Are we in a bubble?

[Sweet]

The price action it the chip makers like Intel, AMD, Micron is very sketchy.  Regularly getting huge intraday swings of 5-10%.  Some of those stocks are up 5x in a year.  Total mania.

[Libs]

 

 

Another mind-blowing chart. Mind you, it doesn't mean 51% of the stocks, it should say 'of the weighting'. Still...

 

[Paarslaars]

Well sure but that is the thing, price goes up because forward sales increase... if these estimations are correct then this isn't an issue.

[kab60]

I'm very confident there's a massive bubble in anything related to AI as well as the Elon complex. It's the dumbest market I can recall, but it also seems like a tremendous opportunity. I've never had as many actionable and juicy ideas, as AI has sucked out the air (and capital...) of large swaths of the market. It even deflated most of the 'quality' bubble, so unlike in the past, I can even buy great franchises at 10x fwd FCF instead of (just) dumpster diving.

 

SpaceX is trying to go public at close to 2T. It does 20B in revenue and loses money. Tesla is a shitty business shedding market share but still commanding a trillion dollar+ valuation. Does anyone really think making cars and selling space-beamed broadband will be a great business? Or launching rockets into space?

 

SpaceX only makes sense if data centers in space works and he has a monopoly on that sort of thing, but given he can't make his cars run autonomously in Austin ten years after proclaiming self-driving was here, I'll take the under on that one... But there's also this weird dissonance in the market... Because if people will pay 2T for SpaceX based on some datacenter-in-the-sky fancy, shouldn't all hyperscalers, neoclouds and what have you be selling off due to massive sunk costs?

 

Memory is another one... It reminds me of 2021, when every 'quality bro' was doing 100p deep dives on pool companies, junk yards and tile stores and capitalizing a one-in-a-lifetime boom... But memory is a certifiably crappy business, how exactly is it gonna end well paying trillions for commodity companies due to a temporary bottleneck?

 

Google, Meta & Amazon are a bit different. They're not crazy expensive on the typical metrics. But I still struggle to see how Google, despite fending off Open AI somewhat in search, isn't a worse business than it used to be. These companies used to stay in their lane and be royalty-like businesses. Now they think they're in some kind of existential battle with each other and investing like a drunken E&P major (on 'roids). And given Google now has real competition in search, which requires massive commute to compete, that just seems like a much worse business than an asset-light business with +90% market share and no competition.

 

 

[Gregmal]

37 minutes ago, kab60 said:

I'm very confident there's a massive bubble in anything related to AI as well as the Elon complex. It's the dumbest market I can recall, but it also seems like a tremendous opportunity. I've never had as many actionable and juicy ideas, as AI has sucked out the air (and capital...) of large swaths of the market. It even deflated most of the 'quality' bubble, so unlike in the past, I can even buy great franchises at 10x fwd FCF instead of (just) dumpster diving.

 

SpaceX is trying to go public at close to 2T. It does 20B in revenue and loses money. Tesla is a shitty business shedding market share but still commanding a trillion dollar+ valuation. Does anyone really think making cars and selling space-beamed broadband will be a great business? Or launching rockets into space?

 

SpaceX only makes sense if data centers in space works and he has a monopoly on that sort of thing, but given he can't make his cars run autonomously in Austin ten years after proclaiming self-driving was here, I'll take the under on that one... But there's also this weird dissonance in the market... Because if people will pay 2T for SpaceX based on some datacenter-in-the-sky fancy, shouldn't all hyperscalers, neoclouds and what have you be selling off due to massive sunk costs?

 

Memory is another one... It reminds me of 2021, when every 'quality bro' was doing 100p deep dives on pool companies, junk yards and tile stores and capitalizing a one-in-a-lifetime boom... But memory is a certifiably crappy business, how exactly is it gonna end well paying trillions for commodity companies due to a temporary bottleneck?

 

Google, Meta & Amazon are a bit different. They're not crazy expensive on the typical metrics. But I still struggle to see how Google, despite fending off Open AI somewhat in search, isn't a worse business than it used to be. These companies used to stay in their lane and be royalty-like businesses. Now they think they're in some kind of existential battle with each other and investing like a drunken E&P major (on 'roids). And given Google now has real competition in search, which requires massive commute to compete, that just seems like a much worse business than an asset-light business with +90% market share and no competition.

