Friday Charts: Then and Now - Decoding Market Bubbles in Real Time

Bubbles don't burst—they transform. Today's charts reveal patterns that echo history while rewriting the rules entirely.

Pattern Recognition: Echoes Across Eras

Market cycles keep repeating, yet each iteration introduces new variables that defy traditional analysis. The same euphoria, different assets.

Digital Acceleration: Compressed Timelines

What took years now unfolds in months. Technology accelerates everything—including how quickly markets can reach extremes and correct.

Retail Revolution: Democratized Speculation

Everyone's a trader now. Accessible platforms and social media create feedback loops that amplify moves in both directions.

Institutional Adoption: The Double-Edged Sword

Big money brings stability—until it doesn't. When institutions pile in, they bring liquidity and volatility in equal measure.

Regulatory Reality: Watching While Moving

Regulators always play catch-up. They're still writing rules for last cycle's innovations while new ones emerge daily.

Remember: the smart money profits from bubbles—the rest just complain about them afterward while waiting for the next one.

John Authers notes that the run-up in Palantir dwarfs even the historic Cisco MOVE in 1999. Appropriately, Cisco is finally approaching its all-time highs from 2000, thanks to a booming AI business. 

The data center boom:

The US will soon be spending more on data centers than it does on office buildings.

Back to school:

Ben Carlson notes that a steep drop in OpenAI usage coincided with the end of the school year. Investors will have to hope that AI finds a better use case than students outsourcing their homework.

The US is exporting government debt and AI investments:

Brad Setser explains that the AI bubble is funding the US’s current account deficit. The blue area above is thought to be mostly investment flows into US equities. The green area is mostly government debt.

Generation degen:

This fun chart from BofA (via @MikeZaccardi) suggests millennials are driving the surge in trading volumes on US stock exchanges.

Someone is buying all the debt, too:

Despite all the hand-wringing over unsustainable government deficits, investors are pouring more money into bond funds than ever before.

The market is ignoring the indicators:

The Conference Board’s Index of Leading Economic Indicators (in blue) has turned sharply lower. But stocks (in red) have continued to go higher.

The long view:

It’s always tempting to try to time the next investing bubble, but here’s a reminder of the opportunity cost: Adjusted for inflation, the S&P 500 is up 5,462% over the past five decades.

Past performance is no guarantee of future performance, of course, and the AI investment bubble may well be due to pop.

But Alan Turing might advise you to let yourself be surprised.

Have a great weekend, naturally intelligent readers.

• The Breakdown: Decoding crypto and the markets. Daily.
• 0xResearch: Alpha in your inbox. Think like an analyst.
• Empire: Crypto news and analysis to start your day.
• Forward Guidance: The intersection of crypto, macro and policy.
• The Drop: Apps, games, memes and more.
• Lightspeed: All things Solana.
• Supply Shock: Bitcoin, bitcoin, bitcoin.