4 ms·

I'm curious what HN is doing with their portfolios right about now. I'd be dumping NVDA and reallocating to more bonds for the time being.

josefritzishere 11mo ago
This sub is the most important question in the thread. Where do you put your money to hedge against an AI market crash?
- hirako2000 11mo ago
  Commodities.
- ajross 11mo ago
  You can't hedge against a whole market. And you can't time bubble pop events anyway. You can dump NVDA today, sure, because it's overvalued at $180. And most of us agree. But that won't prevent it from going to $300 before it pops (which is totally reasonable too!), so dumping it today might hurt as much as it helps. Run-ups at the end of a speculative bubble are by definition irrational and produce in-hindsight-ridiculous numbers. If you're young and invested for the long term, just leave all your junk in broad index securities. You can't do better than that, you just have to ride the bumps. On the other hand, I'm approaching retirement and looking seriously at when to pull the trigger. The aggregate downside to me of a large market drop or whatever is much higher than it is to a 20-something, because losing out on (to make a number up) an extra 30% of net worth is minor when compared to "now you have to work another three years before retiring" (or alternate framings like "you have to retire in Houston and not Miami", etc...). So most of my assets are moving out of volatiles entirely.
  - _zoltan_ 11mo ago
    into? bonds?
    - ajross 11mo ago
      A few bond funds, but frankly just a lot of money market cash in the short term. Most of our guts say that the crash is imminent and if it is the extra fees and hassle won't be worth it.
- oulipo2 11mo ago
  Cash or bonds I assume
- nradov 11mo ago
  In a crash everything gets positively correlated for a while. You can go to cash temporarily but of course no one can consistently time the market.
- coldpie 11mo ago
  Same thing as always. Stick with your plan and rebalance if you need to. If your plan is 80% stock 20% bond (or whatever ratios), and the increased stock prices are putting you significantly out of balance, then sell your stock funds and buy bonds to put it back to where it should be. If the crash happens, sell your now too-high bonds and buy stocks. Or just buy into one of those funds that does all this for you, or hire a fiduciary financial advisor to do it for you.
- hylaride 11mo ago
  With even the SP500 being super concentrated in AI-exposed companies, probably a combination of bonds and foreign equities. But hedging does mean being OK with watching any (perceived or real) bubble madness continue. I wanted to put all my wealth into Apple circa 2005, but chose not to because blah blah blah diversification. Obviously I wish I did, but I'm ok with the perfectly sensible decision I made - and I'd be retired many times over had I done it. Personally speaking, as somebody that was 100% in equities until earlier this year (I'm in my early 40s and had most of my wealth in VOO), I shifted to a 60-40 portfolio - there are ETFs that maintain the balance for you. I did this knowing full well that this could attenuate my upside, but I figured it's worth it than being so concentrated in a single part of an industry (AI within tech) and so much upside was already acquired up until that point. Also, I figured the chances of the 2nd Trump term adding to volatility weren't going to help tamper volatility. On top of that, my income is tied to tech, so diversifying away further from it is sensible (especially the equity parts of my compensation). But if you're in your 20s, your nest egg is likely small enough that I'd just continue plugging away in automatic contributions. Investing at all is far more important than anything else at that stage.
- mrtesthah 11mo ago
  AAPL is chronically undervalued, and at the same time derives no revenue from generative AI.
- eqvinox 11mo ago
