Twelve Rules for Riding a Bubble With Jeff deGraaf, Micron and Sandisk (Finally) Pull Back, Housing Stocks Crash

May 12, 2026

AI Summary

5 min read

Jeff deGraaf of Renaissance Macro joins the hosts to outline rules for navigating market bubbles, using recent surges in Korean stocks and US semiconductors as examples. The discussion covers bubble signals, position sizing amid euphoria, today's memory stock pullback, extreme earnings reactions, AI capex risks, and housing sector weakness, blending technical insights with fundamental context.

Bubble Detection and Riding Rules

DeGraaf defines a bubble zone for diversified indices or sectors when they double in value over two years or less, drawing from 36 years of testing formulas like escape velocity. This signal flags irrationality and V-shaped tops, akin to market "hypoxia"—euphoria between 15,000-20,000 feet altitude causing dizziness and impaired judgment, much like climbers on Everest. Korean KOSPI entered this zone due to Samsung and SK Hynix comprising 43% of the index (up from 18-20% in 2000), driven by AI memory demand. The SOX index hit it two weeks prior, with five prior instances signaling painful drawdowns 6-12 months out.

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What you'll learn

1 (04:02) **Jeff deGraaf Intro** - Legendary technician joins to discuss parabolic moves in Korean stocks and semis
2 (05:01) **Doubling Rule for Bubbles** - Index or sector doubles in 2 years signals bubble environment, not immediate sell
3 (07:22) **Hypoxia Analogy** - Market euphoria from altitude-like rallies leads to impaired judgment
4 (08:26) **SOX Index Example** - Semis doubled in 2 years; historical 5 instances show painful drawdowns 6-12 months out
5 (10:05) **Sizing Not Shorting** - Bubble flags demand risk management, not bearish bets
6 (11:44) **Isaac Newton South Sea Lesson** - Even geniuses get FOMO'd back into bubbles
7 (13:10) **Twelve Rules for Riding Bubbles** - Core guidelines: rates favor trend, valuation without tape premature, size down as conditions deteriorate

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Show Notes

This episode is sponsored by Betterment Advisor Solutions and Janus Henderson Investors.

Learn more at https://www.betterment.com/advisors

Find out more at https://www.janushenderson.com/

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