Transcription
Welcome to the "Finance Recap" program. We hope everyone will give a like and subscribe to thank you for your support. Recently, US stocks, benefiting from the AI wave, can be said to be completely unable to fall. Since the beginning of this year, the S&P 500 has already risen by 8.4%, and the Nasdaq has risen by 16%. While everyone is watching memory chip giants Micron and SK Hynix reach new highs, more and more experts are warning that US stocks have peaked and are even describing it as the biggest financial bubble, about to burst. The scale of the collapse is comparable to the Great Depression of 1929. Among them, Michael Burry, a prototype from the movie "The Big Short," warned that after tech stocks reach unsustainable heights, they will face a reversal. He mentioned that the market now resembles the peak of the dot-com bubble burst in 2000, especially with tech stocks having risen sharply by 70% by the end of March. His calculation shows that the current price-to-earnings ratio is 43 times, higher than the reasonable level of 30 times. This is because the earnings of the fastest-growing and highest-valued companies have increased by 50%. He said that what we are witnessing now is usually not a good thing in the stock market. He described the current situation as the last few minutes before a bloody car crash. He said history tells us that even if the frenzy continues for another week, a month, three months, or even a year, the ultimate result will be a sharp decline in prices. We are now entering an extremely rare phase, where the extremity will bring unavoidable consequences. There is nowhere to escape. However, he advises not to short sell, because the valuations are too high, and the timing is not right, which will lead to losses. He suggests that investors take profits recently, reduce overall exposure, especially in tech stocks. Michael Burry is most famous for accurately predicting the financial crisis and making a profit of 5.4 billion Hong Kong dollars. In 2023, he often made big bets. He proposed shorting AI concept stocks, but the S&P 500 kept hitting new highs. Previously, he bought QQQ, NVIDIA, and IS. The results are known to everyone, so many people often feel that he is crazy when he speaks out, but he is just issuing warnings to the market. He is not the only one. Economist Henrik Zeberg is another expert issuing warnings. He said that US stocks are approaching what he believes to be the largest financial bubble in history, about to burst. If you cannot see this market bubble, then economics, finance, and investment are clearly not suitable for you. This market is in the midst of the largest bubble and is about to collapse. It is even more severe than the Great Depression of 1929, with the most serious economic recession and collapse. He uses indicators to support his discussion. The Buffett Indicator, which compares the total market value of the US stock market to GDP to measure whether the market is overheated or experiencing speculative bubbles, is currently at 173%, which is 75 percentage points higher than the long-term trend. Henrik Zeberg said that current stock price levels exceed those of the dot-com bubble and the post-rebound period. He believes that investors who are creating this bubble are simply ignoring the obvious signs in the financial market. The global market is approaching the final stage of a decade-long bull market cycle, after which it will face the most severe decline in decades. However, it may not happen all at once. He predicts that the stock market may continue to hit new highs, with the S&P 500 potentially reaching 8000 to 8200 points before a major decline. He believes that the current high stock market is driven by excessive liquidity and investor optimism. While corporate earnings and employment growth are slowing, they are still a drag on economic fundamentals. Therefore, investors must diversify their risks. If you want to achieve stable growth amidst market fluctuations, you should pay attention to the sponsor of this video. They manage over 10 billion US dollars in assets and hold licenses in three major financial markets in Asia. Among them, fixed-rate savings, which are very popular among Hong Kong citizens, are a very low-risk fixed-interest investment, offering up to 3.65%. If you like receiving interest regularly, then the flexible savings plan with daily payouts is perfect for you. If you want to maximize your returns, J.P. Morgan Chase offers target clients a dividend yield of 8% to 10%. Currently, with the 730 promotion, opening an account and depositing funds can also get a bonus of up to 2500 yuan. Similar to Michael Burry and Henrik Zeberg, prominent investor Jeremy Grantham also recently warned in an interview that the US is currently in its largest bubble in history. He said that the momentum driven by the AI craze has pushed the market to unprecedented extreme levels, even surpassing the peak of the dot-com bubble. He believes that the eventual crash will be equally severe, comparable to the Great Depression of 1929. While AI has the potential to revolutionize industries, investors are too focused on AI and ignoring potential structural risks. He analyzes that the current market rally is driven by liquidity, but even high-quality companies will experience significant declines due to overvaluation during a major economic adjustment. He recalls that during the dot-com bubble burst, the Nasdaq fell by 92%. However, he also believes that we are not yet in the final stage. According to his experience, a typical sign of a bubble peak is when investors shift their funds from high-growth stocks to safer, more traditional assets like Coca-Cola and defensive stocks. When this begins to happen, then we should be worried. Finally, he reminds investors that large financial institutions rely on customer deposits for investment and rarely issue warnings proactively, knowing that investors will miss the opportunity to exit. In fact, Ray Dalio, the founder of hedge fund Bridgewater, has also said that the US will enter a period of great turmoil in the next few years. The expansion of the balance sheet, wealth inequality, and political polarization, coupled with the impact of AI, will exacerbate turmoil. The world will change beyond recognition. He advises investors to diversify their portfolios and allocate 5% to 15% to gold. Even Warren Buffett, the "Oracle of Omaha," recently said in an interview that the speculative frenzy in the market has reached its peak, and he has 380 billion US dollars in cash that he is not investing because market prices are too high and there is nothing to buy. Returning to Hong Kong, the market has also been active in the past year. First, in the second half of last year, they acquired a UK car rental business, then in February this year, they acquired UK electricity grid assets, and this month, they acquired a 49% stake in a UK water company, totaling 167.2 billion yuan in cash. Both major conglomerates have significantly reduced their assets and accumulated cash. Could this be a premonition that a global financial crisis is imminent? If you enjoyed this discussion, remember to give a like and subscribe to "Finance Recap" again.