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Comment by bofadeez | Hacker News Reader

During most of the dot-com boom, there was not a broad consensus that a bubble existed, whereas today’s AI boom is widely accompanied by media warnings about an AI bubble, making public awareness much higher than it was in the late 1990s. I don't think a single person hasn't heard the "circular financing" talking points from multiple people who think they're being insightful. Or Burry who thinks a GPU should be trashed after 2 years. Doesn't sound like irrational euphoria.

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Greenspan warned about irrational exuberance, the newspapers were full of articles like the Guardian one:

https://www.stlouisfed.org/publications/regional-economist/a...

https://www.theguardian.com/business/1999/dec/20/nasdaq.efin...

This time, "AI" has been hyped up more than tech in 1999 by the media. The media has just reversed course in 2025 because they found out that most people hate "AI". in 2023-2024 it was mainly hype.

The thing that got me most about Federal Reserve Chairman Greenspan's warning about "irrational exuberance" of the markets was that the warning was in 1996, and it seemed to me and many others already obvious by then, and that Greenspan was cautious and late in his warning.

Yet, the markets continued rapidly upward for another FOUR years. Shorting the high-flying stocks with negligible income in 1997 or 1998 would have been completely sensible. And it would have wiped you out, as you would have been years too early.

It just proves the adage: "The markets can remain irrational longer than you can remain solvent."

Today, the levels of (over-)investment compared to investment are even more extreme. But when is the time to call it?

This line from The Guardian article:

"The notion that Amazon.com will be allowed to corner the market in on-line book sales is wholly implausible."

There is better awareness of everything bc of the internet, you are just in the disbelief phase even though markets have already peaked and insiders are heading for the exits.

Eugene Fama believes it's impossible to detect a bubble. Why do you think he's wrong?

Why do you think Jeffery Gundlach is wrong when he just said literally everything is overvalued? Everyone knew it was a bubble in 2001 and in 1929, that's part of being a bubble, it doesn't make sense but it just keeps going up ignoring all risks. Is there liquidity for a little more yeah maybe, but when everyone is long and highly leveraged there is only one way for things eventually to go.

That person is not even an academic. At least google Eugene Fama so you don't embarrass yourself like this.

What does Ja Rule think about bubbles? Ask him why markets can remain irrational longer than you can remain solvent.

I do know who he is, why do you assume I don't, just so you think you can appear smart on the internet? Pretty pathetic. Gundalach has better investing success than you and Fama, you should listen to what he says instead of just assume he's wrong, that's called being intellectually dishonest.

Yeah I guess you fundamentally misunderstand the difference/significance between someone who is seeking objective peer-reviewed truth and someone who tries to seduce investors to put money into their fund for fees on the internet with wild theories and anecdotal gambling success. It's not your fault, you must be a teenager or something.

Why are you so angry buddy, are you way overinvested in tech or something? What are you even trying to argue, that it's impossible to value the market?

Yeah markets are disconnected from fundamentals. Conduct causal inference with any fundamental metric on forward returns and you'll see they have almost zero predictive ability. That supports the efficient market hypothesis, as do many many other observations.

If you could simply "value the market" in some analytical way, then any simple neural network would (universally) approximate it. Instead you see the vast vast majority of machine learning quant funds fail. Here are the specific details as to why: https://www.youtube.com/watch?v=BRUlSm4gdQ4

So how was I able to make money on both crashes this year and buy the bottom in 2022, how did Burry know it was a bubble in 2008, how did Greenspan know it in the late 1990s? Humans act irrationally, they get overconfident and overreach then things pull back, boom/busts in specific industries and whole economies have happened since the beginning of history. We humans only have so many ways to value a company and us investors all look at the same ones, we have jobs though that require us to put values to these assets for our clients. This is how human emotions and psychology gets into the market. Fama might be right it's impossible to mathematically predict the exact day and time the bubble will crash, but that doesn't mean the obvious bubble we are seeing isn't a bubble.

> So how was I able to make money

That's called "anecodtatal gambling success" and a lot of smart people suffer from this fallacy.

Applying formal causal inference procedures such as propensity score matching, doubly robust estimators, causal forests, and targeted maximum likelihood estimation (TMLE) to test whether standard fundamental variables like P/E, P/B, EV/EBITDA, ROE, ROA, gross profitability, or free cash flow yield causally influence forward equity returns consistently shows that these metrics exhibit negligible average treatment effects once confounders and colliders are controlled for.

In other words, across modern causal inference frameworks, the estimated causal impact of common fundamental signals on subsequent returns is statistically indistinguishable from zero, which indicates that most traditional fundamentals have no meaningful predictive or causal power for future price performance. There's no alternative opinion to be had. You're just wrong. You can continue gambling if you like, but you're not doing any kind of predictive analysis.

Eugene Fama also believes the value of a Bitcoin will be zero (as do I). So he is implicitly calling Bitcoin a bubble.

He does this because he understands how money works and how Bitcoin works.

Yes but his point is it's impossible to detect in realtime. Timing.

You can detect that you're in a bubble, but there's no way to know how long it will keep going before it bursts.

Well yes, we're in a permanent bubble with fractional reserve banking and central planning. Mises institute spends a lot of resources explaining how that works to the public, etc. That's not helpful insight though in terms of taking informed action e.g. as an investor.

Why do you think he is right? Lots of people detected previous bubbles. The problem is that the same people also missed or called out bubbles that never happened.

The general term bubble doesn’t help.

It’s reasonably obvious that there are some very high expectations baked in to certain equity valuations.

Leave it to the reader to take a view on whether it makes sense.

Doesn’t that make it more irrational?

There was, at least towards the end. FED chair at the time described it as 'irrational exuberance'. Warren Buffett made an excellent speech in front of most Silicon Valley titans at the time - telling them that their wealth is about to be blown up.

This isn't rocket science - do anybody sane believe that OpenAI will spend what, 1.5 Trillion $ they project ? Quite a big chunck of Oracle, Nvidia and others projections are based on this 1.5 Trillion $. They are loosing money and their revenue is 1% of this figure.

Warnings today are mainstream and widely understood, unlike late‑90s dot-coms where Buffett was largely ignored. Buffett explicitly says he doesn't invest in complicated businesses, finances aside. Plus, core AI players are profitable and funding capex from real earnings, valuations are concentrated in a few mega-caps, revenues are real, and financing is healthier. So while parts of AI may be overvalued, it’s structurally very different from the 1999 bubble.

And is it really overvalued if AGI is achieved? Sounds like risk:reward profile is already priced in the gamble, and the valuation is appropriate....But I guess if you take it to the logical conclusion... if AGI is achieved, everyone will be out of a job, so scarcity-based economics, based on scarce labor input, itself will have to be redone. Wild speculation there.

"core AI players are profitable and funding capex from real earnings"

What ? Who's profitable except NVidia who is selling shovels (increasingly to itself) ?

Edit. Profitable on AI, if by profitable you mean from other sources then yes.

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