Comment by timmg
16 hours ago
The way I've been thinking about it: there is too much money trying to pour into the market. That's why valuations are so high.
Maybe getting more of these big private companies public will bring valuations down a bit.
(Just my impression. No math or financial studies behind it :)
> there is too much money trying to pour into the market
Keep in mind that inflation ran over 7% annualized in April [1].
[1] https://www.bls.gov/news.release/cpi.nr0.htm
The vast majority of that was fuel.
> vast majority of that was fuel
Everything else is up around 3% YoY. And if energy and transportation are up double digits, and producer prices are up double digits, other consumer prices will follow.
Yea and the cost of fuel has zero downstream effects on the economy.
From that doc, prices went up 0.6% in one month, multiple by 12 get 7.2% annual inflation rate.
Inflation is a measure of the cost of living. It's not got loads to do with large-scale, institutional investments.
> Inflation is a measure of the cost of living
The faster your cash loses value, the stronger your incentive to trade it for something else. That something else can be financial assets.
> It's not got loads to do with large-scale, institutional investments
For investors, particularly retail investors, the consumer price index is most relevant. But for whatever it's worth, producer prices are up over 16% in April (7% excluding "foods, energy, and trade services," which jumped over 50% annualized) [1].
To be clear, I'm floating a hypothesis here. I have seen no evidence linking inflation to demand for these companies' shares. (If anything, it should be the inverse.)
[1] https://www.bls.gov/news.release/ppi.nr0.htm
That depends. Inflation is a measure of the cost of living in terms of currency. It can be high either if goods and services required for living become scarce, or if currency supply increases. Currency supply increasing does affect asset prices.
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Inflation then is already higher. Cost of living is driven mostly by rent
I'd say your sense is not wrong: https://www.thisamericanlife.org/355/the-giant-pool-of-money
No, the crash (that we all know is coming) will do that. Until then, history teaches that we'll just keep going up and up
This is one of those "everyone who dies, breaths air" statements.
It's frustrating people who parrot it think they're smart by saying it to others with no basis and finally when it does happen they're like SEE SEE!?
> Until then, history teaches that we'll just keep going up and up
And this is the more important part. As long as you're <40 you SHOULD always buy SPY or VOO, even at the very top.
People have been saying the crash has been coming since 2022. If you believed this and acted on it, you would've missed 3-4 +10%/yr returns.
As Buffet says: You can't time the market; be in it.
It doesn’t seem Berkshire is that much in the market right now.
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Right now SPY not be such a great idea with SpaceX launch upcoming since it will be included into it immediately. Retail investors will be bearing that particular flop's cost.
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I was old enough to remember the 08 crash. Then the market starting recovering in 2011/2012 and the sentiment was that the system would crash again soon like 08. Turns out, it was an amazing time to invest.
Post 08 crash, all sorts of conspiracy websites like Zero Hedge were popular saying how the world economy would keep crashing.
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It would crash if not for massive public debt that went mostly into capital markets and huge inflation.
One of my favorite phrases is “the market can stay irrational longer than you can stay solvent.”
Even if all signs point to impending doom, at the end of the day if people are still buying, stocks will hold their value.
>And this is the more important part. As long as you're <40 you SHOULD always buy SPY or VOO, even at the very top.
But why? The US population is set to dramatically shrink in the next 30 years. Where does all the money come from?
no one is going to get wealthy buying SPY/VOO. you might get rich, but not wealthy. things have changed now in a sense that handful of companies are large percentage of the stock market to the point where one has to question why invest in “s&p 500” vs “s&p 25-ish”
while going with the tried&true makes some sense, I think we have to open our eyes to a different reality of our stock market… and this market concentration into few companies is going to get a lot worse…
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I very much disagree that it's coming. I think we need to completely reset our expectations of how the market works. There's been nearly an entire generation working in this "new" bull market, where things like EPS mean absolutely nothing and speculation no longer requires actual returns.
>I think we need to completely reset our expectations of how the market works.
Is this not just "It's different this time" thinking? I remember it being used all the time during the dotcom boom
> There's been nearly an entire generation working in this "new" bull market
You mean 0DTE babies?
[dead]
> the crash (that we all know is coming) will do that. Until then, history teaches that we'll just keep going up and up
Stock prices don't have to crash. They can just stagnate while profits catch up and multiples compress.
Debt binges, on the other hand, tend to go bust with a bang. But after the recent private-credit scare, the AI build-out has been predominantly financed with stock. (I think.)
Hasn't there been a _lot_ of debt to buy up Nvidia GPUs? I follow this stuff somewhat closely and it feels intentionally confusing, so I've likely lost track.
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> Equity bubbles don't have to crash. Prices can just stagnate while profits catch up and multiples compress.
Is there is historical evidence for that? As someone who used to follow Jeremy Grantham a lot (he considered himself a "bubble historian"), IIRC every bubble he studied always mean reverted, and it usually (maybe always, can't remember) overshot on the downside during the correction.
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Corporations across the board are experiencing record profitability. That's the reason behind the high valuations.
This isn't true of AI companies...yet. But these are companies entering the market with pre-IPO userbase (including lots of B2B) numbers that Meta and YouTube would have dreamed of before their acquisition/IPO.
I think this whole situation is very sleazy and corrupt, but ultimately my prediction is that nothing serious will come of it. Even the exposure of index and passive investing is overstated.
There is nowhere else for that money to go