 

 

Spot on. Fun time to be in the markets 

[thepupil]

3 hours ago, kab60 said:

I'm very confident there's a massive bubble in anything related to AI as well as the Elon complex. It's the dumbest market I can recall, but it also seems like a tremendous opportunity. I've never had as many actionable and juicy ideas, as AI has sucked out the air (and capital...) of large swaths of the market. It even deflated most of the 'quality' bubble, so unlike in the past, I can even buy great franchises at 10x fwd FCF instead of (just) dumpster diving.

 

SpaceX is trying to go public at close to 2T. It does 20B in revenue and loses money. Tesla is a shitty business shedding market share but still commanding a trillion dollar+ valuation. Does anyone really think making cars and selling space-beamed broadband will be a great business? Or launching rockets into space?

 

SpaceX only makes sense if data centers in space works and he has a monopoly on that sort of thing, but given he can't make his cars run autonomously in Austin ten years after proclaiming self-driving was here, I'll take the under on that one... But there's also this weird dissonance in the market... Because if people will pay 2T for SpaceX based on some datacenter-in-the-sky fancy, shouldn't all hyperscalers, neoclouds and what have you be selling off due to massive sunk costs?

 

Memory is another one... It reminds me of 2021, when every 'quality bro' was doing 100p deep dives on pool companies, junk yards and tile stores and capitalizing a one-in-a-lifetime boom... But memory is a certifiably crappy business, how exactly is it gonna end well paying trillions for commodity companies due to a temporary bottleneck?

 

Google, Meta & Amazon are a bit different. They're not crazy expensive on the typical metrics. But I still struggle to see how Google, despite fending off Open AI somewhat in search, isn't a worse business than it used to be. These companies used to stay in their lane and be royalty-like businesses. Now they think they're in some kind of existential battle with each other and investing like a drunken E&P major (on 'roids). And given Google now has real competition in search, which requires massive commute to compete, that just seems like a much worse business than an asset-light business with +90% market share and no competition.

 

 

agree on Elon complex, valuations look dumb my stupid little mutual fund trade notwithstanding.

 

on memory, it’s tough for me to agree in that earnings have absolutely exploded and that for these to trade at “intrinsic value” assuming this only last a couple years they’d probably have to trade for like 3x earnings which isn’t really realistic for mega caps so they trade to like 8….like with hindsight Micron at $100B in 2023 was trading for 1x 2027 earnings, so with hindsight we know that it was well below its intrinsic value (unless they never earn another $1 or estimates are way off). 
 

they’re shifting to longer term contracts which one experienced person I k ow says that always marks the top of the cycle but does lengthen the period of supernormal return.

 

in other words, they might be worth 50% or 60% less on a true PV of earning, but are we really THAT confident the supply

response will destroy earnings THAT quickly. I am not. The difference in supervycle length of 1 or 2 years is like a few hundred billion of earnings.

 

and then the leaders as you say are potentially worse businesses than before from all this, but also like no one else can muster the scale of resources like they are…

 

I’m more in the wishy washy useless Howard marks camp “be a little cautious / don’t go all in on any one view”

 

 

with that said yesterday was amazing, market down 2.5%, portfolio up 1-2%. Let’s have more of those please!
 

One of the tensions to manage is if you think the market leadership /stuff at the top is a little optimistic, then you might be cautious on market and think everything goes down….or you could have rotation into other stuff…I just stay mostly invested / root for rotation, but obviously if it all goes down the. Hedges/cash whatever would be better. Can’t predict that.

Yesterday felt more like rotation and it was glorious. Who knows what tomorrow holds. Given the degree so many invest passively, I’d think eventually everything goes down if the big stuff does.

Edited yesterday at 10:27 AM by thepupil

[kab60]

1 hour ago, thepupil said:

agree on Elon complex, valuations look dumb my stupid little mutual fund trade notwithstanding.

 

on memory, it’s tough for me to agree in that earnings have absolutely exploded and that for these to trade at “intrinsic value” assuming this only last a couple years they’d probably have to trade for like 3x earnings which isn’t really realistic for mega caps so they trade to like 8….like with hindsight Micron at $100B in 2023 was trading for 1x 2027 earnings, so with hindsight we know that it was well below its intrinsic value (unless they never earn another $1 or estimates are way off). 
 

they’re shifting to longer term contracts which one experienced person I k ow says that always marks the top of the cycle but does lengthen the period of supernormal return.

 

in other words, they might be worth 50% or 60% less on a true PV of earning, but are we really THAT confident the supply

response will destroy earnings THAT quickly. I am not. The difference in supervycle length of 1 or 2 years is like a few hundred billion of earnings.