  Land/housing/property, as directly as possible and reasonable. Just make sure you don't do it in an overheated place like New York.
  - JumpCrisscross 11mo ago
    > Just make sure you don't do it in an overheated place like New York If the stock market crashes, New York property probably sings. Stock market crash means ZIRP. And ZIRP means lots of money sloshing through New York.
    - eqvinox 11mo ago
      > lots of money sloshing through New York. That's kinda the problem, I'd expect it to be a bit… volatile. I guess it's a valid target to gamble on if that matches your risk profile.
      - JumpCrisscross 11mo ago
        > I'd expect it to be a bit… volatile Technically yes, but only because something monotonically increasing in price is volatile.
- ndriscoll 11mo ago
  Do you live in a home you own with no mortgage? Do you have a fully electrified home, only EVs, and enough solar to run those things? You can make real concrete capital investments instead of abstract financial ones to reduce your required living/"operating" expenses, insulating you somewhat from the state of financial markets.
  - Anonyneko 11mo ago
    This doesn't seem to work very well in economies where housing isn't constantly appreciating like crazy (I'm not from the US)...
    - ndriscoll 11mo ago
      It does if you're paying for that housing (either rent or mortgage payments). People invest into stocks while simultaneously holding a liability (e.g. they need to somehow come up with payments to continue living somewhere, or to continue having heating/cooling/lights). If you think all of the financial investments available to you might crash, and your source of income may evaporate in a correlated event, you can instead put all of your money into minimizing your liabilities. The goal is not to see your home value increase--you're not trying to sell it. It's to secure everything you need to have the standard of living you want by owning those things.
- TrainedMonkey 11mo ago
  It's more complex than that, a summary of my highly subjective understanding: 1. AI companies manage to build AGI and achieve takeoff. I have no idea on how to hedge against that. 2. The market is not allowed to crash. There will likely be some lag between economic weakness and money printing. Safer option is probably to buy split 50% SPY and 50% bonds. A riskier option is trying to time the market. 3. The market is allowed to crash. Bonds, cash, etc. Depending on what you believe will happen and risk appetite you can blend between the strategies or add a short component. I am holding #2 with no short positions in post-tax accounts and full SPY in tax advantaged accounts.
- dabockster 11mo ago
  US government bonds
nurettin 11mo ago
Why trade individual stocks anyway? Cost averaging ETFs is a proven way to building wealth. S&P goes down 20%, you average down, it recovers and you get another 2-3 years of growth. This goes on until civilization collapses.
- gretch 11mo ago
  If you buy ETFs, you basically hold some stocks you don't want. For example, stock from war profiteering companies (lockheed, raytheon). Note that investing in war profiteers is a proven way to build wealth. I just don't want to do that. This argument not only applies to evil companies, but also dumb ones. For example, I have no interest in investing in IBM or Oracle even those both of those are also money makers.
  - lazide 11mo ago
    Ok?
  - miloignis 11mo ago
    You could buy ETFs and then short the stocks you don't like more, I suppose.
  - nurettin 11mo ago
    That only works if you wear horse blinders and subconsciously ignore or make up excuses for evil by association. There is absolutely no way to invest anything ethically.
- nradov 11mo ago
