The Data Says Crash… I’m Not Convinced

本站添加: 2026-05-22

[00:00:00]J.P. Morgan CEO Jamie Dimon has said that the AI bubble will not burst and in fact the spending boom on artificial intelligence will turn out just fine.

[00:00:09]However, are we going to see a crash like we haven't seen since the 1999 dot com bubble? A lot of indicators are predicting that that could be a possibility. A lot of analysts are predicting that that could be a possibility. They are predicting that we could be facing into the sort of crash that is generational. We're talking 40 50% that could last a number of years.

[00:00:29]Want to look over a number of different tools and charts to try and understand whether that's going to be the case. And I'm also going to give you my view on what I think's going to happen as well.

[00:00:38]First, I want to tell you about this early because it's an unbelievable offer and there is limited availability. XTB is offering a free share of Nvidia with £144. All you need to do is use the link in my bio and promo code Neil NVD. You then need to make sure you deposit a minimum of £200 within 7 days, but it is extremely limited availability on this and because the offer is so good, I don't think it's going to hang around very long. It is of course up to you.

[00:01:08]You can keep it and buy more or you can sell it and buy something else. The choice is yours. Obviously, XTB have got a stocks and shares ISA which you can use to take advantage of and make sure that you're not paying any unnecessary tax on the gains that you make. There's a link in the description to take advantage of this and make sure you use that promo code Neil NVD. I'll pin a comment below when this deal has run out because I know it's not going to last long. So, there are a number of different metrics in place that are actually predicting that we are way above and beyond expecting a crash as a result of the AI boom that we're seeing and it could be just around the corner.

[00:01:40]These indicators which we'll go over are saying that we are in very similar territory to 1999. The first one that I want to point out is the Buffett indicator. This at one point was considered a really valuable tool to understand how over or under valued the market is predominantly around the S&P 500 and that's what we're talking about here in reality cuz it is led The gains we're seeing globally are heavily led by AI, and the biggest AI companies in the world are in the US. It is quite simply the total value of the stock market, specifically the S&P 500, divided by the GDP of the US, the gross domestic product, and then times by 100 in order to give it a nice round number. To give some context to it, if the number was coming out below 75%, we are looking at an undervalued market. 75% to 100% equals fair value. 100% starts to look expensive. 120% to 150% overvalued, and 150% plus very stretched historical highs, dangerous territory.

[00:02:39]So, looking at this indicator alone, we are above 220%. And as you saw on the chart, that is the highest that the Buffett Indicator has ever been. Now, if you relied on this metric alone, you looked at no other analysis, and you were really focused on trying to work out if the market was overvalued, this would scare the bejesus out of you. And you'd probably be selling out as soon as you possibly could. However, there are a couple of issues with it. First issue is the indicator compares US businesses to US GDP, but most of these US businesses are global and make just as much money, if not more, from outside of the US than they do inside of the US. So, whilst this might have been relevant 30, 40, 50 years ago, when the majority of the income from US businesses was made in the US, at that point it would be more relevant. But, it is less relevant because how can you compare the two?

[00:03:26]Global income from US businesses divided by US GDP starts to make less sense. And no wonder it is so high as a result of that. Buffett himself has even said that this indicator is somewhat dated and not necessarily a tool that should be used in isolation to determine what you're going to be doing. Now, Buffett, of course, also always says, "Just keep buying the S&P 500, whatever's going on." And people are always saying, "Well, Buffett at the moment is sitting on billions and billions of pounds worth of cash. Well, he's in a very different circumstance than than you are. And he's not necessarily advocating that that's the right thing to do. He's running one of the biggest funds in the entire world. He's also 99 years old. So, his circumstances are very different to yours and I's. And people use that often as a defense as to why it's a bad time to invest. But they've been saying that for years, since I've been creating content on it anyway. My portfolio has done 19 20% per year since I started.

[00:04:17]So, if I'd have listened to that 6 years ago, I wouldn't have taken advantage of those gains. So, another metric that a lot of people look at is the Shiller CAPE ratio. So, this is typically more reliable, isn't it? Well, let's find out. So, the Shiller CAPE ratio is a market price divided by 10 years of earnings. The value of the market divided by 10 years of earning. It's adjusted for inflation. And the idea is to smooth out these earnings, to smooth out the volatility a little bit. And this is what it looks like now. And I've highlighted one specific time in the past, as you can see. On the far right hand side, that's where we are now, 43.

[00:04:50]And there is only one ever time since the dawn of markets that this ratio has been higher. When was it? 1999. So, once again, this is catastrophic and surely we're going to see a crash. Well, this metric has also added issues. First of all, it's very slow to adapt to changing market conditions. Because it's looking 10 years into the past, it doesn't necessarily reflect where we are right now. The idea was it to smooth things over, but that doesn't necessarily reflect where we are in any given day.

[00:05:16]It's described as being very conservative cuz its accounting methods have not kept up with the way that the world is now. And this can skew the numbers to make them look worse than they are. Of course, through its very nature, it looks back 10 years into the past. So, it is looking into the past.

