Magnificent 7 makes up 31% of SP500 !! WTF were you thinking, SP500?

If you were vol-guys you'd be thrilled to have a ready dispersion against SN in an index vol contract at 18 vol (currently).
 
I thought it was common knowledge....I am diversifying into small caps, energy, utilities, etc.

But I dont think it would matter if China invaded Taiwan while Biden is still in there.

It would be exestential for the markets. Definitely not priced into the VIX.
 
The weighting of the M7 is the only reason why you see these crazy S&P 500 Futures moves. This opens the door for easy manipulative vola-spikes...
 
schizo said:
In the aggregate, no one particular stock should be given more than 5% weight (and I think that's even too much). Otherwise, this can pose a systemic risk if things go south.
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I disagree, if only equal weight existed you would probably not like that.
What’s wrong with putting arbitrary business within another arbitrary (legal) entity? It doesn’t change economics in a whole (i would think)
 
Zwaen said:
I disagree, if only equal weight existed you would probably not like that.
What’s wrong with putting arbitrary business within another arbitrary (legal) entity? It doesn’t change economics in a whole (i would think)
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Well, as long as things are going smoothly, what's there to complain? But if the AI bubble bursts, this can have a catastrophic effect on the entire market. Those 7 companies, which effectively comprise 1/3 of the index, will drag down the entire economy down the drain.

And to see such a small number of companies wielding so much power over the market is unheard of. Not even during the heyday of the Nasdaq bubble was there so much concentration in just a few stocks. If we don't do anything, it's only a matter of time before this blows up in everyone's face.
 
It is not like the concentration is done yet though. We were probably at a low point yesterday. It will get more concentrated yet.
I think rotating out is going to be a bad trade right now.
2026 it might be the mag 3 or 4. We are going to still get better AI models and at some point we will figure out something economically useful AI models can do beyond youtube thumbnail generation.
My peak indicator is an AI model is released that there is real debate if it is conscious or can be considered AGI. I just believe the OpenAI hype masters have this trick of their sleeve and we just melt up with pull backs until that time comes.

engineering said:
Holy crap what a ridiculous concentration of risk.

I'm going to rotate more out of SP500 funds and more into SP500 "value" to cut my exposure to super high PE ratio unicorns.

I wonder how many people have 30% of their retirement funds concentrated in 7 stocks and don't even know it.
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punktrader said:
It is not like the concentration is done yet though. We were probably at a low point yesterday. It will get more concentrated yet.
I think rotating out is going to be a bad trade right now.
2026 it might be the mag 3 or 4. We are going to still get better AI models and at some point we will figure out something economically useful AI models can do beyond youtube thumbnail generation.
My peak indicator is an AI model is released that there is real debate if it is conscious or can be considered AGI. I just believe the OpenAI hype masters have this trick of their sleeve and we just melt up with pull backs until that time comes.
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The AI trade right now, in particular NVDA and maybe AMD, is not about the consumer, ie Youtube or search etc. It's about the behind the scenes stuff that it can do on the enterprise side reducing costs, which in time will result in higher margins and eps. NVDA is the anterior face of AI right now, the real payoff will be in many Fortune 500 companies over time. And that's why NVDA is selling all it can make.
 
Overnight said:
How would you know what I say? You've had me on /ignore block for years and years.

Oh, you've been fucking BUSTED!

Dumbass.
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C'mon, you should take that as a compliment. After all, you don't often get the honor of being compared to Mr. Schizo. :D
 
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