You Need To Hear THIS Before The Market Breaks

This guy's about to destroy everything you think you know about investing in this economy. Let's take a look. >> What advice do you give for the average person that's looking to invest their salary or [music] their wages? >> Don't own US stocks as a simple strategy that you can act on. >> What about S&P 500? >> No. Really? Yeah. And if you have a big position in [music] US technology stock, my personal advice would be to sell them all. >> But I'm an investor. >> Good luck. SpaceX is such a fabulous DS story and we can go into that >> crypto. >> No. Why? >> It's an unnecessary piece of nonsense that facilitates nothing except criminals moving money so they can't be seen. >> Do you think Bitcoin's going to go to zero? >> Yes, it will certainly go to zero. >> So, how many years have you spent investing? >> 60 years. >> And what's the most amount of money you've ever managed of other people's money? >> 165 billion. >> And one of the things you're famous for talking about is this idea of bubbles. >> Yes. [music] And bubbles always occur around the very most important ideas. So, the railroads, everyone could see that it would change the world. The same with the internet. and everyone wanted to put their money in and so they overinvested. But this is the problem. [music] Eventually they lost. And if you look at the great bubbles breaking of the past, you find that it's followed by really tough times, a miserable period for the economy. And the bigger the bubble, the bigger the bust. And now we're in the biggest investment bubble that arguably has ever occurred. A >> right about that. Are we on the verge of a collapse with AI over the coming years? >> The next few days, the next few weeks, the next few months, but certainly the next few years. So if you're not someone that has a huge amount of savings, what kind of strategy should they be adopting when an economy starts to get bad [music] and there's an economic bubble collapse? >> So I would go through everything, but you will not receive this advice from investment advisers because they'll lose a lot of business. >> Would you be thinking about the country you live in at this moment in time? >> Absolutely. >> Is there any countries you wouldn't live in? >> I think I have to refuse to answer this on the grounds that it might tend to incriminate me. >> Oh, okay. So you're saying don't live in the United States. I've just moved here. Why not the United States? >> I can't wait to hear his answer on that one. >> Jeremy Grantham, your firm managed up to $165 billion at its peak, what we call aum, assets under management. So, you know a lot about money. You know a lot about investing. How do you sort of self-define your expertise? Because you traverse so many different subjects through your work. If I said to you >> before he answers that, one thing that people need to think about when you're looking at somebody like a Radalio or Grantham is understanding that when you have a massive team of researchers and you have access to deals that other people aren't going to get, if they're giving you the advice that they would follow, as long as it's the advice they would follow in your position, it can be useful. And that's one of the things I've always found interesting about Ray Dalio is he talks about this all-weather fund. As far as I know, the all-weather fund was him trying to answer that question for his own loved ones that weren't in his fund, but he wanted to give them something that would work all the time. Or it may have just been a thought exercise for people that ask him all the time. And he's saying, "Listen, if I were advising people that I know and love, this is what I would say, knowing that that person's not going to be an active trader, knowing that they don't have fiber optic cable that can make transactions, you know, where shaving off a millisecond matters. Um, so it'll be interesting to see if he calculates for that as he goes. >> You know, how do you introduce yourself professionally? What is the answer? >> I can't think I ever do introduce myself professionally, >> but I think of myself as specializing in a longer term horizon >> than most people and trying to look at a higher and higher level of abstraction. What is really going on here? >> And what are people missing? >> I've discovered over decades that humans are incredibly short-term oriented. >> Yes, they are. and they have an enormous predisposition to optimism. >> They're looking for optimistic new. >> I don't know that I would say that it's optimism. I think that there are certainly certain people that are hyper optimistic. But I think a lot of people are uh something that people often round to euphoric. What I'll say is they're emotional. And so when there's a lot of hype that feels like I feel excitement, therefore because I feel it, it must be real. This is a sure thing. I got to get in. And they go weigh in. all they're looking to avoid unpleasantness. The idea that you can have steady compound growth is ridiculous. One of my few heroes, Kenneth Baldinger, an economist, he said, "The only people who think you can have compound growth on a finite planet are madmen and economists, [laughter] >> which is so accurate. >> I like this. >> Economists simply believe you can have growth