is fundamentally different post covid. I don't know if this is temporary or if this shift is here to stay; but the market seems to be so forward looking that it blows past geopolitical events and instead of long drawn out reactions you see quick short temporary re-ratings and then back to business as usual. I'm not 100% on board and think there could be some recency bias here (which could come back to bite). But since Covid there has been quite a few of these events. I'm not convinced it's only euphoria and bubble mania....There is something to a slightly more efficient market and a more global/connected 24/7 news cycle that reduces that duration of these events. As I said, famous last words...

Exactly, the supply demand situation is completely different currently than what we saw in the dotcom bubble. We didn't have the the end point users to support the telecom buildout. Today we have a shortage of chips and compute demand with a constantly developing use case. People love to distill bubbles down to simple things and draw parallels; but at the end of the day you can't forecast the "pop". The trigger will likely be whatever event or sentiment change that causes the hyperscale's halt buildout. But even still this might not be the "system reset" everyone is hoping for. I wager we see a few small pullbacks (10-20% short duration) as compute demand outpaces and under paces supply. Meanwhile entire market segments continue to be tossed to the wayside (where I'm shopping). Volatility is a value investors "Open for Business" sign.

You can't look at capex in a vacuum without looking at earnings and margins of the top companies "growing the bubble." in 1999 the top 9 out of 10 companies (Nasdaq 100) had a PE over 100...today the average is like 26x with a high of 40 I believe. Margins are also wildly different (much larger today for a larger percentage of the market). I'm not arguing their isn't a bubble of course. Capex spend will likely overrun and we will over supply. But that's also pretty standard bananas operating procedure for these types of things. Cloud was the same way in ~2016ish but a smaller scale for sure.

Value investing in a nutshell...

I have no idea what will happen. I'm not rushing to buy the Mag7 (I do own GOOGL with $150 cost basis). I think history shows that the market goes through bubbles and cycles pretty consistently and even if you get your timing 100% wrong and buy at the peak, you will generally do just fine and outperform cash, bonds, and real estate. There is always a bubble, always a cycle, always new fad companies, and neglected sectors. Yet unless history changes (as Blake claims) the market for the most part has always been up and to the right over a 20+ year time horizon.

@Blake Hampton Nasdaq 100...Last 20 years returns are 15% yr...earnings have compounded at 15% for the index over the same timeframe....If you bought right at the peak in the early 2000's endured that 82% drawdown and held to today you still compounded at 8.8%/yr for 26 years... EPS quarter over quarter is 45% and looking like close to 30% on the year. Forward PE was recently at ~30x with 9 of the top 10 companies having PE below 40. Dotcom bubble had the index north of 100 forward PE and 9 of the top 10 companies had PE also north of 100. Today 20% of the index has a net margin of 50 and 100% in 1999 there were zero companies in that bucket. Today 50% of companies have margins between 25 and 50%. in 99 43% of index had margins 10-25% margins...21% of the index had 0-10% margins (vs 9% of index today) and 10% was negative....