Seems like bubble chatter is everywhere. Whether it's news, yahoo finance, my advisor,, market is X over valued,, etc.

Could we possibly not be? Wondering if the value norms have shifted the trend line up? Is there any rational support for the levels the market is at?

Could we be in a bubble? Sure. But I'm in line with the others and I doubt it.

If we are though, tell me where in the bubble we are at and how big it will pop?

If we're at the top and there is a 30%+ drop, then yeah buying more protective assets will be great.

But what if we're only part way up? If we grow 50% before a 30% drop, that protection you bought will likely put you behind.

I'm not going to time the market since I am still on a 10+ year outlook for relying on investments instead of salary.

Downside risk for me right now is private credit and passive investing, in that order.

I'm on the fence about how significant the private credit risk is - my biggest concern is collateral. First Brands and Tricolor were big private credit issues not really because of the size but just because of the smoke and mirrors of how they were underwritten. The primary cause of them going under is one time events - illegal immigration ceasing and tariff front running. Even though it was one time events, it points out the huge flaw in levered business models..You can be illiquid forever but you can't be insolvement for a moment.

I think if you look at a lot of our large systems, they have been on auto-pilot for years. They were set up well and they have been running procedures and processes since. When people are trained to check boxes but not really understand what it is they are doing or why they are doing it, you put systemic risk in the system. I think that is where private credit is currently and that's why I see it as the biggest bubble risk.

Passive investing is one to think about for me because it is emotionless. Once the algo's flip to sell, they're self-reinforcing to the downside in the same way they are to the upside. With that being said, it's going to take much larger employment issues than we have today in order to interrupt the momentum of passive 401k purchases.

It feels like a lot of the elements are in place for a bubble, but I'm not sure that we're seeing the widespread market euphoria.
Maybe a Fed cutting cycle will provide the fuel we need to get that level of craziness in the market.

But, like dotcom bubble, there are going to be some big winners emerge. But will you be able to pick them up for cents on the dollar in the pit of a crash??

Yeah...we're in a bubble. WGAS?! My portfolio looks awesome. Number go up and to the right!!

Yep. And a lot more money too. That's why I think comparing historical PE ratios today's ratios saying we're topping out is misleading. One has to account for the shrinkage of equities and increases of dollars. I haven't seen anyone put that data out but I bet it would be VERY telling as to where we are in the market cycle.

Essentially something like a ratio between total supply of publicly traded companies and total supply of dollars compared to PE for different years. Then see how that looks for today.

I've never used an AI model thing but if you have access maybe query it for something

When was the last time you were honestly sure we were or were not in a bubble?

Mr.Milkshake said:

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When was the last time you were honestly sure we were or were not in a bubble?

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2001-2005
2009-2018
Summer 2020 - 2023

Yukon Cornelius said:

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I don't think we are. People talking about and being afraid of a bubble is the antithesis to what creates a bubble. A bubble is created by capitulation to buy. Trillions in cash still on the sidelines.

People talking about bubbles often don't show any metrics indicating it either. It's all vibes and feels.


We have less publicity traded companies today then we did in 2007. Roughly a 1000 less.

We have about 3000 less publicity traded companies then in 1999.

But we have 6x the money supply. In 1999 it was 4-5 trillion. Now we have 22-23 trillion in money supply.

So less equities but more money. Especially since 2020.

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Fewer.

Do we have fewer public companies because of more companies going private? I think that's more of a recent trend, but I'm not sure if it's enough of a trend to statistically matter.

Probably a combination of things. Private equity definitely being one of them. Lots of companies probably were vaporware that never left a real void to be replaced.

Somewhere, Tonya is smiling.

I feel as though we are figuring out ways to compensate for a lot of things that should be causing a popped bubble. The thing is we can only compensate for so long.

There are a lot of bubbles in tech, and AI is leading to a lot of layoffs, or tariffs are leading to layoffs, groceries are becoming more expensive slowly, and housing markets seem to be opening as more homes sit on the market for longer, and now millions of federal employees aren't getting paid. I don't know when it will hit, but at some point things are going to pop.

Also, I think the market performance is a little divorced from reality at the moment. At some point they'll reconcile and come back together.

Give me a year and I'll show you dozens of articles from that year saying we're in a bubble. Maybe we are and maybe we aren't, but the odds are in favor of not. Much more money has been lost trying to time the next "crash" than in the actual "crash" itself (not my words… Peter Lynch?)