  Buying index funds (either mutual funds or ETFs) has been an effective approach for retail investors. But the concern now is that some US stock index funds are so heavily weighted to the "Magnificent 7" stocks that much of the previous benefit of diversification has been lost. The Mag 7 are all highly correlated with each other so if one falls then usually the others do as well. https://www.fidelity.com/learning-center/smart-money/magnificent-7-stocks https://www.fidelity.com/learning-center/smart-money/magnifi... There are other index funds which are equal weighted rather than market weighted. Those have underperformed lately but might be less volatile if the AI bubble pops.
AstroBen 11mo ago
Broad, global diversification with a long term time horizon. So I'm doing exactly nothing I'm not able to predict what the overall market is going to do short or medium term What makes you think your guess is better than the rest of the money in the market, most of it acting with better information than you?
boringg 11mo ago
Theres a really funny thing going on right now -- in that everyone is forecasting an AI bubble to pop. It feels like every single human is saying that from the heads of tech companies with comments that are veiled to bankers and everyone on the street. It reminds me of the time that everyone said the economy was going to tank and somehow everyone had it wrong a couple years ago. It feels implausible that it isn't overbuilt but it also feels really strange for everyone to be pushing this narrative that its a bubble - and people taking very public short bets. It feels like the contrarian bet is that its going to keep running hot. Nvidia earnings tommorrow big litmus test.
- HarHarVeryFunny 11mo ago
  If it was the people actually investing in AI all saying it's a bubble, implying that they are holding back, not all-in, for fear of it crashing, then it'd have room to run further (until they were all-in, and leveraged to the eyeballs, cf subprime housing crash liar loans, dot-com crash investor margin accounts). However, it seems more like the people pumping billions into AI are all still "this is going to the moon" gung-ho, and unless they are investing billions of CASH, then I guess they are borrowing to do so. I don't know how this financing works - maybe no fear of having it pulled like a foreclosure on a subprime mortgage holder, or a broker margin call, but it's not going to end well if these investments start to fail and the investors start running for the door. Peter Thiel's recent exit from NVidia should be a bit concerning given his good record on macro bets and timing.
officeplant 11mo ago
Currently? Wishing there was an S&P 500 that banned tech stocks.
- cschmidt 11mo ago
  There are equal weight S&P ETFs, which avoid having a handful of stock dominating. However, they do have to do a lot more rebalancing to keep things in line.
- MontyCarloHall 11mo ago
  The SPXT [0]/XMAG [1] ETFs are exactly what you're looking for. [0] https://www.proshares.com/our-etfs/strategic/spxt https://www.proshares.com/our-etfs/strategic/spxt (S&P minus tech stocks) [1] https://www.defianceetfs.com/xmag/ https://www.defianceetfs.com/xmag/ (S&P minus "Magnificent 7")
  - mNovak 11mo ago
    Am I misreading, or does SPXT still hold >20% GOOG, TSLA, META, AMZN? "Information technology" apparently just means Microsoft and Apple.
    - MontyCarloHall 11mo ago
      It's because none of those companies is considered "Information Technology" according to the official GICS criteria [0] used to classify companies in the index. For instance, Meta and Google are in the "Communications Services" sector; Amazon is in "Consumer Discretionary." There are 69 total companies in the S&P 500 in the "Information Technology" GICS sector [1], and all are excluded from SPXT. [0] https://en.wikipedia.org/wiki/Global_Industry_Classification_Standard https://en.wikipedia.org/wiki/Global_Industry_Classification... [1] https://en.wikipedia.org/wiki/List_of_S%26P_500_companies https://en.wikipedia.org/wiki/List_of_S%26P_500_companies
  - officeplant 11mo ago
    Welp, time to see if my 401k provider supports them.
paxys 11mo ago
Same thing I've been doing for 15 years - VTI and chill.

