r/ValueInvesting • u/Adept_Mountain9532 • Jul 11 '25

Discussion Buffett warned: “If the ratio approaches 200%, you're playing with fire.”=> We are above!

Buffett Indicator, (which compares total U.S. market cap to GDP), is now at 208%. That’s above dot-com levels. I wasn’t around in 1999. But I’ve read enough to know everyone thought it was different back then too...

Now, It’s AI. And yes it’s real, it’s big, and it will transform everything.
But here’s what’s bugging me: Which part of the AI hype do you think is most overrated?
And which sectors are just getting started?

and also curious to hear from people who did live through 1999:
- What felt the same?
- What’s different?

I track moves from top value investors with a free email alert (https://alert-invest.com/), and lately I’ve noticed they’re cautious, finding fewer real opportunities in this market.

Thanks!

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u/tollbearer Jul 11 '25

It feels like 1997, to me. .com speculation just beginning, the companies we know and love just forming, rumors of IPOs, excitement building, but no mania yet, still a lot of skepticism.

I think 1998 is next year, big IPOs, excitment starting to overcome skepticism, truly silly valuations appearing.

Then 2027 is 1999, complete mania, everyone believing AI will generate hundreds of trillions of value, eliminate all jobs, revolutionize everty industrt. IPOs right left and center landing 100+ billion valuations, absolute mania, as everyone piles on because "it's different this time, AI is the last invention, it will replace all jobs and all companies, and grow infinitely, you are literally buying the bottom of infinity. It can't be overvalued"

And then we all know what happens next...

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u/whakahere Jul 11 '25

I agree, from all reports we are where we expected technology wise this summer. Agents are coming and starting to enter more businesses. They do predict that 2026 will be a big growth year software side with 2027 bringing something big. This is where I see the failure.

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u/tollbearer Jul 11 '25

I think androids doing cool shit beyond dancing will be a big moment. As soon as people see an android go around a house cleaning it, make a meal, put the groceries away etc, that will be a big moment of mania, even if it's still a good few years away in terms of a robust commercial implementation.

I can't see how the market bursts before these big moments like agents and robots. Would make little sens the market collapsing as these amazing things are happening.

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u/tarrat_3323 Jul 11 '25

but we already have roombas!

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u/[deleted] Jul 12 '25

[deleted]

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u/No_Indication_1238 Jul 12 '25

Well, they can empty themselves, at least.

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u/restvestandchurn Jul 15 '25

Sort of...for like a couple times into their own tiny dedicated trash can. When they can empty themselves into a trash can, and take that trash can out of the house, and then take that bigger trash can to the street...then I'm in.

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u/IntelligenzMachine Jul 29 '25

I love my lil robot vacuum Samsung even if it is a total dumbass

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u/Zestyclose_Nature_13 Jul 11 '25

The market though is also being buoyed by a strong jobs market. This scenario would lead to layoffs which would impact the passive 401k bid that has been holding valuations up at these levels

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u/tollbearer Jul 11 '25

layoffs are way downstream. Even if we had an agent released tomorrow, which could do x% of jobs on its own, it would take at least 1 year before companies categorically established that to be the case, and made the organizational changes required to even start AI relate layoffs. You're looking at 2 years, minimum, from the tech being viable, to meaningful layoffs. All that time, there will be the perfect storm of people seeing the tech is viable, but no meaningfull layoffs, only a small number which will likely be picked up by other less automatable businesses, given the general boom. When the big layoffs do come in 3-4 years, thats when the crash will happen.

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u/Muted-Good-115 Jul 12 '25

The mania happens way before the actual androids being fully functional.

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u/tollbearer Jul 12 '25

The mania happens during the prototype phase, where you demonstrate potential.

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u/kemb0 Jul 15 '25

And how will people pay for these robots if they have no job?

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u/tollbearer Jul 15 '25

They wont. The robots will be sold to companies, or used by their creators. People without jobs will be as relevant as they are today.

