Have We Hit The Top?

[Xerxes]

20 minutes ago, RedLion said:

Its interesting blackstone ipo’d at the top of the market in 2007, but overall it seems to increase the likelihood of a broken ipo, and not sure that really benefits a money manager in the long run. 

That only means that Bruce Flatt beat them all by IPO the “asset manager” more than a year ago.

 

If things gets sour, no one will look back and say Brookfield top-tick the market. It was Ackman in 2024 and BX back in GFC days. 

[UK]

https://pracap.com/the-culling/?utm_source=rss&utm_medium=rss&utm_campaign=the-culling

 

I will admit that currently I share some exact thoughts and feelings about the investing and market with him and also have done a lot of culling recently (at the same time nothing new/big or exciting YTD). Still mostly invested (and very likely will stay this way), but moved to the defensive side of my pendulum and would like to clear/reset my mind:)

 

Edited June 20 by UK

[UK]

https://www.economist.com/finance-and-economics/2024/06/16/why-house-prices-are-surging-once-again?itm_source=parsely-api

 

Is there any asset class left which yet did not shrugged off higher interest rates:)?

[Gamecock-YT]

https://www.bloomberg.com/news/articles/2024-06-29/clos-have-too-much-money-and-are-running-out-of-things-to-buy-credit-weekly

 

 

Quote

 

CLOs Have Too Much Money and Are Running Out of Things to Buy

The $1.3 trillion collateralized loan obligation market is about to become a victim of its own success because managers can’t create the bonds fast enough to meet demand and are running out of things to buy.

 

 

 

You know they're going to keep the gravy train running so next move is dogshit about to turn into dogshit²

 

 

[Gregmal]

The clownshow continues. Just looks like we upped the "target" 750 points from a year or two ago...

 

https://nypost.com/2024/07/02/business/us-headed-for-a-deep-recession-stocks-could-fall-30-analyst-warns/

[UK]

https://www.bloomberg.com/news/articles/2024-07-03/jpmorgan-s-kolanovic-to-leave-bank-after-two-challenging-years

 

The move comes following a disastrous two-year stretch of stock-market calls by Kolanovic. He was steadfastly bullish in much of 2022 as the S&P 500 Index sank 19% and strategists across Wall Street lowered their expectations for equities. Then he turned bearish just as the market bottomed, missing last year’s 24% surge in the S&P 500 as well as the 14% gain in the first half of this year.

[Gregmal]

3 hours ago, UK said:

https://www.bloomberg.com/news/articles/2024-07-03/jpmorgan-s-kolanovic-to-leave-bank-after-two-challenging-years

 

The move comes following a disastrous two-year stretch of stock-market calls by Kolanovic. He was steadfastly bullish in much of 2022 as the S&P 500 Index sank 19% and strategists across Wall Street lowered their expectations for equities. Then he turned bearish just as the market bottomed, missing last year’s 24% surge in the S&P 500 as well as the 14% gain in the first half of this year.

Yup. How much money do you think this dirtbag made the last few years? 

[UK]

https://www.wsj.com/finance/stocks/earnings-season-to-test-investors-faith-in-big-tech-stocks-a16dc89e?mod=hp_lead_pos6

 

[mattee2264]

https://www.sequoiacap.com/article/ais-600b-question/

 

This is a good read as well which should also encourage caution for those investing in a top heavy S&P 500. For those too busy to read the article the table below sums up the argument: we are seeing huge amounts of AI spending but it has yet to translate into any meaningful incremental revenue. 

 

[Luke]

2 hours ago, mattee2264 said:

https://www.sequoiacap.com/article/ais-600b-question/

 

This is a good read as well which should also encourage caution for those investing in a top heavy S&P 500. For those too busy to read the article the table below sums up the argument: we are seeing huge amounts of AI spending but it has yet to translate into any meaningful incremental revenue. 

 

If every company spends money on AI, everybody will make similar efficiency/productivity gains and incremental revenue is likely 0 due to that effect. Winners are the AI providers like Nvidia as we can see. 

[Sweet]

11 hours ago, Luke said:

If every company spends money on AI, everybody will make similar efficiency/productivity gains and incremental revenue is likely 0 due to that effect. Winners are the AI providers like Nvidia as we can see. 

I think this might be wrong in potentially two ways.

