It seems that June is the month to call the bubble if you are an experienced fund manager or forecaster.
AI is one of the biggest bubbles of all time, Meb told Jim Grant on his podcast last week:
AI capital is bigger than the dot-com bubble, says Jim Chanos:
Jeremy Grantham loves to make a new bubble call:
So does Ray Dalio:
I received a question On Dalio’s latest thoughts on the market this week:
OK, Ray Dalio is worth over $20 billion. So he knows something, that’s for sure. Many people definitely believe his ideas. I’m not saying he’s wrong, but are you unhappy with his current thinking, or at least some of it?
This references a few things Dalio owns written in recent weeks:
Market and economic concentration is concentrated in a new sector that is highly volatile and risky and extremely popular with unsophisticated investors. This is classic bubble stuff.
While it is indisputable that the risks are high, I will now give you the potentially inaccurate idea that the potential returns are low. This assessment of possible future returns is based on my analytical work on valuations and the readings of my bubble indicator: real returns on stocks over the next 5 to 10 years appear to be around -5 to -10%, although there is significant uncertainty around these numbers.
This all sounds a little scary.
Maybe they are good. Maybe this is a huge bubble ready to burst. Maybe we are living in a lost decade. Maybe stock market returns from here are terrible.
This has all happened in the past and will probably happen again in the future. Risk assets are sometimes risky.1
Listen, Dalio is very smart. He is extraordinarily rich. It also made many Bridgewater investors rich. The man actually saved (search for) McDonald’s Chicken McNuggets in the 1970s.
However, even legendary investors like Ray Dalio have difficulty predicting these.
He has been making dire warnings for over a decade, and none of them have come true:
Grantham also:
Spotting bubbles and reaching the top is difficult even for legendary fund managers.
The point is that hedge fund managers, newsletter writers and the like have to make predictions about financial crises, bubbles and stock market valuations. It’s in the job description or something.
financial media He always attacks these things too:
Everyone knows when we are in a financial crisis or crash. No one can know for sure that we’re in a bubble until it’s real.
AI may actually be a bubble right now. It definitely checks a lot of the boxes.
However, it is also worth noting the fact that people have been calling technology a bubble for a very long time.
I wrote something in 2017 About the many tech bubble calls that turned out to be wrong:
Everything before the pandemic feels like a hundred years ago, but that was so long ago!
Does that mean this isn’t a bubble? Of course not. It could be!
I don’t like the idea that you have to look for bubbles and market tops to be a successful investor. The experts’ graveyard, the market’s best, is full of unfulfilled calls.
Over the years through my writing and working in the wealth management field, I have interacted with thousands of wealthy people. I have yet to meet a person who told me they got rich at picking up the tops and summoning bubbles. It sounds exciting, but it’s not necessary.
And people who get it right often get it right one time in a row and spend the rest of their careers chasing the thrill of predicting the next high.
This is a fund manager’s pipe dream.
I am sure someone With a combination of skill and luck, he will “summon” the next peak. They may even profit from it.
But they will not be able to do this consistently.
No one can search superiors consistently.
Build a durable portfolio that can see you through the tops, bottoms and middles.
That’s the best thing you can do.
Further Reading:
Is This a Balloon?
1Part of this message Risk and Reward.