 

and then the leaders as you say are potentially worse businesses than before from all this, but also like no one else can muster the scale of resources like they are…

 

I’m more in the wishy washy useless Howard marks camp “be a little cautious / don’t go all in on any one view”

 

 

with that said yesterday was amazing, market down 2.5%, portfolio up 1-2%. Let’s have more of those please!
 

One of the tensions to manage is if you think the market leadership /stuff at the top is a little optimistic, then you might be cautious on market and think everything goes down….or you could have rotation into other stuff…I just stay mostly invested / root for rotation, but obviously if it all goes down the. Hedges/cash whatever would be better. Can’t predict that.

Yesterday felt more like rotation and it was glorious. Who knows what tomorrow holds. Given the degree so many invest passively, I’d think eventually everything goes down if the big stuff does.

On memory, I will just say; look at all the covid winners, who are now - 5 years hence - still struggling. Some of these businesses would have been way better off had they not had that massive demand spike, which led to malinvestment as demand signals were all screwed. I don't know what happens to memory, but it looks like a massive bubble to me. It's a commodity, should be a matter of time before you get a supply response or people design around it. As for LT contracts, they usually have those in shipping as well during boom times... Then they get renegotiated when things turn to shit. Happens in a lot of industries, all the time. Look at EAF...

[John Hjorth]

Where is all the power to keep all this new, near future and tangible AI stuff running at full capacity and full throttle going to come from, at least until Musk et. al. is the savior of the planet in that respect?

 

- - - o 0 o - - -

 

Disclosure : Thick books can be written about what I don't understand or know.

[73 Reds]

6 hours ago, kab60 said:

I'm very confident there's a massive bubble in anything related to AI as well as the Elon complex. It's the dumbest market I can recall, but it also seems like a tremendous opportunity. I've never had as many actionable and juicy ideas, as AI has sucked out the air (and capital...) of large swaths of the market. It even deflated most of the 'quality' bubble, so unlike in the past, I can even buy great franchises at 10x fwd FCF instead of (just) dumpster diving.

 

SpaceX is trying to go public at close to 2T. It does 20B in revenue and loses money. Tesla is a shitty business shedding market share but still commanding a trillion dollar+ valuation. Does anyone really think making cars and selling space-beamed broadband will be a great business? Or launching rockets into space?

 

SpaceX only makes sense if data centers in space works and he has a monopoly on that sort of thing, but given he can't make his cars run autonomously in Austin ten years after proclaiming self-driving was here, I'll take the under on that one... But there's also this weird dissonance in the market... Because if people will pay 2T for SpaceX based on some datacenter-in-the-sky fancy, shouldn't all hyperscalers, neoclouds and what have you be selling off due to massive sunk costs?

 

Memory is another one... It reminds me of 2021, when every 'quality bro' was doing 100p deep dives on pool companies, junk yards and tile stores and capitalizing a one-in-a-lifetime boom... But memory is a certifiably crappy business, how exactly is it gonna end well paying trillions for commodity companies due to a temporary bottleneck?

 

Google, Meta & Amazon are a bit different. They're not crazy expensive on the typical metrics. But I still struggle to see how Google, despite fending off Open AI somewhat in search, isn't a worse business than it used to be. These companies used to stay in their lane and be royalty-like businesses. Now they think they're in some kind of existential battle with each other and investing like a drunken E&P major (on 'roids). And given Google now has real competition in search, which requires massive commute to compete, that just seems like a much worse business than an asset-light business with +90% market share and no competition.

 

 

Yeah but dot com was worse.  At least AI companies generate sales and earnings.  Some of you may not have been around  but literally anything not related to tech was left for dead and 401k "millionaires" all believed they were investment geniuses; who needed stocks that didn't go up 10%/week?     

[changegonnacome]

Bubble........all I'll say on it is its a deeply disadvantageous time to be invested in broad market indexes where for example in QQQ your going to get SPCX rammed down your throat and a wonderful time to find individual names left for dead.

[changegonnacome]

8 hours ago, kab60 said:

I can even buy great franchises at 10x fwd FCF instead of (just) dumpster diving.

 

Care to share some names?

[John Hjorth]

17 minutes ago, changegonnacome said:

Bubble........all I'll say on it is its a deeply disadvantageous time to be invested in broad market indexes where for example in QQQ your going to get SPCX rammed down your throat and a wonderful time to find individual names left for dead.

 

What's your source for this statement, related to specificly QQQ, @changegonnacome ? [ Please see posts by @Dalal.Holdings and @Spekulatius related to SPCX index inclusion].