Far too many on this board that think they're too smart for that.

bigtruckguy3500 said:

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I feel as though we are figuring out ways to compensate for a lot of things that should be causing a popped bubble. The thing is we can only compensate for so long.

There are a lot of bubbles in tech, and AI is leading to a lot of layoffs, or tariffs are leading to layoffs, groceries are becoming more expensive slowly, and housing markets seem to be opening as more homes sit on the market for longer, and now millions of federal employees aren't getting paid. I don't know when it will hit, but at some point things are going to pop.

Also, I think the market performance is a little divorced from reality at the moment. At some point they'll reconcile and come back together.

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There's a lot of stupid in this post

My first comment was tongue-in-cheek to slightly mock overzealous bulls. Is the market in a bubble? Maybe...

Smart money employs capital where there is value. There are good reasons to be heavy in the Mag 7. Obviously, that is where most see value. What value? Artificial intelligence. Why AI? Bottom line...AI has great potential to create efficiencies. Efficiency is an elemental backbone to increase production and reduce costs.

Think of some of the most prolific machines and inventions of the industrialization age: the tractor, the automobile, the cotton gin. All added to efficiencies: greater production, reduced costs, growth, opportunity, increased employment, improved quality of life, and great wealth.

As a technology, AI is still learning to walk, but there seems to be infinite possibilities where this technology could be deployed to create immense efficiencies and reduce costs. I've even entertained the idea of using AI to replace government, a wholly inefficient and wasteful institution. Naturally, we need to keep some guardrails on AI to insure it remains a public positive and not a societal detriment.

Banking, finance, and markets are smack in the middle of an evolutionary change. Crypto currencies, blockchain, stablecoins, smart contracts, tokenization of assets, etc... AI will play a huge role in this sector as well. Currently, money flows like a river; bending around trees, banks, and rocks. With AI, money will flow at the speed of light.

I think most of the doom comes from those clinging to old ways and not terribly comfortable with change. I fully admit I am one of those people. I see the potential of AI as I work in the technology sector and use it daily. And that's probably what scares me the most; watching these infant technologies reshape the world.

In 1983, just a kid, I stood in a Radio Shack looking at a "personal computer" as my dad was shopping for something. The salesman came over to me, smiled, and said, "You can learn to work on one, or push a broom around one." I think that's kind of where we are with some of these new technologies.

We live in surreal times. Half the country maybe even half the world wants a burst due to Trump.

He is extraordinary and possibly biblical.

When it does burst, it really won't matter where your wealth is at, it will be apocalyptic.

IMO

Agree with all of that. Doesn't mean we might not be in a bubble though. AI meets all the criteria for a bubble.

The question will be how these companies can produce real economic value proportional to their price. I'm high on certain aspects of AI and low on others.

Low on AI for basic fact checking:

Already shared earlier but if OpenAI never does anything beyond a chat bot sub I'm not sure that's worth all the hubub. Granted, perception is reality and if people believe it to be enough, then it will be. I'm now seeing routine qualifier statements in "How to use AI" articles that tell the reader to fact check their results they get from AI. LOL! What a waste of time to use AI for search but then you have to go do a traditional internet search to validate what you looked up in AI. For many, why the hell would you use AI in the first place for fact checking? What's the point if I have to look it up a second time?

Studies right now show it's wrong about 50% of the time which is about what I've found in my own use of it. Just stupid hallucinations throughout. This will presumably get better over time but it's going to be interesting to see how LLM devs curate their sources going forward to try and fix this since most of them started out using garbage in sources in the first place. Ex: Reddit. Elon seems to be the only one trying to get better here and one recent comparison study I just read proves that showing Grok is the most accurate of the current AI tools.

High on AI for coding:

I've used it for this and it works really, really well. It works better here because the rules around coding are rule based vs just open ended information vomit from the internet with basic fact checking. It's why Claude has taken off as the gold standard for now. Before I retired a couple of months ago, we adopted Claude as basically our junior devs foregoing the need to even hire junior devs going forward. There are inherent issues with this approach that will show up later, but AI in the coding world is absolutely a game changer. I've used it to help me build out advanced spreadsheet functions that are beyond my skill. I never would have been able to do that in the past without taking some kind of course that likely would have taken me weeks to solve. Using AI, I figured it out in about an hour with just continued prompting and refinement.

