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Comment by october8140 | Hacker News Reader

This thing is about to pop.

Have you moved your retirement account money out of stocks and index funds into something safer? I've actually been thinking about it...

I did. I moved to sovereign debt (not US), bonds and stocks of boring companies (staples, energy, medicine, ...) that have at least AA rating. Might miss out a few months of glamorous growth, but fuck that, it reached a point that just one company hiccuping will send the whole thing tumbling (IMHO).

Energy and healthcare has big AI exposure too. If it pops, you're going to be better off but not totally spared. I suppose that's probably a smart move though...

Fair enough and thank you for the comment.

I went with a bit of Roche, Novartis, ... So something that would at least cushion the fall with dividends and not being in the GenAI crossfire since they definitely use AI/ML (I got them through an ETF). Also almost all my assets are now either CHF or Euro denominated/hedged. I am also not comfortable with the dollar weakening and the next Fed head probably cutting rates again like Trump wishes

You’d be surprised. A lot of biotech is using genai not just traditional ml. And hiring for genai and LLM. They want to build their own chatbots, only trained on their own data and primary literature not reddit comments from armchair biologists.

Yeah, I figure. The thing is that I have a mix of bonds and stocks. Bonds should remain stable or even rally a bit if a crash happens. I mean, usually governments cut interest rates in time of crisis, so existing bonds should go up. It is definitely a hard time to invest as everything feels expensive

Valuations really aren't that crazy, but the incestuous deals between Nvidia, Oracle, and OpenAI might cause a decent correction. I'm not too worried about my portfolio personally. It'll be a small bump in the road and you're better off not trying to time the market.

> Valuations really aren't that crazy

Okay

What public company is massively overvalued in your opinion? Nvidia right now is trading at 44 P/E which is higher than the S&P average, sure, but not anything like the dotcom bubble with a median of 120x earnings.

The problem with this hype cycle has always been that the hyperscalers are pouring unbelievable amounts of capital into a technology that hasn't proven it can generate the revenues needed to justify that.

Nvidia might have an ok P/E right now, but the question is if the industry can sustain buying over $50B of GPUs every quarter(or that it even needs to).

This exactly. How sustainable are the current spends in the wake of needing ROI against these spends in the not too distant future? And who will be able to afford an upgrade cycle only 2-3 years from now given none of the capex spent will have hit positive ROI 2-3 years out.

Will everyone just accept negative ROI in the name of hype? Will scalers be able to meaningfully increase service prices without eroding customer interest?

These are all unanswered questions that a simple PE statement can't support.

Look at TSLA pe

Yes. Went from 100% S&P500 fund into a gold ETF and a high-dividend fund (SCHD). Still a good portion in S&P but gotta hedge some.

Similar. Went from near 100% VOO down to 25%, with about 50% in SCHD and the remaining 25% sitting on cash, for now.

Is high-dividend a signal that the equities are more value oriented than growth oriented?

Yep, the fund picks the equities with the highest dividend payout, therfore the most value-oriented. Those tend to be old blue chips which have stood the test of time and pay out well to their shareholders. Lockheed Martin, Merck, Coca Cola, etc. When the growth economy tanks, it's an oasis of relative stability. People love their cheap sugar water.

How do you handle the capital gains taxes? I’d love to be able to rebalance the massive S&P 500 portion of my portfolio into other things but it would trigger huge federal and state taxes. Was hoping to hold on to these until retirement at which point I’d slowly be selling it for living expenses and the income taxes would be much smaller.

I'm very curious about this as well. This is the main thing that has held me back from a meaningful rebalancing. Eating a huge tax bill to avoid a theoretical future loss of unknown size and duration while also losing out on potential gains if that loss ends up not materializing is a hard pill to swallow. I suppose this is probably why most long-term investment advice suggests not trying to time the market unless you have a very short time horizon. (Note: for me, I'm referring to funds in taxable brokerage accounts.)

