Transcription
Every financial bubble bursts, not some of them, not most of them, but all of them. And from the dot-com bubble to the housing bubble, they all follow the same pattern. Euphoria, denial, panic, and collapse.
But here's the thing about bubbles, they usually start with something real, something genuinely transformative. Railroads changed the world, the dot-com bubble changed the way we live our lives. But every bubble still ended in a crash, not because the technology wasn't revolutionary, but because the price that people were willing to pay had separated from what it could actually deliver on in a real timeline. And if you think, "Well, this time is any different," you're the exact person who needs to hear this message because the signs are all there and they're getting harder to ignore.
But here's the thing about bubbles, they feel amazing while you're in them, I'll give you that. Everyone seems richer, prices are going up, and everyone feels like a genius. But bubbles don't slowly pop, they burst suddenly and violently. While smart money has already exited, leaving everyday Americans holding the bag. But the good news is, while we know how bubbles end, we also know how they operate. And if you understand the stages of a bubble, then you too can protect yourself from what's coming next. So, let's get into it.
Now, I have used this chart before, but the timing could not be more perfect to use it again because this matters to you specifically. Whether or not you think you own one share of Nvidia, I can promise you that most of you out there have exposure through your retirement account, okay? The truth is a significant chunk of most people's retirement are exposed to a handful of companies whose valuations today are dependent on a near perfect execution. But, I'm skipping ahead. This isn't about what to buy, what to sell, it's about understanding a pattern that is repeated throughout history that you've lived through before, and understanding where we are today and what's coming next so you can make the best informed decision for your family.
All right, so every bubble starts with something new, okay? This is a shift or a breakthrough or something different is happening. This is when smart money enters, okay? Now, this is the stealth phase. Now, this period actually is very risky because nothing is proven at this point, right? Nothing is proven. So, maybe smart money has access to information that not everyone else does, but at this point in time, the media might not even be on their radar. If it is, they're going to poopoo it. They're going to say, "Don't even bother. Don't waste your time." Um, because it's worth nothing, right? Smart money knows better.
But, this moves us into stage two, institutional investors. This is where institutional investors get in and this is the awareness phase, okay? Now, once we reach this phase, this is when people start to take notice, all right? There's a little bit of an antenna going on there. So, you kind of have this takeoff that starts, all right? Because people are getting aware. It's not widespread, it's not ripping off, but things are happening, okay? Now, it is common to see a first sell-off happen here as again, there's more awareness built. Um, but after the bear trap, when things keep moving up, well, you better believe this is when the media gets on board.
But, the media attention, that changes everything as we know because once it's hit your TV screen, your social media, you can better believe that the public is going to be moving in at this point because they're going to bring with it a ton of enthusiasm. And why? Because things are going up. Who doesn't love things that go up, right? At this point, woohoo, we're on a ride. And this is what we call the mania phase. All right, so the media's talking about it, the public's aware of it, and things are good. People are enthusiastic, they're happy. Because they see something they think no one else sees, right? Or maybe they're in a club of people who all see the same thing. Their pockets are getting bigger, right? They see the numbers ticking up on the screen. So, this is a good exciting time for investors, okay?
But the problem is, and it doesn't always look just like a straight line up, right? There might be ups and downs here. Um but as that enthusiasm continues, you start to see greed. Now, greed is a tricky one, right? It's a sin, but not just that, it's not good for investing. What's that famous Warren Buffett quote? He says, "Be fearful when others are greedy and greedy when others are fearful." And that's good advice because once you see greed happen, this is when people start to lose their minds a little, right? They start leveraging their trades, they start putting in more than they said they were going to because they start to feel the sense that they're going to miss out because everything just keeps going up. And eventually that greed, well, what does it do? It gives way to a delusion, okay? A delusion that things are going up, they have been for so long that it's just going to keep going up. There's no way that this could ever go down. And to be honest, the way we've seen things with the stock market, if you ask me, this is where we are right now, right? There's this delusion or new paradigm.
