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i think the forming and breaking of the great bubbles are really the only thing that really matters in uh equity management rest of the time show up keep your nose clean make a point or two lose a point or two it doesn't really matter but once in a blue moon typically every 20 years but more recently a little more frequently than that you have these bubbles they form over a number of years they dominate everything and then they break and once again they dominate everything it really does matter and if you can bring yourself to sidestep some of the pain it can make a lot of difference i don't think the bubbles are hard to spot but that is my specialty i look at the handful of real mccoy bubbles the type that have really crazy investor behavior that have masses of enthusiasm and they stand out like a sore thumb the 2000 tech bubble the 2007 housing bubble in the us japan in 1989 both land and housing and the stock market probably the biggest bubbles of both the equity market and the real estate market in the history of man so they are the real mccoy and then there's an interesting almost case of 1972 the nifty 50.
it didn't go quite as high it wasn't quite as silly but it was on the cusp of oil crises and so on so that it went down a whole lot it went down every bit as much as some of the others a 62 decline adjusted for inflation in 1973 74 still the biggest decline since the 1930s so that's my universe and and here we are we have checked off all of the indicators that are unique to those handful of events crazy behavior check check the bitcoins of the world and the cryptocurrencies the meme stocks of the amc gamestop variety i could even add my quantum scape and very rapid acceleration the prior year in 2020 where the nasdaq more than doubled in the year and even from the beginning pre-covet was up almost 60 percent up almost 60 percent despite a huge wipeout from covent so rapid acceleration is a characteristic you have to see crazy behavior you have to see and then there is a unique and special case and that is on the upside and that's important on the upside the blue chips start to win and the stocks with the very high volatility that normally go up one and a half or two times the blue chips they don't even get the sign right and they start to go down 1929 the specs the really crazy stops went down all year little known fact that they did the day before the crash they were down 30 as an index nothing like that happened again until 1972 1972 in the nifty 50 the s p went up 17 and the average big board stock went down 17 so that i could remember it forever symmetry nothing like that happened again until 2000 and then in 2000 in the tech bubble the dot coms peeled off in march and really collapsed and then through the summer the junior growth the medium growth and then finally the senior growth all peeled off and by the early fall most of them were down 50 percent and some of the dot-coms were down a lot more but the s p was unchanged which meant that the 70 that was not growth had gone up 18 so the s p blue chips had gone up 18 and the growth and the nasdaq and the dot coms had taken a very big hit that is absolutely classic now starting early last year one by one the various most speculative groups that had done brilliantly in 2020 started to do bad these great bubbles have nothing to do very very little to do with the underlying reality that started in 2020 december and then the meme stock started march april and um bitcoin april may june and so on and then one by one most of the advanced techie stocks started to come down an arc um peaked out a couple of months later and has of course declined 75 arc is a whole portfolio of 25 growth stocks that often have no earnings but that do have at least in the portfolio managers that believe huge prospects but they that kind of stock is very vulnerable to a loss of confidence and therefore it started the decline pretty early and continues today right into the teeth of the seller so this market has been proceeding eerily like 2000 and i think phase one superficially you have a 2000 tech bubble horribly overpriced much too much enthusiasm huge buy-in by individuals fueled by a massive program of cash distribution associated with covet bailout a lot of that found its way into the stock market so this was sensational so that's phase one phase two which i really worry about is this whole thing morphing into what i call the 1970s underlying inflation as an everyday topic once again it may not be spiking in the 70s it came and went came and went came it was always part of the background discussion and uh that's what i think it will be now for quite a long time several years and similarly interest rates were always a worry in the 1970s and they will be a worry for quite a few years to come beyond that longer term i worry that we are fairly deep into running out of the cheapest most available resources i think that turning point was 2002.
between 1900 and 2002 the average important commodity came down 70 in real price adjusted for inflation and we keep our own index at gmo 36 most important equal weighted commodities this is not dominated by oil this is looking at the breadth of what is happening to commodities and then if you look at that again today it is not down 70 percent it's down 10 since 1900 a rounding error so it's gone from down 70 or 30 on an index basis to 90.
it has tripled since 2002. the average important commodity has tripled in real terms since 2002 and i think this is an important problem going forward we haven't done any capex there are no great reserves of copper lithium cobalt nickel etc waiting to crush onto the market and yet we need them to green the economy we're simply going to run light of these metals we need technology to design a way around them new batteries that don't use so much recycling techniques to save what we have etc etc we have bad actors around the world as we see in the ukraine with russia an unstable situation such as this that we are likely to see with food does not bode well the other thing we have to bear in mind is that the developed world in china beginning to run out of people in any developed country except israel we're not replacing our people you
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