josefritzishere 11mo ago

This sub is the most important question in the thread. Where do you put your money to hedge against an AI market crash?

hirako2000 11mo ago
Commodities.
ajross 11mo ago
You can't hedge against a whole market. And you can't time bubble pop events anyway. You can dump NVDA today, sure, because it's overvalued at $180. And most of us agree. But that won't prevent it from going to $300 before it pops (which is totally reasonable too!), so dumping it today might hurt as much as it helps. Run-ups at the end of a speculative bubble are by definition irrational and produce in-hindsight-ridiculous numbers. If you're young and invested for the long term, just leave all your junk in broad index securities. You can't do better than that, you just have to ride the bumps. On the other hand, I'm approaching retirement and looking seriously at when to pull the trigger. The aggregate downside to me of a large market drop or whatever is much higher than it is to a 20-something, because losing out on (to make a number up) an extra 30% of net worth is minor when compared to "now you have to work another three years before retiring" (or alternate framings like "you have to retire in Houston and not Miami", etc...). So most of my assets are moving out of volatiles entirely.
- _zoltan_ 11mo ago
  into? bonds?
  - ajross 11mo ago
    A few bond funds, but frankly just a lot of money market cash in the short term. Most of our guts say that the crash is imminent and if it is the extra fees and hassle won't be worth it.
oulipo2 11mo ago
Cash or bonds I assume
nradov 11mo ago
In a crash everything gets positively correlated for a while. You can go to cash temporarily but of course no one can consistently time the market.
coldpie 11mo ago
Same thing as always. Stick with your plan and rebalance if you need to. If your plan is 80% stock 20% bond (or whatever ratios), and the increased stock prices are putting you significantly out of balance, then sell your stock funds and buy bonds to put it back to where it should be. If the crash happens, sell your now too-high bonds and buy stocks. Or just buy into one of those funds that does all this for you, or hire a fiduciary financial advisor to do it for you.
hylaride 11mo ago
With even the SP500 being super concentrated in AI-exposed companies, probably a combination of bonds and foreign equities. But hedging does mean being OK with watching any (perceived or real) bubble madness continue. I wanted to put all my wealth into Apple circa 2005, but chose not to because blah blah blah diversification. Obviously I wish I did, but I'm ok with the perfectly sensible decision I made - and I'd be retired many times over had I done it. Personally speaking, as somebody that was 100% in equities until earlier this year (I'm in my early 40s and had most of my wealth in VOO), I shifted to a 60-40 portfolio - there are ETFs that maintain the balance for you. I did this knowing full well that this could attenuate my upside, but I figured it's worth it than being so concentrated in a single part of an industry (AI within tech) and so much upside was already acquired up until that point. Also, I figured the chances of the 2nd Trump term adding to volatility weren't going to help tamper volatility. On top of that, my income is tied to tech, so diversifying away further from it is sensible (especially the equity parts of my compensation). But if you're in your 20s, your nest egg is likely small enough that I'd just continue plugging away in automatic contributions. Investing at all is far more important than anything else at that stage.
mrtesthah 11mo ago
AAPL is chronically undervalued, and at the same time derives no revenue from generative AI.
eqvinox 11mo ago
Land/housing/property, as directly as possible and reasonable. Just make sure you don't do it in an overheated place like New York.
- JumpCrisscross 11mo ago
  > Just make sure you don't do it in an overheated place like New York If the stock market crashes, New York property probably sings. Stock market crash means ZIRP. And ZIRP means lots of money sloshing through New York.
  - eqvinox 11mo ago
    > lots of money sloshing through New York. That's kinda the problem, I'd expect it to be a bit… volatile. I guess it's a valid target to gamble on if that matches your risk profile.
    - JumpCrisscross 11mo ago
      > I'd expect it to be a bit… volatile Technically yes, but only because something monotonically increasing in price is volatile.
ndriscoll 11mo ago
Do you live in a home you own with no mortgage? Do you have a fully electrified home, only EVs, and enough solar to run those things? You can make real concrete capital investments instead of abstract financial ones to reduce your required living/"operating" expenses, insulating you somewhat from the state of financial markets.
- Anonyneko 11mo ago
  This doesn't seem to work very well in economies where housing isn't constantly appreciating like crazy (I'm not from the US)...
  - ndriscoll 11mo ago
    It does if you're paying for that housing (either rent or mortgage payments). People invest into stocks while simultaneously holding a liability (e.g. they need to somehow come up with payments to continue living somewhere, or to continue having heating/cooling/lights). If you think all of the financial investments available to you might crash, and your source of income may evaporate in a correlated event, you can instead put all of your money into minimizing your liabilities. The goal is not to see your home value increase--you're not trying to sell it. It's to secure everything you need to have the standard of living you want by owning those things.
TrainedMonkey 11mo ago
It's more complex than that, a summary of my highly subjective understanding: 1. AI companies manage to build AGI and achieve takeoff. I have no idea on how to hedge against that. 2. The market is not allowed to crash. There will likely be some lag between economic weakness and money printing. Safer option is probably to buy split 50% SPY and 50% bonds. A riskier option is trying to time the market. 3. The market is allowed to crash. Bonds, cash, etc. Depending on what you believe will happen and risk appetite you can blend between the strategies or add a short component. I am holding #2 with no short positions in post-tax accounts and full SPY in tax advantaged accounts.
dabockster 11mo ago
US government bonds

nurettin 11mo ago

Why trade individual stocks anyway? Cost averaging ETFs is a proven way to building wealth. S&P goes down 20%, you average down, it recovers and you get another 2-3 years of growth. This goes on until civilization collapses.

