Now that even main Indices (which were supposed to be much safer to invest in - via things like ETFs - than individual stock picking) are being shamelessly rigged to feed Retail and Fund money to the IPO pires, you should literally not be invested in any US Stock Market by the time this and other AI IPOs happen.
Literally even having money under your matress (even with the current inflation) is safer than being in any way form or shape invested in the Nasdaq 100 and if this shit is the straw that breaks the camel’s back, matress savings storage is safer that being invested anywhere in a US stock market.
I was in none other than Lehman Brothers in the 2008 Crash and saw that shit from the front row and all of this crap (the ever more articles about how AI is not delivering returns for companies using it, the steep increases in AI usage fees - which stink of desperate attempts at monetising it, which in turn mean that either the companies selling AI services have run out of runway or believe AI cannot improve further hence their investment must start producing returns NOW - these 3 AI IPOs pretty much at the same time all with insane valuations and the shameless rigging of Indices) are making alarm bells ring in my head like crazy.
Think of it as alarmism if you want.
I can tell you one thing for sure from my own experience in 2008 Crash: there were but a few obscure signs that shit was about to hit the fan back then (for example, there was an article in The Economist about how the Credit Derivative positions of both Bear Stearns and Lehman Brothers were 2x higher than the 3rd largest and the rest of the Industry, plus some wispers of Goldman Sachs reducing their exposure to Credit Derivatives) and between that and the first big crack - Bear Stearns collapsing and being sold the JPMorgan for peanuts - it was but a few weeks and between that and Lehman Brothers going bankrupt and the markets going into an uncrontrolled crash, it was about a week, so expect the same kind of time scale in the transition from “this all looks kinda suspicious” to the first “oh shit” (maybe OpenAI’s IPO?!) to an out of control fall of the markets that no matter what they try Central Banks are unable to stop until it hits a stable new and much lower level, and meanwhile all that shit will be throwing shrapnel into the rest of the Economy, not just via retraction in Financial Markets such as the Money Markets but via the complete collapse of everything proped up by the current data center projects (most of which not even yet started yet already propping up things like land acquisition and long term equipment purchasing contracts).
Judging by how P/Es in the Nasdaq 100 are now literally TWICE as much as in 2022, in the least bad scenario the Nasdaq market will collapse to half its value right now as P/E levels go back to 2022 (which was much closer to historic average), though judging by my experience in 2008 Crash plus there being other massive asset price bubbles in other markets (such as realestate), IMHO as the the bursting of the bubbles feed each other and impact the broader Economy which in turn impacts back all kinds of markets - via retractions in Consumption and Investment as well as spiking Loan Default rates in turn feeding into retractions in credit from traditional Banks and Money Markets - this shit will go much further than a mere 50% fall in the Nasdaq).
I’m moving most of my US stock holdings to these funds. It’s still US market exposure, so there will be some risk from the AI bubble. But the key thing is that these indices are not trying to track the Dow Jones, the NASDAQ, etc. They don’t actively manage funds - they don’t pick winners and losers. They are a passive investment blindly applying uniform rules - just like index funds. However, they don’t weight by market cap. Instead they weight stocks in the index based on fundamental values - actual sales, retained earnings, book value, etc. The actual share price of the companies isn’t factored in at all. And you can’t even get into one of these indices until your company is profitable.
The expense ratios are higher than I’m used to. The low-cost index funds I’ve traditionally used have expense ratios more like 0.01-0.02%. This is 0.25%. This is still well below the 1% most managed funds use. But that is a downside of this.
With how tightly the whole global financial system is tied together, I’m not under any illusions that moving to these funds will eliminate my exposure to the AI bubble. But I hope at least to ameliorate it.
I think a lot of people will brush it off what ever happens with SpaceX because Xai is the weakest of the big model providers. I don’t think we’ll even get to the openAI IPO. I think the S1 or IPO from anthropic will be the real kicker, because they’re the darling at the moment. The one that seems to have the most momentum and business customers.
If their S1 turns out to be utter dog water and/or their IPO flops, that’s when the real panic comes. When people say “oh crap, these GPU data centers don’t have customers that can make money”, and that narrative will hit all the people building data center and all the people selling hardware to them. Amazon, Google, Microsoft, Nvidia, that’s like… what, 25% of the S&P 500? That seems like a big enough hit to catch a lot of other stuff in the blast radius.
I’m sure you are much more familiar with internal workings than I am, but isn’t the playing field so different now due to machine trading?
