🐝 In today's Weekly Buzz I dove into the arguments published in Fortune and Yahoo Finance by Capital Economics analyst James Reilly who calls the AI trade a “late-stage bubble” and is projecting a 30% drop in the S&P 500 from its highs by 2027. 💡 His arguments include: - 📈 S&P 500 earnings growth concentrated almost entirely in tech and chips, now matching dot-com era peaks - 💸 Combined free cash flow of the four largest AI hyperscalers projected to turn negative in 2027 due to AI CapEx - 🏦 Big Tech bond issuance more than doubling year-over-year to fund the cash flow gap - 🚀 A fresh wave of AI IPOs, which Reilly calls the clearest late-bubble signal (most notably Anthropic’s IPO, which he called an ‘IPO of doom’ and compared to Pets.com, whose IPO was seen as the beginning of the end for the dot-com bubble) 💥 Obviously calls for a crash are nothing new, but I thought the argument was worth covering, so wanted to open up a discussion thread to hear everyone's thoughts on Blossom! 💬 One quote I liked in this context from Peter Lynch: ""Far more money has been lost by investors preparing for corrections, or trying to anticipate corrections, than has been lost in corrections themselves." Take last weekend for example when everyone thought the market was going to crash Monday due to the open letter from Anthropic 🤣 💡 That said, I think the risks are real and the '30% drop' prediction is a good thought experiment for us all to make sure your portfolio matches your goals and risk tolerence... if your investing for the long-term, statistically you WILL experience a crash eventually, the test is whether you can ride it out without panic selling 👀 🫡 My full write-up should be in your inbox!
Those who deny the upcoming crash will learn the hard way. Lots of people here have less than 3 years investing experience and what I saw during Liberation Day these youngins who think that was bad and tech will hold up will be very surprised, worse than surprised pikachu.
monthly mint@monthlymint · 37m
No i think 15% pullback this year then rally v shap into year end
Jess @truenorthjess · 16mEdited
I'm not too worried about a crash due to the AI bubble popping. I'm more worried about the US midterms. What markets hate most is uncertainty. If the Democrats take both the house and the senate I'm sure Trump will do everything that he can to sow chaos by vetoing and blocking everything that they try and do. This will grind everything including markets to a halt. I'm currently back in school so I have cash saved up for that. But I did decide to put more cash aside than I initially budgeted for just in case markets fall next year.
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