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On Bubble Watch - Howard Marks
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ben ski
Posted: 08 January 2025 19:36:27(UTC)
#10

Joined: 15/01/2016(UTC)
Posts: 1,357
L.P.;330371 wrote:
Newbie;330354 wrote:
ben ski;330351 wrote:
I would say I think this is one of those situations where a regular person who's an early adopter and using AI daily can easily have a more informed opinion than an analyst or fund manager. Howard Marks' views are very reasonable – but he can't obviously comment on specific company valuations here.

I think, while there could be a pullback, we may be in an inverted bubble, in which some of the mag7 may be so essential to all future business, entertainment, society, etc. that it's almost impossible to overvalue them. If Nvidia maintain a several year lead in GPUs, they're going to be supplying the world. I was saying I think Google's a poorly run business, but if they've got access to more training data (like YouTube) then they're going to have the best models.

Huge potential moats here. They'll also have the capital to buy up the next Open AI.

As I said in another post
Try going a day without using the services or tech of the mag 7,
If you manage that try a week
If you manage then then you are either in a monastery or ashram or should be.
Alternatively you may be in a top security solitary confined hole somewhere.

One may not like Amazon but they are having to use their services to post here !


Benski/Newbie

Please excuse my analogy but I drink milk every day but I do not see the producer of my milk taking over the world’s milk production any time soon.
The real money is made by the people I buy it from whereas the producer is constantly having to invest any profits just to keep the business/production going.

This is how I see the AI producers. The amount of money that they need to invest in the next few years (and ongoing) to stay ahead and get anywhere near the profits the market has baked in to their valuations is mind blowing.
Like the actual supplier of my daily pint, it will be the big adopters of AI whose businesses will benefit from its use and especially as competition really gets going.

Some comments remind me of the kind of thing one would read on the eve of the dot.com crash.

Just to add, I am pretty sure that Howard Marks has a little more knowledge about “specific company valuations” than anyone posting in here regardless of whether one always agrees with his comments or not.

Edit.. also consider any future government legislation to break any up any company that finds itself in a too dominant of a position.


What I'm getting at is Tech bubble comparisons are rampant. We've got charts of price moves overlaid on the 1990s. Extreme pessimism in the investment trust sector (a better gauge of retail investor sentiment) – financial-crisis-discounts on US private equity trusts.

So as Marks gets at, it doesn't seem like we've got the exuberance side of things. And unlike the Tech bubble, so far these firms have been beating estimates. And no, I think there are situations when a quantitative investor can't understand a business as well as an enduser. If you'd asked teenagers 10 years ago which 6 brands they couldn't live without, they'd be picking 6 stocks that beat 99% of fund managers.

Re: Like the actual supplier of my daily pint, it will be the big adopters of AI whose businesses will benefit from its use and especially as competition really gets going

I think again, this is more the everyman take. It could be the case. But because everyone's got access to the same AI tools, I think any company not fully embracing it falls behind, but those that do potentially get closer to 'perfect competition' (which is the last thing an investor wants). They all downsize their workforce by 60%, all optimise marketing, etc. and they all become very efficient. But if they're all paying big tech just to stay competitive, then big tech cleans up. If they have the training data, models, etc. then THAT's the moat, and that's where you get uncommon profits. I also like infrastructure, because there are moats there.
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bearcub
Posted: 08 January 2025 21:27:39(UTC)
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L.P.;330371 wrote:

Some comments remind me of the kind of thing one would read on the eve of the dot.com crash.

True, but many of the companies at the centre of the Dot.com bubble were speculative investments, valued on huge multiples of forward P/E but not generating profits. By contrast, today's Magnificent 7 have huge capitalisations because they're generating huge recurrent profits. IMHO, it's companies like Palantir that are today's speculative investments, and they'll likely be hit worst if there was a tech crash today.

If anyone needs confirmation of the nature of the speculative bubble, head to Reddit and see what posters on Wall Street Bets are trading in (betting on) … stocks like Palantir. WSB is fascinating, even though its ethos is pretty much the opposite of mine.
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Newbie on 08/01/2025(UTC)
Newbie
Posted: 08 January 2025 22:11:52(UTC)
#6

Joined: 31/01/2012(UTC)
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bearcub;330495 wrote:
L.P.;330371 wrote:

Some comments remind me of the kind of thing one would read on the eve of the dot.com crash.

True, but many of the companies at the centre of the Dot.com bubble were speculative investments, valued on huge multiples of forward P/E but not generating profits. By contrast, today's Magnificent 7 have huge capitalisations because they're generating huge recurrent profits. IMHO, it's companies like Palantir that are today's speculative investments, and they'll likely be hit worst if there was a tech crash today.

If anyone needs confirmation of the nature of the speculative bubble, head to Reddit and see what posters on Wall Street Bets are trading in (betting on) … stocks like Palantir. WSB is fascinating, even though its ethos is pretty much the opposite of mine.