And I'm going to pause here for a second. We're going to come back to this chart. Um, but I want to show you guys something because this is a very pivotal moment. This is when the actual fundamentals of what you're investing in no longer matter to most people, right, out there. Investors stop asking about a company and the fundamentals and its earnings and instead they just justify the valuations based on the fact that the stock's going up. So, the stock price itself is actually the proof that it deserves to keep going, that they should keep investing, not anything about what they're actually investing in.
All right. Now, we can all agree that AI is changing the world. There's no if, ands, or buts about it, but it's not the technology itself that's the problem. Are these companies actually making enough to justify the prices that investors are paying today? And again, we'll come back to this chart cuz there's more I want to show you on here, but look at this, right? This just came out. Alphabet as $205 billion spending plan fuels AI cost fear. Okay, so AI spending has increased and cash flow for many of these companies is starting to turn negative and the path to profitability could be more expensive and slower than many assumed. It's the same for OpenAI, right? OpenAI, which of course is in charge of ChatGPT, on pace to miss its own ad revenue forecast 90%? 90%? How is that possible? How do they miss it by so much? Right? Okay. Well, it says here ChatGPT's AI traffic share dropped from 87% to 65% as Gemini gains ground, making projections of chatbot ad dominance harder to justify. Okay, so it used to be here, right? We had just a couple of companies in this front race. Now, we have more competition. We have these data centers that are costing an arm and a leg. We have all this outflow of cash, and everyone's just blindly running ahead because it's a race. But in the meantime, is anyone stopping to ask, will this actually be profitable?
But if any of this sounds familiar, it should because this is exactly what happened during the dot-com bubble. There was a race to get in or miss out, but no one stopped to ask what actually is the end game. How do the profits come back to me? And everyone who thought, well, the internet's going to revolutionize the world, guess what? They were right. Anyone out there saying right now, AI's going to revolutionize the world, it already is. I'm not arguing that. I don't think anyone's arguing that. But back in 2000, the prices that investors were willing to pay, these astronomical prices, right? Even the best companies, they just couldn't keep up with those near-perfect expectations. And ultimately, we're seeing the exact same pattern unfold right now.
And you can think of it this way, another sign that we're in this delusion phase, right? Is that everyone you talk to seems to be an expert, whether it's the person at the grocery store you're talking to in line next to you, maybe it's your mailman, your Uber driver, whoever it might be. They're all telling you what to do with your money, what to invest, how much profit they've made. Everyone starts to think that they're an expert investor, and genius, that is a red flag. When people are getting into the action, right? When that FOMO is taking hold, that fear of missing out, that is when your antenna should go up, and you should be worried about what's coming next because that typically means that we are at the peak.
And there are other patterns emerging right now, too. In fact, it doesn't stop here. Um, Um, let's see. I saw that buying stocks with borrowed money reaches levels of past market tops, okay? Since Q4 of 2023, US margin debt or borrowed funds, right, to invest in stocks has skyrocketed almost 150%. Okay, that's since 2003 2023. 150% increase in the amount of borrowing that's being done to buy these stocks. We're talking about a lot of leverage here. All right, I have a chart here. This purple is the margin debt. Okay, and the turquoise or the steel is S&P 500. Right, look how high this is today, okay? And you can see that it kind of correlates, right, back in 2021, we have back here in 2007, right before the Great Financial Crisis, and then of course back here in 2000, right? Because again, why would these investors be taking on these massive amounts of debt? Leveraging their trades because at the end of the day they believe it's going to just go up up up up up, okay? This kind of debt hasn't been seen since past market tops. So, when it all comes crashing down, the fallout is going to be so much worse. But again, this is a signal that what we're seeing today is not sustainable growth based on fundamentals, it's based on speculation and hype.
So, let's go back to the four stages of a bubble, okay? Because we left off right around here. This delusion and new paradigm. Now, new paradigm basically means this time is different. And if you're someone out there watching and you think this time is different, tell me why you think this time is different in the comments below. I want to hear from you. Tell me why this time is different. If you don't think it's different, also tell me why in the comments below. What else am I missing? What else are you seeing out there that's telling you this is history repeating its pattern. Okay? Because ultimately, a new paradigm, what we're seeing here, is that every bubble convinces people that this time is different. But what story are you being sold? Is it speculation or real growth? Are the profits, right, it's actually matching the speculation that's being told? Okay? Because today, the stock market is so concentrated. And that's why I said, anyone out there with a retirement, you're probably at risk of what's coming next, too. Because this new normal is not a new normal. I hate to burst your bubble here. Um, but some would say, you know, this is where we are, up at the top. I don't know. I don't know if we're still in this delusion or new paradigm. You know, some people are questioning a little bit, but there's still many people out there, and we can tell, again, by the amount of debt that's flooding into this market right now, you know, leveraging everything to get in on it, that they think it's just going to keep going up. But what comes up must come down.
