107274093 - 1_9suzrbzg - PID 1851201 >> As you know, there's an incredible amount going on and it's becoming increasingly difficult to make sense of it all. What's real, what's not, and the question we're all asking is, is this a bubble? I don't even know if that's the right question to ask. I'm trying to process all of this and one thing I know is that I don't have the answers. I don't know everything, I'm not a guru, I'm just trying to figure it out like the rest of us. I'm lucky I've had 30 years experience, but that doesn't make me more right or wrong than others. Our own perceptions can become our investment biases as well. Where, I don't like crypto therefore it's a bubble, or I don't like US equities because they are very expensive now, there're a bubble. But mostly, these things are shades of gray, and many reflexive trends which many identify as bubbles can go on for a lot longer than many of us imagine, or maybe were circular shifts. Those things happen to. I mean, we've got to make sense of all of this and we did talk about this in the past in one of the two week campaigns but has everything changed. But really, what's happened since then, is many more things have gone to extremes and I want to make sense of it. So what I want you to do is get two or so weeks of incredible content where we asked real amazing experts, some of the best in the world, whether it's Mark Cuban or Lacy Hunt, whoever it may be to come and talk to us how they're seeing this, what their perceptions are, what they think the bubbles are, what they think are the real opportunities, what's the signal and what's the noise. I mean, as you know, I did that piece recently on Real Vision where I explained my concerns about the speculative risk that I think is excessive in the US markets. I looked at this and saw the record speculation, auction activity, the record amount of volume on pink sheets, the most speculative stocks dwarfing anything of the past. We've seen a massive explosion of the rise of companies like Tesla, of P/E ratios that were unprecedented. But there again in the past, Amazon's traded off P/E ratios of 800 and it never really corrected, the business calls up. So I don't know how much is speculation, and how much is a true shift. How much is the game-changing? But I see it everywhere where we've got these record extremes, the future expected returns from equities by most people who use structural analysis to look at this, as negative 10 percent, negative five percent over the next 10 years. That concerns me that maybe it is a bubble. Maybe this is unsustainable, but within that, I think we're going to see a bifurcation, my favorite word as you know, the bifurcation of some things that harms, that these really are real trend changes. When we look back at the Wallstreet bets and I alluded to this in my piece recently, is that I think was a signal change and not noise. That was a signal change at the democratization of finance, something that we built Real Vision on the back off, and it feels that the average person is taking control of their finances in their lives. What does that mean? It can mean all things, it could mean broader participation in crypto markets which has a placement because the higher expected future returns. It could be that speculative activity just because of the sheer numbers of millennials entering the investment place, means that the numbers go up anyway because before, it was traditionally the baby boomers who were driving the activity, and now you just brought in another 80 million people into the investment world, so maybe evaluations change again on demographics. But we've also talked about what's the pensions industry when those baby boomers come out. Where did the asset price is clear between boomers and millennials. We're seeing it with housing now as more people start participating in the housing market again. These are things that often they take us by surprise, so the first reaction is to call it a bubble. Again, I don't really know, I do see risk, as I said before, I see a lot of risk in the US market because even if it's not a bubble, the speculative activities is just much placement, when mutual funds have no cash, the lowest cash they've ever had in history tells me there's no buffers in the market. Could that just create more volatility? Is the long volatility bet a bubble because there's a lot of people in that. Again, these things are interestingly crypto, we're looking at that, many of you have seen by now that I've been using stuff like Metcalfe's law to try and get an understanding of that because, again, with stock like Amazon and Facebook, everybody said they were bubbles stocks until they realized it was all about network adoption effects. Never [inaudible] I didn't value these correctly, maybe that's right with crypto, that's my personal view, and maybe that's right with the stock market alone. Could it be that it's a Metcalfe's law effect as this new generation comes into the market. Real estate, what does that all mean? You know real estate's come bat shake crazy in this environment, and that to me is something that is interesting. What happens if interest rates go up? Can all of these people suddenly afford this? I don't know, it's not clear. So these things are really of concern, but they're also a ponderance because I don't want to miss the signal from the noise by using mild biases, and also, there were certain things that are definitely not a bubble. We talked about this, I talked about this in the past which is stuff like emerging markets. They've underperformed developed markets for about 15 years now, is one of the longest divergences in history, and one of the largest. So far, developed markets there're a bubble and the baby boomer generation coming out, popular over time. It doesn't have to be a sharp fall. We've seen it in things like oil companies that over time, people just want to own less of them, and over time, they just underperform. That doesn't mean you have cyclical performance, but these