 

1. Companies cut costs with AI which results in larger profit margins which means more income for shareholders.

 

2. Companies cut costs with AI, they cut costs for consumers, consumers have more money, economy grows.

 

I know jobs will be lost with AI, certain services will get hit hard, but overall I don’t think we are going to lose half the workforce for instance…. I hope I’m right because if we did it would be chaos.

[Luke]

6 minutes ago, Sweet said:

I think this might be wrong in potentially two ways.

 

1. Companies cut costs with AI which results in larger profit margins which means more income for shareholders.

6 minutes ago, Sweet said:

2. Companies cut costs with AI, they cut costs for consumers, consumers have more money, economy grows.

 

I know jobs will be lost with AI, certain services will get hit hard, but overall I don’t think we are going to lose half the workforce for instance…. I hope I’m right because if we did it would be chaos.

I am not sure because the jobs that will be lost won't spawn again and I think there needs to be workers compensation who can not find new jobs->higher corporate taxes->some sort of income to the declining labor market due to AI. They cant just cut costs a lot without heavy impact on the labor market and following demand. AI will lead to general productivity increases but that will be true too then for most businesses. AI is bullish for the overall market and for the suppliers. The rest will implement it together and is forced to do so to maintain competitiveness and viability with little growth coming from AI implementation solely but rather from a general efficiency increase for everyone leading to higher GPD growth/revenue growth for all. 

Edited July 8 by Luke

[Spekulatius]

14 hours ago, Luke said:

If every company spends money on AI, everybody will make similar efficiency/productivity gains and incremental revenue is likely 0 due to that effect. Winners are the AI providers like Nvidia as we can see. 

The mag 6 are getting more Capex heavy business. MSFT for example has roughly doubled profits since 2019 , which is impressive, but Capex went up 3x. They are less assets light business than they used to be. MSFT is n exception - Amazon, Google etc have similar trends.

 

Edited July 9 by Spekulatius

[mattee2264]

The problem at the moment is that AI can do some tasks that workers can do but at multiples of the cost!  AI also needs a lot of handholding because there is still a good degree of hallucination. So the value proposition is somewhat questionable. And adoption has been quite disappointing by businesses. And for workers there is a catch 22. If their productivity increases because of AI then they put their job at risk. So they try to hide their use of AI. 

 

Luke's point I think is the ultimate beneficiaries will be the users of the technology. But even then it won't be overnight because adoption takes time and it takes time to learn to use a new technology. 

 

NVIDIA has a technological lead but so did Tesla and there is now a proliferation of EVs. And if NVIDIA loses market share or its margins fall its stock price will get destroyed! The other Mag 7 companies are all scrambling to release AI products to recoup their massive capex spend on AI and there are also start-ups releasing LLMs. It is difficult to charge much upfront because they need to encourage adoption and capture market share. As Zuckerberg has already said it is a long game and investors may not be patient enough to wait until then just as they weren't prepared to wait for the internet to bear full fruit. 

 

 

 

[Luke]

18 minutes ago, mattee2264 said:

The problem at the moment is that AI can do some tasks that workers can do but at multiples of the cost!  AI also needs a lot of handholding because there is still a good degree of hallucination. So the value proposition is somewhat questionable. And adoption has been quite disappointing by businesses. And for workers there is a catch 22. If their productivity increases because of AI then they put their job at risk. So they try to hide their use of AI. 

 

Luke's point I think is the ultimate beneficiaries will be the users of the technology. But even then it won't be overnight because adoption takes time and it takes time to learn to use a new technology. 

 

NVIDIA has a technological lead but so did Tesla and there is now a proliferation of EVs. And if NVIDIA loses market share or its margins fall its stock price will get destroyed! The other Mag 7 companies are all scrambling to release AI products to recoup their massive capex spend on AI and there are also start-ups releasing LLMs. It is difficult to charge much upfront because they need to encourage adoption and capture market share. As Zuckerberg has already said it is a long game and investors may not be patient enough to wait until then just as they weren't prepared to wait for the internet to bear full fruit. 

Yeah, a lot of the capex is defensive investments to prevent disruption. Everybody is experimenting and buying as much as they can so that they can protect their business. Koos Bekker said that in the Prosus special call very well. And they are right, AI will disrupt a lot but nobody knows who, when and where. Maybe businesses will disrupt themselves with AI haha. I shifted from 100% google search to around 60% google search 40% perplexity/GPT 4o. And perplexity is a lot better in many ways. I remain skeptical of the overall bottom line benefit to singular companies but think that overall market growth will benefit well and the chip suppliers as long as they can maintain their moat. 

