AI isn't like the tech bubble because all the companies are profitable this time, huh?
Meet Oklo, the $19bn nuclear company that has never generated any revenue and has no product to sell.
The *hope* is that they can capitalize on the massive uptick in power demand from the datacenter boom. A lot would have to go right to justify this valuation.
The same people calling for rate cuts are touting the economy's strength. That makes no sense. It's like saying "you're too muscular, so you should work out more."
The Fed cares about 2 things: The job market and inflation (2% target).
Cutting rates helps strengthen the economy/job market but it boosts inflation.
So, if the economy is already strong, and inflation is above their target then they should be... RAISING rates, right?
The reality, of course, is that the economy is NOT strong. In the first half of the year, the U.S. only had 0.1% GDP growth outside of AI. That means that the rest of the economy has been teetering on recession. If the economy were actually strong, the Fed would not be cutting rates with 3% inflation.
We explained this link more in our recent AI video and there is more on this topic coming soon. Circular financing, anyone? Scary!
A FLURRY of posts are claiming that the $7trn in money market funds means that when the FED cuts rates there will be a "LIQUIDITY TSUNAMI" and all that money will go to stocks/bonds/real estate/crypto, sending asset prices skyrocketing.
This is, unfortunately, COMPLETELY WRONG. What these people don't understand is that:
1. The value of assets, in general, goes up over time with inflation and GDP growth. If you looked at a chart of any asset... the stock market, the bond market, the value of all real estate... they would all look like this (especially when you compress it into a chart like this to make it look more extreme).
2. This would be a more legitimate argument IF the recent spike in money market assets were due to fear, and rate cuts were due to a recession. Neither is the case. We saw money market assets fall, being reinvested elsewhere, in 2000-2002 and 2009 AFTER big stock market crashes. Now the market is at an all-time high.
3. Rather, the rise in money market funds is due to rising rates. Money markets function similarly to savings accounts (but without FDIC insurance). For a decade+, the return on a money market fund was close to 0, because they're largely driven by the fed funds rate. When rates rose, the yields on money market funds rose with them. However, banks still pay you virtually nothing on your savings account assets. So, that divergence in returns among savings vehicles led to a flood of money out of savings accounts, and into money market funds.
4. A 25bp cut in rates is NOT going to get people to take their savings and invest it in the stock market or bitcoin at an all-time high.
Fundamentals of Finance
Tesla's STOCK quadrupled while their EARNINGS were cut in half.
It now trades at a forward P/E of over 200.
Does this seem like a rational market to you? Make it make sense.
6 months ago | [YT] | 20
View 7 replies
Fundamentals of Finance
Pro-AI site boomorbubble.ai says AI isn't in a bubble. Are you buying this?
6 months ago | [YT] | 9
View 2 replies
Fundamentals of Finance
Nvidia is now bigger than 6 of the 11 sectors in the S&P and all but 3 COUNTRIES!
This is the kind of thing you look back on and think "oh yeah, OF COURSE it was a BUBBLE."
6 months ago | [YT] | 17
View 4 replies
Fundamentals of Finance
AI isn't like the tech bubble because all the companies are profitable this time, huh?
Meet Oklo, the $19bn nuclear company that has never generated any revenue and has no product to sell.
The *hope* is that they can capitalize on the massive uptick in power demand from the datacenter boom. A lot would have to go right to justify this valuation.
6 months ago | [YT] | 14
View 2 replies
Fundamentals of Finance
The same people calling for rate cuts are touting the economy's strength. That makes no sense. It's like saying "you're too muscular, so you should work out more."
The Fed cares about 2 things: The job market and inflation (2% target).
Cutting rates helps strengthen the economy/job market but it boosts inflation.
So, if the economy is already strong, and inflation is above their target then they should be... RAISING rates, right?
The reality, of course, is that the economy is NOT strong. In the first half of the year, the U.S. only had 0.1% GDP growth outside of AI. That means that the rest of the economy has been teetering on recession. If the economy were actually strong, the Fed would not be cutting rates with 3% inflation.
We explained this link more in our recent AI video and there is more on this topic coming soon. Circular financing, anyone? Scary!
https://www.youtube.com/watch?v=PNHDu...
6 months ago | [YT] | 2
View 0 replies
Fundamentals of Finance
$7 trillion of FAKE NEWS and FALSE HOPES
A FLURRY of posts are claiming that the $7trn in money market funds means that when the FED cuts rates there will be a "LIQUIDITY TSUNAMI" and all that money will go to stocks/bonds/real estate/crypto, sending asset prices skyrocketing.
This is, unfortunately, COMPLETELY WRONG. What these people don't understand is that:
1. The value of assets, in general, goes up over time with inflation and GDP growth. If you looked at a chart of any asset... the stock market, the bond market, the value of all real estate... they would all look like this (especially when you compress it into a chart like this to make it look more extreme).
2. This would be a more legitimate argument IF the recent spike in money market assets were due to fear, and rate cuts were due to a recession. Neither is the case. We saw money market assets fall, being reinvested elsewhere, in 2000-2002 and 2009 AFTER big stock market crashes. Now the market is at an all-time high.
3. Rather, the rise in money market funds is due to rising rates. Money markets function similarly to savings accounts (but without FDIC insurance). For a decade+, the return on a money market fund was close to 0, because they're largely driven by the fed funds rate. When rates rose, the yields on money market funds rose with them. However, banks still pay you virtually nothing on your savings account assets. So, that divergence in returns among savings vehicles led to a flood of money out of savings accounts, and into money market funds.
4. A 25bp cut in rates is NOT going to get people to take their savings and invest it in the stock market or bitcoin at an all-time high.
7 months ago | [YT] | 15
View 1 reply
Fundamentals of Finance
Which fund do you want me to review next? Or I could do another fund comparison.
Think about funds you own in your 401k, or funds you're thinking about buying! Let me know!
2 years ago | [YT] | 5
View 4 replies
Fundamentals of Finance
Once again, we tell you the news before it is news. Today's news
www.bbc.com/news/business-68537965.amp
Our video published March 11th https://youtu.be/2NS6V7COQHM
2 years ago | [YT] | 3
View 0 replies
Fundamentals of Finance
Time to Short NVIDIA? "Short" video from May 2023
https://youtu.be/5DGyfgLQCPU?si=MdXYi...
2 years ago | [YT] | 2
View 0 replies
Fundamentals of Finance
2024 Housing Market Outlook video and email going out tomorrow!
Sign up for emails here: www.fundamentalsoffinance.com/freecurrencycourse
2 years ago (edited) | [YT] | 9
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