[Dalal.Holdings]

2 hours ago, John Hjorth said:

 

What's your source for this statement, related to specificly QQQ, @changegonnacome ? [ Please see posts by @Dalal.Holdings and @Spekulatius related to SPCX index inclusion].

He is right. While the S&P 500 is not including SPCX, the Nasdaq-100 relaxed rules to include it which is crazy

[Peregrine]

All the AI labs (including probably SpaceX) now in talks with the Trump admin to use US taxpayer dollars to invest in them, presumably because private liquidity could be drying up to provide exit liquidity to insiders.

 

Just incredible how much a bunch of these tech elites are seeking to fleece the public. Is there no shame? This might be on par with what Putin and the Russian oligarchs did following the fall of the Soviet Union.

[aesophawk]

11 hours ago, kab60 said:

I'm very confident there's a massive bubble in anything related to AI as well as the Elon complex. It's the dumbest market I can recall, but it also seems like a tremendous opportunity. I've never had as many actionable and juicy ideas, as AI has sucked out the air (and capital...) of large swaths of the market. It even deflated most of the 'quality' bubble, so unlike in the past, I can even buy great franchises at 10x fwd FCF instead of (just) dumpster diving.

 

SpaceX is trying to go public at close to 2T. It does 20B in revenue and loses money. Tesla is a shitty business shedding market share but still commanding a trillion dollar+ valuation. Does anyone really think making cars and selling space-beamed broadband will be a great business? Or launching rockets into space?

 

SpaceX only makes sense if data centers in space works and he has a monopoly on that sort of thing, but given he can't make his cars run autonomously in Austin ten years after proclaiming self-driving was here, I'll take the under on that one... But there's also this weird dissonance in the market... Because if people will pay 2T for SpaceX based on some datacenter-in-the-sky fancy, shouldn't all hyperscalers, neoclouds and what have you be selling off due to massive sunk costs?

 

Memory is another one... It reminds me of 2021, when every 'quality bro' was doing 100p deep dives on pool companies, junk yards and tile stores and capitalizing a one-in-a-lifetime boom... But memory is a certifiably crappy business, how exactly is it gonna end well paying trillions for commodity companies due to a temporary bottleneck?

 

Google, Meta & Amazon are a bit different. They're not crazy expensive on the typical metrics. But I still struggle to see how Google, despite fending off Open AI somewhat in search, isn't a worse business than it used to be. These companies used to stay in their lane and be royalty-like businesses. Now they think they're in some kind of existential battle with each other and investing like a drunken E&P major (on 'roids). And given Google now has real competition in search, which requires massive commute to compete, that just seems like a much worse business than an asset-light business with +90% market share and no competition.

 

 

 

Completely agree. Market looks bubbly, but underneath you have real opportunities. My portfolio might look similar from a valuation perspective, but the quality and growth prospects of the businesses are much better than the "dumpster diving" names that made up the majority of my previous portfolio. Getting GARP companies at a value price. 

[John Hjorth]

8 minutes ago, Dalal.Holdings said:

He is right. While the S&P 500 is not including SPCX, the Nasdaq-100 relaxed rules to include it which is crazy

 

@Dalal.Holdings,

 

Thank you for replying.

 

Yeah, it seems crazy, at least to me, personally.

[Spekulatius]

Memory is the largest bubble I have ever seen. Even the telecom bubble which pushed up the price of optical filters, tantalum and glass fiber wasn’t even close . Memory prices went up 4-5 x and if you look long term, they go down 20% per unit every year on average and I think we go back to this trajectory which means memory prices will go down 90% per unit in a couple of year.

I agree that this market is glorious for individual investors. Index return may well suck for the next 5 years. Stay nimble and humble. I could well be wrong on above. I think AI will be net benefit for society.

[dealraker]

44 minutes ago, Spekulatius said:

Memory is the largest bubble I have ever seen. Even the telecom bubble which pushed up the price of optical filters, tantalum and glass fiber wasn’t even close . Memory prices went up 4-5 x and if you look long term, they go down 20% per unit every year on average and I think we go back to this trajectory which means memory prices will go down 90% per unit in a couple of year.

I agree that this market is glorious for individual investors. Index return may well suck for the next 5 years. Stay nimble and humble. I could well be wrong on above. I think AI will be net benefit for society.

Wherever it goes and when it goes is unknown.  What's 99.99999999999% certain is that there will be a fire in the theater when every investor in the world will be trying to get out fast at any price.  PE multiples are the most irrelevant measure of bubbles, they are meaningless.  Yet the successful "sell" today focuses on them to make the sustainable case.  That said, I don't think we are near the top yet, gotta have some more fun first.

