The Everything Bubble

[Trophicdynamics]

To add to my Depflation theory. China shock 2.0 is here. In the first China shock we lost low value added manufacturing work, this time around we are going to loose jobs in high value add work, technology, research and design, engineering, etc. 

[73 Reds]

33 minutes ago, coffeecaninvestor said:

My guess is he doesn’t care if he loses purchasing power over a 2-3 year period if he thinks he will have an opportunity to buy great businesses at a cheaper prices.. he’s probably more worried about return of capital over return on capital. My guess is he isn’t planning on holding $300+ billion in t-bills forever. Listen to last years AGM he basically walks you through his thought process.

Capital allocation is the hardest part of managing money for others.  He is always second-guessed.  Frankly, Berkshire only needs enough excess cash to cover potential liabilities from its insurance operations.  It could easily borrow money to acquire new businesses.  For a long time the argument has been why not invest excess cash in SPY if there is nothing better?  Yet like every other successful investor, Buffett follows the old tried and true.  As an ardent fan of both Buffett and Jack Bogle I wish that Bogle had rubbed off just a bit more on Buffett, particularly now that Berkshire has grown into its current size.      

[Gregmal]

Well again Id also point out the fact he's operating on a different level than us, but those whom have incentive to weave stories portray it however it suits them. In April, there were no shortage of "Buffett called the crash by unloading stocks"...but the reality is Buffett starting selling Apple in the 150s years ago and his sale of banks is looking worse by the day now as well.  

[Milu]

Just now, coffeecaninvestor said:

My guess is he doesn’t care if he loses purchasing power over a 2-3 year period if he thinks he will have an opportunity to buy great businesses at a cheaper prices.. he’s probably more worried about return of capital over return on capital. My guess is he isn’t planning on holding $300+ billion in t-bills forever. Listen to last years AGM he basically walks you through his thought process.

Yes but he's been holding large cash balances for at least the last 5 years already, possibly longer, add another 2-3 years to that and you are looking at close to a decade waiting for the fat pitch in a continually depreciating currency.

[Gregmal]

Oh yea, forgot about TSM too lol. Folks gotta think for themselves. Lotta faltering hero’s out there 

[coffeecaninvestor]

18 minutes ago, Milu said:

Yes but he's been holding large cash balances for at least the last 5 years already, possibly longer, add another 2-3 years to that and you are looking at close to a decade waiting for the fat pitch in a continually depreciating currency.

I don't think that is necessarily true. Cash as a % of Assets or Equity didn't really start increasing significantly until 2024. Berkshire will likely never have no cash on hand, and not want to rely on debt when shit hits the fan. He is also dealing with different limitations, and situations than the average investor, so I don't really fault him for being early. He can't blow out of positions quickly. I think it has turned out alright BRK is up 134% VS S&P 91% over the past 5 years according to google. 

[Marco Van Basten]

4 hours ago, coffeecaninvestor said:

My guess is he doesn’t care if he loses purchasing power over a 2-3 year period if he thinks he will have an opportunity to buy great businesses at a cheaper prices.. he’s probably more worried about return of capital over return on capital. My guess is he isn’t planning on holding $300+ billion in t-bills forever. Listen to last years AGM he basically walks you through his thought process.

With all due respect, what has he bought in March of 2020, fall of 2022, April of 2025?  

[Gregmal]

I think he was actually a seller during some of those periods LMFAO

[coffeecaninvestor]

55 minutes ago, Marco Van Basten said:

With all due respect, what has he bought in March of 2020, fall of 2022, April of 2025?  

 

He was buying back Berkshire stock

[Gamecock-YT]

[WayWardCloud]

You guys are making me bullish with all the doom talk 

The sp500 has returned 26% + dividends since the beginning of this thread by the way.

[winjitsu]

47 minutes ago, WayWardCloud said:

You guys are making me bullish with all the doom talk 

The sp500 has returned 26% + dividends since the beginning of this thread by the way.

 

[Milu]

Just now, WayWardCloud said:

You guys are making me bullish with all the doom talk 

The sp500 has returned 26% + dividends since the beginning of this thread by the way.