[00:05:30]It's a very retrospective approach and it doesn't necessarily consider potential or even market sentiment at any given time. So, so far we've got two tools that are used to predict whether the market is overvalued or not. And both of them are saying, screaming to get the hell out because it's time, you know, for a crash. Let's have a look at things in a little bit more near it.

[00:05:51]Let's look at the returns of the S&P 500 just over the course of the last month, up nearly 8%. This is an amazing return.

[00:05:58]But where have these returns come from?

[00:06:00]So, let's just think about that for a minute. We can see here that 50% of the growth has come from just five companies, Alphabet, Nvidia, Amazon, Broadcom, and Apple. All of these are now very heavily invested into AI, putting billions into R&D, backing the continued growth of AI, and spending a fortune in order to try and take advantage of what they think is going to be the what has been described as the fourth industrial revolution. That's how significant some people believe where we are now is. So, of course therefore there is risk in terms of concentration.

[00:06:29]If one of these fails, that'll have an impact on pretty much everyone's portfolio that is in equities globally, globally, never mind in the US. However, most of these have had their earnings reports out recently, and the reason that we've seen the growth of 8% over the course of the last month is because these businesses are making money. They are making a lot of money. Don't forget, this is very different to the dot-com in terms of the fact that these businesses are making money.

[00:06:54]Right, back in 1999, you just needed to put dot-com in the title of your business, and the share value went through the roof as a result without any fundamentals being considered whatsoever. That is what was so dangerous about that time. These businesses, however, are making money.

[00:07:09]I've picked out a few other different ones that are not in the top five.

[00:07:12]SanDisk, for example, that's up nearly 4,000% in a year. 4,000% in a year. If you were to put £25,000 into SanDisk a year ago, you'd be a millionaire now. Now, of course, we all wish we'd done that, but it's a case of finding these businesses. It's not as easy as it looks. However, SanDisk has been around for years. It's not a new business. It's not just jumping on the bandwagon. It has been around for years, but it has done really well because of its approach to AI.

[00:07:40]Another one, Western Digital.

[00:07:43]1,000% up in a year. Another very heavy light heavily invested into AI business.

[00:07:48]Even Cisco, old Cisco from decades ago, is up 70% in the last year. Now, about a year ago I asked ChatGPT to give me five businesses that it thought would beat the S&P 500 over the course of the next 6 months. It was a series I did on TikTok. I did a few videos on it covering what it was picking, putting in, taking out, just to try and determine if it could if ChatGPT could beat the S&P 500. It was just gimmicky.

[00:08:11]It was just a bit of a trial. I only put about 50 quid into it. However, one of the businesses that it picked out was Micron Technologies. And this is how Micron Technologies has done over the last 12 months. I started this uh trial a year ago and Micron Technologies is now up 800%. This is not a behemoth business in the US. It is now. These returns are based on earnings from their approach to AI. And yes, of course, looking into the future, expected earnings. The whole market is built on what the expected returns of of the market in any given business is going to do going forward. So, that's the final important point for me in terms of why I am less worried. Now, you can you will find bulls and bears in equal weight on either side saying it's going to crash or it's going to continue to rise from here. There has been predictions that the S&P 500 is going to do slow single-digit growth over the course of the next years because it's so very highly overvalued. There are other people that are saying this is the fourth industrial revolution is going to revolutionize way in which we live and now is the best time to get into the market. I'm somewhere in between, in the middle. I don't anticipate that the market's going to crash like it did in 1999, but sure, we could see a correction. I could be completely wrong.

[00:09:20]The fundamental difference is that these businesses are making money and they weren't a lot of them weren't in 1999.

[00:09:26]There was irrational money going into the market to try and take advantage of something where people saw growth and thought they could just jump on it. Some of these businesses will fail. Some of these ones that have done 800% and 4,000% over the course of a year, they're not going to continue to do that. It's completely That's not going to happen. A much bigger issue to your portfolio, as I see it, is the stuff that people aren't talking about. That's what always typically crashes the market more than the stuff that people are talking about. So, if you're thinking about things like wars, pandemics, geopolitical issues, housing crises, these things come out of nowhere. No one predicts them. You know, Michael Burry predicted 2008, one person out of 8 billion, the financial crisis.

[00:10:02]Naturally, it stands to reason that one person out of 8 billion is going to predict the crash at any given time.

[00:10:06]But, the unknown occurrences that happen in the world are the biggest threat to your portfolio, as far as I can see it, rather than the things that everyone's talking about. So, my continued approach is going to be to continue to invest into the market. I am still in the S&P 500. I also still hold an old world as controversial as that might be. But, that has worked for me. These indicators are useful in their own right in certain circumstances, but I wouldn't use them blindly. You need to consider the whole picture, and the whole picture for me is that I have an anticipation that in my time horizon, which is decades, the market is going to continue to increase.