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Berkshire's $397B Bet Against an Overheated Market

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Re: Berkshire's $397B Bet Against an Overheated Market

#11

Post by nadermx »

bonesss wrote: post #7

It’s such an odd time investment wise… We have a blooming oil war that could take chunks of the global economy with it, booming and teetering credit levels threatening collapse, the “AI” companies have a lot of tinkerbell magic and impossible returns needed to justify their stocks, major cash rich tech giants are suddenly hands-out pockets-out for big money, and … well: Elon is the worlds richest man/CEO who also sha…

Na. Its just the status quoe with diffrent charectors, same game. Jobs/musk. Altman/gates. Etc

Re: Berkshire's $397B Bet Against an Overheated Market

#12

Post by cmiles8 »

bonesss wrote: post #7

It’s such an odd time investment wise… We have a blooming oil war that could take chunks of the global economy with it, booming and teetering credit levels threatening collapse, the “AI” companies have a lot of tinkerbell magic and impossible returns needed to justify their stocks, major cash rich tech giants are suddenly hands-out pockets-out for big money, and … well: Elon is the worlds richest man/CEO who also sha…

There’s always money to be made in a bubble implosion. The challenge is there’s a very thin line between major bank and losing your shirt. Because of that most long terms smart investors just sit it out which is likely why you see Berkshire sitting on treasury bills.

Re: Berkshire's $397B Bet Against an Overheated Market

#13

Post by actionfromafar »

cmiles8 wrote: post #4

There’s really not much question we are in a giant bubble that’s broadly been fueled by AI hype. The only serious question is how do we get out of it. In a controlled scenario the AI sector gets a severe correction with many AI-focused companies wiped out but broader damage more limited. In an uncontrolled scenario the AI bubble bursts and takes the whole economy with it. The likelihood of a scenario where suddenly t…

A controlled scenario also looks very unlikely, right? I think some people with influence believe (rightly or wrongly) they can get even more power from an uncontrolled scenario.

Re: Berkshire's $397B Bet Against an Overheated Market

#14

Post by actionfromafar »

matwood wrote: post #9
cmiles8 wrote: post #4

There’s really not much question we are in a giant bubble that’s broadly been fueled by AI hype. The only serious question is how do we get out of it. In a controlled scenario the AI sector gets a severe correction with many AI-focused companies wiped out but broader damage more limited. In an uncontrolled scenario the AI bubble bursts and takes the whole economy with it. The likelihood of a scenario where suddenly t…

> In an uncontrolled scenario the AI bubble bursts and takes the whole economy with it. How is the whole economy exposed to AI? Will Anthropic or SpaceX cratering threaten the entire financial system? NVDA will certainly correct, which is probably the biggest risk to the market, but then what? All the FCF being spent by Google, Amazon, MS, Meta, etc... will suddenly start flowing to dividends and stock buybacks again…

The same people pull the oil strings, crypto strings and AI strings. The whole economy suffering part intensifies when the "gubmint" bails its best friends out when the music stops.

Re: Berkshire's $397B Bet Against an Overheated Market

#16

Post by akoboldfrying »

cmiles8 wrote: post #4

There’s really not much question we are in a giant bubble that’s broadly been fueled by AI hype. The only serious question is how do we get out of it. In a controlled scenario the AI sector gets a severe correction with many AI-focused companies wiped out but broader damage more limited. In an uncontrolled scenario the AI bubble bursts and takes the whole economy with it. The likelihood of a scenario where suddenly t…

> There’s really not much question we are in a giant bubble

IIUC, some indicators correlated with previous bubbles are lighting up now, which is being interpreted as evidence that AI is likewise a bubble. But what about indicators of previous non-bubbles? How did it look when textile mills were first industrialised, or kerosene replaced whale oil for lighting, or the electric grid became widespread, etc. -- real advances that materially increased productivity in a lasting way? If these same indicators lit up in those cases too, how can we distinguish bubble from genuine advance?