Ya all this talk about a bubble is making me feel a bit more confident that we aren't in a bubble. The time to worry for me is when people stop talking about a bubble and start proclaiming we are in a new era where the normal rules of economics don't apply.

[Gregmal]

7 minutes ago, Milu said:

Ya all this talk about a bubble is making me feel a bit more confident that we aren't in a bubble. The time to worry for me is when people stop talking about a bubble and start proclaiming we are in a new era where the normal rules of economics don't apply.

Yea but a lotta folks think “normal rules” are that stocks should trade at 17x…

[Milu]

46 minutes ago, Gregmal said:

Yea but a lotta folks think “normal rules” are that stocks should trade at 17x…

Yes very true. It's an interesting one, when I was in my 20's I used to care a lot about macro and pay attention to certain indicators like the shiller PE and marketcap-to-gdp. Then I mostly realised this was pointless and the people who keep focusing on it, John Hussman for example have underperformed for decades.

 

These days I just buy and hold good stocks for the long term and not get too worried about whether the market gets a little hot or not. I'm comfortable with volatility so mostly happy to just ride things up and down with the belief that the long term will work out ok.

 

I've always kept a bit of cash on the sidelines to help my psychology during the downturns but mathematically it probably made more sense for me to just be fully invested. Maybe market will double from here, maybe it will drop 50%, maybe it will triple and then plummet.  Nobody knows or should care too much in my opinion.

[winjitsu]

1 hour ago, Milu said:

Yes very true. It's an interesting one, when I was in my 20's I used to care a lot about macro and pay attention to certain indicators like the shiller PE and marketcap-to-gdp. Then I mostly realised this was pointless and the people who keep focusing on it, John Hussman for example have underperformed for decades.

 

These days I just buy and hold good stocks for the long term and not get too worried about whether the market gets a little hot or not. I'm comfortable with volatility so mostly happy to just ride things up and down with the belief that the long term will work out ok.

 

I've always kept a bit of cash on the sidelines to help my psychology during the downturns but mathematically it probably made more sense for me to just be fully invested. Maybe market will double from here, maybe it will drop 50%, maybe it will triple and then plummet.  Nobody knows or should care too much in my opinion.

 

It's like driving a car. You're driving your own speed towards your own destination. But if someone zips by you at 3x the speed limit, it doesn't take a genius to acknowledge "Hey, they are going too fast." 
 

Does it impact you? Maybe not. Or maybe they crashed around the corner, so you need to slow down a bit before you take the turn. 

 

But the first step is acknowledging the risk. And from where I stand, shit is looking real frothy in AI, Rare Earth, Quantum, Crypto, Drones, Gold and Silver, Labubus, Trading Cards etc. 

 

[Milu]

37 minutes ago, winjitsu said:

 

It's like driving a car. You're driving your own speed towards your own destination. But if someone zips by you at 3x the speed limit, it doesn't take a genius to acknowledge "Hey, they are going too fast." 
 

Does it impact you? Maybe not. Or maybe they crashed around the corner, so you need to slow down a bit before you take the turn. 

 

But the first step is acknowledging the risk. And from where I stand, shit is looking real frothy in AI, Rare Earth, Quantum, Crypto, Drones, Gold and Silver, Labubus, Trading Cards etc. 

 

Can you give some examples of public companies where there is a lot of froth. I hear a lot of people focus on mag 7 stocks as being in a bubble. Most of them are in the 30-40 PE multiple level, on the expensive side sure but expensive shouldn't necessarily equate to bubble. During the dot com bubble, most of the largest publically traded firms Cisco Oracle, Microsoft were anywhere from 60-400 PE multiple. 

 

People say AI is a bubble but most of the AI companies are private. There are lots of areas of the market that are not in a bubble and are possibly quite depressed, retail clothing firms (Lululemon, Crox) for example. 

 

I suppose my question for you is when was the last time you felt that the market was fairly priced, and what actions did you take during that time?

[Spekulatius]

5 hours ago, Milu said:

Ya all this talk about a bubble is making me feel a bit more confident that we aren't in a bubble. The time to worry for me is when people stop talking about a bubble and start proclaiming we are in a new era where the normal rules of economics don't apply.

