TOPIC • 6 CLAIMS
Bubbles
What separates a bubble from a bull market, and whether the distinction is usable in real time.
HOWARD MARKS/
He splits bubbles into two kinds, which is the memo’s main contribution: inflection bubbles, built on technology that ultimately delivers, versus mean-reversion bubbles, financial fads that leave nothing behind.
IS IT A BUBBLE? →HOWARD MARKS/
On the central valuation question he argues the historical comparison cuts the other way — today’s leaders trade cheaper than the 1999 leaders did.
- P/E ratios for Microsoft, Cisco and Oracle in 1998-2000 were much higher than current ratios for Nvidia, Microsoft, Alphabet, Amazon and Meta
HOWARD MARKS/
His concern is located in the financing of the buildout rather than in the equity multiples.
- roughly $5 trillion of data center buildout
- against about $350 billion held collectively by Microsoft, Alphabet, Amazon, Meta and Oracle
HOWARD MARKS/
He cites private-market pricing as the clearer symptom of excess.
- Thinking Machines raised $2 billion at a $10 billion valuation with no released product, later valued at $50 billion
HOWARD MARKS/
He notes how narrow the market’s dependence on one theme has become.
- AI stocks accounted for 75% of S&P 500 gains, 80% of profits, 90% of capex
HOWARD MARKS/
He grounds the downside in what actually happened to earlier inflection bubbles, where the technology survived and the shareholders did not.
- RCA lost 97% after 1929
- aviation stocks fell 96% by 1932
Claims are restated; figures are the authors' own. Each links to the document it came from, which in turn links to the original in full.