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Michael Burry has warned that this is exactly how the market crashes. It's not the straight up home moves, it's not the Fed, it's something completely different. I think the stock market could be in for a number of bad years. I think it could be a longer bear market, more akin to 2000. I will show you what Burry says can actually cause the next market crash and use Forecaster to go through five stocks to protect ourselves from it.
Burry says that holding up everything is this one small building block. This building block, it's not big, it's not stable, and the interesting thing about it is it's a mirage. It's not real. As soon as people realize that this is not actually real, the whole market collapses with it. I will show you what this block is soon.
But let's start by getting into our first stock to protect ourselves from this potential market crash. You cannot build your house with straw, you must build it with bricks. And there's arguably no stronger company as Berkshire Hathaway. Forecaster shows us that Berkshire Hathaway operates as a highly diversified conglomerate, meaning it owns and operates a wide array of businesses across various sectors.
Instead of focusing on one type of product or service, Berkshire Hathaway acquires entire companies or significant stakes in publicly traded companies. This strategy allows for diversification and stability as the performance of one business can offset fluctuations in another. So basically, if you own Berkshire Hathaway, you own this beautiful portfolio of businesses, all chosen by Warren Buffett throughout his years of investing.
Warren Buffett's first rule to investing is never lose money. So he's bought businesses for Berkshire that are less likely to lose money, no matter the market condition. Forecaster's graphing tool shows us that Berkshire keeps on bringing in profit for the company pretty consistently, and they've been building this profit for a long time.
Also, if you dig into their balance sheet, this is going to prove to be very important in a market crash. Look at all of this cash they've got on their books. $373 billion in cash and short-term investments. This part of their balance sheet will not crash in a stock market collapse and will mean that they can use this cash to purchase companies at a cheap price when, if the downturn comes.
Before we can understand what this twig is that is holding up the entire system, we have to understand what the system is that surrounds it. We have three levels here. We have the foundation, the middle, and the top. I will start with the foundation. Think of the foundation as the ground that the whole tower is built on.
At the very base of the structure sits three things. The first is the Mag 7 free cash flow. This is pretty straightforward. Apple, Microsoft, Google, Meta, Amazon, Nvidia, Tesla. These companies generate an almost incomprehensible amount of cash every quarter. And that cash, along with their balance sheet strength, is what gives the entire AI buildout its initial credibility.
And second, you have SaaS debt. The legacy software industry spent the last decade loading up on cheap debt during the zero interest rate era. And that debt, as Forecaster shows us, is still sitting on their balance sheets. If you didn't dig into their financials, you would never know this. And yeah, Forecaster is an easy website to get this info, and that debt is now being recycled and redirected into AI bets.
But this time, with higher interest rates. And LLM compression sits underneath everything. The idea that all human knowledge can be compressed into a machine, and that this machine will actually generate more money for those companies as opposed to increasing competition and lowering margins. It's less of a financial fact and more of a belief.
So, the foundation isn't nothing, but it's thinner than it looks. Before we understand the middle, let's get into our second stock to protect ourselves from the market crash. Sometimes, when a market crashes, one group of investors who do well are the dividend investors because they keep getting paid dividends even when things are down.
But the key is you need a reliable company and one whose business will keep selling in tough times. Hormel Foods is one of these dividend type of stocks. As we can see with Forecaster, it pays a 5% dividend, which is really good in this market. And if we scroll down on the overview tab, we can see that they have actually continually increased their dividends, at least historically.
Hormel Foods Corporation has increased its dividend for 60 consecutive years. This qualifies it officially as a dividend king. Remember, a dividend king is any stock that has increased its dividend for over 50 years. So Hormel Foods did this throughout the Great Financial Crisis in 2008 and the dot-com bubble collapse in 2000 and all of the other financial turmoil that we've seen in 60 years.
If we dig into their financial statements, which I know we do this all the time, but you have to do it before you invest in a company. It's not an option. So look at their net income. They have been very profitable for the last 9 years, sitting between 800 million and 1 billion. Of course, in 2025, they had a dip in profit down to 478 million.
But that profit is expected to go back up to 800 million in 2026 and 880 million in 2027. So yes, their current PE is 25, but their forward PE is 14 because their earnings will be better this financial year. 14 is very reasonable for a company like this. If you don't think so, just compare it to Walmart stock.
And if you look at all of their competitors with Forecaster's AI agent, it's an old and mature industry. They have three key competitors, and they are Tyson Foods, TSN, founded in 1935. Pilgrim's Pride, PPC, founded in 1946. And Conagra Brands, founded in 1919. This industry requires high capital investments, entrenched brands, and thin margins that keep new competitors out.
