A few puts on SPY dated a year or two out?
Assuming you are the average person, and not a financial professional, using actual financial hedging instruments properly is unlikely, and far more likely to just increase risk and lower expected return.
A realistic way for an American citizen to reduce risk in the current market is to have a globally diversified portfolio that under-allocates to the US.
There are almost surely severe bumps ahead for the AI space and that will likely spill over into the broader market. But unless you’re retiring in the next few years don’t worry about it. You can’t time the ups and downs and the only proven strategy is to just keep investing in a broad indexed portfolio and just ride out. You’ll take a short term hit but also end up buying on the dip because you don’t stop investing.
(As for me, I'm just hedging my rhetorical front lawn.)
But that's not what they said?
>> I didn't get to participate in much of that
Never buy derivatives as a non institutional investor.
At the same time, one can make financial decisions based on risk rather than longterm expected returns.
For instance, I'm happy with fixed income yields rn.
What would scare me is losing a big chunk of my portfolio in a downturn, exactly when I'm also most likely to lose my job.
There are a lot of failure modes. The dot-com bubble looked obvious in 1997; it popped in 2000. Anyone shorting in '97-'98 was carried out on a stretcher before being vindicated. In fact 2000-2002 fell in three brutal legs over two years, and anyone who leveraged up after the first 25% leg was destroyed by the next two.
which target date fund exactly? You can increase risk/reward buy choosing a target date fund far in the future or you can reduce risk/reward by choosing a target date fund closer to the present. The point of those funds is to gradually reduce your risk as you get closer to your planned retirement date. I moved my 401k into a target date fund about +10 years from my planned retirement (I'm 50). So a little bit on the risk++ side but not much.
https://workplace.vanguard.com/investments/product-details/f...
You want to search for the chart at "Allocation to underlying funds (actual)"
The AI crash is about stock market indicator ratios matching those that preceded other major crashes. That's what got me spooked. I don't want to be heavily invested in those companies when/if something bad happens.
> The AI crash is about stock market indicator ratios matching those that preceded other major crashes.
The way to put faith in such indicators is not (only) by looking at prior crashes, but by forward testing them. Over the last decade, it's been common for me to hear a sentiment like yours: "Indicator X has always resulted in a serious downturn in the past, and we're in X territory now" - and no crash ensued. Over and over again.
Find me an indicator that someone back tested, and then also actually predicted a real crash (with zero false positives). The cost of even a single false positive can be huge. Ask the guys who pulled out (or sold their houses) when COVID struck.
Don't become the person who predicts 7 of the last 2 recessions.
Most ppl are better off KISSing and lowering risk by selling equity for fixed income.
What? Absolutely not.
However! If you don’t want to learn and want to get rich quick instead, stay away.
honestly, if you're >= 10 years away from needing that money (retirement or whatever) then the best hedge is to ignore the news and just keep contributing to your investment as always. I got caught up in a couple moments (tarif drama April before last was one) where i panicked and sold and then it only took a few months to get back to even meanwhile 18% of my capital gains were now due to the taxman. I wrote a check to the IRS for 10's of thousands for no reason except over reacting and ignoring every financial advisor's advice.
if you're going to need your investment money within 10 years then you need to get advice on how to start reducing risk (and therefore reward) because you don't have time to survive and repair from a crash.
#2: What I've done so far: Haven't bought stock in a year. Have moderate short positions on Palantir, SpaceX, and Tesla. Have big short positions in the most popular Quantum computing companies. (Scams IMO). I have sold most of my positions ("profit taking"?) in stocks which have gone up a lot in the past year. (Nvidia, Broadcom etc), and am no longer using margin; about 1/3 of my brokerage value is now "cash", generating ~3% interest.
Wouldn't it be wiser to get out of the market into fixed rate assets like government bonds?
I just hope the companies aren't considered too big to fail. Bailing them out would be a bad idea.
https://www.openmarketsinstitute.org/publications/no-bailout...
They will be. When the SHTF, you'll see Rubio in the room^H^H^H^H circus tent, sitting right next to Bessent, arguing that propping up OpenAI is as much a national security interest as bailing out GM was.
Most researchers have shown that attempting to play the market is likely to fail in the end. Set it and forget it. Ride the wave.
I dunno.
"The market can remain irrational longer than you can remain solvent"
A friend of mine and I go out to lunch every 3 months and talk about, among other things, investing. We've made a trope of it, calling out the people who are predicting an imminent market crash every time we have lunch.
I'm not saying that it doesn't look like it's going to crash, but I'll also say that there's also a very sizeable downside potential for getting out of the market.
You think the hedge funds selling SPY options don't have this priced in already? Of course, you can still make money on this bet, just like you can win money at a roulette table, but unless you think have some special insight that hedge/quant funds don't have, buying options should be negative EV.
I’d argue that it is very normal for hedging to be giving up expected value in return for a reduction in volatility of returns.
If you have a lot of exposure to the market already one could say not buying the option is more akin to roulette.
Of course not, but it is a hedge, is it not? What would be your preferred hedge in this scenario?
Much of their current debt fuelled expansion isn't singular to AI. The circular narrative ignores this.
Nvidia owns all the chairs, and they’re letting other companies pretend to for a while, but if it all falls apart the backstop to the collapse will be nvidia.
Frankly, their forays into dubious financial engineering and investments are expected at this point.
qemu definitely won't do that out of the box, so, yeah, VirtualBox is better than qemu there. But I bet there's a fancy-pants GUI out there that has an import wizard that will handle that for you.
[0] <https://www.virtualbox.org/manual/topics/storage.html#vdidet...>
Yet, even now, Fable is able to do the work of 4-5 engineers when used by a single senior engineer. Teams can and will shrink.
Look at all the production and advertising companies switching over to Seedance. I know ad firms bidding 1/4th their typical contract price (pharma, P&G, etc.) and winning contract after contract.
This isn't dotcom "dark fiber" before demand. The demand is here now, big legacy firms are just struggling with deploying it. Nimble small teams are making a killing.
It doesn't matter to investors if OpenAI or Anthropic can build AGI if a year later 10 competitors have similar models and eat into the revenue. OpenAI and Anthropic needs years, if not decades, of significant market dominance, post-enshitification, to justify their investment spend.
> Everyone in the tech and media world is dead set on this being a bubble.
is completely orthogonal to this:
> Yet, even now, Fable is able to do the work of 4-5 engineers when used by a single senior engineer.
The industry being in a bubble or not is irrelevant to the tech being good or bad. The dot-com bubble popped (and was a bubble) even while the tech was fit for purpose.
If that's true or not, it's a bit irrelevant. Maybe teams won't shrink because of Jevon's paradox, or maybe tech debt will catch up.
But it doesn't matter because the people calling this a bubble mostly believe that the companies burning money cannot have the return on investment needed. This can be for a variety of reasons, but my favourite one is just that open source AI models are good enough, cost a fraction of what the frontier ones do (with predictable costs), can be fine tuned, and can be relied upon (no orange tweet banning your acces to the model you've been using). So for me OpenAI and Anthropic will really struggle to merit their valuations.
And then companies like Oracle are just a dumpster on fire. GPU hosting is a commodity business; expensive one, for sure, but there's no way in hell they'll make actual returns on the money burned with zero moat. And things are even worse when you consider the political involvement of the CEO and his nepo baby, which can easily burn good will.