Bubble Spotting

The price action in 2024 suggests we're either coming out of a recession or in a bubble. If there was a recession last year, I didn't notice. So... bubble? Maybe. "Bonds master, stocks servant," BofA's Michael Hartnett wrote, describing a typical environment in the latest installment of his popular weekly "Flow Show" series. "Except in bubbles and deflation," he quickly added. A monumental bond rally in November and December was the proximate cause for a raucous year-end stock surge, but in 2

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3 thoughts on “Bubble Spotting

  1. AI is definitely beginning to look bubbly, but that can imply two different views altogether. Either it’s 1. “wow, we’re on the precipice of disaster”, or 2. “wow, I need to catch this run before we approach ARKK or even Bitcoin highs”. The latter is very possible– we maintain the dynamics in flows/positioning you and Charlie at Nomura have described in much better detail than I can, institutional MMF assets get ploughed into stocks to chase the rally further, and we get some critical mass of retail investors starting to throw their life savings into AI stocks. Obviously, it’s also contingent on macro/Fed policy/geopolitical events not deteriorating/disappointing/killing people to whatever extent it takes equities to start caring, but to an investor, what does any of that really matter as long as NVDA keeps growing revenue 200% per year and there’s ample cash to buy more shares? Big tech really, really wants more human decisions made by a fancier version of an iPhone’s autocomplete (that’s essentially what LLMs are, actual AI it is not) so NVDA/whoever surpasses them will keep growing at incredible speeds– at least until we find a path to more genuine AI, and/or the world becomes utterly saturated with LLMs making more and more decisions for us, to the point that we all see their limitations in spectacularly terrible and unforeseen ways. No idea what happens first, or what either really looks like, but the S&P should do quite well over this timeframe, so those of us with some means can watch the world burn from our mansions in relative safety, at least until the plebs/terminator bots come for us too. I hope I’m completely wrong about every prediction here about LLMs/AI/humanity, but that seems to be the course Mark Zuckerberg has chosen for us.

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