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Big City Dems Are Masters of Hiding Their True Selves

Mainstream Media will always shield their minions from ever hearing statements like this, but even if they didn’t, would it really matter? If it’s someone on “their side,” some justifiation or excuse will be found.

Do We Have Anything in History to Guide Us? 🤔

The current inflated valuations of AI stocks have both similarities and differences with the 2000 tech stock and 2007 housing bubbles. All three were fed by manic buying based on dubious assumptions. In 2007, the assumption was that housing prices could only go up, so it wasn’t a problem to give mortgages with little or no down payment. In the lead up to the 2000 tech bubble, we had an amazing new invention mania taking over — the Internet, similar to the AI craze nowadays. However, in the previous tech bubble, people were buying any companies remotely related to the Internet, even if they hadn’t seen a single dollar of profit, or even any sales. The current AI bubble is different, though, in that the companies at the center are indeed making money, and a lot of it! Almost all the valuation is concentrated in the so-called Magnificant 7 stocks, headed by the amazing Nvidia.

However, once again, it’s psychology driving the manic buying more than fundamentals. Artifical intelligence has massive potential, but companies haven’t really figured out how to make money from the tech yet. Nvidia is getting rich mainly by selling the hardware to do AI. A good analogy is the 1849 gold rush. Back then, very few miners ever found gold. The ones who really got rich were the ones selling shovels and pick axes. That’s basically what Nvidia is doing in AI. Unfortunately, it’s probably way too late to get onboard the Nvidia machine, as well as the rest of the Magnificent 7. And there are two problems now:

1) There’s a lot of dubious accounting for the way they record profits. As Burry describes, they do so much buying & selling from each other, and tech assets depreciate so quickly, that real profits are distorted. For me, it’s a red flag when I see tech companies have profits that are higher than operating cash flow, since much of their GAAP income should be reduced by depreciation/amortization costs. Picture this example: say we both have businesses selling cars. I sell you a car for $50,000. You sell me a different car for $50,000. Both of us now show a sales increase of $50k on our income statements, but the cash in our bank accounts is the same. Have either of us really earned any money? Maybe, but it’s all based on guesses & assumptions on the values of the cars exchanged.

2) A bigger problem is simply the law of big numbers. The Magnificant 7 already account for almost 40% of the U.S. stock market. Much of the pricing models assume they can grow income at 30, 40, or even 100 percent rates. Even at a modest 10 percent with current multiples, they’d be worth almost the entire stock market in 10 years. In other words, it’s mathematically impossible to fulfill these assumptions. There aren’t enough buyers available!

In truth, money has simply been taken out of the rest of the stock market and re-directed to these stocks. Energy, food, real estate, and other blue chip stocks have plummeted in value as that money has gone to the Magnificant 7 with the hope (i.e. craze) of what AI can do. At some point, the reckoning is coming. It doesn’t mean AI isn’t amazing or won’t be tranformative. Just like the Internet, AI tech could dramatically change the world. But like the 2000 and 2007 bubbles, a lot of carnage will happen before we move to a realistic model of valuations. It’s no reason to panic, though, if you’re diversified. Even if Nvidia value was suddenly cut in half, it would just mean that those trillions were going back into the long-neglected other investments.

Blog Link: https://educationdojo.com/study-break/2025/11/11-26-education-dojo-daily/#random_thoughts

Recommended movies: The Big Short and Margin Call.

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