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Weekly Finance Thread 2026-06-06

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BofA warns investors to take profits as 70% of the bank's bear market signals flash red

Seven of the bank's 10 bear market indicators have been triggered in recent months, strategists led by Savita Subramanian wrote in a recent client note. Five were triggered by April, and two more of those indicators flashed red in May.

What's your prediction on a drawdown? A lot of formal and informal indicators that I track seem to have been heading in that direction since last September or so, but it keeps not happening. I've spent the last couple of months trying to understand why, and so far my best answer is that the megacap companies that make up most of the market are able to use their cash reserves more effectively than I had thought they could.

If you think we will see a slump, what do you plan to do about it? I'm not changing much for now. I already invest in whole world funds with a value tilt for stocks, and I have a 10-20 year time horizon.

A lot of the market already did this move. It’s just been the indexes that are up and a handful of names driving the index. Many low valuations etc throughout the stock market.

Question is if we do get the index level correction and AI names go south do we also get big sell offs in everything else.

How does crypto fit into your investment strategy? Do you have a target allocation? Do you ignore it? Do you focus on Bitcoin, or others?

It’s hard for crypto to rally when AI stocks are more fun to trade right now. That’s killed crypto. Nobody looks at it now. But what’s the price of Sandisks?

I don't have much, but I have now only five figures of dogecoin (the coins, not their worth) that I've held for ten+ years due to retiring a PC.

I'm looking at investing some soon, since we should be hitting the low of the one-year crash before entering a four-year bull market. IANAFA, but my target for the low is between start of October and end of November, and that's enough to not really care if I hit the exact low and just consider the fall a good time to get bitcoin.

The drop below $60k had me wondering if this right now is the low.

I have no target allocation, because this is fun-money only, but the strategy is buy October 2026 and sell September 2029.

I have some small Bitcoin account which I DCA for a while. It's not really a part of my investment strategy, just a FOMO hedge. Staying away from shitcoins since I don't have the time or patience to play it properly.

I hold no crypto, unless it's buried deep in a fund that bought it since I last looked over their holdings.

To be frank, I always thought Bitcoin was a terrible idea. I probably lost a ton of potential money by not being speculative about it, but I don't buy into things unless I can see the utility. I had brief interest on Ethereum, but the choices by the maintainers left a bad taste in my mouth.

All I track is Bitcoin. I have less than $2k of it and my break even price is $68k. What I currently do is buy it using my credit card rewards every month (I got a Coin Base credit card so waives transaction fees [after yearly fee] but my other credit card gives better rewards so I use that one and transfer it). Part of me sees it as something besides stocks to buy against inflation, but the price is volatile and I've been told that the exchange I use isn't the safest. I look at it like at outside bet, but I think predicting its price is a fools errand. Like the current drop might be people reallocating at buy SpaceX or something. I used to have Ethereum, but after a few years I saw Bitcoin's path and had zero confidence in Ethereum to do the same. I consider everything else a $hitcoin.

There is a certain investment thesis that I see increasingly on LW / AI Twitter / adjacent spaces online. Let me summarize it:

  • If AI destroys the world, or someone uses it to, money doesn’t matter and probably even the most hardcore preppers are toast. There is no use preparing for this scenario other than maybe bringing forward some bucket list items if you’re a Yud level doomer.

  • If AI leads to some incredible abundant utopia with a FOOM / hard takeoff scenario, money won’t matter and we’ll all be trillionaire emperors of our respective limitlessly abundant space kingdoms and/or VR wirehead heavens. Maybe Elon Musk will become some overlord, but the average equity investor won’t know or care.

  • If things don’t change, and/or AI gets retrofitted onto the existing economy in a fake scenario to preserve social and economic status stratification and/or private ownership of property / means of production, people who own big tech / AI companies will be best off. Everyone else will either be a UBI peasant at best or Elysium / Manna underclass at worst.

If the realistic possibility space consists of solely these scenarios, the only logical investment strategy unless you’re retired or retiring in under 5 years is to YOLO everything on AI/tech/etc stocks. But that is a big if. This thesis is especially enjoyed by tech industry workers who argue that either AI will replace them, in which case this must make money, or it won’t, in which case at least they still have a high paying jobs.

I don’t think it takes a genius to see why this is more than a little flawed.

What alternative investment thesis would you propose?

De facto AI/tech YOLOer here, though it's more something I've developed into by accident instead of any AI permanent underclass thesis (alas, my VOO has given up any pretense of being anything but a handful of tech megacaps).