Markets don’t react as human traders would because of algorithms buying up dips and other black magic rules that happen in milliseconds.
If Hormuz was closed in 1998 markets would have been in a panic, and when it happened in 2026 it was a small blip.
There are plenty of deep rooted problems with the current economy that I think makes it fragile- Among them, the fact that without data center buildout, the US would be in a recession.
So while your post makes perfect sense and I agree with all of it, I just don’t trust markets to follow the same laws of physics as the rest of the universe.
“This time is different” is always bullshit. In fact there’s even a book called exactly that which covers 500 years of History of financial crashes and people saying that for some reason or other “things are different now” to justify “no more Crashes”, is an incredibly common occurrence just before major Crashes.
Markets exist in a human society context, which exists in a real world context, were the only Laws that never break are the Laws Of Physics: no matter how much of a fantastical and magical imaginary fairyland the Financial Investment universe has become, there is always some link back to the real world (what would be the point for investors if their investment didn’t somehow translate back into being able to get more concrete things in the real world), at the very minimum through the value of the currencies in which the investment assets are valued (if the Economy supporting a currency collapses, the real value - aka purchasing power - of investment assets which are priced in that current goes down, the number which is that asset in that currency can keep going up and yet it’s actually worth less - you can see a good example of that by looking at the FTSE100 and the GDPEUR cross-currency pair when the result of the Leave Vote in Britain came out: the FTSE100, which is listed in British Pounds, went up right after it at the same time as the British Pound collapsed around 20%, so the real value of the FTSE100 and thus the stocks in that index actually went down even though the number itself was up)
(EDIT It doesn’t matter how much of the transformation from “imaginary asset worth” to actual real concrete goods and services in the real world uses and abuses the subjectivity of “convincing people that this imaginary shit is worth as much as it is worth” to swindle people to give real stuff in exchange for la-la-land fantasy tokens - as shown every single time by Ponzi Schemes, such things always end up in running out of fools or the fools running out of money, and then collapsing, the only question being how far they spread before that happens)
This is why in my post I pointed out several links back from the stockmarkets to the broader Economy.
Beyond that, the broader Economy links to the broader society by in the extreme how humans react to being fucked up repeatedly (i.e. having difficulty accessing resources required for survival and seeing their quality of life plummet). I suspect that the current movements when it comes to ever more extreme surveillance, ever more shrill blaming of scapegoats (such as immigrants and transsexuals) by the billionaire-owned Press and Politicians and ever more extreme use of Force by the State against civil society movements trying to change things, is the current elites preparing for just that human reaction - a lot of very wealthy people are preparing (some even openly stating things around those lines) for turning Democratic countries into Autocratic ones rather than accept any changes to the machinery that makes them ever richer and lets them de facto be the top power.
I would say that the only uncertainty is not IF things will break, it’s how far they will stretch before they break - judging by all that’s happenning, there really doesn’t seem to be any chance for enough of the people holding most of the money accepting that “this is unsustainable” and taking a loss for things to go back enough that a different route can be taken - as the Economy increasingly sputtered and growth stopped, they just doubled down on pillaging wealth from the rest of society and funding political movements scapegoating minorities and outsiders rather than addressing the reasons for the Economy having stopped growing.
As for specifically your point on algorithmic trading, that kind of trading applies to very short time frames - money goes in and then out sometimes in seconds - and its mainly a way of making money by front-running the information about trades done in different Stock Markets or things like news that will impact prices: it doesn’t create market movements, it just tries to run ahead of them, so its not actually a sustained force to push the Markets in any direction.
I would say that the current overabundance of speculative bubbles (including the AI bubble and realestate bubble) are not the product of algorithmic trading but rather the product of the increasing concentration of wealth - especially following the 2008 Crash - which has moved a lot of money from those who have little and mainly Spend most of their money to those who have much and thus Save/Invest most of their money (something which also explains the current record level of Household Debt - the people at lower end of the wealth scale increasingly require more debt merelly to survive) so A TON of money was seeking any and all investment opportunities thus pumping out lots of asset prices purelly via more demand for those assets rather than due to the fundamentals of what backs them (for example, corporate profits) having got better. If you search for it, there are several people out there explaining it much better and in more depth than me.
Now that even main Indices (which were supposed to be much safer to invest in - via things like ETFs - than individual stock picking) are being shamelessly rigged to feed Retail and Fund money to the IPO pires, you should literally not be invested in any US Stock Market by the time this and other AI IPOs happen.
