Does Saylor vs Buffett ratio indicate a crypto & AI bubble?

The enthusiasm sparked by Trump's victory is see-sawing since late last week. The S&P 500 lost a third of its post-election gains and ended lower last week, while the NASDAQ 100 experienced a four-day decline.

However, the narrative shifted slightly on Monday, even as near-record prices of assets across the board did not deter investors.

In the innovative realm of cryptocurrency, investors keep moving the goal post higher.

Despite bitcoin's retreat from Wednesday's record peak, it has remained over 30 per cent higher since the presidential election.

On Monday, the OG token resumed its surge.

Wall Street stocks, on the other hand, floundered as benchmark treasury yields held close to 4.5 per cent.

A metric created by Owen Lamont, a portfolio manager at Acadian Asset Management, is to assess the current state of animal spirits.

The previous finance educator monitors the comparative performance of two stocks.

Warren Buffett's Berkshire Hathaway, a well-known entity that focuses on traditional companies, contrasts sharply with Michael Saylor's MicroStrategy, which has gained notoriety for his bold investments in Bitcoin.

Referred to as the Saylor-Buffett ratio, this metric offers insight into the prevailing sentiments of fear and greed in the market.

Although Berkshire has increased by 31 per cent this year, outperforming benchmark indices like the S&P 500, it falls short when compared to MicroStrategy at this moment.

Saylor's MicroStrategy has experienced an impressive increase of over 400 per cent, driven by the ongoing surge in cryptocurrencies.

In Buffett versus Saylor, the comparative performance currently contributes to the indication of an overheated market.

Due to MicroStrategy's improved returns, the Saylor-Buffett ratio has surged to heights not seen since 2000.

While the internet frenzy characterised the dotcom era, the current landscape also reveals that speculation remains robust for emerging investments such as Bitcoin and artificial intelligence.

According to Owen Lamont, that surge in the ratio conveys a concerning indication.

Lamont said, "If we look at the big picture, I'm not sure we've reached extreme conditions just yet."

Regarding the crypto and AI bubbles, he said: "I don't know if we're in an AI bubble, but it sure feels like we're in a crypto bubble. Right now, we have two largely separate narrative streams: AI and crypto. If these two streams cross, it would be bad."

Lamont concludes, "The recent increase in the Saylor-Buffett ratio is one of the many small pieces of evidence...That all point in the same direction: the market is getting frothy."