Hormel Foods have been around since 1891, so that adds to the reliability of the company. If it can survive the Great Depression, two world wars, and everything else, it's probably going to survive the next collapse, too. Now, to the middle part of the system. If we can understand the middle, we can understand what's built on top of it.
If we can understand the top, we can understand the piece that collapses everything. Sitting on top of that foundation is what Burry calls circular financing. Here's how it works. A company decides it needs to be an AI. It doesn't matter if they have a clear use case for it or not. Their board is nervous.
Their competitors are announcing AI partnerships, and their stock will get punished if they say nothing. So they act. They go to the private credit and borrow money to fund AI infrastructure, data centers, compute, all of it. But here's the problem. That spending flows directly into the AI companies selling the infrastructure, which inflates their valuations, which makes them look like better collateral, which makes it easier to lend more money against them, which funds more spending, which inflates valuations further.
And this arrow just keeps going on in a circle, kind of similar to how it did with the subprime mortgages 18 years ago. Corporate FOMO is the fuel. Every CEO who pumps the brakes risks being labeled the one who missed it. So nobody pumps the brakes. The spending continues, and pie-in-the-sky thinking becomes the official internal strategy documents.
Private credit is the engine underneath all of it, moving capitals from lenders to borrowers on the promise that this all works out eventually. We need to be prepared for if it all were to collapse, which brings me onto the third stock. What we want is to own businesses that will still be operating even if the sentiment changes.
This is one reason why I've put Domino's stock in this list is because cheap pizza, even in a recession, will still be in demand. Forecaster teaches us that Domino's has two main ways of getting their pizzas to people and making money. One is through their company-owned stores. So just like a regular restaurant, Domino's owns and runs some of its pizza stores directly.
But two is through its franchise stores. Most Domino's stores around the world are actually owned and run by other people called franchisees. They get to own their own Domino's stores, and in return, they pay a portion of their sales called royalties to Domino's. So that is a great business model. Domino's owns the brand name, and franchisees use it and have to pay regular fees to Domino's.
The business model itself has been working a treat. They've grown their revenue from 2 billion in 2014 to 4.9 billion today. That's That's a double. Maybe not as big as some of the growth AI stocks, but sometimes slow and steady wins, especially if a downturn were to come. They've been growing their profit around the 10 to 30% range for a number of years now.
They're increasing it from 160 million in 2014 to 600 million today. And with a PE ratio of just 20 and a dividend yield of 1.9%, you can see why it's one of the more fair deals in the market right now. And you can understand why a company like Warren Buffett's Berkshire Hathaway has decided to make it one of its recent buys, too.
And this brings me to the top of the system. If the foundation is the money that exists and the middle is the money being borrowed, the top is the money being imagined. Start with the $5 AI unicorns. These are the private AI companies, OpenAI, Anthropic, xAI, and a long tail of startups. These have accumulated valuations that would have seemed like science fiction 5 years ago.
They are not publicly traded. They have no earnings to point to. And their value is essentially a collective agreement that they will be worth this much or more in the future. Then you have GPU hoarding. The major players, Microsoft, Google, Meta, Amazon, have been stockpiling Nvidia hardware at a pace that goes well beyond any specific near-term workload.
The logic is that GPUs will be scarce, so you buy them before you need them. And then comes the part that ties it all together. GPU collateral. Those physical chips sitting in data centers are now being used as collateral for loans. Real hardware borrowed against to fund more spending. It sounds tangible until you ask what a GPU is worth in a world where the AI buildout slows down and everyone wants to sell them.
The top of the structure is heavy and it is resting on the middle, which is resting on the foundation, which is thinner than it looks. And that leaves one thing holding it all up, which I'll show you in the next chapter. Our fourth stock to help protect us in a crash is United Health stock and a lot of people are not going to like this one.
If we look up the stock on forecaster, there is a lot of fear around the stock. It's crashed 53% from $594 last year to $277. So it's basically halved in price this past year. Why? Well, click what's happening with forecaster and we can see United Healthcare facing ongoing legal scrutiny. The Ninth Circuit Court of Appeals is set to decide on a fraud case involving United Healthcare's Medicare Advantage program.
The ruling will determine if the company can utilize a preemption defense to evade liability. A decision with significant implications for the nation's largest Medicare provider. So alongside with what happened with their former CEO, some people are not happy with the company and investors are panicking.
