Well, I just had to go ahead and do it. It looks like the Shiller PE ratio is a good leading indicator for the Puru-index. I calculated how many times Puru has been mentioned in this thread (or previous parts) per quarter.
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I bet we’re going to see a major downturn in the fall, or by next spring at the latest.
The US is pumping insane amounts of money into the system again (actually, the whole world is), and companies are investing wildly. There is no end in sight for the conflict in Iran. We are seeing rising inflation almost everywhere now, and I believe this growth is somewhat lagging. I expect the figures in the fall to be much uglier.
In a sense, TINA (There Is No Alternative) applies—but still, the earnings of many companies driving the stock markets are far off in the distant future. As interest rates rise, acquiring data centers becomes increasingly expensive, especially since it’s unclear how much actual revenue can be extracted from them.
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I came to the conclusion today to move over 80% of my portfolio into cash. Between 6/2025 and 6/2026, the portfolio saw a 79% increase, which is quite a good result for an OMXH portfolio. From a fairly concentrated portfolio of 4 stocks, the following were sold today:
Neste €29
Kempower €14
Outokumpu €6
In my opinion, these companies are green value stocks that fit my investment philosophy well, which I picked up from the bottom of the ESG bubble at a good price. My investment strategy was to keep these in the portfolio for at least 10 years, but the market is showing too many red lights right now, and I believe I will be able to get back into these sold positions later at a reasonable price with lower market risk. Of course, the taxman will take his share in the meantime.
Main reasons for emptying the portfolio:
- What I consider to be the unjustifiably high valuation of AI companies and their increased weight in the S&P 500 index
- The concentrated and interconnected business environment of AI companies driven by external capital
- SpaceX’s irrational IPO with a 100 x P/S valuation multiple
- Generally poor quality of IPOs
- Jeff Bezos and Jensen Huang offloading their portfolios
- The AI bubble spilling over into the energy sector
Additionally, the risk of a broad-based decline is increased by:
- Record-high household stock allocation as a share of wealth
- Record amount of investment loans (margin debt)
- Growth in trading volumes
- Record number of option and derivative trades
- Shiller PE at near-record levels
- Low level of the VIX index - the calm before the storm
- Rising oil prices and the risk of inflation and interest rates increasing
- I value the opinions of few analysts or doomsayers, but I listen closely to Michael Burry, and he has been on a cautionary path for some time now
All these listed factors indicate market overheating. I wouldn’t consider it impossible for the S&P 500 at 7,600 or OMXH at 14,600 to remain the peaks of this cycle. Today’s unjustified, broad, and sharp price drop, which was apparently triggered by a small and not even very negative news item regarding Broadcom’s earnings, was the final straw for me. The mania could certainly still grow from here, but I prefer to watch from the sidelines.
The stocks I removed from my portfolio have not been AI-driven, but I fear that a crash will spread broadly across the entire stock market. An additional motivator for the radical clearing was the portfolio’s increased imbalance and running out of cash. Now is a good time to retreat into the rabbit hole for the summer, sleep well at night, enjoy a mojito, help fix the national economy with capital gains tax, and re-enter the market with a new strategy when the VIX breaks the 30-point mark next time.
“Sell in May and go away” .. a couple of days late.
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To put it politely, this is a distorted truth.
Yes, he sold about $900 million worth of Nvidia last year.
Is the portfolio empty? No, his Nvidia holdings are still worth approximately $185 billion. The sales were part of a pre-planned trading program and represented about 0.5% of his Nvidia ownership.
So, the portfolio is still very much full of shares.
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Adding my own bearish take to the mix. I am still involved with over 100% stock weight, and increasing cash is only at the consideration stage.
In my view, the AI boom contains elements of a reflexive bubble as described by George Soros.
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A prevailing trend: large language models (LLMs) are a useful new technology.
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A misconception regarding the trend: large language models are a highly profitable business.
Hyperscalers are investing in AI infrastructure because of the points mentioned above. These cash flows inflate the earnings and valuations of infrastructure companies, which is erroneously seen as confirming the misconception in point 2. This increases hype and draws capital into the sector, enabling even larger investments, and the cycle continues. Soros would say that investors’ “cognitive function” is distorted.
Furthermore, hyperscalers are, for example, recycling their cash flows through AI labs (Anthropic, OpenAI) via equity investments back into their own cloud services, and this earnings growth partly proves to investors that the investments are profitable. AI hardware firms like Nvidia practice the same recycling with their own customers.
This kind of self-reinforcing reflexive feedback dynamic creates a strong uptrend that is not worth betting against prematurely. Eventually, however, expectations and reality diverge too far, and a crash follows when the market is forced to acknowledge its mistake.
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To put it nicely, this is a distorted truth.
I was indeed a victim of a Forbes clickbait headline here, but if this is the only point on that list that missed the mark, I don’t regret the decision to sell just yet. I still wouldn’t take a billion-dollar trim as a bullish sign, but you can’t give it too much weight either.
Personally, I can’t find many positive things in the current market right now, but it would be nice to hear views on what factors could still sustain this trend.
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The thread certainly turned bearish quickly. 
The AI hype trade, or whatever you want to call it, is admittedly generously and quite optimistically priced (and if the multiples don’t look bubbly, consider whether the earnings are sustainable).
And of course, the biggest AI companies are also the largest firms in the indices: from NVIDIA to Micron, the TOP 10 companies in the MSCI World index are all part of the AI trade.
But around this theme, there are plenty of stocks that have mostly been stagnating (mörniä) and forgotten in recent years.
A few examples, not recommendations!
I don’t know if this is a good investment, but for example, Tractor Supply—which used to be raved about in quality investing circles—is trading at a P/E of 14x.
Autozone 21x.