always. And everything comes down to just price. The reason that you're never going to have growth all the time and the thing that most people do not take into consideration when they're thinking about projecting forward what's going to happen in the economy is how emotional and irrational people are. >> One of the things you're famous for talking about is this idea of bubbles and we're living in a moment where everybody's talking about the subject of artificial intelligence and everyone's getting very excited by it. Some people are getting very pessimistic about the impact it will have on society. I wanted to start there because it's it's an area where there is rife optimism on one side of things. Um, but there's also a lot of money plowing into the market which is I think I really do think optimism is the wrong level of analysis. I think they're groping for something that's true but the real standin is humans navigate the world based on an emotion. When there is a contagion happening in culture that says this thing is a sure bet. You understand it now. you get it. You're on the inside. Uh, make a move fast. This thing is really going to happen. All your friends are telling you it's going to happen. You sit back, you watch it, you see it's happening. Maybe you see somebody get rich and then it's that emotion that captures people. I don't think that by default people are are positive because if pessimism is the thing that grabs a hold of people, then you'll see the entire herd run in a scared direction, which is exactly what happens in a recession. Look at Japan. So, Japan has the bubble burst in like 1989, 1990. And even after that, as much as the government tried to create inflation, they couldn't create inflation because everybody was so convinced that they could get burned again, they just wanted to pull back, pull back, pull back, and that stuck with them for 40 years. So, I don't think that's the Japanese being somehow uniquely pessimistic. I think that when a social contagion happens, you need something that breaks people out of that. And the thing that breaks people out of the social contagion of that excitement, oh my god, AI is going to work. This is going to be incredible will only be a lot of people losing a lot of money really fast and then boom, people are snapped out of it. And it's not like in that moment their fundamental character ceases to be what they're calling optimistic. I just think they're confusing optimism for emotional contagion. >> What's your view on artificial intelligence? Well, you said you're good at understanding what people are missing. What is it that people are missing? Well, first of all, let me say I think artificial intelligence is right up there with the railroads. It's one of the defining great ideas of the last couple hundred years. >> Agreed. >> It's going to change everything. And that is critical. If you if you mean to have a bubble, people think that a bubble is a mainly because it's a scam and nothing could be further from the truth. The great bubbles always occur around the very most important ideas. >> This is really important. So I think the problem that people are having when they look at AI is they want it to be a debate about whether AI is going to end up being real or not. And so even the people that are going allin, they're going all in because they think the thesis that they need to bet against in the um marketplace is that oh these dumb asses that are saying, you know, I'm I'm betting against this or it's over inflated. They think what they're saying is that AI isn't going to be real. What Grantham is saying, and I think that this is brilliant, and people have really got to burn this into their nervous system, is he's saying the bubble is going to form specifically around something that is real. And what ends up becoming a question of is this game of chicken that people play between the debt that you have to take on in order to build out the infrastructure and it's staggeringly large on AI and then when is the revenue going to come in because the euphoria in the markets will kick in a lot faster than the revenue from actual people adopting the technology. >> One could see that it would change the world and everyone wanted to put their money in and everybody put their money in. They overinvested and even though the railroads were a spectacularly powerful idea, >> uh the railroads uh >> and not just a powerful idea, they end up being everybody lost a ton of dough. >> The same with the internet. >> Okay, the I'm I'll assume that he's going to get to this, but the actual pattern that plays out is you wipe out the early investors and then the later investors do end up winning massively. And that's what you see over and over. If you guys aren't looking at your screen, you should. It's so interesting to see these bubbles rise and then fall, but then they rise. And so what they're mapping here, and this is I think how people think of it, which is a mistake. What they're mapping here is going from bubble to bubble to bubble instead of tracking the technology. So think about the internet. So they show the bubble rise, they show the bubble fall, but they're not mapping their the rise of companies like Google that end up generating freakish amounts of wealth or Amazon generating freakish amounts