However, let's look at the fundamentals because after all, that is what we're left owning. They are bringing in more and more money every year in terms of revenue. They're growing it at around the 10% mark and they've been doing this for a long time now. But if you look at their net income, their net income has dropped these past 2 years.
This is because of a healthcare cyber attack, a divestiture write-down in its Brazil operation, and just a few other things. But this net income is expected to go to 16 billion in 2026 and about 18 billion in 2027. So it seems to be more of a one-off type drop and then a recover type story as opposed to consistent low profits for a long extended period.
And if you look at investor sentiment with forecaster's AI, there is a structural tailwind from an aging population, increased outsourcing of healthcare services, and AI-driven efficiency initiatives at Optum are expected to expand margins and reinforce United Health's competitive moat over time. So that is big for United Health stock.
And yeah, the website that I'm using to analyze these stocks is a website called forecaster. If you haven't tried it yet and you're looking for a stock market website to make your investing easier, give it a go. It's got AI incorporated throughout. It's got valuation tools for every stock. It's got graphing tools to see a company's financials deep into the past.
And maybe the best thing is they've been improving their technology every day. I've been working with forecaster for a while now and I've seen this firsthand. So go click the link in the description or the pinned comment to get 10% off forecaster's website. So, we have a foundation of real but finite cash flows.
We have a middle layer of circular debt and corporate panic. We have a top floor of imagined valuations, hoarded hardware, and trillion-dollar promises. The whole thing is enormous and it is all pressing down on one single assumption that this all pays off eventually. It's what Burry labeled the monetization mirage.
Remember that a mirage is an illusion, something that appears real or possible but is in fact not so. Right now, companies are spending enormous amounts of money on AI. This is all in hope that AI will at some point bring extra money back to the company in the future. But right now, they are not making money back from AI.
In fact, they are losing money. Open AI brought in around $4 billion in revenue in 2024 and spent $9 billion to do it. So it cannot sell its product without losing money on every transaction. XAI is said to be burning through a billion dollars every single month while generating very little revenue.
Microsoft spent $93.7 billion on AI capital expenditures in 2025. This works out to be roughly $8,518 per monthly active user on its Copilot app. Per user, per year for a chatbot. Also, forecaster shows us that Microsoft is investing significantly in AI with a $10 billion commitment in Japan for infrastructure and cybersecurity, indicating a strong push into the global AI markets.
So they're even going global with their AI spend. But it is not profitable. They're burning through money and yet they continue to do so because they have no other choice. And maybe just like in 2008 with subprime loans, it all works until it doesn't. When the mirage is discovered, everything collapses.
That's Burry's point. Whether you agree with it or not, you still need to be prepared for if the scenario plays out, which brings me to the fifth stock to help protect yourself in a market crash. And this is a deep value play. Because I'm such an investing nerd, I was scrolling through the presentation of Monish Pabrai's Wagons Fund the other day.
Some people call him the Indian Warren Buffett. I'm not sure I agree with them, but he is someone that I look to now that Buffett has gotten a bit older. Monish has chosen to invest in an industry that everyone hates but is so cheap right now and is going to be very much in need. I am talking coal. Forecaster will help explain the idea behind the investment.
What is Warrior Met Coal? Imagine a company that goes deep underground to find a special kind of rock called coal. But it's not just any coal. Warrior Met Coal specializes in finding and digging up a very specific type of coal called metallurgical coal or met coal. This coal is super important because it's a key ingredient for making steel.
Think about all of the things made from steel, cars, buildings, bridges, and even some of your toys. To make that strong, shiny steel factories need met coal. Warrior Met Coal digs this coal out of the ground, cleans it up, and then sells it to steel makers all around the world. So met coal is needed to make steel, steel is used in everything, and there is no meaningful alternative to using met coal to produce steel for several decades.
If you look at what's happening with the news on forecaster, Warrior Met Coal recently reported strong Q4 and full year 2025 results fueled by record sales volumes and the early launch of its transformative Blue Creek Mine, which is improving production and cost structures. The company also announced a quarterly cash dividend and secured federal coal leases for expansion.
Yes, it is an alternative play. Most people will probably hate it, but sometimes when everything collapses, the needed businesses do well. You need coal to produce steel and everyone knows how much we need steel. Still, do your own research on the stock and don't just buy because Monish is buying. Thank you, forecaster, for sponsoring this video.
If you want access to the same graphing tool that I've been using throughout this video, where you can dig into a company's revenue, profit, valuation, and a whole lot more, you can sign up with the link in the description and you'll get 10% off. Well worth it if you're serious about doing your own research before investing.
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