A word on the market
Against all headwinds, the market has been “remarkably resilient” except it’s a chimera buoyed by seven stocks that are gung-hoing into the brave new world of AI.
The average American is not reaping any rewards from the sale of chips, the building of data centers and the use of tera watts of energy to float this headlong, reckless movement to our own ELE.
And pretty soon, just like the.com and mortgage bubbles, it will burst but, IMO, with far worse consequences because the American consumer will not be able to bail out the economy this time.
There, I’ve identified, again IMO, the problem and here’s a solution, stockpile as much liquidity as you can. Since January, I’ve been doing just that and will continue to do so until all vestiges of this fucking administration are figuratively horizontal.
= new reply since forum marked as read
Bubbles require events to burst them, and the timing of events is unpredictable.
Events might be a Fed rate hike instead of a cut, a large switch in sentiment, a terrible earnings report, a study indicating no gains from AI (unlikely), an international crisis, a big corporate bankruptcy, a massive political crisis, etc. None of those are predictable as to existence or timing.
The average American is benefiting from the boost in the economy from the construction of data centres and power supplies. Reasonable estimates say that the economy might be in recession without that or perhaps close to one.
There are many signs of a bubble. As you mention, the seven stocks are a top-heavy component of the SP500; about 35% of market value. Their PE ratio is much higher than the market and the market is itself very expensive with a PE ratio of about 26. But the Mag7 PE's are higher.
NVDA NVIDIA 53.45
MSFT Microsoft 37.93
AAPL Apple 39.16
GOOGL Alphabet 26.52
AMZN Amazon.com 33.46
META Meta Platforms 25.76
TSLA Tesla 248.45
Trailing PE ratio (12 months) is about 31.
Cyclically Adjusted PE (CAPE) is about 40 today.
