I'd say the stock market bubble of 1929 was the worst. The magnitude of the fallout can be measured by the fact that the USD experienced 3 years of severe deflation following, with many banks failing and unemployment peaking around 25% in 1933Do you view the current AI boom as mainly (a) a normal hype cycle, (b) a classic bubble, or (c) something like dot-com: real tech + lots of busted valuations? And if we do get an AI/mega-cap unwind, do you think it will mostly be a valuation reset inside US large-cap growth, or a broader market event? One's view of this could promt one to change portfolio allocation. Here's an article that gave me pause:
https://www.wired.com/story/ai-bubble-will-burst/
Usually when we experience bubbles, they are either technological or financial. The dotcom bubble was technological and produced mild economic turbulence. The mortgage bubble was financial and caused enormous turbulence.
The bubble of 1929 was one that combined both aspects of technological and financial into the perfect storm for a calamitous fallout. People got too excited about cars, radio and utility companies. Banks got too saucy with lending standards, encouraging stock market investors to take on up to 10:1 leverage without the ability to issue a margin call in a timely manner.
As for today, the AI bubble is real. Investors have gotten too excited and the tech companies have entertained them with extreme capex spending on LLMs, chip design and data center buildout. Obviously they can't all win in those 3 areas. The only question now is how saucy banks have become with lending standards. Enough to call it a financial bubble as well?
Maybe there's a hidden financial bubble elsewhere, like a student loan one as degrees are becoming more useless while college tuition keeps rising. Maybe it's all this BNPL junk from klarna and friends that people are engaging in. Financial bubbles are incredibly difficult to spot. Only hedge against those are long dated US treasuries.... Unless ofc you have a bubble in the USD itself from a Breton Woods agreement artificially pegging the value to gold
Statistics: Posted by Stacked_Tendies — Sun Dec 21, 2025 6:15 am — Replies 26 — Views 2240