[timmg]

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 :)

[JumpCrisscross]

> 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

[Alive-in-2025]

From that doc, prices went up 0.6% in one month, multiple by 12 get 7.2% annual inflation rate.

[Auracle]

The vast majority of that was fuel.

[JumpCrisscross]

> 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.

[themafia]

Yea and the cost of fuel has zero downstream effects on the economy.

[philipallstar]

Inflation is a measure of the cost of living. It's not got loads to do with large-scale, institutional investments.

[JumpCrisscross]

> 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

[9question1]

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.

[philipallstar]

Yes, but they're not directly correlated. Of course events can affect them both! Going to war would both increase the cost of living and (some) asset prices would go way up. But that doesn't mean they should be measured together like that.

[thrawa8387336]

Inflation then is already higher. Cost of living is driven mostly by rent

[dangus]

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.

[podunkPDX]

I'd say your sense is not wrong: https://www.thisamericanlife.org/355/the-giant-pool-of-money

[hungryhobbit]

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

[irjustin]

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.

[manoDev]

It doesn’t seem Berkshire is that much in the market right now.

[ElProlactin]

Just to add some color using real numbers: Berkshire's Q1 cash pile was $397.4 billion, which is nearly 60% of its investable assets.

[caspper69]

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.

[delfinom]

>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?

[prepend]

The US population is projected to 385M in 2055. [0] What makes you think the population will dramatically shrink?

Even if it did, the money would come from global investors who find the US more attractive than their home markets.

[0] https://database.earth/population/by-country/2055

[vinyl7]

The birthrate across all western nations has been below replacement levels for quite a while. All nations will see population shrink in the coming decades (aside from labor importation)

https://pmc.ncbi.nlm.nih.gov/articles/PMC11537490/

[munk-a]

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.

[JumpCrisscross]

> SPY not be such a great idea with SpaceX launch upcoming since it will be included into it immediately

S&P has not announced a methodology change yet.

[valleyer]

They haven't approved a change, but they have released proposals, which are tentatively to go into effect on June 8:

https://www.spglobal.com/spdji/en/documents/indexnews/announ...

[bdangubic]

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…

[JumpCrisscross]

> 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”

A small number of companies have always driven most stock-market gains. Betting on size isn't fundamentally a bad bet. But it is a bet against value and the historical tendency for small companies to be higher risk and higher reward.

[bdangubic]

you may be technically correct but today’s concentration in say top 10-15 companies is historic and by significant margin. I have been self-employed for a long time and somewhat “forced” into being “an investor” and starting in 2021-2022-ish I took my money out of all the “funds” … while I do not disagree that it is “a bet” - it is a calculated bet. things are different now even if historically you are right, no question

[prepend]

> you might get rich, but not wealthy

What do you mean by this? It seems pretty likely to be wealthy by investing in these indices. Certainly a “normal” worker who started investing $10k/year in SPY when it started in 1993 has enough wealth to allow them to retire now.

[aurareturn]

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.

[sailfast]

The only reason this happened was due to taxpayers bailing out financial institutions. This only exacerbated an insane amount of moral hazard already present in the market following previous bailouts.

Unfortunately, the US Government continued to run themselves into the ground spending-wise and may have a difficult time with another bailout, unless everyone pretty much agrees that we cannot have a USG failure, so they all pretend like nothing happened.

Eventually the merry-go-round stops, I'm just not sure what the catalyst will be, and it might be 100 years from now.

[cogogo]

I am old enough to have had multiple career changes since starting on a major firm’s rates floor in 2008. These IPOs are tiny compared to the overall stock market and the stock market is absolutely tiny compared to debt markets. People consistently underestimate the size of the world economy or even their local economy. The world may look small from an orion capsule near the moon but almost every aspect of human society is bigger than most people can reason about. It is possible these IPOs have an outsized impact on sentiment for weird reasons. But it won’t be an actual outsized impact on capital markets.

Edit: I should add the AI bubble can absolutely burst but there is no reason to believe these IPOs are the end of the ride. If I knew I would be…

[lompad]

The thing is that the IPOs necessitate a full release of their actual costs for inference and training. This by itself should be enough to pop the bubble, if the occasional bits of it we get are anything to go by.

There is a reason anthropic is still hiding those details:

> key details typically included in that form about a company’s operations — like potential risks to its business, executive compensation, and other financials — won’t become public until later on in the process

Source: https://www.theverge.com/ai-artificial-intelligence/941016/a...

We'll see, maybe they trigger some new rule change to be allowed to keep it hidden. Wouldn't be surprised about that at all.

[nm980]

Without massive government intervention it probably would have

[lossolo]

It would crash if not for massive public debt that went mostly into capital markets and huge inflation.

[TechSquidTV]

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.

[djeastm]

>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

[ElProlactin]

> There's been nearly an entire generation working in this "new" bull market

You mean 0DTE babies?

[486sx33]

It’s unfortunate, but this exact sentiment precludes every market crash. Just before dotcom burst it was the same thing. Technology will change everything the nasdaq will continue to grow in the technology age, etc etc. eventually the chickens come home to roost as they say

[TechSquidTV]

It did though. Look at it now. The crash was incredibly short lived, and if you try to point it out on a graph of the last 30 years, you won't be able to find it.

[JumpCrisscross]

> 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.)

[layoric]

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.

[JumpCrisscross]

> Hasn't there been a _lot_ of debt to buy up Nvidia GPUs?

I believe that's been concentrated at the hyperscaler layer, and subsided when the aforementioned private-credit scare reared its head. (I haven't heard a big datacenter debt deal announced in a while. Though of course that doesn't mean they aren't being done.)

[aurareturn]

And we're still extremely compute constrained. We need more Nvidia GPUs, RAM, power.

[hn_throwaway_99]

> 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.

[JumpCrisscross]

> IIRC every bubble he studied always mean reverted

This really depends on how we're defining these things. Let's call a stock-market bubble a period of elevated multiples. That can mean revert by prices decreasing while earnings stay constant or by prices staying constant and earnings rising. (Alternatively, both earnings and multiples can rise and fall.)

[hn_throwaway_99]

Yes, for equity prices in particular he talks about P/E ratios (among some other metrics like corporate profit margins), and so you're right, it would be possible for this to mean revert by prices holding stagnant and earnings catching up. However, as far as I can remember (primarily because a big emphasis of his was how unchecked bubbles can cause a lot of damage on the downside) all the historical bubbles he studied (something like 50) always crashed with a big price drop. Not 100% sure though, which is why I was curious if you had any contrary examples.

[1270018080]

There is nowhere else for that money to go