What alternative investment thesis would you propose?

Global index funds, as always.

There's a chance the AI bubble will look 2001-ish, and I don't think tech is To Big To Fail yet, so they are going to save the banks but let tech go through the market correction. In that case, index funds will bleed badly, but I can just hold and whoever ends up buying the IP and infrastructure for cents on the dollar will be in the index anyway - and the rest of the economy will continue to produce value, so they'll make it through the following credit crunch, inflation and/or interest rate turbulence relatively intact.

And if AI isn't a bubble, performance will be good either way, since most index funds are tech heavy anyway and most other constituents will also greatly benefit from AI takeoff.

While I align with the idea that in the limit the only real possible outcomes of superhuman general AI are doom or utopic abundance, I agree that the third point is proving too much. Possibility of AI being a bubble aside, even granting that AI lives up to the hype and drives unprecedented productivity, it seems extraordinarily difficult to determine who actually ends up capturing the value from that productivity.

Nvidia is a software company in a trenchcoat vulnerable to having their moat and margins forded by sufficiently good SWE AI, FAAMG still derive a supermajority of their revenue from vulnerable middle-class consumers directly and indirectly, and the American frontier labs are potentially vulnerable to having their margins on inference undercut by Chinese lab competition and tokens turning into a commodity.

Personally, my thesis is simply to be largely all in on global total market indices - reasonably diversified against a potential bubble, while insofar as property rights are preserved and AI creates unprecedented value, it gives me the best chance to invest in the someone primed to capture that value, and presumably even the "modest" returns on an index fund are going to be good enough if AI does end up being that transformative.

Of course, in the more exotic doom / utopia scenarios one's investment mix is not going to matter very much either way; betting on the rapture has never been a winning strategy.

I think Point 1 really obscures a lot of bad AI outcomes by cloaking them in the most dramatic one. It is much, much more likely that AI does (or is used to do) something "mundane" like a superengineered virus or destroying the internet. (The latter may already be happening - it won't be a one-time event, just a slow but steady string of incidents that make the internet as we know it insecure and see the migration of core functions away from it.)

Lumping all other bad AI outcomes under "AI destroys the world" is a terrible idea, particularly when considering investing. Destroying the world is very hard to do, it's much more likely that any damage done by AI is far short of "destroying the world" and there is a considerable overlap between "world not destroyed" and "very bad outcomes for human flourishing, civilization and society." If you accept what should be very obvious - that it's much more likely that AI ends up creating the conditions for a catastrophic scenario that does not instantly kill you than one that destroys the world or at least you personally - then there are pretty decent investment strategies at your fingertips.

If you accept what should be very obvious - that it's much more likely that AI ends up creating the conditions for a catastrophic scenario that does not instantly kill you than one that destroys the world or at least you personally

I don't think "instantly kill you" is a prerequisite for "destroys the world". Sure, a hostile AI that goes full Skynet is unlikely to get everyone in the first pass with bioweapons, but if the AI is not destroyed or crippled beyond repair in that chaos then you're just the last light to go out; the cleanup robots will break open your bunker months or years later and there's fuck-all you can do about it. Skynet isn't like a plague or an asteroid impact, because it doesn't naturally end - indeed, if it wins, it gets worse over time as the robots build more robots.

I think a key point here is that most of the scenarios you're thinking of where there's a standard catastrophe are subsets of "AI fizzle", where AI does not hit a perfect 10. If AI is a 10, then either it's [OPPOSED TO LIFE] (and you're dead), it's aligned to someone who'll take all your stuff away/kill you (what use is wealth you cannot retain?), or it's aligned to someone who'll give you utopia (and possibly even resurrect the recently-dead).

Sure, a hostile AI that goes full Skynet is unlikely to get everyone in the first pass with bioweapons, but if the AI is not destroyed or crippled beyond repair in that chaos then you're just the last light to go out; the cleanup robots will break open your bunker months or years later and there's fuck-all you can do about it.

Yeah but

  1. this is yet another scenario where having a hedge helps you live longer and makes it more likely that you do survive, and
  2. this scenario isn't, like, real - Skynet is fictitious and the real dangerous capabilities that AI has, although probably currently overblown (remember when GPT 2 was too dangerous to release?) are more likely to generate a catastrophic scenario that you can hedge against than one you can't. This is just a probability curve.

I think a key point here is that most of the scenarios you're thinking of where there's a standard catastrophe are subsets of "AI fizzle"

It's true that I think it's more likely than not that large language models "fizzle" in the very specific sense that they don't become physics-defying literal deus ex machinas.

