Sounds stupid but I think AI isn't really the bubble here. (Quantum is very bubble-y, though.)
Salesforce traded at 8x revenues, 120x fwd earnings in 2014. ( The Art of Value Investing | John Heins & Whitney Tilson | Talks at Google - 23 mins in.)
Did investors get "killed"? No. It was real. And multiples did compress to 6.3x sales, 20x fwd earnings today. But investors were still left with a result. Maybe not "market-beating" but to keep pace with the market is pretty damn good imo.
Luckily, it doesn't really affect my portfolio that much. Just mental gymnastics with no skin in the game.
It's just too hard to "sense" a bubble and that's why when everyone calls it a bubble, I get sceptical.
"Circular" economies, high capex etc.- it's nothing "ground-breaking." It's nothing "unseen."
Slightly disappointed by Dr Burry's bear case thus far in that it's not unique. We'll see, though. (Never write off Burry, though.) But it's lazy to compare this to dotcom - telco companies were saddled with debt through acquisition-led growth. I don't see AI as this extreme. If anything, circular lending means they have to work together. So issues will be even harder to notice.
My real issue has been, and continues to be, "staple" stocks like Costco and FICO that trade at ludicrous premiums. WMT P/E used to be sub-20x (2000s and 2010s). Now close to 40x.
Worse, is the consumer tech companies that now trade at 2021 levels despite much higher rates.
That assumes growth assumptions are higher than they were 5 years ago since the discount rate has increased so dramatically. That's crazy to me - DASH, SPOT, NFLX, CVNA... where exactly has the growth come from? It's not growth but pricing and cost-cutting (R&D). Any weakness in consumer spend and their valuations are finished.
The market values "repeatable"/"recurring" revenues but it's so easy to switch off. Consumers changing habits, to me, is the big paradigm shift that will eventually happen. It takes so long because it's hard to cut back on holidays, new iPhones, streaming services, dining out.. all at once but difficult choices will be made. And none of the above are priorities.
Think your private credit loans example is another example of something to be wary of. But hidden. I wonder if there's a way to actually lift the hood and find out what's going on.
I think I agree with your cash strategy. And would probably action it if I were American. It's nowhere near clear enough to take a direction on the overall market. But the UK stocks feel so much more reasonable. (Granted, there's less story-telling/growth-y companies lol!)
Say tuned for next week when I'll inevitably change my mind and go back on everything I thought :) |