things are really interesting because we're going to find the performance of that. Is ESG investing a bubble? Again, all I know is regulation is forcing more people into that. Whether it's in Europe and it's going to come in the US. More stimulus that's related to the green economy is going to put more money behind that. How big does that bubble get? Is it a bubble or does it actually have productive uses of capital that change society forever? I think it might be a mix of both, as it always is. Usually, there is something behind the narratives that create the reflexive loops that cause bubbles, and also to be real about it, is as George Soros has talked about in his book: Soros on Sorrows, it's that reflexivity as people build onto a narrative that is actually all powerful, and we can make a lot of money from investing in that. But my own biases, I'm terrified of the US stock market and I have been for a long time, and I've been wrong for them and shorted. I recently bought some puts, but that's about as scary as I'm going to get into, and I pick a top in that thing because I don't really want to because the reflective loop is huge, the money printing is massive, the new participants coming in is enormous, so I know it's a worry, but can that all be offset. That's why, that for me, I find Real Vision so valuable, and I first did this several years ago when I saw something going on in the oil markets and I didn't understand it. I reached out to Twitter and said, ''Give me the best experts on oil,'' and I did a whole bunch of programs picking their brains. Since then, it works super well because people who come with experiences that I don't have and perspectives I don't have, came on. So we try and do that periodically for Real Vision, and this whole idea we've got coming up is, can we get other people to figure this out? I've already done some of the interviews before doing this piece, and there's some really interesting stuff. There's the wide-eyed optimism of Silicon Valley and technologists. There's the pessimism of the value investor and the anti central banker. There is a narrative about modern monetary theory that it's going to create inflation and the world is going to blow up. I don't know, we've not done this before, but I'm not sure the answers are ever going to be black and white. That makes it even more important for all of us to sit down and try and pick up all of the narratives, and work out what works best for us. What are the risks? Because really bubbles are about, can I invest in them and make money? Is crypto on the middle of a bubble? Will it go much further? My view is, probably and yes. But the other thing is, is where do I have risks that I shouldn't have? For me it's the US equity market. But again, I can be dead wrong, but I'd rather allocate to something else. My big bet was the CryptoBet, and the CryptoBet, I said, it is the asset that's going to be the super black hole that sucks in all other asset performances, and to this day it's true. Ethereum was another bet of mine, and at time of recording this, bitcoin is up 30 percent on the year, but ethereum is up 120 percent on the year, and we've only just started February. It's extraordinary. There's no other asset, nothing, no commodity, nothing that has come close to any of this. That narrative as it builds, creates that reflective narrative. What it is in this, is finding out where we can make the best bets in a slightly risky, unclear world. The bubble of central banking is the narrative that almost all of us share. We can see it dwarfing most other macro factors these days. It makes it really difficult for those of us in macro to even use economic variables any longer. We need to think through those things, that are all part of this equation of understanding this framework. People like Lacy Hunt super useful to really find out how this all interconnects, and to try and get a combination of views within all of this too. We don't want just the one view, central bank printing is bad. It's bad from some perspectives and good from others. It's been good for the housing market. If you're in real estate, it's been great for you, and it's been good for your 401K portfolio, but it's been bad for your savings, in cash, and other things. It is a level of complexity that most people don't really know how to deal with, and nor do I, to be honest. That's why for me to do something like this, to get these people together really helps me. I've been through many booms and busts, and I've seen bubbles. I started my career in the bond bust, well, I started before that, but the bond bust in '94 was the first major event that I saw. That was also the Mexican crisis around that time where the emerging market bubble first popped. The next bubble that I dealt with was the 1998 and '97 Asian crisis that morphed into the long-term capital crisis. That was a huge bubble burst as excess capital had been allocated to countries that couldn't really afford to pay, and they had these peg currencies to the dollar. That was a massive deflationary wave that occurred roughly when China entered the WTO as well. The bubble of globalization happened that seems to be unwinding now in front of our eyes. The next bubble that came straight out of that, because again, the Federal Reserve jacked up everything into that and drew the line and said, "We can't have assets falling, and we can't have too big to falling either, so we're going to prop it up." That lead to a green flag to say, "Go for it, the equity market." What we saw was an enormous speculative bubble that came out of the tech stocks particularly, but equities overall. That also had a backdrop against the start of the indexation bubble as most of the big pension funds and asset allocators were able to use futures in their asset allocations to passive funds, and there was a lot of passive fund vehicles. That created that. The next bubble that was part of, was then the commodity bubble and the China bubble, which happened over the early phase of the 