I have a family member who once told me that their net worth was roughly halved in 2008. They probably recovered it if they stayed in the market after, but I don't know what they did.

I suppose the real question is whether you can weather the storm long enough for the market to recover. And beyond that, how cynical you are overall about everything taking completely before that can happen. I wonder a lot about that second one.

If you'd been DCAing a fixed amount monthly into stocks for 10 years prior to the 2007 peak, then during the crash continued doing so without selling, the total value of your portfolio would've matched its pre-cash peak in just 3 years and exceeded it significantly by the time the market itself recovered in ~5.5 years.

3 years is really not a long time. So I'd say it comes down to emotional fortitude and probability of staying employed. If your time horizon is longer than 3 years, the calculation of whether to sell should essentially come down to calculating your odds of keeping your job. I bet it's possible to build a robust mathematical model that recommends a decision given your best personal estimate of your layoff probability during a severe market crash.

You vastly overestimate the money a lot of people have. A lot of people will be destroyed by this.

I did this in my IRA and 401(k). No tax penalty or gains tax in doing that.

You pay taxes with the proceeds from the sale? You sell all the losers in your portfolio to offset what gain you can?

this is the spot i'm in too, i can move my 401k and IRAs around fine but ye'old brokerage account is a different story. Unless my losses are greater than the capital gains i'm going to pay then i'm better off just staying put. That brokerage account is dedicated to funding college for my two boys. I have enough now for about 6 years of undergrad. The bills start coming in 2 years, idk if that's enough time to recover from a dot-com level crash...

If you need the money in 2 years, I wouldn't leave it in the stock market. Find a money market or CD to avoid the gamble. You're going to get hit with capital gains taxes either now or in 2 years, so that shouldn't impact your decision.

My personal time frame is 4-5 years of emergency funds. You can adjust that for your own risk tolerance, but have a look at various past crashes to make an educated decision.

I'd only leave it invested if you don't actually need it, because college can be delayed or financed with student loans.

No for a few reasons. I'm not close to retiring, I already own a good deal of bonds, and moving money based on emotion defeats the purpose.

I rebalanced the same as I always have.

To anyone reading, don’t do this.

This is the ONE thing you aren’t supposed to do as a passive investor. A play like this will cause you to lose upside almost always, and some people never get back in and miss out on almost a lifetime of growth.

THE MARKETS ARE NOT RATIONAL.

My concern is shifting from maximizing upside to minimizing downside because I'm only about 10-12 years from retirement.

The laziest safe thing to do is put money into a target fund that is managed. So you could look for "Target 2040" and in theory, they change the asset mix as it approaches that date.

But that’s people, what do they know about 2040 that I don’t?

If I was 10 years away, I’d maybe look at bonds or GICs or is that too conservative?

Enough VXUS to minimize the impact of Mag 7 exuberance on my portfolio.

I'm not so sure VXUS will protect from the AI bubble popping since ~10% of its holdings are TSMC, ASML, Samsung, Tencent, Alibaba, and SK Hynix which are all way overvalued due to the AI bubble and will most likely crater when it becomes clear the LLM companies have no business and the data center lenders start calling in their debts.

Those companies had baseline demand before the AI bubble. They will have demand after.

Sure, they won't go to 0 but they will certainly go down once it becomes clear the LLM companies don't have money to pay for chips or RAM. That will cause VXUS to go down as well but much it goes down is anyone's guess.

Drawdown will be limited compared to the S&P500 or other indexes that weight the Mag 7 heavily. I'm unsure what your point is? It's impossible to predict the future, but it is trivial and straightforward to derisk against this current market environment ("AI bubble") with a basic level of capital market understanding.

Yep. And I've already moved it back. I think we can all see this is a bubble, but it has been for over a year now, and I cannot predict when it will pop.

Also, there aren't a ton of great options that are safer.

I thought about it. The bulk of my 401k money is in a growth fund that i found has something like 30% in the big tech companies.

