Transcription
OKAY. BACK TO YOU, RICK.
>> THANK YOU. APPRECIATE IT VERY MUCH. RICK'S TALKING ABOUT THE ECONOMY COOKING WITH GREASE. OUR NEXT GUEST IS A LEGEND. HE'S GOT A LONG HISTORY OF CALLING BUBBLES. AND I THINK YOU'RE WORRIED ABOUT ALL THAT GREASE. MAYBE WE'LL SEE. JEREMY GRANTHAM IS HERE. HE'S THE CO-FOUNDER AND LONG-TERM INVESTMENT STRATEGIST OF G.M.O. AND ASSET MANAGEMENT FIRM, WITH $85 BILLION IN ASSETS UNDER MANAGEMENT. AND HE IS THE AUTHOR OF "MAKING OF A PERMA BEAR: THE PERILS OF LONG-TERM INVESTING IN A SHORT-TERM WORLD." AND WE'RE THRILLED TO HAVE YOU AT THE TABLE THIS MORNING.
>> GOOD MORNING. TO BE HERE. SO WE'RE COOKING WITH GAS, APPARENTLY, OR WITH GREASE. AND THE QUESTION IS, ARE WE IN A BUBBLE? ARE WE NOT IN A BUBBLE? ARE WE ALWAYS IN A BUBBLE? AND HOW MUCH OF THIS IS ABOUT BEING ABLE TO CALL THE TIMING VERSUS BEING ABLE TO ACTUALLY UNDERSTAND THE UNDERLYING ECONOMICS AT PLAY?
>> OKAY. WE NEEDED A DEFINITION OF A BUBBLE. SO WE FOUND A VERY PRECISE ONE, A NERDY STATISTICAL TERM, TWO SIGMA, THE KIND THAT WOULD COME UP EVERY 44 YEARS IF IT WAS COMPLETELY RANDOM. AND ACTUALLY, IT COMES UP EVERY 36 YEARS. SO IT'S PRETTY CLOSE. AND WE TRACKED THROUGH AND FOUND ALL THE BUBBLES THAT MET THAT DEFINITION. AND WE ASKED THE QUESTION, HOW MANY BROKE ALL THE WAY BACK TO THE PRE-EXISTING TREND? AND THERE WERE 26 OF THEM, AND 26 BROKE ALL THE WAY BACK TO THE PRE-EXISTING TREND. AND SOME OF THEM WENT UP FROM TWO SIGMA TO TWO AND A HALF SIGMA. AND IN THE CASE OF JAPAN, ALMOST THREE SIGMA. SO THEY CAN BE PAINFULLY HIGHER THAN JUST TWO SIGMA. AND THAT'S THE PROBLEM BECAUSE THE CLIENT'S PATIENCE IS NOT QUITE AS LONG.
>> SO I APPRECIATE THE PROBLEM OF CALLING IT, OF CALLING IT. BUT THE OTHER PROBLEM IS THAT IT HAS PAID SHOCKINGLY WELL TO BE A PERMA-BULL OVER THE LAST HUNDRED YEARS, MORE THAN IT HAS PAID TO BE A PERMA-BEAR.
>> OH, OF COURSE. WE LIVE IN A RISING ECONOMY IN THE LONG RUN. BUT HALF THE TIME YOU'RE WAITING TO GET BACK TO THE OLD HIGH. PEOPLE DON'T REALIZE THAT BECAUSE WE'VE JUST SPENT THE LAST, WHATEVER IT IS, 16 YEARS GOING UP. BUT IN THE LONG RUN, IT'S HALF THE TIME. AFTER 1929, YOU HAVE TO WAIT UNTIL 1954. AFTER 1972, YOU HAVE TO WAIT UNTIL '80, '80. A LONG TIME.
>> '81 OR?
>> '82. '81 OR '82. AND SO. SO WHERE ARE WE NOW, THEN? WHAT'S THE, WHAT'S THE COMPARABLE TO YOU?
>> IN A VERY REAL SENSE, I'M NOT SURE THERE IS A COMPARABLE. BUT THE TECH BUBBLE OF 2000 WOULD COME THE CLOSEST ON THE WAYS THAT ARE THE VALUE SYSTEMS THAT ARE MOST PREDICTIVE BASED ON THE VALUE OF THE STOCK MARKET COMPARED TO THE GDP WITH WITH MODIFICATIONS. THIS IS THE MOST EXPENSIVE MARKET IN AMERICAN HISTORY.