Literally even having money under your matress (even with the current inflation) is safer than being in any way form or shape invested in the Nasdaq 100 and if this shit is the straw that breaks the camel’s back, matress savings storage is safer that being invested anywhere in a US stock market.
I was in none other than Lehman Brothers in the 2008 Crash and saw that shit from the front row and all of this crap (the ever more articles about how AI is not delivering returns for companies using it, the steep increases in AI usage fees - which stink of desperate attempts at monetising it, which in turn mean that either the companies selling AI services have run out of runway or believe AI cannot improve further hence their investment must start producing returns NOW - these 3 AI IPOs pretty much at the same time all with insane valuations and the shameless rigging of Indices) are making alarm bells ring in my head like crazy.
Think of it as alarmism if you want.
I can tell you one thing for sure from my own experience in 2008 Crash: there were but a few obscure signs that shit was about to hit the fan back then (for example, there was an article in The Economist about how the Credit Derivative positions of both Bear Stearns and Lehman Brothers were 2x higher than the 3rd largest and the rest of the Industry, plus some wispers of Goldman Sachs reducing their exposure to Credit Derivatives) and between that and the first big crack - Bear Stearns collapsing and being sold the JPMorgan for peanuts - it was but a few weeks and between that and Lehman Brothers going bankrupt and the markets going into an uncrontrolled crash, it was about a week, so expect the same kind of time scale in the transition from “this all looks kinda suspicious” to the first “oh shit” (maybe OpenAI’s IPO?!) to an out of control fall of the markets that no matter what they try Central Banks are unable to stop until it hits a stable new and much lower level, and meanwhile all that shit will be throwing shrapnel into the rest of the Economy, not just via retraction in Financial Markets such as the Money Markets but via the complete collapse of everything proped up by the current data center projects (most of which not even yet started yet already propping up things like land acquisition and long term equipment purchasing contracts).
Judging by how P/Es in the Nasdaq 100 are now literally TWICE as much as in 2022, in the least bad scenario the Nasdaq market will collapse to half its value right now as P/E levels go back to 2022 (which was much closer to historic average), though judging by my experience in 2008 Crash plus there being other massive asset price bubbles in other markets (such as realestate), IMHO as the the bursting of the bubbles feed each other and impact the broader Economy which in turn impacts back all kinds of markets - via retractions in Consumption and Investment as well as spiking Loan Default rates in turn feeding into retractions in credit from traditional Banks and Money Markets - this shit will go much further than a mere 50% fall in the Nasdaq).
What do you think about value mutual funds like these?
https://www.schwab.com/research/mutual-funds/tools/schwab-funds/index-funds/fundamental
I’m moving most of my US stock holdings to these funds. It’s still US market exposure, so there will be some risk from the AI bubble. But the key thing is that these indices are not trying to track the Dow Jones, the NASDAQ, etc. They don’t actively manage funds - they don’t pick winners and losers. They are a passive investment blindly applying uniform rules - just like index funds. However, they don’t weight by market cap. Instead they weight stocks in the index based on fundamental values - actual sales, retained earnings, book value, etc. The actual share price of the companies isn’t factored in at all. And you can’t even get into one of these indices until your company is profitable.
The expense ratios are higher than I’m used to. The low-cost index funds I’ve traditionally used have expense ratios more like 0.01-0.02%. This is 0.25%. This is still well below the 1% most managed funds use. But that is a downside of this.
With how tightly the whole global financial system is tied together, I’m not under any illusions that moving to these funds will eliminate my exposure to the AI bubble. But I hope at least to ameliorate it.
I think a lot of people will brush it off what ever happens with SpaceX because Xai is the weakest of the big model providers. I don’t think we’ll even get to the openAI IPO. I think the S1 or IPO from anthropic will be the real kicker, because they’re the darling at the moment. The one that seems to have the most momentum and business customers.
If their S1 turns out to be utter dog water and/or their IPO flops, that’s when the real panic comes. When people say “oh crap, these GPU data centers don’t have customers that can make money”, and that narrative will hit all the people building data center and all the people selling hardware to them. Amazon, Google, Microsoft, Nvidia, that’s like… what, 25% of the S&P 500? That seems like a big enough hit to catch a lot of other stuff in the blast radius.
I’m sure you are much more familiar with internal workings than I am, but isn’t the playing field so different now due to machine trading?