TTUArmy said:

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In 1983, just a kid, I stood in a Radio Shack looking at a "personal computer" as my dad was shopping for something. The salesman came over to me, smiled, and said, "You can learn to work on one, or push a broom around one." I think that's kind of where we are with some of these new technologies.

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I have no idea if we're in a bubble or not - we can really only assess that after-the-fact. HOWEVER, I can strongly opine that the example above is a good place to start.

There will be winners and (more) losers from this early wave of AI adoption. In the "PC revolution", we didn't know which of Radio Shack TRS-80(?), Commodore 64, and Apple II was going to succeed, and had no idea of new entrants that would end up dominating (Intel, MSFT, Dell, Compaq, etc.). While we can't directly "know" which AI approach will be the best place to invest, just know that some, or more probably, MOST, will fail. In 5-10 years, it will be easy to see which method drove mass-adoption, and I don't think it will necessarily will be the best and fastest version. It will likely be the ones that make the technology most accessible and easily deployed. I'm waiting for the Google, WalMart, Home Depot, or Schwab of AI to step forward, not chasing today's high-flyers (the likeliest bubble candidates) exclusively.

I dont know if bubble is the word since thats very broad sweeping. Its like watching women's 7th grade hurdles. Some will face plant in spectacular fashion and others will cross the finish line

My best guess of where we are right now is upward for a few more years, at least. Many companies will show increasing profits by using AI and not hiring new people. This is an increase in corporate efficiency like we saw with the first realistic introduction of desktop computers into the corporate world. Who still has a secretary to type letters? So, companies will be making bigger profits by laying off (or freeze hiring) while increasing productivity. It may even lead to increased profit margins on flat revenue growth through these efficiency increases. We've already seen the tech industry with substantial layoffs even though they are reporting record profits. This trend will trickle through most other businesses in a similar way.

If Trump can end the Ukraine war (any way possible). I'm guessing he still needs a year or two to make that work. I don't care who winds up with what land. But any stop of that will ring the market up more.

Also, I see interest rates coming down in the next couple of years and the real estate market coming back a bit.

I believe all the above will continue to push the markets higher for several more years. Hard to predict much beyond that. Maybe the euphoria continues with a Vance presidency win. But maybe we get to a "topping" on all that and a Black Swan event like several terrorist drone attacks in the US and it pops pretty bad from there. Maybe down 40-50%. Not to mention the centennial anniversary of the stock market crash spooking the baby boomers to pull all their retirement out of the market and into something safer. That's what my crystal ball is showing me right now.

User name sort of doesn't check out.

Have any metrics to show?

https://www.wsj.com/opinion/a-private-credit-winter-is-coming-cb016ec5?st=xduBu7&reflink=desktopwebshare_permalink

Any of you finance bros can tell me what this article really says?

Yukon Cornelius said:

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Have any metrics to show?

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Here is a good article on why some think it could be.

I think anyone that automatically writes this off as nothing to see here is a classic case of someone who is part of the bubble. Again, this has all of the classic signs of one. It remains to be seen if it will burst. It may not.

https://www.wsj.com/tech/ai/is-the-flurry-of-circular-ai-deals-a-win-winor-sign-of-a-bubble-8a2d70c5?st=LzDJkL&reflink=article_copyURL_share

DDub74 said:

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https://www.wsj.com/opinion/a-private-credit-winter-is-coming-cb016ec5?st=xduBu7&reflink=desktopwebshare_permalink

Any of you finance bros can tell me what this article really says?

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Not an expert on this but one thing not mentioned in that article is that Tri-Color's customer market was essentially illegal aliens. Trump got elected and that pipeline collapsed.

Lesson here is know how your money is being used. Glad they failed.

Name one classic sign..

Like I've said above if your model is not accounting for the exponential growth of money you're likely wrong. I haven't seen any metrics showing how or why this is a bubble. Only opinion pieces.

And lines like "classic signs are there"..

Despite the fact there's so much fear in the market which is antitheses' of a bubble.

And I suspect most people with the opinion we are in a bubble are under exposed and they are hoping it's a bubble and pops so they can buy back in cheaper. Not because they are evaluating data.

Like your article. Not single piece of data is given to show we're in a bubble. It's 100% opinion based off nvida investing in openAI.