gretch 11mo ago
If you buy ETFs, you basically hold some stocks you don't want. For example, stock from war profiteering companies (lockheed, raytheon). Note that investing in war profiteers is a proven way to build wealth. I just don't want to do that. This argument not only applies to evil companies, but also dumb ones. For example, I have no interest in investing in IBM or Oracle even those both of those are also money makers.
- lazide 11mo ago
  Ok?
- miloignis 11mo ago
  You could buy ETFs and then short the stocks you don't like more, I suppose.
- nurettin 11mo ago
  That only works if you wear horse blinders and subconsciously ignore or make up excuses for evil by association. There is absolutely no way to invest anything ethically.
nradov 11mo ago
Buying index funds (either mutual funds or ETFs) has been an effective approach for retail investors. But the concern now is that some US stock index funds are so heavily weighted to the "Magnificent 7" stocks that much of the previous benefit of diversification has been lost. The Mag 7 are all highly correlated with each other so if one falls then usually the others do as well. https://www.fidelity.com/learning-center/smart-money/magnificent-7-stocks https://www.fidelity.com/learning-center/smart-money/magnifi... There are other index funds which are equal weighted rather than market weighted. Those have underperformed lately but might be less volatile if the AI bubble pops.

AstroBen 11mo ago

Broad, global diversification with a long term time horizon. So I'm doing exactly nothing I'm not able to predict what the overall market is going to do short or medium term What makes you think your guess is better than the rest of the money in the market, most of it acting with better information than you?

boringg 11mo ago

Theres a really funny thing going on right now -- in that everyone is forecasting an AI bubble to pop. It feels like every single human is saying that from the heads of tech companies with comments that are veiled to bankers and everyone on the street. It reminds me of the time that everyone said the economy was going to tank and somehow everyone had it wrong a couple years ago. It feels implausible that it isn't overbuilt but it also feels really strange for everyone to be pushing this narrative that its a bubble - and people taking very public short bets. It feels like the contrarian bet is that its going to keep running hot. Nvidia earnings tommorrow big litmus test.

HarHarVeryFunny 11mo ago
If it was the people actually investing in AI all saying it's a bubble, implying that they are holding back, not all-in, for fear of it crashing, then it'd have room to run further (until they were all-in, and leveraged to the eyeballs, cf subprime housing crash liar loans, dot-com crash investor margin accounts). However, it seems more like the people pumping billions into AI are all still "this is going to the moon" gung-ho, and unless they are investing billions of CASH, then I guess they are borrowing to do so. I don't know how this financing works - maybe no fear of having it pulled like a foreclosure on a subprime mortgage holder, or a broker margin call, but it's not going to end well if these investments start to fail and the investors start running for the door. Peter Thiel's recent exit from NVidia should be a bit concerning given his good record on macro bets and timing.

officeplant 11mo ago

Currently? Wishing there was an S&P 500 that banned tech stocks.

cschmidt 11mo ago
There are equal weight S&P ETFs, which avoid having a handful of stock dominating. However, they do have to do a lot more rebalancing to keep things in line.
MontyCarloHall 11mo ago
The SPXT [0]/XMAG [1] ETFs are exactly what you're looking for. [0] https://www.proshares.com/our-etfs/strategic/spxt https://www.proshares.com/our-etfs/strategic/spxt (S&P minus tech stocks) [1] https://www.defianceetfs.com/xmag/ https://www.defianceetfs.com/xmag/ (S&P minus "Magnificent 7")
- mNovak 11mo ago
  Am I misreading, or does SPXT still hold >20% GOOG, TSLA, META, AMZN? "Information technology" apparently just means Microsoft and Apple.
  - MontyCarloHall 11mo ago
    It's because none of those companies is considered "Information Technology" according to the official GICS criteria [0] used to classify companies in the index. For instance, Meta and Google are in the "Communications Services" sector; Amazon is in "Consumer Discretionary." There are 69 total companies in the S&P 500 in the "Information Technology" GICS sector [1], and all are excluded from SPXT. [0] https://en.wikipedia.org/wiki/Global_Industry_Classification_Standard https://en.wikipedia.org/wiki/Global_Industry_Classification... [1] https://en.wikipedia.org/wiki/List_of_S%26P_500_companies https://en.wikipedia.org/wiki/List_of_S%26P_500_companies
- officeplant 11mo ago
  Welp, time to see if my 401k provider supports them.

paxys 11mo ago

Same thing I've been doing for 15 years - VTI and chill.