>> AND IF IT'S THE MOST EXPENSIVE MARKET IN AMERICAN HISTORY, DOES THAT MEAN THAT IT'S OVERVALUED AND HAS TO GO DOWN FROM HERE, OR IS IT POSSIBLE THAT IT COULD CONTINUE TO GO UP FOR MANY MORE YEARS?
>> MY GUESS IS SOMETIME BETWEEN TWO WEEKS AGO, TWO WEEKS FROM NOW, TWO MONTHS, TWO QUARTERS, AND CONCEIVABLY TWO YEARS. THE TIMING IS ALWAYS TERRIBLY UNCERTAIN. THE MARKET'S GOING TO PEAK OUT AND DROP BACK TO TREND. AND GETTING BACK TO TREND FROM HERE IS A CLOSER TO A 70% DECLINE THAN A 50%.
>> A 70% DECLINE YOU THINK IS IN ORDER?
>> YES, I DO. AND BEAR IN MIND, WE SAID A 70, 75% DECLINE FOR THE NASDAQ IN 2000 IN OUR QUARTERLY LETTERS, AND THEY WENT DOWN 82.
>> WHAT WAS IN 2021 AND 2022? WHAT WAS YOUR SUPER BUBBLE CALL? AND THAT PREDICTED AN IMMINENT CATASTROPHE CRASH ACROSS STOCKS, BONDS, REAL ESTATE, COMMODITIES AND STOCKS. AND YOU HAD ANOTHER ONE IN 2023, ANOTHER COLLAPSE PREDICTION.
>> NO, NO, NO.
>> BUT HOW ABOUT HOW ABOUT IN.
>> 2021 WAS A SUPER BUBBLE. THE ONLY TWO TIMES I CLEARLY SAID IT'S NOW. THE OTHER TIMES I SAID IT'S OVERPRICED. THE 21ST CENTURY HAS BEEN OVERPRICED BY THE STANDARDS OF THE 20TH CENTURY. 100 YEARS OF DATA, WE'VE BEEN OVERPRICED.
>> BUT IS THERE ANY ARGUMENT AROUND? I WAS GOING TO MAKE AN ARGUMENT AROUND A TECHNOLOGY.
>> OR 2010. BUT THROUGH THROUGH THE 2010S, WERE YOU EVER BULLISH THROUGH THAT ENTIRE PERIOD?
>> 2009? ALMOST THERE. I POSTED MY ONLY ONE-PAGER CALLED "REINVESTING WHEN TERRIFIED."
>> BUT MOST OF.
>> THE TIME.
>> BUT IT WAS A BIG, BIG BULL MARKET. 2010, 2010 TO '20. 2666. OKAY.
>> BUT NOBODY ELSE, BY THE WAY, WAS TOUTING THE MARKET.
>> OKAY.
>> THAT WEEK, THAT MONTH.
>> BUT THROUGH 2010, A HUGE BULL MARKET TO 210 TO 220.
>> FROM 2010 UNTIL TODAY, THE P/E HAS AVERAGED OVER 60% HIGHER THAN IT DID FOR THE PRIOR 100 YEARS. NOW, I DON'T KNOW WHEN YOU DECIDE TO SAY THE MARKET IS OVERVALUED, BUT IF YOU'RE TRAVELING AT 60% HIGHER P/E THAN IT USED TO BE, I THINK THAT IT DOESN'T SAY THE MARKET'S GOING TO COLLAPSE, BUT IT DOES INDICATE IT'S EXPENSIVE.
>> WELL, THAT WAS MY, BUT MY QUESTION, THIS GOES TO THE TECHNOLOGY PIECE OF IT. AND I THINK WE'RE AT THIS MOMENT NOW WITH AI WHERE EVERYBODY'S, YOU KNOW, ASKING THE QUESTION, WHICH IS THE MOST DANGEROUS WORDS IN IN ECONOMICS? IS THIS TIME DIFFERENT? YOU TALK ABOUT A 60 TIMES P/E. ARE WE IN A.
>> SITUATION 60%.
