Ed, your Econ 101 chart is correct, but your application of it is incomplete. You shifted the supply curve but did not re-draw the demand curve. You also skipped past the fact that the market has been retiring shares faster than it issues them. Add demand elasticity to the picture and the analysis gets a lot more complete, and a lot less alarming. Short-term market indigestion after these mega-IPOs, I do buy. The 'trillion in supply forces a crash' version, I do not buy.
The real insight of this article is that none of the players can afford the AI build-out, so they are passing the bill to retail (the public). The major stakeholders will cash out and diversify. The average Joe or working man should stay away, and only invest in the items that these firms need to buy to fulfill their childhood Sci-fi fantasies.
The “something’s got to give” line is right, but the interesting bit is in the plumbing. S&P Dow Jones just refused to fast-track any of the three into the index, sticking to its profitability rule, which Bloomberg reckons costs them about $27bn in forced passive buying.
So the index keepers are holding the line on quality at the same moment the insiders are rushing to sell. When the people who run the rules and the people selling the shares disagree this openly about whether these even belong in public hands yet, that is the part I would watch.
Wrote it up in more depth if anyone finds it useful.
I read articles providing investing advice with a very strong prior belief that they won't know any better than the market does, and this short article didn't do enough to convince me.
Even taking the ~ $1 trillion total valuation for granted, the US stock market is many tens of times larger. And the critical underlying assumption of every article like this is "I have important information that other people spending lots of time and money on this issue do not have," which usually articles like this don't spend much time on (because they can't justify it). I don't see that here either.
Bonds and speculative assets like gold or crypto can be sold to generate liquidity for those who want to join the party of AI IPOs. Why sell other tech shares, say semiconductors or software, when everything stands to appreciate thanks to so many “cyclical references” in tech? The tide will lift all boats IMHO.
The market has and always will be about sentiment more than anything else. We can argue multiples and EBITDA until we’re blue in the face. It doesn’t matter.
The metaphor of Chinese ghost cities is misleading since it is no longer true, yet it persists as a stubborn myth in the West. Most of these cities are vibrant and growing today. While China can and should be criticized, its urbanization plans are a great example of the long game.
Stock buybacks were over $1T in each of the last 2 years. Seems like a counter argument to this being too much money to absorb. I’m still not buying tho
Ed, your Econ 101 chart is correct, but your application of it is incomplete. You shifted the supply curve but did not re-draw the demand curve. You also skipped past the fact that the market has been retiring shares faster than it issues them. Add demand elasticity to the picture and the analysis gets a lot more complete, and a lot less alarming. Short-term market indigestion after these mega-IPOs, I do buy. The 'trillion in supply forces a crash' version, I do not buy.
Don't forget the huge amount of money that will be funneled out of index component stocks to move the IPO stocks into them.
Exactly
The real insight of this article is that none of the players can afford the AI build-out, so they are passing the bill to retail (the public). The major stakeholders will cash out and diversify. The average Joe or working man should stay away, and only invest in the items that these firms need to buy to fulfill their childhood Sci-fi fantasies.
Good Article. So much supply hitting the market. Will the money on the sidelines be eager to buy is the question.
These IPOs feel exciting and will get people out of bed. Money they had on the side that wasn’t factored into the demand curve before.
The “something’s got to give” line is right, but the interesting bit is in the plumbing. S&P Dow Jones just refused to fast-track any of the three into the index, sticking to its profitability rule, which Bloomberg reckons costs them about $27bn in forced passive buying.
So the index keepers are holding the line on quality at the same moment the insiders are rushing to sell. When the people who run the rules and the people selling the shares disagree this openly about whether these even belong in public hands yet, that is the part I would watch.
Wrote it up in more depth if anyone finds it useful.
@jackonomics what say you?
I read articles providing investing advice with a very strong prior belief that they won't know any better than the market does, and this short article didn't do enough to convince me.
Even taking the ~ $1 trillion total valuation for granted, the US stock market is many tens of times larger. And the critical underlying assumption of every article like this is "I have important information that other people spending lots of time and money on this issue do not have," which usually articles like this don't spend much time on (because they can't justify it). I don't see that here either.
Bonds and speculative assets like gold or crypto can be sold to generate liquidity for those who want to join the party of AI IPOs. Why sell other tech shares, say semiconductors or software, when everything stands to appreciate thanks to so many “cyclical references” in tech? The tide will lift all boats IMHO.
Is it waking or are there a handful of mega IPOs? Very different situations.
The market has and always will be about sentiment more than anything else. We can argue multiples and EBITDA until we’re blue in the face. It doesn’t matter.
The metaphor of Chinese ghost cities is misleading since it is no longer true, yet it persists as a stubborn myth in the West. Most of these cities are vibrant and growing today. While China can and should be criticized, its urbanization plans are a great example of the long game.
Reckoning day
Stock buybacks were over $1T in each of the last 2 years. Seems like a counter argument to this being too much money to absorb. I’m still not buying tho