Wallstreet Is Running 100% on Vibez
I recently discovered a great writer named Kyla Scanlon. She also makes a lot of video content, but I don’t go on Instagram so I follow her ideas mostly through her newsletter.
One of the concepts that Kyla speaks about is Vibez. This is a fun way of saying that the stock market is not based on fundamentals, but rather, the markets are 100% dependent on emotional sentiment and outlooks.
You know … vibez. 💃🎊
Vibez in AI
The vibe session was most noticeable in the AI industry. For instance, NVIDIA Corps stock trading in relation to its real revenues is absolutely off the charts. You can see in the chart below, that the blue line (revenues) has hardly increased, whereas it’s stock price has gone parabolic.
To be clear, the revenues for NVIDIA Corp are actually quite remarkable. It’s an amazing company that is well managed and is taking advantage of a hot market. The outlier is the distance between the revenues and the stock price. The chart below shows revenue growth while the chart above shows the correlation between the two. It’s staggaring.
The stock price of NVIDIA Corp, like the rest of the AI industry, is completely based on vibez.
People feel as though AI is a hot market, and they simply can’t help themselves. They need to get in on the action. If you’re a follower of economic and investing best practices, you would avoid this stock at all costs.
However, avoiding this trade is difficult because there is also a high likelihood that the vibe session will continue to inflate the stock, because the rest of us are also irrational and emotional.
Note* - The charts above stop at September of 2023, because that’s as far back as I could go with the data. I will look at the q1 and q2 reports of 2024 and report on that later this week, but I didn’t have time to dive in.
What’s remarkable, is that the reverse correlation between revenues and stock price has only increased in 2024.
Vibez and Trump
This next data point completely blew my mind.
The stock market is trading hand in hand with the prediction odds of whether or not Trump will get elected.
Wall street analysts, investors, and hedge fund managers have spent billions of dollars to try and convince us that they have an upper hand in the markets and that they are privy to information that regular folks like you and I don’t have access to.
However, the data says that these “investing elites” are just like everyone else. They are completely reliant on emotion.
The vibe session is real and the US economy is still booming because of it.
How To Ride The Vibe Waves
The best thing I have done as an investor is to accept the fact that I have no idea what I’m doing. I’m not that smart, and neither are you. The good news is that even the smart people don’t know what their doing, as is evidenced by the data sets (and many other examples) outlined above.
My best advice is simple. Bet on the U.S. economy.
Almost all of my equity investments are in U.S. based index funds. There’s no reason to think that the U.S. economy, and subsequently the U.S. stock market, will decline any time soon. In fact, all the metrics and circumstances tell me that the United States will continue to dominate over the course of the next 50 years.
Why?
Our demographics are decent and immigration brings more young people into our economy on a daily basis. (Yes, there is an undocumented problem but hopefully our government can stop arguing and come to a consensus for a reasonable solution).
We are onshoring manufacturing.
The U.S. dollar will continue to dominate, nothing else even comes close.
We are energy independent.
We are food independent.
We are net energy exporters.
Etc. etc. etc.
Below is a chart of my returns over the last decade by dollar cost averaging into index funds.
I’ve done zero research or market analysis. All I’ve done is dollar cost average into index funds which means I bet on America.
In Closing
Contrary to what you’ve been told, markets (and business) are not based on fundamentals, they are based on emotion. Although there is a lot of turmoil in America recently, the worldwide sentiment is that America is still the place to be, especially if you want to make money.
The vibe session is borderline ridiculous, that that doesn’t mean it’s not real.
Thanks for reading. Love you guys. Talk to you tomorrow.
Tim Stoddart
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