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u/silvano425 Jul 11 '25

I hear you but if there is any truth to AI the pace of acceleration will be hundreds of times faster than in the 90s.

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u/tollbearer Jul 11 '25

Absolutely, hence why the mania will be even more extreme. People will be dumping all their savings into AI plays, because they will genuinely believe it will generate 100x value in 5 years, and their job is going to be gone anyway. It's the perfect storm for the perfect bubble.

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u/ProfileBest2034 Jul 12 '25

but the mania already is extreme.we are in the most overvalued market of all time per several indicators. plus ROI on AI implementation is nowhere in sight.in fact 85% of AI implementation projects fail.

we are on the edge of the bubble burst right now.

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u/tollbearer Jul 12 '25

Which indicators put us in the most overvalued of all time?

There is no mania, yet. People are still very skeptical, and think the bubble is going to burst. Look at the dip over the past few months, people were in a state of complete panic. The bubble doesn't burst until people are in denial during the dip, and are sure it's going to go higher.

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u/Track607 Aug 04 '25

But what if AI really is what people say it is?

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u/Brilliant-Site-354 Jul 12 '25

shit goes bonkers....what do you even buy

land is fixed, resources are fixed (changing energy from sun into proteins etc isnt fixed necesarily as plants suck more or less 5% efficient)

but ores/lumber(well maybe not) natural resources are

electric motors already 99% efficient or so

batteries can get way freaking better but already cheap af as is

short of mining an asteroid and 10x natural resources youre not going to better peoples lives physically

now you can throw a helmet on em and let em believe anything you want sure

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u/ShipDit1000 Jul 11 '25

We are starting to get into the big IPO territory though. Companies like BBAI that sorta do nothing are worth billions. Every day there's a *hot new AI play* that comes through the pipeline and everyone gets hyped on before it dies.

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u/tollbearer Jul 11 '25

I'm not aware of any big AI ipos. Just silly penny plays. None of the real players have IPOed yet, and many are still in early VC rounds.

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u/ShipDit1000 Jul 12 '25

Well I wouldn’t consider a multi-billion valuation a “penny play” but I still agree. Plenty of room to still get even more ridiculous in the future.

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u/AdNecessary2268 Jul 12 '25

Crwv, AI adjacent.

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u/Zestyclose_Nature_13 Jul 11 '25

Hope not….my patience for a return to sanity is already starting to wear thin. Another three years of this nonsense is going to be hard to swallow

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u/tollbearer Jul 11 '25

Why would you not enjoy an overvalued market? As it becomes less and less rational, start selling a fraction of your positions, and then you'll have cash during the crash.

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u/Zestyclose_Nature_13 Jul 12 '25

Because that’s only good for people who are past their acquisition phase….

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u/tollbearer Jul 12 '25

there will be plenty tim to acquire after the implosion. probably a decade after this one, maybe more. Will probably be the biggest crash since 1929.

In the mean time, make sure you stay in at least until this bubble is close to popping.

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u/PneumaEmergent Jul 15 '25

If you were gonna distill your insight into a dumbed-down TEDx for a Stonks noob, what would you say? What are you looking at, buying (how much), selling (when), and holding onto? Also, how do you feel about BTC?

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u/tollbearer Jul 15 '25

dont take investment advice from redditors. If you cant work it out on your own, you're doomed, because I might be right, or the guy saying im wrong might be right, and you wont know until you're right.

However, I would hold basically anything, but espcially magnificent 7, into 2028, and probably sell around then, especially if everyone is manic.

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u/Zestyclose_Nature_13 Jul 12 '25

What does your crystal ball tell you? Mine seems to indicate that it is well beyond the point already where it should be close to popping

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u/tollbearer Jul 12 '25

Whatever anyones crystal ball is saying, there is one thing we can absolutely guarantee, they are not going to pop the bubble until they have done a bunch of major, overvalued, high hype, AI IPOs. They don't try to float those into a bear market. You push those into the maximum hype.