2000s. Everybody's eyes went to, where's the next big opportunity? It's China. China exploded. Anybody who sold anything to China exploded; copper, oil, anything, because there was a marginal new bar of some magnitude. In the end, I was writing pieces about the fact that the China miracle was driven on debt, and that there was going to be a payback. We've seen that within the Chinese economy and the performance of Chinese assets over time. They've not done as well as they were back then. It remains to be seen whether the end of that financial bubble gets popped or whether it's a slow workout, Japan style. Even though the Japan equity bubble fell, but then, the economic bubble and the debt bubble has been trying to be worked out over time. The bubble that came straight out of the China situation also was a domestic bubble in most economies, and that was property. Because people thought, "Well, interest rates are low forever, we can start buying properties on leverage." Leverage has been a feature of almost every bubble in history. We saw record leverage in the property market, and that bubble bust too when the debt markets couldn't stand up with all of the debt that was there, and then we had to pick apart the carcass of the financial system. The next part in the bubble? Well, I don't know, but social media has been a big part of it. The size of Facebook, and Google, and Amazon, and all of those new tech stocks have seen truly extraordinary returns. Are they the bubble? It's not clear, is it the passive bubble? That, possibly. Some people say that bond market is a bubble, and I didn't think of that because I don't see speculative activity in the bond market, all I saw is everybody fighting me every time I say I'm bullish bonds and I have been for 30 years. Everyone calls me an idiot and kindly say inflation is coming and it never comes. Maybe there's a bubbling inflation narratives. Maybe there's a bubble in the reflection trade right now, which is one of the things that I think is out there. Those bubbles are interesting. Then we can think of the world in the anti-bubble terms. I think crypto will become a bubble. But in anti-bubble terms, well, crypto is actually an antidote as well, which makes it very interesting to me. That's what makes it have this weird S curve that keeps going up but has these boom bust cycles. Gold is a clear anti-bubble. It's certainly not inner bubble, so anti-bubbles as Diego Parilla talks about, I think are really interesting things. Anti-bubbles are the long vole trade. But I remember the long tail risk trade as well that came out in, let's say, 2012, '13, '14, '15, and that blew up, and almost everybody had long tail risk blew up. But now, there's different types of long vole structures. Does that change the dynamics of those markets? Again, I don't really know, but I do think it's interesting. But I also know where there isn't a bubble. There is not a bubble in commodities, there might be a short-term bubble in the positioning of commodity prices. But commodities have been held down over an extended period of time as they've worked out the worst excesses of the last bubble. I think, gold miners and things like that are at the later phases of that. Other companies? I'm not so sure, not sure copper really got rid of it all. But we'll see, but that's interesting, to look forward to a future expecting returns. The same, I think is true as I said of emerging markets. But maybe I am wrong. Maybe there's a new trend change to inflation too. How do we play that? What does it mean for the valuation of SaaS stocks? What does it mean for the bond market? Again, I have more questions than I know the answers to. I'm with you guys on this journey of trying to figure this all out. I've got my own biases, I've got my own perspectives and where I think the opportunities lie. There'll be other opportunities coming along. I think one thing that people don't really think about is, everyone is in biotech and blah, blah, blah, but really pharmaceuticals, if you think you've got 76 million baby boomers in the US alone, and then you've got about the same again in Europe. The pharmaceutical sector is going to have an enormous amount of demand just from the aging population, and only has probably priced into regular pharmaceutical subs, ignore the vaccine thing, but it also shows how flexible and incredible these companies can be. That was as impressive as one of the technology companies creating an entirely new platform. This one's something truly amazing and how fast it's got done. How science and the pharmaceutical companies came together and scaled rapidly to solve a problem. That tells me maybe they're underpriced and there's something interesting within that too. Anyway, let's see where we get to over the next couple of weeks or so. Lets have some really interesting conversations, let's keep our minds open. Let's check our own biases at the door, and let's find out, is everything a bubble, or is that really even not the right question to ask at all? I hope you enjoy it, for getting both in the exchange, let's get some conversation going. Again, we've all got perspectives. Many of you in the exchange, for example, actually work in different industries, and you can add your perspective to this too. Because we don't know, but I do know that the hive mind, including our experts and all of you watching this, are going to help us discover what's really going on, where the opportunities lie, and where the risk lie. That's the best we can do. >> Hey there, since you got to the end, I'm guessing you liked the video. That's probably because we don't just turn on a camera and film, we work really hard on getting the narrative flow just right. That's why many finance companies are actually now hiring Real Vision to make videos for them. One of our recent client videos just hit 100,000 organic views on YouTube, and there were no kittens in site. If you want to find out how Real Vision can make a video for your company, just e-mail us @customvideo@realvision.com.