[John Hjorth]

2 minutes ago, dealraker said:

Wherever it goes and when it goes is unknown.  What's 99.99999999999% certain is that there will be a fire in the theater when every investor in the world will be trying to get out fast at any price.  PE multiples are the most irrelevant measure of bubbles, they are meaningless.  Yet the successful "sell" today focuses on them to make the sustainable case.  That said, I don't think we are near the top yet, gotta have some more fun first.

 

Does that imply, that I'm urgent in need, ASAP, monday morning, to call my general practicitioner for a recipe of some anti FOMO stuff? 

[dealraker]

7 minutes ago, John Hjorth said:

 

Does that imply, that I'm urgent in need, ASAP, monday morning, to call my general practicitioner for a recipe of some anti FOMO stuff? 

LOL, I think it just means lengthy chaos!  

[changegonnacome]

3 hours ago, John Hjorth said:

 

@Dalal.Holdings,

 

Thank you for replying.

 

Yeah, it seems crazy, at least to me, personally.

Nasdaq prostituted itself via index inclusion rule changes to secure the listing over NYSE…..there is something disheartening around an institution like Nasdaq doing something so brazen, low down, obvious and clearly hostile to the end investor which they claim to serve to make a few bucks and score some points.
 

Stuff like this was always done in the shadows, the skim counted in millions, not billions…see the participants were embarrassed to be perceived as being so greedy, so low down that they hid it well….it’s says a lot about the current moment that the participants of this scheme were happy to do it in broad daylight (indeed everybody is talking about it it’s so obvious). 

[SharperDingaan]

2 hours ago, dealraker said:

Wherever it goes and when it goes is unknown.  What's 99.99999999999% certain is that there will be a fire in the theatre when every investor in the world will be trying to get out fast at any price.  That said, I don't think we are near the top yet, gotta have some more fun first.

 

+1

 

The only reason we're punting on SpaceX is because we're sure we can rely on the greed. A great deal of money rests on this historic trillion dollar IPO not only doing well, but also closing the day at well above the issue price. A material bump that also bumps the indices, and opens the way for those lined up behind it .... and the fees that come with it.  Heaven and earth moved to ensure that nothing threatens it.

 

The GFC demonstrated that excessive fee income corrupted the judgement of rating agencies and associated analysts. We would expect that the same thing is happening here.

 

SD

[kab60]

9 hours ago, 73 Reds said:

Yeah but dot com was worse.  At least AI companies generate sales and earnings.  Some of you may not have been around  but literally anything not related to tech was left for dead and 401k "millionaires" all believed they were investment geniuses; who needed stocks that didn't go up 10%/week?     

A lot of the earnings are circular though.

 

Nvidia books earnings upfront, customers depreciate these things over 5-7-10 years. Of course you get a massive spike in earnings. Question is what follows. Sure dotcom had silly companies, but take a look at Tesla/SpaceX. The magnitude is beyond anything we have ever seen.

Edited 14 hours ago by kab60

[Sweet]

4 hours ago, Spekulatius said:

Memory is the largest bubble I have ever seen. Even the telecom bubble which pushed up the price of optical filters, tantalum and glass fiber wasn’t even close . Memory prices went up 4-5 x and if you look long term, they go down 20% per unit every year on average and I think we go back to this trajectory which means memory prices will go down 90% per unit in a couple of year.

I agree that this market is glorious for individual investors. Index return may well suck for the next 5 years. Stay nimble and humble. I could well be wrong on above. I think AI will be net benefit for society.

Quite something to say the largest bubble you have seen.

 

I think a lot of the tech stuff is a bit dodgy.  I don’t think the AI build out is a mistake but it’s darn expensive and it’s bidding up prices in ‘compute’.  The level of capex is not sustainable.

 

Something is going to break, I hope it doesn’t bring down the whole market with it.

[treasurehunt]

9 hours ago, 73 Reds said:

Yeah but dot com was worse.  At least AI companies generate sales and earnings.  Some of you may not have been around  but literally anything not related to tech was left for dead and 401k "millionaires" all believed they were investment geniuses; who needed stocks that didn't go up 10%/week?

 

I was around then but new to the markets, having started investing in stocks in 1998. But it's a little too simplistic to say that "literally anything not related to tech was left for dead". Retailers like WMT and HD, pharma companies like PFE and MRK, consumer companies like KO and PG, some financials like AXP and GS were all trading at very high valuations. I do remember all the genius 401k millionaires and maybe today's mania hasn't quite reached that level of craziness yet.