Markets don’t react as human traders would because of algorithms buying up dips and other black magic rules that happen in milliseconds.
If Hormuz was closed in 1998 markets would have been in a panic, and when it happened in 2026 it was a small blip.
There are plenty of deep rooted problems with the current economy that I think makes it fragile- Among them, the fact that without data center buildout, the US would be in a recession.
So while your post makes perfect sense and I agree with all of it, I just don’t trust markets to follow the same laws of physics as the rest of the universe.
“This time is different” is always bullshit. In fact there’s even a book called exactly that which covers 500 years of History of financial crashes and people saying that for some reason or other “things are different now” to justify “no more Crashes”, is an incredibly common occurrence just before major Crashes.
Markets exist in a human society context, which exists in a real world context, were the only Laws that never break are the Laws Of Physics: no matter how much of a fantastical and magical imaginary fairyland the Financial Investment universe has become, there is always some link back to the real world (what would be the point for investors if their investment didn’t somehow translate back into being able to get more concrete things in the real world), at the very minimum through the value of the currencies in which the investment assets are valued (if the Economy supporting a currency collapses, the real value - aka purchasing power - of investment assets which are priced in that current goes down, the number which is that asset in that currency can keep going up and yet it’s actually worth less - you can see a good example of that by looking at the FTSE100 and the GDPEUR cross-currency pair when the result of the Leave Vote in Britain came out: the FTSE100, which is listed in British Pounds, went up right after it at the same time as the British Pound collapsed around 20%, so the real value of the FTSE100 and thus the stocks in that index actually went down even though the number itself was up)
(EDIT It doesn’t matter how much of the transformation from “imaginary asset worth” to actual real concrete goods and services in the real world uses and abuses the subjectivity of “convincing people that this imaginary shit is worth as much as it is worth” to swindle people to give real stuff in exchange for la-la-land fantasy tokens - as shown every single time by Ponzi Schemes, such things always end up in running out of fools or the fools running out of money, and then collapsing, the only question being how far they spread before that happens)
This is why in my post I pointed out several links back from the stockmarkets to the broader Economy.
Beyond that, the broader Economy links to the broader society by in the extreme how humans react to being fucked up repeatedly (i.e. having difficulty accessing resources required for survival and seeing their quality of life plummet). I suspect that the current movements when it comes to ever more extreme surveillance, ever more shrill blaming of scapegoats (such as immigrants and transsexuals) by the billionaire-owned Press and Politicians and ever more extreme use of Force by the State against civil society movements trying to change things, is the current elites preparing for just that human reaction - a lot of very wealthy people are preparing (some even openly stating things around those lines) for turning Democratic countries into Autocratic ones rather than accept any changes to the machinery that makes them ever richer and lets them de facto be the top power.
I would say that the only uncertainty is not IF things will break, it’s how far they will stretch before they break - judging by all that’s happenning, there really doesn’t seem to be any chance for enough of the people holding most of the money accepting that “this is unsustainable” and taking a loss for things to go back enough that a different route can be taken - as the Economy increasingly sputtered and growth stopped, they just doubled down on pillaging wealth from the rest of society and funding political movements scapegoating minorities and outsiders rather than addressing the reasons for the Economy having stopped growing.
As for specifically your point on algorithmic trading, that kind of trading applies to very short time frames - money goes in and then out sometimes in seconds - and its mainly a way of making money by front-running the information about trades done in different Stock Markets or things like news that will impact prices: it doesn’t create market movements, it just tries to run ahead of them, so its not actually a sustained force to push the Markets in any direction.
I would say that the current overabundance of speculative bubbles (including the AI bubble and realestate bubble) are not the product of algorithmic trading but rather the product of the increasing concentration of wealth - especially following the 2008 Crash - which has moved a lot of money from those who have little and mainly Spend most of their money to those who have much and thus Save/Invest most of their money (something which also explains the current record level of Household Debt - the people at lower end of the wealth scale increasingly require more debt merelly to survive) so A TON of money was seeking any and all investment opportunities thus pumping out lots of asset prices purelly via more demand for those assets rather than due to the fundamentals of what backs them (for example, corporate profits) having got better. If you search for it, there are several people out there explaining it much better and in more depth than me.
Fair. Good answer
But we computers now. Really is different.
We was computers in 2008 too. Not at all different.
And in 2000
And in 1997
And even in 1973
Algorithmic or “machine” trading was very much already a thing and deeply ingrained into the market in 2008.