of wealth, but all after they wipe out that first phase of investors. And so that's the thing I'm screaming at people to try to get them to understand about what's going on in AI is predicting the timing is going to be brutally difficult. He's already said uh could be in a couple days, could be in a couple months, uh certainly going to be in a couple years. The problem is the difference in there is the difference between getting the timing right and making a fortune and getting the timing wrong and missing the window. So this is why also hold in your head he's talking about I invest for the long term. That is going to be very very important. He hasn't said it yet but I think hiding behind this stuff is um I I think he would fully acknowledge that retail investors tend to buy high and sell low. That speaks to my contagion theory, which is in the excitement. People are going to buy because it seems like it's going to go up forever. They don't understand that it may go up significantly from the high of the bubble, but it's going to crash first and then build slowly over time as real companies are built on the back of the new technology. And so understanding that people panic when the price drops because in their excitement they come in on debt and it's the debt that ends up biting them in the ass because they either get liquidated because they were just way out over their skis or they didn't go in on debt but they still needed a return on that money like they're like I can put it in the market for a year but I can't do more than that. If you put your money in the market for, let's say, 20 years, then you don't have to worry. There in the US stock market, there has never been a 20-year period, including the Great Depression, where you would not have come out if you were broad, uh, enough. You you would have come out ahead, even at the if you bought in at the height of the depression and followed the crash all the way down. But you have to hold and almost nobody can because they couldn't afford it or does because they emotionally panic and sell everything off. And then out of the wreckage, the railroads changed the world and and the internet changed the world. What we have to remember is that in 99, Amazon went up six or seven times. In the crash, in the tech bubble, it went down 92%. >> As I like to say, check it. It's such a remarkably large number. And then out of the wreckage, it inherited the retail world. And u that's that's how it works. The greater the idea, the more obvious the idea, the more money goes in and the bigger the bubble and the bigger the bus. >> Now, here's the thing. I'll be interested to see if he ends up touching on this. The reason that something becomes a bubble is that the excitement, that emotional contagion ends up convincing people that fundamentals don't matter anymore. And I will just say the fundamentals always matter. And so when you start seeing, and I assume they're going to touch on this with SpaceX, when you start seeing that something is just getting way untethered from the fundamentals, that's what they mean, that we're in a bubble. It's not that one day that even that company like Amazon won't be worth more than it is at the height of the bubble. It's just that it isn't yet worth that. It will be one day and the investors can see that and they've gotten swept up in the excitement and so they put their money in according to that. But if the revenues don't match, then some very substantive number of those companies because they don't have the revenue coming in, but they almost certainly have the debt, they're not going to be able to survive and get to the other side of this. And the reason that Amazon could survive a 92% draw down on its share price is because it had real revenue. And the revenue was growing. We'll get back to the show in a second, but first, let's talk about AI video creation. I'm sure you've seen the demos. A 5-second clip of a robot walking through a city. It looks cool. A quick shot of a product spinning in midair. [music] All looks amazing for all of the 9 seconds. But you can't promote a business in 9 [music] seconds. Can't explain a product or build trust or deliver even a call to action in a highlight reel. You need 60, 90 seconds of coherent content, a hook, a message, a payoff where the visuals actually match what you're saying from start to finish. And that's where most AI video tools just fall apart. But not Asian Opus by Opus Clip. My team has been using Asian Opus and we have been very impressed. You give it a script or audio file, upload your brand assets, logo, product shots, characters, things like that. Lock in your visual style and it produces a fulllength animated video that holds together the entire way through [music] and the output is ready to publish. Not ready to demo, ready to post. Check out Agent Opus at agent.opus. [music] opus.pro/explore. Now, let's get back to the show. >> When I say verge, I mean over the coming years. >> If you look at the data, it would be compatible with history for the peak to be very soon. Everything is in line. This is, I think, the biggest investment bubble in American history. The indicators of pure crazy euphoria like SpaceX are all over the place. SpaceX defines as its addressable market a quarter of the global GDP. It talks about