What we’re reading (11/7)
“The Week The AI Boom Got A Reality Check On Wall Street” (Wall Street Journal). “Investors’ confidence in the outlook for the economy and the artificial intelligence boom has powered stocks to record highs. Their faith is wavering. The tech-heavy Nasdaq Composite Index, long buoyed by excitement over AI, had its worst week since President Trump unveiled his ‘Liberation Day’ plans to impose tariffs on the rest of the world. Some of the biggest beneficiaries of that rally fell sharply amid concerns of overspending, and overpromising, on AI initiatives.”
“The Astonishing Bull Market Will End One Day. Are You Ready?” (New York Times). “Investors who stuck with the S&P 500 index after the dot-com crash were still hurting a decade later. The numbers are sobering. Those unfortunate enough to have bought S&P 500 index funds at the March 2000 peak were sitting on a loss of 8.3 percent, including dividends, a decade later, according to calculations I ran on FactSet…far worse has happened in the U.S. stock market, when you go back as far as the Great Depression of the 1920s and 1930s. Using inflation-adjusted data, Robert Shiller, a Nobel laureate in economics, found that it took 29 years to recover from the stock market crash of 1929.”
“AI Valuation Fears Grip Global Investors As Tech Bubble Concerns Grow” (CNBC). “Goldman Sachs CEO David Solomon warned this week of a “likely” 10-20% drawdown in equity markets at some point within the next two years, while the International Monetary Fund and the Bank of England have both sounded the alarm bells. Bank of England Governor Andrew Bailey highlighted the possibilities of an AI bubble in an interview with CNBC on Thursday, noting that the ‘very positive productivity contribution’ from technology companies could be offset by uncertainty around future earning streams in the sector. ‘We have to be very alert to these risks,’ Bailey said.”
“Legendary Investor Mark Mobius Says The AI Bubble Could Lead To A 40% Drop In Stocks, And Flags One Area Of The Market Investors Should Buy” (Business Insider). “‘When I look at a correction, I look at 30%, down 30%, 40%,’ Mobius speculated, though he said he believed in the long-term uptrend for the AI. ‘That will happen, but it will be short-lived.’”
“Does Momentum Exist In Prediction Markets? A Short Analysis” (No Dumb Ideas). “ In theory, a high liquidity market like the mayoral race (nearly $400 million in volume!) should arbitrage out big swings that diverge from the conventional wisdom of the traders. So people began asking the obvious question: does momentum exist in election prediction markets? After two days of learning the Polymarket API, I can definitively confirm the answer is: yes, but with some caveats.”