Then again, I'm 20+ years from accessing it, so I figure I'm about 5 years out from moving more to S&P tracking and bonds. I am not a financial advisor.

The Market can stay irrational longer than you can stay solvent.

That's a terrible idea. Never ever do that. Never even think about what's in your retirement account unless you are actually about to retire.

Hopefully I'll soon be able to build a new high end gaming PC and not be forced to pay 1980s era prices for it.

I've been hearing "the bubble is about to burst" every day since 2011. Yeah there will be an eventual correction, maybe in a major way, but trying to time the market is and always will be a fool's errand. The rock bottom of the next hype cycle can be higher than the peak of the current one.

When retail is predicting a pop it’s time to buy.

When my friend told me not to put my hand in the fire, I knew it was time to stick it in and not pull it out, no matter what it cost me.

Not sure what your story has to do with the discussion at hand. On average people do not beat the market, the market can be irrational longer than you are solvent but also most people probably have not done any modeling and so these are really feelings and not real economic bets.

Your statement was deciding to do something based solely on the fact that someone else advised them not to do that. So I presented the same scenario with the same logical process.

It isn't valid. It's being a contrarian, and not the outgrowth of some logical process.

No my statement was the usual joke that it’s always best to do the opposite of the herd. Once everyone is buying beanie babies the market is probably getting saturated. With all these bubble comments on HN I think it’s very much the same.

Is there a bubble? Probably. Is it going to pop, probably not.

You know it's bad when even scam altman calls for regulations. They spend their entire lives telling you regulations are bad and taxation is theft but as soon as they need to drown the competition they lobby for more regulations

https://www.yahoo.com/news/articles/openai-chief-sam-altman-...

Rules for thee not for meeeeeee

Altman has been calling for it since 2023, lobbying world leaders meeting them to push on this Lol, were you under a rock or something?

> since 2023

Is this supposed to be ancient history already ?

But he's been doing that for years too.

This comment cannot be further from reality. Altman has always been a very loud advocate for AI regulation.

https://www.nytimes.com/2023/05/16/technology/openai-altman-...

Of course he has. Major incumbents want regulation that makes it harder for new comers

Except when that regulation actually has teeth, which is why he opposed California’s SB 1047. I agree with GP that Altman (and all the rest) want regulation insofar as it protects their moat but no further.

> Altman has always been a very loud advocate for AI regulation.

And then the EU said “OK, let’s regulate”, and Altman said “no, not like that!”

https://www.reuters.com/technology/openai-may-leave-eu-if-re...

Note the dates. The above article was posted merely a week after yours.

Altman only cares about regulations if they can benefit him, he doesn’t do it out of some sense of morality. To these tech bros, “regulation” means “codify into law whatever I’m doing, and disallow everything else so I don’t have competition.”

Using words like “Scam Altman” instantly reduces credibility of the author in my eyes. If you want to convince people of something, perhaps it’s better not to use childish methods.

No disrespect, just sharing my thoughts. I see “Elmo Musk” and “Orange Man” etc., and I immediately think this is not worth reading (regardless of my opinion of those persons).

> Using words like “Scam Altman” instantly reduces credibility of the author in my eyes.

He 100% deserves his title for Loopt alone. I don't have any credibility to being with, this is an anonymous wantrepreneur shitposting forum not the US congress. I know people lurking here love these sociopaths but come on...

How sad for you. Whenever I hear people proudly announcing how arbitrarily and illogically and performatively they decide what's worth reading, I don't think what you write is worth reading either.

I'm much better off reading diverse opinions and deciding what to believe based on what they actually say, instead of imposing petty rules and self-censoring what I read, and self-cultivating ignorance.

You'd be much better off, mentally healthier, and subjected to less propaganda if instead you ignored what "Scam Altman" and "Elmo Musk" and "Orange Man" write instead of what people who criticize them write, since they have such asymmetrically bigger platforms and pro-oligarchy biases than their critics, and they also regularly call people childish names themselves.

TL;DR: you're choosing to ignore the wrong people.

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