Irrational

Talk about irony. Or was God playing with us again? She’s wicked.

Alan Greenspan died Monday after a hundred-year run. The legendary central banker drove the Fed for 18 years. He dealt with the 1987 crash (22% in a single day), Y2K, the Dot-Com disaster, Nine Eleven, the Wall Street collapse, the credit crisis and real estate collapse.

Mostly he saved the world from itself. And his greatest gift to those who came after was a two-word warning. Irrational exuberance.

As investors in 1999 were wildly throwing money at CEOs on skateboards who had come up with a cool name for their profitless online business which had the life expectancy of a moth, Greenspan was warning them. This may feel exciting and novel, he said, but you’re nuts.

The Dot-Com era ended fast. The tech-heavy Nasdaq lost 70% of its value. Nortel went to zero. Investors were Hoovered.

And here we go again?

Last week we got SpaceX. This week we have an AI bust. What happened in the last few hours was, well, shocking. The world’s best-performing stock market, South Korea’s Kospi, shed 10.5% of its total value. AI chip-makers like Samsung were crushed with a 12% decline (the stock had doubled in value so far this year – irrationally). Japanese stocks fell 3.6%. Euro shares fall a percent. The S&P 500 opened down 1.5% in New York.

No 1987 crash. But a warning shot? After all, there are lots of reasons investors should worry. The wars in Iran and Ukraine. A global energy shock. Increasing inflation. Rampant global debt and tapped credit markets. Rising bond yields. A tariff-fueled trade war. Upward pressure on interest rates. And a rogue US president, backed by lapdog legislators.

Despite all this, Mr. Market has been on a tear, gassed up by $700 billion being spent this year on AI data centres, huge jumps in the valuation of tech giants and the sheer exuberance over how AI will change everything.

But we’re humans. We go too far, too fast, sail over the guardrails and end up in the muck. Never fails. Alan knew.

Look at SpaceX, Elon Musk’s baby which had its IPO just days ago. We told you the deal was oversubscribed, would likely soar on mystique and FOMO, then have a reckoning. Our advice: stay away. Why buy equity in a company that may never turn a profit, will rack up unrepayable debt and reward you with volatility?

Happened.

SpaceX shares dropped almost 4% at the end of last week, more than 16% yesterday, and continued to sink this morning. What was $225 last week is $149 as this pathetic blog post is written. That’s a swing of 34%, with a good chance units may fall below the IPO price of $135, making every single investor a loser.

Of course, if Elon gets to Mars and decides to colonise it with his own offspring, this could change. But for now, yeah, stay away.

None of this is to say AI or data centres in space are a scam. This technology will make swaths of society and the economy almost unrecognizable. Productivity will probably soar and wealth cascade. AI, chatbots, deepfakes, generative slop will be everywhere. Humanity will be changed.

Source: NASDAQ, NY Times

But the same held true thirty years ago when the Internet became a useful thing. The early dot-comers were crushed because they had vision without viable business plans. But today our entire world has moved online turning newspapers, the post office and CDs into relics. The kids on the skateboards had it right. But so did Greenspan. It was the market that got pooched.

Smart people are saying today the AI correction could last a few weeks or months. A big concern is that tech now dominates the market. Because of all the other crap happening in the world, it’s the sole positive driver of economic growth, The impact could be wide. SpaceX, in other words, could start smelling a lot like GameStop – the meme stock kids ballooned using Robinhood on their phones.

This much seems right: Stocks are pricey. Companies that don’t make money don’t deserve yours. Your best defence is to be diversified – use an ETF. AI is real, so stop resisting it. Don’t panic and sell in a storm. It’ll pass. Don’t get greedy and buy a fad. That, too, won’t last.

And don’t diss old guys. Even the dead ones. They know stuff.

About the picture: “Let me introduce you to Hazel and Whiskey, my youngest daughter dogs,” writes Jorge. “Like many women in her generation, she is delaying having kids and not ruling out going childless, so these may well also be my fury grandkids. This is the recent celebration of Whiskey’s birthday, and as you can see, they are treated like royalty, to the bewilderedness of their nemesis, Tia the cat, in the background. Please keep the good work you do, and I hope you recover soon from the coward attack you were a victim of recently.”

To be in touch or send a picture of your beast, email to ‘[email protected]’.

Source: https://www.greaterfool.ca/2026/06/23/irrational/