Here's the thing, though. When it reaches this point, right, this delusion and paradigm, again, you'll see smart money having already exited. You look at Warren Buffett with his massive cash pile, right? We're starting to see more people exit, or at least warn about being over leveraged, or about potentially diversifying more. Why is that starting? Because, again, people who have gone through it before understand, although I say that a lot of people have short-term memory loss, right? You just focus on what's in front of you. But again, when you hit this phase, what happens next? It starts to turn. And eventually, or at first, there's going to be denial. People are going to say, "Well, this is just temporary, right? This is This is not part of the new normal. We already know where it's going next." This is denial. And sure, there'll be a bull trap, right? And suddenly everyone goes, "Oh, okay, good. We're back to where we thought we were." Okay? We thought that we were in the new normal, we're back on track. Not so fast. Not so fast.
This is when things happen, and they happen fast, you guys. That's what I'm saying about bubbles bursting fast. There is no soft landing, okay? People are going to be scared, but they're going to hold on because they're still delusional. They're still thinking it's going up, okay? And as everything just drops, drops, drops, drops, drops, eventually you get despair, right? Because you've lost it all. You went from the highest high to the lowest low. And at this point, there's there's just nothing that you can do. You'll lose your savings, you'll lose your retirement. Um poof, gone. And when this despair hits, it's going to be hard. And eventually there will be a market correction, right? Back to what it really was. Back to what was once considered unbreakable, broke, right? And then rebalances. This is history. This isn't just something made up, right? This is the same playbook we see over and over and over again.
And it's the reason why timing is so important because people ask me, "Well, Taylor, don't you want to make a profit?" Of course. Who doesn't want to make a profit? I'm not sitting here saying, "Don't make a profit." But at the end of the day, if you're going to gamble, if you're going to risk something as important as your retirement, right? Just make sure you are protected outside of it as well. You know, don't put all of your eggs in one basket, especially when history repeats itself. I'm not a financial advisor, so I'm not here to tell you what to do. All I can say is that again, if you study these patterns throughout history and you understand the same parallels that are happening today, just make sure that you have that insurance policy outside of the system because when this comes crashing down, and it will, cuz we know it will, right? It always does. This pattern repeats. When it comes crashing down, make sure you're protected outside of the system because everything's going down with this, right?
Now, for me personally, if you ask me, "Well, what does that mean? What's being protected outside of the system?" Right? For me, it's physical gold and silver. Right, having a tangible asset, true money, true wealth outside of the system. It's not reliant on counterparty risk, on all of these companies, or competition from China, or made-up, propped-up valuations, or speculation and hype. It's based on thousands of years as a true money and a true store of value. Now, that's what lets me sleep well at night. And again, I'm not telling you what to do. I'm not saying you have to take everything out. I'm just saying that if you're worried about this, it might be time to talk to someone who understands these cycles, understands these patterns, and can help you position for what's coming next.
Now, our team here at ITM Trading has been helping people for 30 years. Again, I sleep well at night knowing I'm protected. So, if you want that same peace of mind, highly, highly recommend that you give us a call at the number below. You could set up a time to talk to one of our expert analysts down below by clicking the Calendly link and picking a time that works best for you. Um but if you do call us, I can promise you this, you are going to talk to a real person on the other end. Someone again who has dedicated their lives to helping people just like you prepare for what's coming next. So, if this was a wake-up call for you, or if this would be helpful for any of your loved ones, please share. It helps get the message out. It will help protect more people. And in the meantime, thank you so much for being here. I'm Taylor Kenney with ITM Trading, [music] your trusted source for all things gold, silver, and lifelong wealth protection. Until next time.