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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

#81

Post by AnimalMuppet »

bawana wrote: post #29

This bubble will never burst. The big investors are feeding a leverage cycle and cannot afford to stop. In addition, corporate nepotism has taken hold - for example, AI firms(the current flavor of software) invest in hardware companies. Hardware companies make money as the AI firms buy their product. Hardware companies then take that money and in vest in AI firms. The 'free market' no longer looks at 'value' to asses…

The big investors don't have control over the leverage cycle; the banks do. What kills a leveraged bubble is when banks won't lend any more for leveraged investments. Then leverage quits making the market go up. Then people realize that the market isn't going up constantly any more, and so a few get out. Then the market goes down a bit, and some people who are leveraged panic and get out. So the market goes down more, and a lot more people who are leveraged panic...

The big investors can do whatever they want. They don't have the final control here.

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

#82

Post by bryanlarsen »

wongarsu wrote: post #46
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…

In a world where Tesla has stayed at "severely overvalued" stock prices for about a decade, with occasional crashes to just "overvalued", I'm not so sure the big AI companies really need returns that justify their stocks. Sam Altman and Dario Amodei are both in their own ways trying to capture that same lighting in a bottle where the company is evaluated solely on the CEO's vision

In 2022, Tesla had a P/E of 34 and a growth rate of 50%.

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

#83

Post by abirch »

wongarsu wrote: post #46
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…

In a world where Tesla has stayed at "severely overvalued" stock prices for about a decade, with occasional crashes to just "overvalued", I'm not so sure the big AI companies really need returns that justify their stocks. Sam Altman and Dario Amodei are both in their own ways trying to capture that same lighting in a bottle where the company is evaluated solely on the CEO's vision

I feel like this is dot com 2.0. The dot com's valuations eventually were proven to be true, only way too early. With investing Timing is everything, if you invest in Pets.com you lost, if you invested in chewy.com you won. If you invested in Broadcast.com you lost, if you invested in YouTube.com you won.

AI is going to transform things but these current prices are crazy.

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

#84

Post by DonsDiscountGas »

khurs wrote: post #53

> Berkshire Hathaway just reported a record $397.4 billion in cash and T-bills, 59% of its investable portfolio. Isn't that just lazy? Even if the market is overheated, there will be opportunities in non-overheated areas/other countries/distressed companies etc? Unless they are sure of a crash and need funds to buy on the cheap.

I rather doubt the folks at Berkshire are sitting on their thumbs or playing golf all day and just forgot to buy anything. It's a measure of discipline, they won't invest in something without a good margin of safety. They'd rather miss out on a lot of good opportunities than pile money into bad (or even mediocre) ones.

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

#85

Post by ghtbircshotbe »

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…

I'll believe Musk is a trillionaire when the free float of spcx is 95%, not 5%

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

#86

Post by raesene9 »

ywvcbk wrote: post #76
raesene9 wrote: post #66

Earlier quoted context omitted.

You might find some areas to criticize Berkshire Hathaway but I don't see being lazy as one of them. This is one of the most successful investment companies of all time and they got that way by being better than most at judging when the right time to get in and get out of the market, and by putting in the work on researching where/when to buy. Might there be opportunities they miss? I'm sure there will be, but perhap…

> This is one of the most successful investment companies It was for a long time. There is not a lot of evidence that's still the case (so far at least but even if the crash comes but its not big enough its not guaranteed they will outperform S&P 500 over a several year period).

Future returns are never guaranteed but over the course of the orgs history (since 1965) they've done a fair bit better than the S&P 500.... https://www.visualcapitalist.com/warren-buffett-vs-the-sp-50...

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

#88

Post by mschuster91 »

wongarsu wrote: post #46
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…

In a world where Tesla has stayed at "severely overvalued" stock prices for about a decade, with occasional crashes to just "overvalued", I'm not so sure the big AI companies really need returns that justify their stocks. Sam Altman and Dario Amodei are both in their own ways trying to capture that same lighting in a bottle where the company is evaluated solely on the CEO's vision

The problem is, the last two decades were marked by extremely low, zero and sometimes outright negative interest rates plus a ton of outright printed money that got blown up the arses of the big banks. Worldwide.

That money sought returns and found them in hypergrowth of increasingly dumber nonsense. First it was Meta (or back then, just Facebook), then Tesla, then during Covid cryptocurrencies and NFTs, and now it's AI... but now, there seems nothing to be the "next big thing" to sink money into when the old thing dies down in growth and expectation and matures. Maybe gambling, but that's not sustainable, the number of whales/marks to make money from is finite.

IMHO, we're headed for a very big worldwide correction to deflate the markets and hand back a lot of the money to the central banks where it can be taken out of circulation, and it will be an event larger than the dotcom bust plus 2007ff combined. But, unfortunately, the markets can stay irrational longer than a good short-seller can stay solvent...

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

#89

Post by ldoughty »

cicko wrote: post #44
ldoughty wrote: post #21

Earlier quoted context omitted.

> How is the whole economy exposed to AI? Out of fear/ uncertainty, investors don't just pull out of AI, but the stock market in general. More money shifts to bonds/commodities, not just people selling AI, but Coca-Cola and Johnson and Johnson, etc. Of course, the impact would not be equally distributed, staple stocks will crash less, but there will probably be overall a huge pull out as people panic shift assets. Th…

Who cares if "investors" are getting out of the market? They are not literally pulling money out of those companies but out of a casino that is the stock market. One good thing in all this is, at least, if the AI stocks collapse that should not result in large-scale lay-offs. :) Quite the contrary.

That's a very narrow view...

The people in charge of companies usually have large amounts of stock in their companies... And often bonuses tied to metrics that often includes stock. If their share price drops 50%, that's a personal "net worth" and/or "salary" loss which, unlike most people, they have bounce-back control.

"We need to trim the workforce", "improve margins", "show we are still a solid company"

The above doesn't just happen in AI/Tech stocks, it happens EVERYWHERE... Small business owners see their retirement portfolio hurt, they can't fix those companies, but they might reevaluate what they do in the next 2-3 years so they can get their retirement back on track... How do they increase profits while lowing costs? Try to cut staff/hours, find (perhaps foreign?) cheaper suppliers.

I think AI stock bubble bursting won't result in large scale layoffs, I think it will result in large-scale _trimming_ across the economy, which is almost worse. AI will be expected to fill in the gaps to increase productivity for less than the cost of an employee, which means slower rehiring .. AI will rebound at a "more correct" evaluation. And hiring will slowly pick up as companies see they still need people to produce.

Viewing the stock market as purely a casino -- the executives are the house at various casinos... and the house likes to win at the expense of the players (anyone not a casino)

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

#90

Post by ryandvm »

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…

> on the other, whatever shady crap these guys do after it all goes ‘boom’ to save their wallets is only gonna reward people in the market

Yup. That's kind of my feeling. Are we in a bubble? Obviously. But the people who have the most to lose have never been more intertwined with the rule makers and have never been so shameless about it.

"Don't bet against the house" has never been more appropriate. We may well be on the verge of the 2nd Great Depression, but you can be damn sure that the last ones to lose will be the billionaires hanging out in the new ballroom. We'll be burning poor people for warmth before they allow the asset prices to collapse.

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