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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

#31

Post by hypeatei »

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…

Bull markets are born out of skepticism. Everyone is fearful that there's a giant bubble so all eyes are on the fundamentals. When euphoria sets in, i.e. neighbors and co-workers start telling you how easy it is to make money on stocks, that's when you know you're at the top. We're not at the top and have seen multiple corrections/bear markets over the past 5-6 years.

Berkshire themselves have made investments into Google this year, a company at the center of this supposed "bubble"... make of it what you will but I think the market is setup to do pretty well in the near future.

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

#32

Post by cindyllm »

abc123abc123 wrote: post #30
sph wrote: post #8

Earlier quoted context omitted.

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

You do, your children will live. Or, if you don't have children, your non-profit does not. I wish people would stop using this "we all die" slogan when it comes to their financial lives, and think a bit about the people who will be left after you retire.

[dead]

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

#33

Post by inigyou »

abc123abc123 wrote: post #30
sph wrote: post #8

Earlier quoted context omitted.

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

You do, your children will live. Or, if you don't have children, your non-profit does not. I wish people would stop using this "we all die" slogan when it comes to their financial lives, and think a bit about the people who will be left after you retire.

I hate that having children is apparently the only purpose anyone has in life because I don't have children or a purpose in life and I'm pretty sure I would be even more depressed if I had children.

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

#34

Post by BLKNSLVR »

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…

The thing I worry about is: what happens when an actual set of adults get back into the White House?

That could well be the trigger for the crash of all crashes because they might actually bring some reality pins with them, which are the antithesis of the growing, in size and number, fantasy balloons of hot-air the current cough leadership cough is facilitating.

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

#35

Post by abc123abc123 »

le-mark wrote: post #27
rajnathani wrote: post #6

I would rename the title to “The Buffett Indicator shows an overvalued market”. For those curious of its definition (from the article): > The Buffett Indicator, a ratio that measures the market cap of the entire stock market against the GDP of the United States, has hit a record of ~232%. Historically, anything above ~120% is a signal of the market being overvalued. That being said, it’s not clear that the Buffet Ind…

The fact the AI emperor wears no clothes seems clear to me at least. The dot-com bubble looked obvious in 1997; it popped in 2000. Anyone shorting in '97-'98 was carried out on a stretcher before being vindicated. In fact 2000-2002 fell in three brutal legs over two years, and anyone who leveraged up after the first 25% leg was destroyed by the next two. My strat is to accumulate cash to buy the drop. The danger with…

This is the way. Did the same thing for 3 years before corona. Drop came, went all in, fast forward a year or two, we did not die, and the stocks were about 150%-200% higher.

I'm doing the same thing now. Slowly starting to sell off the shares I have, putting the profit in bonds/interest accounts, when the bubble pops, I'll go all-in (phasing it in over a few quarters most likely) and then profit after 1-2 years.

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

#36

Post by abc123abc123 »

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…

I hope the general market will not drop by more than 25%-35%, while most AI companies will be wiped out.

I also expect Facebook, Microsoft, Google, to survive, and buy the good pieces that remains after the bubble popped. They each have income from other areas so are well position to survive the AI bubble.

Pure AI plays are the ones who will be annihilated. The best of the pure AI plays will be acquired by the old guard.

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

#37

Post by nerdralph »

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

Instead of cash, I like debt like mortgage funds. High single-digit returns with low volatility.

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

#38

Post by abc123abc123 »

inigyou wrote: post #33
abc123abc123 wrote: post #30

Earlier quoted context omitted.

You do, your children will live. Or, if you don't have children, your non-profit does not. I wish people would stop using this "we all die" slogan when it comes to their financial lives, and think a bit about the people who will be left after you retire.

I hate that having children is apparently the only purpose anyone has in life because I don't have children or a purpose in life and I'm pretty sure I would be even more depressed if I had children.

Note that I am not arguing that children is the purpose in life for everyone. For some it is, for others it is not.

I believe that the majority of child bearers are "on program" driven by their biological imperatives. I believe that among the voluntary non-children people (of which I am one) there's plenty of values, goals, hopes and aspirations. In fact, for me, life is so rich that that is why I do not want children.

There's billions of people all over the planet to carry the burden for me. Sure, if we were in an extinction scenario, I might reconsider, but we're far, far from it.

So while I continue to enjoy life and full freedom, I'll let the people who are "on program" deal with the poop and worry for their offspring.

That does not, however, mean I do not have to care about people. If anything, the fact that I do not have children, gives me the opportunity to care _more_ about people in general, than the people who are busy with raising children.

Hence my idea about a non-profit, that will outlast me for some time.

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

#39

Post by le-mark »

The conclusion I came to on this was to watch for indicators it’s not working out. Canceling these large capex projects is one. Meta scaling back on their compute recently eerily fits that indicator.

In fact anyone reading should ask fable about indicators and ai bubbles, I just did and it was startling!

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

#40

Post by sph »

cmiles8 wrote: post #17
sph wrote: post #8

Earlier quoted context omitted.

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…

Though I keep wondering if the ‘invest consistently whether the market goes up or down’ defeats the point of a stock market in the first place.

People effectively keep throwing money at mediocre or failing endeavours, which magnifies any structural problem, and everything seems to keep going up whether it’s good news or bad news, until the bottom falls out.

My reading might be wrong, but since 2020 there is no bad news that seems to faze the market by an iota.

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