5 ms·

The way I've been thinking about it: there is too much money trying to pour into the market. That's why valuations are so high. Maybe getting more of these bi

by timmg 4mo ago

The way I've been thinking about it: there is too much money trying to pour into the market. That's why valuations are so high. Maybe getting more of these big private companies public will bring valuations down a bit. (Just my impression. No math or financial studies behind it :)

JumpCrisscross 4mo ago
> there is too much money trying to pour into the market Keep in mind that inflation ran over 7% annualized in April [1]. [1] https://www.bls.gov/news.release/cpi.nr0.htm https://www.bls.gov/news.release/cpi.nr0.htm
- philipallstar 4mo ago
  Inflation is a measure of the cost of living. It's not got loads to do with large-scale, institutional investments.
  - 9question1 4mo ago
    That depends. Inflation is a measure of the cost of living in terms of currency. It can be high either if goods and services required for living become scarce, or if currency supply increases. Currency supply increasing does affect asset prices.
    - philipallstar 4mo ago
      Yes, but they're not directly correlated. Of course events can affect them both! Going to war would both increase the cost of living and (some) asset prices would go way up. But that doesn't mean they should be measured together like that.
  - JumpCrisscross 4mo ago
    > Inflation is a measure of the cost of living The faster your cash loses value, the stronger your incentive to trade it for something else. That something else can be financial assets. > It's not got loads to do with large-scale, institutional investments For investors, particularly retail investors, the consumer price index is most relevant. But for whatever it's worth, producer prices are up over 16% in April (7% excluding "foods, energy, and trade services," which jumped over 50% annualized) [1]. To be clear, I'm floating a hypothesis here. I have seen no evidence linking inflation to demand for these companies' shares. (If anything, it should be the inverse.) [1] https://www.bls.gov/news.release/ppi.nr0.htm https://www.bls.gov/news.release/ppi.nr0.htm
  - thrawa8387336 4mo ago
    Inflation then is already higher. Cost of living is driven mostly by rent
- Alive-in-2025 4mo ago
  From that doc, prices went up 0.6% in one month, multiple by 12 get 7.2% annual inflation rate.
- Auracle 4mo ago
  The vast majority of that was fuel.
  - JumpCrisscross 4mo ago
    > vast majority of that was fuel Everything else is up around 3% YoY. And if energy and transportation are up double digits, and producer prices are up double digits, other consumer prices will follow.
  - themafia 4mo ago
    Yea and the cost of fuel has zero downstream effects on the economy.
hungryhobbit 4mo ago
No, the crash (that we all know is coming) will do that. Until then, history teaches that we'll just keep going up and up
- JumpCrisscross 4mo ago
  > the crash (that we all know is coming) will do that. Until then, history teaches that we'll just keep going up and up Stock prices don't have to crash. They can just stagnate while profits catch up and multiples compress. Debt binges, on the other hand, tend to go bust with a bang. But after the recent private-credit scare, the AI build-out has been predominantly financed with stock. (I think.)
  - layoric 4mo ago
    Hasn't there been a _lot_ of debt to buy up Nvidia GPUs? I follow this stuff somewhat closely and it feels intentionally confusing, so I've likely lost track.
    - JumpCrisscross 4mo ago
      > Hasn't there been a _lot_ of debt to buy up Nvidia GPUs? I believe that's been concentrated at the hyperscaler layer, and subsided when the aforementioned private-credit scare reared its head. (I haven't heard a big datacenter debt deal announced in a while. Though of course that doesn't mean they aren't being done.)
    - aurareturn 4mo ago
      And we're still extremely compute constrained. We need more Nvidia GPUs, RAM, power.
  - hn_throwaway_99 4mo ago
    > Equity bubbles don't have to crash. Prices can just stagnate while profits catch up and multiples compress. Is there is historical evidence for that? As someone who used to follow Jeremy Grantham a lot (he considered himself a "bubble historian"), IIRC every bubble he studied always mean reverted, and it usually (maybe always, can't remember) overshot on the downside during the correction.
1270018080 4mo ago
There is nowhere else for that money to go
podunkPDX 4mo ago
I'd say your sense is not wrong: https://www.thisamericanlife.org/355/the-giant-pool-of-money https://www.thisamericanlife.org/355/the-giant-pool-of-money
dangus 4mo ago
Corporations across the board are experiencing record profitability. That's the reason behind the high valuations. This isn't true of AI companies...yet. But these are companies entering the market with pre-IPO userbase (including lots of B2B) numbers that Meta and YouTube would have dreamed of before their acquisition/IPO. I think this whole situation is very sleazy and corrupt, but ultimately my prediction is that nothing serious will come of it. Even the exposure of index and passive investing is overstated.