Re: Berkshire's $397B Bet Against an Overheated Market

#17

Post by cmiles8 »

sph wrote: post #8
bonesss wrote: post #7

It’s such an odd time investment wise… We have a blooming oil war that could take chunks of the global economy with it, booming and teetering credit levels threatening collapse, the “AI” companies have a lot of tinkerbell magic and impossible returns needed to justify their stocks, major cash rich tech giants are suddenly hands-out pockets-out for big money, and … well: Elon is the worlds richest man/CEO who also sha…

How I view the market: Short term: high volatility and uncertainty, feels more like gambling at a casino Medium term: the world is too unstable, best to hold cash Long term: dollar cost averaging and time in the market always win so depending how long your horizon is, it’s a good time as any to invest Longer term: we all die

Good advice. Ironically most long term folks that just buy low cost index funds and take a nap outperform most of the market stressing out daily on their next move. That’s the cruel reality of investing.

When you factor in the opportunity cost of all that stress and managing an active portfolio the percentage of successful active portfolio managers likely falls down to single digits.

Invest early, invest consistently and often in up or down markets, and the math says you will do very well.

Re: Berkshire's $397B Bet Against an Overheated Market

#18

Post by cmiles8 »

matwood wrote: post #9
cmiles8 wrote: post #4

There’s really not much question we are in a giant bubble that’s broadly been fueled by AI hype. The only serious question is how do we get out of it. In a controlled scenario the AI sector gets a severe correction with many AI-focused companies wiped out but broader damage more limited. In an uncontrolled scenario the AI bubble bursts and takes the whole economy with it. The likelihood of a scenario where suddenly t…

> In an uncontrolled scenario the AI bubble bursts and takes the whole economy with it. How is the whole economy exposed to AI? Will Anthropic or SpaceX cratering threaten the entire financial system? NVDA will certainly correct, which is probably the biggest risk to the market, but then what? All the FCF being spent by Google, Amazon, MS, Meta, etc... will suddenly start flowing to dividends and stock buybacks again…

All that AI capital investment is flowing down into construction, utilities, raw materials and many other industries that on the surface appear unrelated to AI.

That’s currently all being kept alive by artificial cash flow broadly funded with loans and VC investment. When that hiccups the blast radius is much much bigger than a few AI companies just folding.

Re: Berkshire's $397B Bet Against an Overheated Market

#19

Post by roenxi »

bonesss wrote: post #7

It’s such an odd time investment wise… We have a blooming oil war that could take chunks of the global economy with it, booming and teetering credit levels threatening collapse, the “AI” companies have a lot of tinkerbell magic and impossible returns needed to justify their stocks, major cash rich tech giants are suddenly hands-out pockets-out for big money, and … well: Elon is the worlds richest man/CEO who also sha…

Yeah but that is likely the normal state of things - high status people are human too, we're all shocked. And on Twitter comment - mass media has been a tool of propaganda since shortly after it was invented. Twitter is substantially better than something like a newspaper or TV channel.

The difference in the modern era is the internet is such a robust communication channel that the ultra-wealthy can't pay money to have the negative stories suppressed any more. If anything the current crop seem to be unusually well behaved by historical standards because there are so many eyes on them. Scandals like the whole Epstein thing or #metoo would simply have vanished into silence before the 2000s unless they were being used to lever out someone uncooperative for political purposes.

Re: Berkshire's $397B Bet Against an Overheated Market

#20

Post by nixon_why69 »

akoboldfrying wrote: post #16
cmiles8 wrote: post #4

There’s really not much question we are in a giant bubble that’s broadly been fueled by AI hype. The only serious question is how do we get out of it. In a controlled scenario the AI sector gets a severe correction with many AI-focused companies wiped out but broader damage more limited. In an uncontrolled scenario the AI bubble bursts and takes the whole economy with it. The likelihood of a scenario where suddenly t…

> There’s really not much question we are in a giant bubble IIUC, some indicators correlated with previous bubbles are lighting up now, which is being interpreted as evidence that AI is likewise a bubble. But what about indicators of previous non-bubbles? How did it look when textile mills were first industrialised, or kerosene replaced whale oil for lighting, or the electric grid became widespread, etc. -- real adva…

1850-1929 was filled with absolutely spectacular boom-bust cycles. Something working long term and having a bubble and crash in the short term are not mutually exclusive.
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