Billionaire investor Howard Marks is warning about a 15 trillion dollar storm that is brewing in the stock market. Marks is the co-founder of Oaktree capital management, one of the most highly respected investment firms in the world. You see, Marks made his career out of being willing to go against the crowd. As legendary investor Warren Buffett puts it, “Be fearful when others are greedy and be greedy when others are fearful”. Well, as you are about to hear, Howard Marks believes we are likely in one of those periods where it could save you a lot of money and financial pain to be fearful about what is happening in the stock market. Particularly, with the so called Magnificent 7 stocks.
Throughout history, bubbles have often formed due to excitement about new technology. The stock market bubble of 1929 saw technology stocks of the day rise dramatically. Back then, an example of that new technology was the advent of the radio. Oh boy is it crazy how things change! From 1921 to 1929, Radio Corp of America, or RCA for short, saw its stock increase from $1 a share to $573 a share as investors got excited about how radios would transform society. The radio did in fact go on to change the lives of people across the world. However, that did not protect people who bought Radio Corp of America stock from losing a lot of money. RCA stock went on to fall by more than 95% as the bubble finally burst.
There was also the dot com bubble of the late 1990s. Here, investors and speculators were excited with how the internet would become an integral part of people's daily lives. The excitement was so high that even companies with little to no revenue saw their valuations skyrocket into the billions of dollars. Companies like Pets.com, Webvan, and Boo.com saw their stock prices skyrocket. Companies that were once worth billions, on paper of course, became completely worthless just a few years later. I think you know where I’m going with this.
Mark Twain famously said “History Doesn't Repeat Itself, but It Often Rhymes”. Now, in the year 2024, the technology that has been getting investors excited is Artificial Intelligence. Similar to other technological innovations, Artificial Intelligence has the potential to fundamentally alter society. This enthusiasm has been concentrated in a group of companies that have come to be known as the Magnificent Seven.