endless opportunities mining asteroids. It will be in 50 years people in a 100 years people will look back and tell stories about SpaceX and its prospectus like they tell stories about the South Sea bubble. You know an enterprise of such enormous value but it cannot at this time be revealed. I want to keep on this train, but for the viewers that don't know your experience, we should probably pause and just tell them your experience because that's the reference point, but also al also gives you credibility and authority to speak to this. What have you done with your life? >> Well, I got into the investment business in 1968. There were very few serious people in the investment business. There were no mathematical models. there were kind of relatively failed sons of rich people who would work for JP Morgan. >> And then over the next 10 years >> it began to get a little more serious. Tro Price introduced the idea of growth stocks. A few of us introduced the idea of value stocks and a few years later at my first firm Battery March we really introduced the idea of small small cap. It hadn't existed before that. And for people that don't know, a small cap is investing in smaller companies. [clears throat] >> Yes. And a value stock is simply one that looks cheap. >> I have a feeling, I don't know if they're going to cover it, but I have a feeling what he's trying to get at is that each of these groupings of companies act differently, therefore need to be invested in differently. And so when the the less granular your level of analysis, the less likely you are to be able to invest wisely because you might go into the right company but in the wrong way. So, if you're expecting a certain outsized return uh from, you know, an AT&T at this stage in its development, that's nonsensical. Uh but they may classify themselves as a value stock, something that's just going to keep going, keep growing over time. Um a small cap company, those are going to be far more ephemeral. They come in, they go out. Uh I I'll be interested to see how he covers it because on this I would say I don't have like a deep um worldview about okay these ones act this way, this one acts that way. Uh but I certainly get what he's trying to get to and getting people to differentiate between these different kinds of stocks. And if you don't understand them, this is where you go broadspectctrum. Uh be as diversified as you can to cover for your ignorance. >> How many years have you spent investing? Uh 60 approximately. >> 60. And what's the the most amount of money you've ever managed for other people in a calendar year? >> Yes. 165 billion. I had a two partners, Mayo and Botto. And when the smoke cleared, you know, I'd made a lot of money, over a billion dollars. >> Personally. >> And how much? >> And paid tax on all of it. >> Oh, good. >> Let's go. And how much does your firm still manage today of other people's money? >> It manages uh 85 billion. >> 85 billion. So are you a billionaire? >> I'm generally referred to as a billionaire, but that's only because they count the money you give away because I've given over 90% of my billion away to a foundation. >> Oh, really? >> Yeah. >> To which foundation? >> It's called the Granthm Foundation for the Protection of the Environment. We invest a lot of our principle in green tech to help combat climate change. >> And you're 87 years old. >> And I'm 87 years old. >> You've given 90% of your money away to your own foundation that's focused on green tech. >> Yeah. Maybe 95. Yeah. >> Wow. Okay. So, coming back to this point that we were talking about. A lot of people won't even know what a bubble is. I think you've done a good job of explaining. A bubble is when everyone gets excited. They all see something obvious. They plow their money in. >> The stocks go up. And then if you look at the graph that's in front of you there which shows the history of asset bubbles eventually there's a big >> collapse. >> Yeah. >> And you're saying that we're >> the collapse is on the horizon. >> Yes. >> And what does that mean for the average person? >> Oh. So it he's going to move on. The the right follow-up question there is what is the mechanism that makes this stuff collapse? Because once you understand that it is merely investor confidence. So right now you you have to differentiate between what makes a stock valuable and I'll say a stock is valuable purely based on narrative. People are going to argue with me to high heaven about that. But the reason that a stock can go up and then dramatically back down without there being any change to the business is simply because a share in a company is only worth what somebody else is willing to pay for it. Period. End of story. That is it. there's no like tangible value to that share unless it pays a dividend and then you could certainly benchmark it off the dividend that it pays and how long that you think that it will take you to how long it will take for it to pay you back for what you put into the share. But most of the time when you get into bubbles like this, you're not talking about that. You're just talking about people getting caught up in the emotional contagion, buying a thing that people are excited about and they want and it's getting in a bubble completely detached from the fundamentals. So you're not even