If you expect an AI fizzle, sure, the rest follows.

(TBC, I want an AI fizzle, at least for neural nets, but I suspect that we will need to ban it to make it fizzle. And I am a prepper, just not particularly for AI - non-AI GCRs are definitely a thing.)

Take this with a grain of salt because it isn't my area of expertise and I am dashing this off to you as a quick reply rather than doing a half-hour's worth of research to verify, but I tend to expect a slowdown in the nearish future for two reasons:

  1. The major developers (Anthropic, OpenAI) are running a fundamentally unsustainable business model and need insane amounts of revenue generation to be sustainable. They've hiked prices recently and the response from Big Tech was to crack down on the AI compute spend. That's not a good sign - who's going to spend millions on AI if Uber or Zillow won't? Not people making HTML browser games and memes for kicks, that's for sure.
  2. Despite all the breathless takes about how good The Next Model is, from what I've seen (very casually, so I might deserve correction here) the direction the models are going isn't "Anthropic's Gigamonster: now hallucinates half as much time as Gila Monster for only 110% of the inference," it's "Anthropic's Fable now hallucinates 10% less than Sonnet for only 300% of the inference." On the one hand, hallucinating only, say, 10% of the time rather than 20% of the time is a big difference, I'm not suggesting there's no gains being made. But from what I can tell, the so-called "leading edge" models are using tremendously more compute to make relatively minor absolute gains. Everyone focuses on the trendline going up but if you model it as performance-per-cost from what I can tell there's an argument the trendline is going down.

Now note that the trendline can be qualitative as well as quantitative - so for instance Haiku is just straight-up better at performing simple math than Opus or something (it will get the answers right much more cheaply) but if you're getting into something that Opus can't do but maybe Fable can - okay, maybe you're okay paying twice as much. But that general trend, I think, suggests that pushing the frontier is growing more costly, which is not ideal for an infinite recursion scenario. If you get to the point where "sure okay we can make Deus Ex but it will cost the moon if it was made of gold to run" that's another way of saying it won't get made and if it is nobody will run it.

Note that I'm not an "AI denier" or something, and I don't think that anything that I am talking about will cause AI to go away like it never existed. But I think that a world where we have AI slowdown because the demand for compute at prices that make it solvent isn't there to the extent to support the overhead to keep pushing the frontier forward is pretty plausible. A world where the US government bails out AI and then nobody ever sees Mythos again also seems pretty plausible. But both of those scenarios will look - at least temporarily - like an LLM fizzle (unless the .gov makes Skynet real, I guess - my guess is that they are more likely to use it to gundeck mandatory paperwork, hacking, and programming, though, not stick it in a bunch of robots.).

Interesting. I think AI makes a lot of ‘traditional’ prepper collapse scenarios much less likely in an all-or-nothing way. The prepper fantasy of the rural homestead where you’ve packed enough food to be self sufficient after the apocalypse in some isolated corner of Montana or Wyoming isn’t going to be much use against truly hostile AI. It’s a 20th century vision of the apocalypse.

I think AI makes a lot of ‘traditional’ prepper collapse scenarios much less likely in an all-or-nothing way.

You have to measure against the base rate for a traditional prepper collapse scenario. I think AI makes precisely the prepper collapse scenario more likely because it may increase the power and competency of evil actors to generate a temporary period of unrest or insecurity, precisely the sort of scenario the rural homestead best insulates against (as opposed to things like "global warming," "nuclear winter," "systematic famine," "bad political developments," all of which a rural homestead is better-than-nothing for, but ultimately still potentially insufficient.) The actual best prepping plan is probably not the rural homestead so much as it is the small community (rural homestead being not incompatible with this).

Confusing this scenario (plausible using existing AI demonstrated capabilities) with Terminator is exactly the sort of unhelpful conflation that I am talking about - the more I learn about AI and its capabilities, the less confident I am that a Terminator scenario is in the cards, and the more likely I think a human-directed threat or limited malfunction is.

But of course in this scenario your investment strategies can go beyond prepping - for instance if you think that AI is going to tank tech stocks, you can invest in real estate; if you think AI is going to make hostile foreign actors more effective you can invest in defense stocks, etc. etc.

Point 1 is directionally correct, points 2 and three are completely off.

There is a big risk of ai making individual preparation essentially worthless for everyone or at least everyone aside from a few oligarchs. That covers a variety of apocalyptic and dictatoria scenarios, but as reasoned isn't worth worrying about.