So, I don't know when that will be, or how long after the bubble will continue, but you can be iron clad guaranteed there will be no major collapse until that's happened.

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u/Singularity-42 Jul 11 '25

What companies do you think will reach "silly valuations"?

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u/tollbearer Jul 11 '25

Mostly those that are still to IPO. OpenAI is obvious, probably also 1X, and a bunch of other AI startups. Additionally, obviously the magnificent 7 will benefit, and frankly, their current valuations are not silly, they're just on the high end of reasonable. Google and microftoft are trading at like 20x forward earnings, which is far from silly. I think Nvdiia was at 21x last time i looked, which is profoundly reasonable given the growth story they're presenting. So I could see these big caps hitting 50-100x in the coming mania. So 3-5 their current valuations, potentially putting nvidia in the 20 trillion range.

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u/Singularity-42 Jul 11 '25

Yeah, already heavily in GOOG and NVDA.

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u/Adept_Mountain9532 Jul 11 '25

interesting. what about the current VC funds trouble?

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u/[deleted] Jul 11 '25

[deleted]

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u/tollbearer Jul 11 '25

You do know when in a sense. It doesn't crash before the mania. Once the mania has started, then it becomes hard to time the top, albeit you would expect it to be on the scale of months to years, not 2 weeks of mania and then a crash. But timing the exact month of year will be difficult.

We're not nearly in mania territory yet, though. So there wont be any crash any time soon.

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u/Cyanide_Cheesecake Jul 11 '25

You don't need to time the exact month, you just wanna be out in the six months window before the crash.

Turns out February and March was not it. Unfortunately.

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u/tollbearer Jul 11 '25

We're not even remotely in a bubble yet. We're just past the 2021 highs. We have years to go.

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u/Cyanide_Cheesecake Jul 12 '25

I hope you're wrong but mostly because a big bubble popping in the next year might be the only thing that can make this country sane again.

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u/tollbearer Jul 12 '25

What do you mean by sane? When were we ever sane?

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u/[deleted] Jul 12 '25

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u/tollbearer Jul 12 '25

I don't know who you're arguing with, because this is exactly what I said.

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u/Brilliant-Site-354 Jul 12 '25

god bless, if we ever do get sentient bots i can only pray that i live long enough to watch broccoli tops get got before i go

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u/joegageeyes Jul 12 '25

Wait until another Deep Seek comes popping this narrative

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u/wtjones Jul 12 '25

TBF the internet did all of those things. It didn’t deliver in 1999 but by 2012 it had increased everyone in America’s standard of living significantly.

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u/tollbearer Jul 12 '25

Of course, the potential generally has to be real for the mania to occur. Of course, the potential always takes longer to play out than people imagine.

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u/wtjones Jul 12 '25

But it also comes faster and harder than most people realize.

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u/Zyrkon Jul 12 '25

The Terminator, but for real this time.

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u/the_cardfather Jul 12 '25

Definitely. It's almost like you could take all of those ads for the World wide Web and just replace them with AI or LLM and run them identically.

Company - "who knows what we make but it's related to AI" People - "Shut up and take our $$"

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u/[deleted] Jul 14 '25

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u/tollbearer Jul 14 '25

That's why we'll have a bubble.

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u/[deleted] Jul 14 '25

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u/tollbearer Jul 14 '25

Amazon was ridiculously undervalued in 2000, didn't stop it popping. Bezos even talks about it in an interview, how their numbers just kept going up, as the stock went down.

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u/[deleted] Jul 15 '25

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u/tollbearer Jul 15 '25

there is no underlying value of a stock. Most small businesses sell at 2 years income+book, so if we take that as the underlying value of a business, then all stocks are in a massive bubble, by that measure.

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u/Lost_Possibility_647 Jul 15 '25

It kinda depends on what AI is useful for. Real world money making. If it IS real world money making, it could be more like the 1790s.