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The worst part is the SP500 is completely held up by this last grift. Once we see the emperor has no clothes look out below. And I don’t know what will prop i

The worst part is the SP500 is completely held up by this last grift. Once we see the emperor has no clothes look out below. And I don’t know what will prop it up after that. We could be in for a very long decade reminiscent of the 2000s’ lost decade. The carnage from everyone blindly buying tech stocks and even the SP500 (mostly propped up by the Magnificent 7) is going to be unimaginable. https://www.aqr.com/Insights/Perspectives/Value-Spreads-Back-to-Tech-Bubble-Highs-Are-You-People-Crazy https://www.aqr.com/Insights/Perspectives/Value-Spreads-Back...

benreesman 2y ago
I'm not a pricing quant by a long way (though AQR at least historically employed more than a few extremely serious quants), so take my hot take with a cold grain of salt. To my untrained eye it looks like most of the Magnificent Seven are priced as though they captured the entire pie at the expense of all the others, which more or less can't happen by definition. The amount of the US equity market based on that pricing outlook would be a terrifying thing to see corrected abruptly.
- benreesman 2y ago
  I’m not bothered by the downvotes, I don’t consider a comment worth typing unless it pisses median people off enough to get buried. I’m perplexed that a low-key armchair chart trader hot take would run up 5 and back down while brutal Swiftian genocides of everything from Docker to Paul Graham get upvoted. Why is this a thing?
hggigg 2y ago
Yeah that. The ETF (IVZ QQQ) I had a chunk of cash in is at risk as well as that tracks SP500 roughly due to the holdings distribution. I pulled it recently. I might lose a few % at the top but when it goes bang I don't want to be near it.
hakfoo 2y ago
The awkward factor is that we could have avoided this sort of bubble on a broader scale by sticking to more traditional pension rules. When everyone gets a 401(k), and everyone gets the cookie-cutter advice that index funds are cheap and tend to outperform active management on the long term, it couples WAY more of the American public to the stock market than was conventional. If the market fizzled in 1980, it would bankrupt some rich traders and a few over-margined firms, but the aspects of the economy that actually made and sold useful things would soldier on. People with guaranteed pensions and secured debts would make it out (relatively) whole. Today, a proper reckoning would be political suicide. We're now forced to deal with the political consequences of "NVDA retreating to $10 per share means a bunch of grandpas (who vote) are evicted from their retirement homes." I expect we'll see a lot of elaborate Rube Goldberg schemes to keep stock prices afloat. We'll insist there's an AI gap with China to unlock endless federal grift, much as the missile gap with the USSR made it of vital national interest that we showered Lockheed and Raytheon with trillions. I wonder if we'd eventually see the equivalent of 'capital controls'-- limiting the ability of institutional investors to sell their shares to prevent price deflation if there's a "market-spooking" event. Of course, this bleeds actual productive assets, and when the bottom finally falls out-- when there's no amount of state intervention that will hold back the obvious-- it's going to burn far worse. Maybe the final endgame is that we end up nationalizing part of the market-- swallowing everyone's IRAs/401(k)s/ESAs and converting them to funny-money that can be marked at whatever price is necessary to keep Grandpa from losing his shirt.
Kon-Peki 2y ago
> The carnage from everyone blindly buying tech stocks and even the SP500 (mostly propped up by the Magnificent 7) is going to be unimaginable. I share this concern, but would also like to point out that there are lots of well-run low cost index funds out there that do not track the S&P500 and/or exclude the Magnificent 7.

benreesman 2y ago

I'm not a pricing quant by a long way (though AQR at least historically employed more than a few extremely serious quants), so take my hot take with a cold grain of salt. To my untrained eye it looks like most of the Magnificent Seven are priced as though they captured the entire pie at the expense of all the others, which more or less can't happen by definition. The amount of the US equity market based on that pricing outlook would be a terrifying thing to see corrected abruptly.

benreesman 2y ago
I’m not bothered by the downvotes, I don’t consider a comment worth typing unless it pisses median people off enough to get buried. I’m perplexed that a low-key armchair chart trader hot take would run up 5 and back down while brutal Swiftian genocides of everything from Docker to Paul Graham get upvoted. Why is this a thing?

hggigg 2y ago

Yeah that. The ETF (IVZ QQQ) I had a chunk of cash in is at risk as well as that tracks SP500 roughly due to the holdings distribution. I pulled it recently. I might lose a few % at the top but when it goes bang I don't want to be near it.

hakfoo 2y ago

The awkward factor is that we could have avoided this sort of bubble on a broader scale by sticking to more traditional pension rules. When everyone gets a 401(k), and everyone gets the cookie-cutter advice that index funds are cheap and tend to outperform active management on the long term, it couples WAY more of the American public to the stock market than was conventional. If the market fizzled in 1980, it would bankrupt some rich traders and a few over-margined firms, but the aspects of the economy that actually made and sold useful things would soldier on. People with guaranteed pensions and secured debts would make it out (relatively) whole. Today, a proper reckoning would be political suicide. We're now forced to deal with the political consequences of "NVDA retreating to $10 per share means a bunch of grandpas (who vote) are evicted from their retirement homes." I expect we'll see a lot of elaborate Rube Goldberg schemes to keep stock prices afloat. We'll insist there's an AI gap with China to unlock endless federal grift, much as the missile gap with the USSR made it of vital national interest that we showered Lockheed and Raytheon with trillions. I wonder if we'd eventually see the equivalent of 'capital controls'-- limiting the ability of institutional investors to sell their shares to prevent price deflation if there's a "market-spooking" event. Of course, this bleeds actual productive assets, and when the bottom finally falls out-- when there's no amount of state intervention that will hold back the obvious-- it's going to burn far worse. Maybe the final endgame is that we end up nationalizing part of the market-- swallowing everyone's IRAs/401(k)s/ESAs and converting them to funny-money that can be marked at whatever price is necessary to keep Grandpa from losing his shirt.

Kon-Peki 2y ago

> The carnage from everyone blindly buying tech stocks and even the SP500 (mostly propped up by the Magnificent 7) is going to be unimaginable. I share this concern, but would also like to point out that there are lots of well-run low cost index funds out there that do not track the S&P500 and/or exclude the Magnificent 7.