able to point at anything to say, well, it's because the share price is tied to 10x the revenue or whatever. It just starts blowing all of that out. So if these share prices are based on narrative, it's the narrative that breaks that causes that plummet. Now the question becomes, what ends up breaking the narrative? Is it the first business crashing into the tsunami of debt? this is almost certainly what's going to happen in AI. But we saw a massive sell-off when DeepSk first hit the market. So that was a pure narrative play. The narrative play was the US is dominating the world in AI. It's our future to hold. And so uh anthropic, um open AI, Google with Gemini. These are going to be the big players. And it's very expensive. We get it. But we're going to stomach the amount of debt that we're going to have to bring on to build the infrastructure out because we're going to have global supremacy and AI and it's likely to be one of these three or four companies. And then all of a sudden, Deep Seek comes out and it was a shot to the heart. It showed that China could create a model for a fraction of the price that was almost as good. And all of a sudden, the narrative wobbled and the price plummeted. People panicked. They got out. They want to be the first out. It causes another contagion of people freaking out. They start selling and it goes down. Now, the narrative ended up stabilizing and it came back up. But I I think there's a whole lot more to look at with China intentionally targeting that narrative. And yes, I am hyper aware of the potential manipulation that's going on behind the scenes that deepseek wasn't necessarily just oh a cheaper model that it's using a distillation process. Anyway, it's beyond the scope of this video, but important to understand that bubbles crash not because something breaks in the fundamental technology, not even necessarily, though it could be, but not necessarily something breaking in the businesses themselves, just something breaks that narrative. >> Really quick, um, do you think the stock market now is completely detached to fundamentals or like we're in 100% narrative territory? >> 100% narrative territory. And this this is where man would it be fun to um sit across from somebody that's been in the game as long as Grantham has. But the um really interesting thing is right now how much of the overall stock market is driven by AI? It's about 40% in the US. >> Massive. That means your entire economy outside of you know your actual productive um assets. But the actual um stock market is the core growth engine of your economy right now. And that's 40% tied to one bet AI and it's on shaky ground for a whole lot of reasons that I'll be interested to see how many they get into, but I'll catalog them if they don't. And so that's like already scary. But then you have we are late money printing. We're late socialism. I know people want to think it's latestage capitalism, but the reality is we have deficits every year. $2 trillion a year just stacking to the debt. Almost $40 trillion of national debt. And so you're in a position now where anybody who's even mildly smart with their money knows I have to be in assets. And so now what asset do most people understand the best? The stock market. So beyond a house, a house is always a preference. But in terms of the markets, so people are just going to be flooding in. So now it's like any investor that understands the game is going, I can't sit in cash, which he teased in the intro. So, I have a feeling he's going to say given inflation, you can't be sitting in cash. He specifically says the US dollar. So, you can't be there. He may go so far as to say you don't even want to be in US debt. I'm not going to go that far, but I will say don't be in long-term debt. That's for sure. Uh, so when you get to that point, you've got to own something. And so, even as the markets get irrational, you start going, "But I've got to be somewhere." And so, that's where this all gets scary. >> Got you. What's going to happen? >> What's going to happen is the high-f flyers will probably come down a lot. >> The high flyers, >> the stocks that have gone up the most, AI and >> the more exciting stocks with the biggest moves historically would be expected to come down the most. From these unprecedented levels, a 70% decline would not be unexpected. >> Dude, do was pushing Amazon to 92. So yeah, 70% is not not crazy. >> So a 70% decline in the in the stock price. >> Yeah. And you have to remember the tech bubble, the NASDAQ, which is an index of the growth stocks, came down 82%. It is far from unprecedented >> to have these major declines. And >> an 82% draw down is panicking, is u people thinking they've lost everything. It's divorce, it's god forbid, suicide. I mean it it's like it is unhappy times. That that is massive. It is catastrophic. And if it is longived, it's not good. >> The biggest bubble in history was in the Japanese stock market in 1989. Back then, Japan seemed to rule the world. All the technology, all the Toyotaas were kicking bottoms in General Motors and so on. >> Research >> and everyone bragged about their 12-in Sony TV in the kitchen and the quality, etc., etc. little things you put on your belt to play music. They were all Japanese. >> Mhm. [clears throat] >> And uh for a