This doesn’t really tell me anything, I’d have to compare it with other charts. E.g. what does the chart for agriculture look like? Airplane manufacturing? Internet in early 2000s?
I know right? It’s not a bubble if there are transactions between the different companies in an industry. Nothing here shows that these investments are self-supporting circular, nor that all of this is propping up the economy.
I think it’s hard to definitely call something a bubble until it pops.
The definition of a bubble goes something along the lines of market prices exceeding the intrinsic value of the investment they represent, which may be true here?
If you want to read more about this the rough name for these companies was “the magnificent seven” a year or so ago when I last looked at this. A quick Google suggests represent about a third of the SNP 500’s value now and have a cape ratio (cyclicly adjusted price to earnings) of ~37 compared to 15-20 being normal.
Edit: the above baseline is incorrect; see sugar_in_tea’s comment for a more accurate baseline and some interesting counterpoints
I can’t find a good numerical source for the correlated risk within this group, and I suspect analyzing it is very difficult. Given they all used to be a lot more diversified in the past but now a large % of their valuation is predicated on AI historical correlation analysis probably fails. But the diagram linked here suggests it’s probably bad to put all your money in these companies. (Or even a 3rd if you are in an s&p 500 index tracker 😶)
Like, none of this definitively says this is a bubble, since if it were possible to divine that the bubble would immediately pop, but it does suggest there is a strong likelihood we are seeing a bubble.
This doesn’t really tell me anything, I’d have to compare it with other charts. E.g. what does the chart for agriculture look like? Airplane manufacturing? Internet in early 2000s?
I know right? It’s not a bubble if there are transactions between the different companies in an industry. Nothing here shows that these investments are self-supporting circular, nor that all of this is propping up the economy.
Circle != bubble
I think it’s hard to definitely call something a bubble until it pops.
The definition of a bubble goes something along the lines of market prices exceeding the intrinsic value of the investment they represent, which may be true here?
If you want to read more about this the rough name for these companies was “the magnificent seven” a year or so ago when I last looked at this. A quick Google suggests represent about a third of the SNP 500’s value now and have a cape ratio (cyclicly adjusted price to earnings) of ~37 compared to 15-20 being normal.
Edit: the above baseline is incorrect; see sugar_in_tea’s comment for a more accurate baseline and some interesting counterpoints
I can’t find a good numerical source for the correlated risk within this group, and I suspect analyzing it is very difficult. Given they all used to be a lot more diversified in the past but now a large % of their valuation is predicated on AI historical correlation analysis probably fails. But the diagram linked here suggests it’s probably bad to put all your money in these companies. (Or even a 3rd if you are in an s&p 500 index tracker 😶)
Like, none of this definitively says this is a bubble, since if it were possible to divine that the bubble would immediately pop, but it does suggest there is a strong likelihood we are seeing a bubble.
Great point.