[Castanza]

12 hours ago, Sweet said:

I think this might be wrong in potentially two ways.

 

1. Companies cut costs with AI which results in larger profit margins which means more income for shareholders.

 

2. Companies cut costs with AI, they cut costs for consumers, consumers have more money, economy grows.

 

I know jobs will be lost with AI, certain services will get hit hard, but overall I don’t think we are going to lose half the workforce for instance…. I hope I’m right because if we did it would be chaos.

1. Increased profits does not always make it down to the shareholders. 
 

2. Cost cutting doesn’t necessarily mean lower prices. In today’s environment it seems the exact opposite. Why would a company lower prices and their profits when consumers are willing to pay? 
 

3. I think it will be more of a shift and pretty gradual. There are lots of jobs that could be replaced now, but aren’t.  Like most tech revolutions the end result has almost always been more jobs and more work. Look at the cotton gin. It increased slavery and did the complete opposite of what Jefferson thought (small self sustained families). Look at the steam engine. Early 1800s US was a wild wild place. There were cults, religion and groups of people who were “worshiping” machinery. Jill Lepore has a few good chapters on this in her book “These Truths” a history of America. With a read. 
 

End of the day I think we nix some unproductive paper pushing jobs, but ultimately increase overall workforce as AI will drive new sectors and innovation keeping demand ahead of educated workforce. Gotta get that education part right though. 

[Sweet]

10 minutes ago, Castanza said:

1. Increased profits does not always make it down to the shareholders. 
 

2. Cost cutting doesn’t necessarily mean lower prices. In today’s environment it seems the exact opposite. Why would a company lower prices and their profits when consumers are willing to pay? 
 

3. I think it will be more of a shift and pretty gradual. There are lots of jobs that could be replaced now, but aren’t.  Like most tech revolutions the end result has almost always been more jobs and more work. Look at the cotton gin. It increased slavery and did the complete opposite of what Jefferson thought (small self sustained families). Look at the steam engine. Early 1800s US was a wild wild place. There were cults, religion and groups of people who were “worshiping” machinery. Jill Lepore has a few good chapters on this in her book “These Truths” a history of America. With a read. 
 

End of the day I think we nix some unproductive paper pushing jobs, but ultimately increase overall workforce as AI will drive new sectors and innovation keeping demand ahead of educated workforce. Gotta get that education part right though. 

 

1. Earning yield affects pricing.

 

2. Competition for market share.

 

3. Agree.

[frommi]

"

“Now if at the start of the 20th century you had seen what the auto [industry] was going to do to this country, the impact it would have on the lives of then your children and grandchildren and so on. It just, it transformed the American landscape. But of those 2000 companies, three basically survive. And they haven’t done that well, many times.

So how do you pick three winners out of 2000? I mean it’s not so easy to do. It’s easy when you look back, but it’s not so easy looking forward. So you could have been dead right on the fact that the auto industry— in fact, you probably couldn’t have predicted how big of an impact it would have. But you wouldn’t have— if you’d bought companies across the board you wouldn’t have made any money, because the economic characteristics of that business were not easy to define.

I’ve always said the easier thing to do is figure out who loses. And what you really should have done in 1905 or so, when you saw what was going to happen with the auto is you should have gone short horses. There were 20 million horses in 1900 and there’s about 4 million horses now. So it’s easy to figure out the losers, you know the loser is the horse*. But the winner was the auto overall.”
Warren Buffett in a speech at University of Georgia in 2001.

I think this fits the current AI hype perferctly. When you want to generate alpha from AI, than look for shorts, not longs.

[Luke]

18 minutes ago, frommi said:

"

“Now if at the start of the 20th century you had seen what the auto [industry] was going to do to this country, the impact it would have on the lives of then your children and grandchildren and so on. It just, it transformed the American landscape. But of those 2000 companies, three basically survive. And they haven’t done that well, many times.

So how do you pick three winners out of 2000? I mean it’s not so easy to do. It’s easy when you look back, but it’s not so easy looking forward. So you could have been dead right on the fact that the auto industry— in fact, you probably couldn’t have predicted how big of an impact it would have. But you wouldn’t have— if you’d bought companies across the board you wouldn’t have made any money, because the economic characteristics of that business were not easy to define.