Berkshire isn’t cheap, but it’s not expensive either with a P/B of 1.4x…
Etc.
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While the AI boom captures all the attention, the distress in Private Credit continues.
Now, even the world’s largest asset manager is seeing redemption requests from clients in its flagship fund:
I previously made a “Vartti” (Quarter) segment about the industry’s problems:
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To top it all off, the housing market is about to take off right now:
Säästöpankki Helsinki also announced on Wednesday that May was clearly busier for mortgage applications compared to the beginning of the year. In Helsinki, the number of applications grew by 25 percent in May compared to the average for the beginning of the year.
“This may well signal a pickup in the housing market in the capital region,” says Tommi Grönlund, Business Director of Säästöpankki Helsinki, in the bank’s press release.
Nordea’s Pajala considers it a good sign that house prices rose in April compared to the previous month, even though prices still decreased compared to a year ago.
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4 posts were merged into a single thread: Housing valuation levels
Of course a correction will come. Sooner or later, but sitting on the sidelines usually eats up your returns. When the sentiment turns, when will those sitting out return to buy? In your list, you’ve cherry-picked the points that support your ultra-bearish narrative. Compared to the Dotcom bubble, AI hype companies have more substance behind them, and only a fraction of humanity is currently using AI—which will be significantly better and more productive just a year from now. The S&P 500 dropping below 3700 points in the modern world would require much more than just earnings or growth misses from the MAG7 or AI hype companies.
Good luck with your market timing attempt, though. I sincerely hope you succeed in it!
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When the VIX rises above 30 points, it’s usually a good time to buy. There is a high probability that this will happen before the year ends.
In times of turbulence, it is easier to assess the systemic effects of the bubble, such as Private Credit and its related connections, as well as how central banks react to falling prices in an inflationary environment. Fear of stagflation can prevent the stimulation of the stock market.
I recognize that consumer staples etc. may well rise strongly even if AI companies come down, if market allocation and the investment narrative change.
Be that as it may, the risk/reward ratio is currently poor, and one has to pay a historically high price for realized returns.
It is easy to return to the market when it feels like the risk/reward ratio is returning to a satisfactory level.. returning to the market doesn’t require many clicks.
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With the Shiller P/E above 40, the market’s expected return is below 2.5%, assuming earnings power remains unchanged.
In my opinion, that is not an attractive return considering that government bonds offer significantly higher yields, and even bank deposit-guaranteed savings accounts reach that 2.5% level.
The P/E of the Helsinki Stock Exchange is lower than the S&P, but I don’t find the pricing in Helsinki to be a very attractive level compared to the risk-free rate either, especially since the share of growth companies in the Helsinki Stock Exchange is negligible.
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The global stock market crash began today. The problems with PE, or private equity funds, were just a beautiful prelude. Or perhaps not even a prelude, but a herald giving a mere faint sign of larger systemic problems.
The acute problem is, of course, the AI bubble. Behind it lies an perhaps even larger structural problem: the funds. Or not even individual funds, but the trend of “fundization” in the world’s stock markets.
Juurikki has the nerve to claim that the pricing mechanism of the global stock market is already badly distorted. People are cramming money into funds and ETFs that contain the exact same companies, which receive an extra injection every time folks pile more money into the funds. Sure, that drives up stock prices.
Fortunately, the same logic works in reverse. The AI bubble will burst within 1 to 16 months when internal billing within the industry collapses due to the breaking of weak links. Unfortunately, the “fundization” trend won’t recover from that yet; tougher measures are needed than the built-in “running head-first into a tree won’t end well” logic of the global market.
Funds, including ETFs, distort the stock market. Elon Musk laughs and cashes out a portion of your pension assets because he can. The current rules actually encourage him to do so, because whatever big enough thing you do, the funds will buy it—with your money, dear safety-seeking fund investor.
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https://finance.yahoo.com/markets/stocks/articles/spacex-other-mega-ipos-denied-223529619.html
The S&P 500 committee decided that there is no back door into the index after all. Good decision.
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If one is looking for undervalued sectors, I personally view most SaaS companies very optimistically at the moment. I don’t actually own them, though, because I like a couple of my current stock picks even more. But I could easily hold them with a heavy weighting. If the market crashes, software firms are unlikely to skyrocket, but they may well outperform cash. And if the rally continues, I’d wager they will still beat the index on a one-to-two-year horizon. However, I would skip cybersecurity companies due to their recent sharp run-up.
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Warnings of a stock market crash are starting to appear with increasing frequency. People are predicting it to happen anytime between tomorrow and within the next 5 years. No one knows exactly when it will occur, but everyone knows it’s inevitable.
Fortunately, time is on the investor’s side. Below is a humorous depiction of a person who managed to invest at the market peak multiple times. However, unlike many nervous investors, the person in the story never sold their holdings.
Disclaimer: I haven’t verified the accuracy of the information presented in the video.
In my own investment activities, I strive to avoid panicking and continue investing steadily in the way I see best. My investments consist mostly of index funds and Berkshire Hathaway Class B shares, which do not require constant monitoring.
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With this strategy, holding is the smartest move, assuming one avoids indexes that concentrate on a bubble sector.
Berkshire’s portfolio is widely diversified and has very little AI exposure. By the way, Berkshire’s record-breaking cash position is one sign of an overheated market:
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Nonfarm payrolls jumped a seasonally adjusted 172,000 for the period, down slightly from the upwardly revised 179,000 in April and far above the Dow Jones consensus estimate for 80,000. The unemployment rate held steady at 4.3%, as expected.
Employment data from the US came in better than expected.
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Heh, you never really get used to the fact that markets tank because of positive real economy data—all because of interest rate expectations—and that the reaction is instantaneous. It feels so counterintuitive.
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