There are clearly bubbles in some segments (crypto, QQQ or the hotter segments like quantum computing , the OpenAI complex) while many other market segments are more then reasonably valued. Echo‘s of 1999, imo.

[Milu]

6 minutes ago, Spekulatius said:

There are clearly bubbles in some segments (crypto, QQQ or the hotter segments like quantum computing , the OpenAI complex) while many other market segments are more then reasonably valued. Echo‘s of 1999, imo.

I think it's very difficult if not impossible to call a bubble until after it pops. For example is Bitcoin in a bubble, how would you judge, if it drops 50% next year and then goes up 300% the following year is the person who said bubble correct?

 

What if someone calls a bubble in the Nasdaq today at 22,000, and then the index goes up to 30,000 before dropping 33% to 20,000. Is that a correct bubble call. It's all very subjective really. I would say the the Dot com crash and the Japanese 1980's crash are clear enough but the rest it's all a bit wishy washy.

[73 Reds]

12 minutes ago, Spekulatius said:

There are clearly bubbles in some segments (crypto, QQQ or the hotter segments like quantum computing , the OpenAI complex) while many other market segments are more then reasonably valued. Echo‘s of 1999, imo.

IDK, if a company, asset, index (or whatever) can reasonably grow into its current price, its not priced in a bubble.  But all bubbles are no different than mere speculation.  Enter at your own risk.

[Masterofnone]

23 minutes ago, Spekulatius said:

There are clearly bubbles in some segments (crypto, QQQ or the hotter segments like quantum computing , the OpenAI complex) while many other market segments are more then reasonably valued. Echo‘s of 1999, imo.

It does seem like 1999 to me too. But it might be 1998! Cisco went from $13 to $75 between October 98 and April 2000!

[winjitsu]

43 minutes ago, Milu said:

Can you give some examples of public companies where there is a lot of froth. I hear a lot of people focus on mag 7 stocks as being in a bubble. Most of them are in the 30-40 PE multiple level, on the expensive side sure but expensive shouldn't necessarily equate to bubble. During the dot com bubble, most of the largest publically traded firms Cisco Oracle, Microsoft were anywhere from 60-400 PE multiple. 

 

 

PLTR 400bn mc 400x P/E
TSLA 1.4tn mc 255x P/E
COST 400bn mc 50x P/E
ORCL 850bn mc 60x PE (also jumped 20%+ on the bogus OpenAI backlog -- so yes private market companies are impacting public companies and the overall market)

OKLO 24bn mc, "cashflow positive in 2041"

Quantum Stocks QUBT, RGTI, QBTS etc are around 50bn total market cap, total vaporware 

DogeCoin 28bn mc

 

Just off some names off the top of my head.

 

43 minutes ago, Milu said:

I suppose my question for you is when was the last time you felt that the market was fairly priced, and what actions did you take during that time?

I stay 80-100% invested but I flex up and down my event-driven / conservative book (dividend payers) compared with my. Right now I'm around 30% towards that book.

 

As the market gets cheaper, I naturally replace it with longs aiming to get 100-115% exposure. Last time I think it was cheaply priced 2022-2023 downturn, swapped my BRK for GOOGL.  

 

Edited October 17, 2025 by winjitsu

[Whensthepaintdry?]

Is it wrong to think that most historic index comparisons are silly now that indexing is so prevalent? It used to be common practice to charge 2 percent plus in mutual funds or from advisors, not to mention tax drag. The common index investor today captures almost 100 percent of the gains today vs the historic 80 percent or whatever after reducing fees. Should the average investor not be willing to pay a little more since they are capturing more of the gains? This is not a question to rationalize a 30 pe on the index more, just a question on if historic comparisons on index valuations are irrational. 

[pricingpower]

I thought this was a nice informed take highlighting financial assumptions where debt is creeping into some of the heavy capex AI buildout happening, like most rapidly changing tech stuff the gaap accounting regime is probably not capturing intrinsic value changes as well as other industries

 

https://www.uncoveralpha.com/p/too-much-ai-too-soon?hide_intro_popup=true

[Spooky]

It’s a funny market. Some areas look pretty bubbly but it means there are lots overlooked companies / opportunities. Big divergence since liberation day between profitable and unprofitable companies (the unprofitable ones doing significantly better).