>> HIGHER. 60% HIGHER P/E. ARE WE IN A, IN A, IN A MOMENT NOW, THOUGH, WHERE THE TECHNOLOGY FUNDAMENTALLY IS DIFFERENT AND IT FUNDAMENTALLY IS GOING TO REWRITE THE RULES OF INVESTING AND VALUATIONS AND EVERYTHING ELSE?
>> THE GREAT NEW INVENTIONS, RAILROADS ARE ALWAYS ACCOMPANIED BY, "IT'S GOING TO REWRITE THE RULES." INTERNET, A HUGE INVENTION, CHANGED EVERYBODY'S LIFE. THEY WERE ALWAYS ACCOMPANIED BY OVERINVESTMENT AND TEMPORARY COLLAPSE, OUT OF WHICH THE RAILROADS CHANGED THE WORLD. THE INTERNET CHANGES THE WORLD. THIS IS EXACTLY THE CASE TODAY. AI IS SO OBVIOUSLY A DAZZLINGLY IMPORTANT IDEA. EVERYBODY KNOWS IT, DON'T THEY? YEAH. WE ALL KNOW IT. AND THEREFORE, WE ALL WANT TO PUT OUR MONEY IN IT, DON'T WE? SO WE ALL PUT OUR MONEY IN IT. AND IT SUCKS IN MORE THAN YOU CAN SHAKE A STICK AT, AND YOU GET OVERINVESTMENT. SO EVERYONE IN THE END, IN THOSE SITUATIONS, LOSES THEIR SHIRT. THEY LOST THEIR SHIRTS IN THE RAILROAD. BRILLIANT IDEA. THEY LOST THEIR SHIRTS IN THE INTERNET. THESE ARE THE THREE GREAT IDEAS OF THE LAST 200 YEARS. AND THEY WILL LOSE THEIR SHIRTS IN THE AI. NOW, OUT OF THAT, BEAR IN MIND THAT AMAZON IN 2000 CAME DOWN 92%. IT HAD GONE UP SIX TIMES. IT CAME DOWN 92% AND THEN INHERITED THE EARTH. WELL, SO WHAT I WAS GOING TO ASK.
>> IS, YOU KNOW, I'D ASKED JEFF BEZOS ABOUT WHETHER WE WERE IN A, IN A BUBBLE WHEN I SAW HIM AND INTERVIEWED HIM ON THIS BROADCAST JUST A COUPLE OF WEEKS, MAYBE A MONTH AGO NOW. AND HE SAID WE MIGHT BE IN A BUBBLE, BUT ACTUALLY THAT BUBBLES UNTO THEMSELVES WHEN YOU THINK ABOUT SORT OF GREAT INNOVATION AND GREAT PROGRESS, EVEN FOR HUMANITY.
>> YEAH.
>> IS REQUIRED.
>> THINK OF THE FIBER OPTIC CABLE THAT GOT LAID. IT RUINED EVERYONE AT THE TIME, BACK IN 2000. BUT WE USED EVENTUALLY, WE USED ALL THAT CABLE. THE TROUBLE IS, BY THE WAY, THAT FIBER OPTIC CABLE WOULD LAST A LONG TIME. CHIPS TODAY MAY BE REDUNDANT IN TWO YEARS. SO YOU THINK.
>> YOU THINK THERE'S ACTUALLY A BIG DISTINCTION? I DO. BETWEEN SOME OF THE INVESTMENTS THAT WERE MADE THEN. AND, YOU KNOW, WE WERE TALKING WHEN I WAS TALKING TO JEFF, WHO WAS ABOUT BIOTECHNOLOGY AND ACTUALLY A LOT OF STUFF THAT ACTUALLY, YOU KNOW, THERE'S THAT BIOTECH BUBBLE AND BUT A LOT OF GREAT THINGS CAME OUT OF IT. DO YOU THINK LESS GREAT THINGS ARE ULTIMATELY GOING TO COME OUT OF THIS SORT OF DATA CENTER.
>> NO, I THINK. BUILD OUT. THIS IS GOING TO CHANGE EVERYONE'S LIFE. THE DISAGREEMENT IN OPINION IS MORE PROFOUND THAN I'VE SEEN IN ANY OTHER ANYTHING IN THE STOCK MARKET EVER, REALLY. THE NOBEL PRIZE WINNERS DISAGREE. THE BOSSES DISAGREE. THE WORKER BEES DISAGREE.