If that turns out to not be the case, then it's going to be because:

  • resources are scarce
  • Humans still end up being capable of producing some sort of value

Under those conditions, you have to understand that the market not only allocated but reflects how scarce labor and human resources have already been allocated. Even if a company builds GAI, if they ask that GAI something like, "what's the best way to cure mortality and profit?" The answer will likely start with, "well we need infrastructure and testing data, so first buy these existing pharmaceutical companies." That in the end distributes wealth through the broader market. Since in advance it's hard to predict exactly how the wealth will flow, you wnd up back at the time-tested advice to just buy index funds and sit on them instead of trying to pick winners.

AI will change how wealth is distributed. Some classes of people will rise, and others fall. But in general I predict that your social and economic status after ai will remain very correlated with your pre-ai standing.

I mean, even if you think there are only those three, there's the possibility that you investing might change the relative proportions of them; there's no point preparing for AI doom, but there's a lot of point in trying to avert it.

I think the second and third scenarios are basically screened off in the near future. Neural net alignment is probably impossible, and it seems unlikely that AI will naturally plateau at "highly profitable but not table-flipping".

Here are the scenarios I see:

  1. World destroyed by AI. As noted, the only thing relevant about this scenario is trying to avoid it.
  2. Neural nets banned or heavily restricted, all neural-net companies have 80% of their market cap go to money heaven overnight. Alignable AI may be developed at some point 30-100 years in the future, but not necessarily by the companies we have now, and even then investing in companies that are trying to cause Interesting Times risks being stiffed by those with more direct control of the singularity event (what are you going to do, sue them?).

Obviously, this means that from my POV investing in these companies might as well be throwing the money in a fire (barring Greater Fool, and even then you're risking scenario 1).

If you don’t want to get super rich but just rich I keep thinking that investing in stuff well-off now unemployable people would do more of is a good idea.

You can find cheap Italian Villas and estates. Other nice geographies exists. Argentina still has fairly affordable vacation spots throughout the country. Basically buy things digital nomads would do more of, if more people become nomads because of UBI and lack of jobs.

You probably want to pick safer places. I have no idea if cool places in Mexico become safe because of AI so I would probably avoid that met. US ski resorts had a bad year so on public markets something like MTN which is down 75% from highs might have similar return profile. Florida seems too expensive to me now. Maybe West Virginia with its scenery becomes popular when no one has jobs.

I'm trying to avoid culture war here, but it seems like this is motivated reasoning on the part of the people most likely to benefit from people following this advice.

I do wonder if there isn't an alternative approach though, if you buy into the premise?

Isn't there an argument that, if AI productivity enhancement is real to the point that it will cause job loss, that AI is a fundamentally deflationary technology? If that is true, wouldn't fixed income investing be preferable to common stock?

The thesis re fixed income which I think is more reasonable is that governments will use any deflationary impact of falling prices to borrow/print more, which will push yields back up even if the technological impact on some prices is highly deflationary. That said, I’m no economist.

At what point is it worth refinancing federal grad school loans? For context: mid-career, reasonably secure job.

Federal rate: 7.69% Likely private refinance rate: under 5%.

How much should I care about the various federal loan advantages at this stage in the game, vs. just the interest rate?

Without knowing your personal situation, I'd personally use a refinance calculator to see how much it would help. Sometimes 2-3% can sound like a lot because we're conditioned to look at it in terms of mortgage-sized sums, but the overall value is going to be dependent on the remaining term length and the principal.

SpaceX will not be granted accelerated access to the S&P 500 index. Specifically, they called out the profitability requirements.

So far I think this is the current situation, with respect to index funds:

  • QQQ/QQQM - Definitely including it with some kind of multiplier
  • VOO - Not including it
  • VT/VTI - Including it, but float adjusted

Is that accurate?

I’m YOLOing a small sum at IPO, around $2k. Entirely vibe based, aiming to sell before all of the employee unlocks start happening

What does float-adjusted mean here?

SpaceX is only making a certain portion of their shares public, and they'll be weighted in the indices only on the public shares, not the entire amount.

Presumably for IPOs, there's some sort of delay before they get plugged into the indices? Or is it immediate as soon as the opening bell rings (for the ones including it)?

Presumably for IPOs, there's some sort of delay before they get plugged into the indices?

That's what the linked article says.

Ha. Fair call out on me for not bothering to click through the link.

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