by timmg 4mo ago

JumpCrisscross 4mo ago

> there is too much money trying to pour into the market Keep in mind that inflation ran over 7% annualized in April [1]. [1] https://www.bls.gov/news.release/cpi.nr0.htm https://www.bls.gov/news.release/cpi.nr0.htm

philipallstar 4mo ago
Inflation is a measure of the cost of living. It's not got loads to do with large-scale, institutional investments.
- 9question1 4mo ago
  That depends. Inflation is a measure of the cost of living in terms of currency. It can be high either if goods and services required for living become scarce, or if currency supply increases. Currency supply increasing does affect asset prices.
  - philipallstar 4mo ago
    Yes, but they're not directly correlated. Of course events can affect them both! Going to war would both increase the cost of living and (some) asset prices would go way up. But that doesn't mean they should be measured together like that.
- JumpCrisscross 4mo ago
  > Inflation is a measure of the cost of living The faster your cash loses value, the stronger your incentive to trade it for something else. That something else can be financial assets. > It's not got loads to do with large-scale, institutional investments For investors, particularly retail investors, the consumer price index is most relevant. But for whatever it's worth, producer prices are up over 16% in April (7% excluding "foods, energy, and trade services," which jumped over 50% annualized) [1]. To be clear, I'm floating a hypothesis here. I have seen no evidence linking inflation to demand for these companies' shares. (If anything, it should be the inverse.) [1] https://www.bls.gov/news.release/ppi.nr0.htm https://www.bls.gov/news.release/ppi.nr0.htm
- thrawa8387336 4mo ago
  Inflation then is already higher. Cost of living is driven mostly by rent
Alive-in-2025 4mo ago
From that doc, prices went up 0.6% in one month, multiple by 12 get 7.2% annual inflation rate.
Auracle 4mo ago
The vast majority of that was fuel.
- JumpCrisscross 4mo ago
  > vast majority of that was fuel Everything else is up around 3% YoY. And if energy and transportation are up double digits, and producer prices are up double digits, other consumer prices will follow.
- themafia 4mo ago
  Yea and the cost of fuel has zero downstream effects on the economy.

hungryhobbit 4mo ago

No, the crash (that we all know is coming) will do that. Until then, history teaches that we'll just keep going up and up

JumpCrisscross 4mo ago
> the crash (that we all know is coming) will do that. Until then, history teaches that we'll just keep going up and up Stock prices don't have to crash. They can just stagnate while profits catch up and multiples compress. Debt binges, on the other hand, tend to go bust with a bang. But after the recent private-credit scare, the AI build-out has been predominantly financed with stock. (I think.)
- layoric 4mo ago
  Hasn't there been a _lot_ of debt to buy up Nvidia GPUs? I follow this stuff somewhat closely and it feels intentionally confusing, so I've likely lost track.
  - JumpCrisscross 4mo ago
    > Hasn't there been a _lot_ of debt to buy up Nvidia GPUs? I believe that's been concentrated at the hyperscaler layer, and subsided when the aforementioned private-credit scare reared its head. (I haven't heard a big datacenter debt deal announced in a while. Though of course that doesn't mean they aren't being done.)
  - aurareturn 4mo ago
    And we're still extremely compute constrained. We need more Nvidia GPUs, RAM, power.
- hn_throwaway_99 4mo ago
  > Equity bubbles don't have to crash. Prices can just stagnate while profits catch up and multiples compress. Is there is historical evidence for that? As someone who used to follow Jeremy Grantham a lot (he considered himself a "bubble historian"), IIRC every bubble he studied always mean reverted, and it usually (maybe always, can't remember) overshot on the downside during the correction.

1270018080 4mo ago

There is nowhere else for that money to go

podunkPDX 4mo ago

I'd say your sense is not wrong: https://www.thisamericanlife.org/355/the-giant-pool-of-money https://www.thisamericanlife.org/355/the-giant-pool-of-money

dangus 4mo ago

Corporations across the board are experiencing record profitability. That's the reason behind the high valuations. This isn't true of AI companies...yet. But these are companies entering the market with pre-IPO userbase (including lots of B2B) numbers that Meta and YouTube would have dreamed of before their acquisition/IPO. I think this whole situation is very sleazy and corrupt, but ultimately my prediction is that nothing serious will come of it. Even the exposure of index and passive investing is overstated.