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Ask HN: Is the stock market in a bubble? What would make it pop?
I’ve been seeing the market climb to ever higher highs, even as everything else like gold is at an all time high. I’ve also seen people talk about the kind of earnings companies eventually need to justify the AI boom. It feels very bubbly but the market seems to be optimistic.
Is this a bubble? What sort of things might trigger it to pop - would disappointing earnings be enough or would it take larger events? It seems like in the short term demand for AI may keep revenues growing but does that mean the bubble may only be popped in a few years?
- PaulHoule 1y agoSee https://www.dwassetmgmt.com/blog/markets-can-remain-irrational-longer-than-you-can-remain-solvent---john-maynard-keynes https://www.dwassetmgmt.com/blog/markets-can-remain-irration...
- SilverElfin 1y agoI’ve seen that quote before. But I wonder what sustains or pops the bubble. Is it really just group think and random movement that can’t be analyzed? Or is it more like needing negative news of a certain “size” or “type” for people to suddenly switch to valuations based on fundamentals?
- odele3 1y agoSame dynamics that makes Trump wake up everyday, put on his suit and tie. I mean why does he need too? Everyone's identity is wrapped up in stories they tell themselves. If the story breaks the identity breaks.
- deleted 1y ago[deleted]
- verdverm 1y agoIf the ad bubble implodes, we're in for a a lot of pain. It's much bigger than the Ai bubble
- incomingpain 1y agohttps://investor.vanguard.com/investment-products/mutual-funds/profile/vtsax#portfolio-composition https://investor.vanguard.com/investment-products/mutual-fun... The PE ratio is about 28x for large cap orgs. The typical PE ratio is 15x; typically the 'safe' range 10-20x. The markets are over valued compared to history. But then again that's not taking into account that you can be a stock trader on your cellphone and tons more people have entered the market. To be a 'bubble' though you need to be 100x to 200x. So no, there's no bubble at all and the 'overvaluation' is more likely due to the modern easy access to the stock market. 30x is probably the new normal; but there's a secondary check. Go down the list of the S&P 500 and check the insiders: https://finance.yahoo.com/quote/AKAM/holders/ https://finance.yahoo.com/quote/AKAM/holders/ Typically 20-30% of a corporation needs to be held to maintain control; but the majority of the SP500 are not held by insiders anymore. like 1-2%. Akamai has essentially no defense against takeover. It's not even a hostile takeover in this case. It's just ready to be picked up by someone and remanaged. But that's not what we're worried about, we're worried that the people in control, the owners, managers, insiders, whatever. They dont want to hold what they manage? Typically a bad sign for individual stocks but when essentially the entire SP500 is like this. It indicates powerful people who know the markets well are out. That's indicating some serious bad mojo.