I’ve always said the easier thing to do is figure out who loses. And what you really should have done in 1905 or so, when you saw what was going to happen with the auto is you should have gone short horses. There were 20 million horses in 1900 and there’s about 4 million horses now. So it’s easy to figure out the losers, you know the loser is the horse*. But the winner was the auto overall.”
Warren Buffett in a speech at University of Georgia in 2001.

I think this fits the current AI hype perferctly. When you want to generate alpha from AI, than look for shorts, not longs.

Or go long a car supplier with significant moat and reasonable valuation (which is really hard to find now but wasn't 1-2 years ago)...

[Saluki]

 

 

I don't think we hit the top until we see stories like this again: 

 

 

Stories like this are why CNBC and other financial media are a joke.  No fact checking whatsoever.  I would bet money that his "investors" are his parents.  

 

I was curious when I saw this in my YouTube so I wondered "where are they now." Speaking of worthless journalism, check out this recent follow up from Money.   

First Generation Investors: Changemakers 2023 | Money

Mattox, named “Most Likely to Revolutionize Wall Street” by Goldman Sachs as a teen himself, launched the hedge fund North Tabor Capital from his bedroom in suburban New Jersey when he was still in braces. 

 

Did no one call Goldman Sachs to confirm this? I doubt they bestowed that title on anyone, but if you're a journalist and someone makes a ridiculous claim, maybe you should fact check it.  

 

Especially since, according to Value Walk, he was operating his fund with convicted criminal Jacob Wohl, who also was on the news for starting a hedge fund in high school until he was shut down by authorities.  

 

Is Teen Hedge Fund Manager Cole Mattox On Jacob Wohl's Path? (valuewalk.com)

 

 

I remember stories about people in their 20s making millions running crypto funds for others.  It was right before BTC got cut in half.  So keep an eye out for stories like this. 

 

 

[mattee2264]

The interesting difference with the 90s tech bubble is that back then it was much more of a free for all. Anyone and everyone set up dot com companies. All you needed was a website and some pie in the sky business idea. 

 

The technology this time around is more widely available than people think. There are lots of LLMs being developed and a few interesting start ups for sure. Chip availability is a bottleneck but it is easing. 

 

But you have these huge tech gorillas who are doing everything they can to restrict the availability of AI chips and are funding a lot of start ups themselves. 

And I am sure they will try and buy up any promising competitors. But there is only so much they can do to delay the inevitable. 

 

And this is exactly how it is supposed to work. Before AI Big Tech were sitting pretty. Amazon dominated online retail. Meta dominated social media. Alphabet dominated search. Apple dominated smartphones. Microsoft dominated enterprise software. Cloud came along but with little capex required it greatly enhanced revenues and they shared the pie. The assumption is that they will dominate AI. But while AI bells and whistles may give them some incremental revenue it is likely that the transformative applications of AI (which are yet to be discovered) will come from nascent businesses and they will take investment dollars and consumer dollars away from the incumbents. 

[UK]

https://seekingalpha.com/news/4123338-the-sp-500-is-racking-up-record-highs-but-theres-defiant-behavior-beneath-the-moves

 

“Oppositional Defiant Disorder”

[UK]

https://www.bloomberg.com/news/articles/2024-07-24/ai-fever-cools-sending-nasdaq-100-into-1-trillion-tailspin?srnd=homepage-europe

 

Some more rotation and volatility, finally, maybe something more interesting / at least correction size serious?

 

https://www.bloomberg.com/opinion/articles/2024-07-24/the-fed-needs-to-cut-interest-rates-now

 

But sure, market has fallen more than 2 per cent for the first time in almost two years and is already off by like 4 per cent from recent ATH!

 

What a horror:). FED put to the rescue!

 

Edited July 25 by UK

[Spooky]

7 hours ago, UK said:

https://www.bloomberg.com/news/articles/2024-07-24/ai-fever-cools-sending-nasdaq-100-into-1-trillion-tailspin?srnd=homepage-europe

 

Some more rotation and volatility, finally, maybe something more interesting / at least correction size serious?

 

https://www.bloomberg.com/opinion/articles/2024-07-24/the-fed-needs-to-cut-interest-rates-now

 

But sure, market has fallen more than 2 per cent for the first time in almost two years and is already off by like 4 per cent from recent ATH!

 

What a horror:). FED put to the rescue!

 

 

The horror!  Stocks should never go down /s

[Spooky]

Anyone know what is driving the big sell-off today?