저자: Master Rich Stocks Options Crypto · 외국인
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And now to our newsmaker of the morning. He is here joining us to discuss the markets, the history of economic bubbles, artificial intelligence, so much more. Bridgewater founder Ray Dallio is with us. Good morning to you, sir. Good morning. So, you've been uh providing lessons for us for a very long time about economic cycles and where we are and what's going on.
The big question in the market right now because we're looking at Nvidia this morning and I think a lot of people are waking up thinking where's the market headed next has been this question of an AI bubble and curious where you ultimately come down. Are you with Jensen Wong who says he doesn't see it that way or do you see something else?
Um there's uh definitely a bubble in uh markets. Yeah. Um bubbles. What is a bubble? Right. What is a bubble? What what is a bubble? Uh a bubble um is that there's a lot of creation of wealth from various ways such as you decide that you're going to have a uh sell $50 billion worth of stock and value it at uh trillion dollars or you have multiples like that and then you create the wealth that way and then the question with all this wealth relative to money is who needs the money.
So it's all it's a matter of who the buyers and sellers are for example um if we had a wealth tax or if you had a tightening of monetary policy then there has to be the selling of those assets. So in order to pay those things so there's a mechanics of who owns it is it overowned and so on. It's not the long-term duration of the earnings.
So you think about it isn't it interesting that we have um such a short-term reaction. And it's great that what the results are, but this is a long it's valued as a long duration asset. So for 25 years, the next 25 years, it's very unknown. We don't know what's going to happen. And bubbles don't go happen, right?
Uh because of good estimates of of what in the future it happens because of the need for cash. Do you sell that asset? Do you have to sell that asset for cash for some reason? Well, that's the question though. So your book I I thought did such a good example. I mean I thought by the way your book is fabulous.
Thank you. Um but you take the 1929 and then you say what made it go up and what made it go down and that dynamic is the way bubbles work, right? And so if you take who has exposures, how much leverage is used and so on. This is about 80% into some a bubble that um was 100% would have been 1929 and 2000.
So how much leverage do you think is supporting all of this? Because we we were talking to um partis the last hour uh and she was explaining this idea that Jensen Wong doesn't see a lot of the transactions that he's been doing. We've been talking about these circular transactions where he's effectively taking an equity stake in some business and that business is then committing to buy his chips, if you will.
Yeah. A form of vendor financing with sort of a equity overlay maybe is the way to think about it. Do you look at that and say that's a problem? It's not a problem. Should we think about vendor financing in a different way? That was something that got a lot of the fiber guys in trouble in the late 90s, for example.
Yeah, I I think it's an issue, but I don't think it's the main issue. I think the real issue is who owns the stock. Okay? Is it in strong hands? Not not not just one stock. Isn't it amazing? We're talking about one stock for the stock market bubble and and we're talking about for the economy bubble.
So you have such a small percentage of the economy, such a small percentage of the American population in terms of wealth and so on concentrated so concentrated and everybody in it and and in a leveraged way in various ways it's it has leverage. What are strong hands? Like what how would you define that?
Uh uh weak hands would be the public. So retail investors are weak hands, right? Strong hands are the owners of these companies. The the the right in other words, strong hands is uh that they primarily invest their own money. They're um you don't have public, right? The weak hands is largely let's say a leveraged public
and all united about that. That's that's one of the key ingredients of a bubble. So it's not just pricing because we have to find out you know your book did such a great job of looking at uh the wonderful companies uh in the 1920s and then and it enumerated how electricity came out and General Electric and RCA and so on and those companies went down a 90%.
Not because of the economy and so on the bubble burst first because they needed cash. So what is you have to understand that wealth can't be spent in order to in order to get money you have to sell wealth in order to get cash to get the money to buy things. And so when that happens bubbles burst. So bubble bursting means let's say a tightening of monetary policy is classic.
But also something like wealth taxes can happen. For example, think about wealth taxes uh forcing uh sales of assets that you have to uh You're right. By the way, there's a proposal for wealth tax in California right now. Yeah. So, state and national, right? State and national. I'm not I'm just trying to describe the mechanics of a bubble.
But you said we're at 80%. Yes. There's I have a bubble indicator that goes back to 1900 and it just makes a it has a number of indicators. How how much leveraging? Who has the leveraging? Is it um what is the amount of money in wealth that relative to the amount of cash that needs to exist and so on.
These indicators there are a number of them um show that um we're on that on that chart. If I was to show you the chart, it's about 80% of where it was um uh in those two times. That doesn't mean that that's the end of the move. Okay? Because bubbles have to be pricricked, right? And and so you can measure that there's vulnerability, a lot of vulnerability.
There's a lot of vulnerability of who's holding what. Here's my question to you about that, which is if the bubble is at this 80% range on your on your on your index or metric, there are folks, we had Paul Tudtor Jones come in here a couple weeks ago and he said, "Look, I think we're in October of 1999.
By the way, the market would still have 40% to go. Back in 1928, Charles Merrill, who founded Meil Lynch, told everybody, "Get out of the market because he thought it was a bubble." And he was right and he was wrong in so far as from the beginning of 1928 to September of 1929, stock market went up 90%.
And so, but but I I think that when you're looking at that, you're looking at it incorrectly. Okay. What is a bubble is the definition, right? it. I I want to reiterate a lot can go up before the the bubble burst. A bubble is an unsustained set of circumstances. It has unsustained amount of buying, right?
It has an unsustained amount of valuation. It has and then there's something that pricks the bubble. Is there is there a way to sustain this though? You can't look at You can't look at Don't sell just because there's a bubble. Okay. Okay. don't sell just because of bubble. But if you look at the correlations with the next 10 years returns, when you are in that territory, you get very low returns.
Um, by the way, JP Morgan just did a report on this that showed that if you got in um at over a 23 PE multiple, typically over a 10-year period, your your return is a delta between 2% and minus 2% a year over 10 years. Oh, yeah. to your point. I just uh put out today a a post on this and you'll see the charts and if you go on that um so I think that you have to say it's unsustainable.
Then you have to go to the timing. What is it that pricks the bubble right? Typically a tighten monetary policy we're not going to have that now. Okay? Right? But we but you could have something. In other words, the need for cash, right? The need for cash is always that which bricks the bubble because when you have wealth, you can't spend wealth, right?
You have to sell wealth in order to get the money to buy the things you need or pay the bills you have. That's the dumb. So, I think that the picture is pretty clear in that we are in that territory of a of a bubble. We are in that bubble territory, but we don't have the pricking of the bubble
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