FWIW - traded

a) Palantir (twice), b) Leverage Shares 3x PLT & c) Granite 3x Palantir - All out now.
a) Micorstrategy b) 3x Microstrategy - All out - in and out in 2 weeks
POET technologies - All out
3x Tesla - Out but looking to go back in
a) IONQ, b) Leverage shares 3x ION - Former out, latter stepped back in today - Was in and out in a week
QBTS - Was out stepped back in today
QUBT - Was out stepped back in today
SOUND - all out (looking to go back in given 30% drop yesterday and 18% drop today)
SERVE - all out
FoA - all out
ALAB - all out
ANET - still in
CRD - still in
SoFI - still in (2nd time - went out, then came back in yesterday ago)
IPX - Iperionx - still in so far up 76% - (limit set to $31.50 price on 05/12/24)
and many more

However these are not what I would describe as long term hold despite some returns being 100% + in a couple of months even days. Minimum return when walking has been 45-50% uplift

To provide some perspective
QUBT tanked 49% today alone
QBTS tanked 45% today
IONQ tanked 40% today.

A 30-50% swing in either direction is normal for these - hence they are for traders not investors. The only one in that list which I would ever consider long term potential is Palantir given the government contracts. With these kind of stock you need put in limits and - ladder ride up with stop sell limits on the downturn.

Anyone investing in these for long term in large amounts be prepared to face something worse than the dot com.
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dlp6666 on 09/01/2025(UTC), bearcub on 09/01/2025(UTC)
ben ski
Posted: 08 January 2025 23:27:44(UTC)
#8

Joined: 15/01/2016(UTC)
Posts: 1,357
Newbie;330496 wrote:

To provide some perspective
QUBT tanked 49% today alone
QBTS tanked 45% today
IONQ tanked 40% today.


Kind of ties into what I was saying about endusers vs stock analysts.

Quantum computing firms can lose half their value in a day, because the Nvidia CEO says quantum computing's likely 20 years away from being useful .. Which I was saying the other day (if it ever becomes useful).

There's a level where fund managers and analysts can't do much more than guess, and mainstream media doesn't understand any of this. So a kid following this stuff on YouTube and Reddit could easily have a more informed opinion.
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bearcub
Posted: 09 January 2025 22:46:18(UTC)
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Newbie;330496 wrote:

A 30-50% swing in either direction is normal for these - hence they are for traders not investors. The only one in that list which I would ever consider long term potential is Palantir given the government contracts. With these kind of stock you need put in limits and - ladder ride up with stop sell limits on the downturn.

That's absolutely fair, you have the experience and stomach for trading, whereas I don't.

In terms of quantum computing, at some point it will become the next internet of things/ cloud computing/ A.I., and by then I guess there will be firms that are investable, presumably as private equity to begin with.
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Newbie on 09/01/2025(UTC)
ben ski
Posted: 10 January 2025 02:04:28(UTC)
#17

Joined: 15/01/2016(UTC)
Posts: 1,357
So far, as someone who wants quantum computing to be a thing, I've always found the deeper you go into the results, the less clear things become. We've got people talking about chips that parallel process across 10s of thousands of alternate universes, yet Nvidia's still actually able to beat many of these benchmarks with its GPUs.

If I have two cards – one with a plus sign, one with a negative. I put each card in an envelope, and send one to New York, the other to Beijing. When someone opens the envelope in New York, they'll instantly know what the card in Beijing is.

In quantum physics, we'll call that 'collapsing the wave function', and claim that the opening of the card in New York instantly transmitted information across the universe ('spooky action at a distance') – they the two cards were 'entangled'. And this is the kind of effect we're using in quantum computing. Think about that example. That's a very down to earth explanation of something that isn't really breaking any rules of classical physics.
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L.P.
Posted: 10 January 2025 07:45:49(UTC)
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bearcub;330495 wrote:
L.P.;330371 wrote:

Some comments remind me of the kind of thing one would read on the eve of the dot.com crash.


True, but many of the companies at the centre of the Dot.com bubble were speculative investments, valued on huge multiples of forward P/E but not generating profits. By contrast, today's Magnificent 7 have huge capitalisations because they're generating huge recurrent profits. .


Are they though? Read the headlines and they are but all that capex has to show up in their figures very soon.

This article might explain a little part of my argument:

“Accounting is boring but important. Particularly important: the difference between a capital expense and an operating expense. A capital expense (buying a big piece of equipment, say) does not count directly against earnings on the income statement, as an operating expense (paying a salary, say) does. Instead, a capital expense appears on the income statement over time, in theory matching the drag on profits to the life of the capital asset. This spread-out expense shows up in a line called “depreciation”.

I see you sleeping at the back. But I drag you through this tiresome point because the most important companies in the world, the Magnificent 7 Big Techs, are running up a huge amount of capital expenditure, mostly on data centres for artificial intelligence. This is cash out the door today, but the expense will only appear in earnings per share over time. The AI arms race has not fully hit profits yet. The question is whether the market has digested the fact that it must do so before long.”

Full article here:
https://www.ft.com/conte...a-4589-a266-da8c632dd01b
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4 users thanked L.P. for this post.
Newbie on 10/01/2025(UTC), dlp6666 on 10/01/2025(UTC), Guest on 10/01/2025(UTC), bearcub on 14/01/2025(UTC)
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