second, Japan sold for more than the US >> in '89. >> It's crazy. >> And it it got to 65 times earnings, which which means for every dollar of earnings, you have $65 of market value. >> And uh the US went to 35 in the tech bubble of 2000. You could argue depending on how you do it that it's 35 or 40 today, but it's not 65. So, we have seen a much bigger bubble in Japan. And what happened? >> But remember, okay, he's about to say it. This is crazy. You got to hear this. >> Happened. >> It went up and up and up and then it came down for 20 years. >> 20 years. >> 20 years. They talk about the last decade, but when you look at it closely, it looks more like a lost 20 years. So for the average person, what do they feel and how does it impact them when there's a market crash like the one that you're forecasting? >> The high-f flyers will lay people off and and a lot of people will feel less rich. And as you acquire people [clears throat] money in the stock market a small fraction of that 2 or 3% is spent and in reverse it goes back and people feel a little bit poorer they spend a little less. So the economy tends to be under some stress and if you look at the great bubbles breaking of the past you find that it's followed by really tough times. 1929 is followed by the great depression >> underplaying this a lot >> that last for several years and of course there are many other factors that go into that but it started with the crash in the market uh which was in the end down about 80%. Or more and then the next one was called the nifty50 because it was the 50 great companies like IBM and Coca-Cola. >> That's interesting. I don't know about this. Do you can you pull something up on that? >> Uh AI overview. The Nifty50 bubble was caused by a dangerous mix of growth at any price mentality and loose monetary policy during the late 1960s and early '7s. Investors justified extreme valuations for 50 elite blue chip stocks such as Coca-Cola and Disney by assuming their earnings were immune to economic downturns. >> That is so interesting. Okay, there's two interesting beats in that. So, uh, one that investors are trying to justify the um that hey, we can just pile money into this like crazy. What ends up happening is money is always seeking a return. Always seeking a return. It will find a return in Pokemon cards if that is what is required. That's like man, I don't think enough people pay attention to Pokemon cards and why that's become a thing. Um but also that easy monetary policy. So basically low um interest rates. So the Fed holding interest rates low potentially. I I'm not sure why they were trying to um spark the economy. So, you make money cheap at that point, which you do because you want to get the economy roaring again. And on the back of that, then people are borrowing money, but they're looking for a return. So, if you're borrowing money at 2 or 3%, then you're going to need north of that uh to pay back the loan and then have some sort of gain. And so, that's where people start looking for anything. And they end up convincing themselves that, oh, I get it. Blue chip stocks, those we can just pour an infinite amount of money in and we can justify, I don't know if it's 20, 30x, whatever. But you can start justifying these higher numbers. Be careful, man. Be careful. It's all narrative. >> 1972 it peaked. It declined by 65% if you adjust for inflation. The recession associated with that was uh just about the worst since the depression. >> So for the for the average person, what kind of strategy should they be adopting? If you if you're not someone that has a huge amount of savings, say you're working for one of these big big companies, um are there any strategies that you should be thinking about now before this before the markets come down and there could be a recession? >> I mean, rule number one is always be diversified. >> People hate this advice, but this is the truest advice ever. The best advice when it comes to investing, buy low, sell high. Nobody can do it. It's an emotional game, but it's so meme to death. People think they can do it and they really can't. And then be diversified. People ask me all the time how they should be investing their money and the answer is always going to be the same. Rule number one, be diversified. You're not as smart as you think you are. >> What does the be diversified mean? >> It means whole wholesome bonds, wholesome cash, perhaps a small amount of precious metals >> like gold and silver. >> Yeah. >> And what is a bond and how do I [clears throat] buy one? >> Yeah. a a bond is a loan that carries a >> By the way, that is the worst list of diversification I've ever heard in terms of it's incomplete. All of those things are true and I think if you asked a follow-up question and push him, he obviously knows where to go. Um, but the thing that I'll add here is diversify against economic forces. The problem is understanding what the economic forces are that are likely to be at play can be very difficult. But for instance, the easy way to give an example would be if you're in a NASDAQ index fund and you own some open AI and just because you don't want to be exposed. You own some stock in anthropic as well. Um, and you're like, "Ah, let me really like broaden out. I'm going to go with Google." You don't realize that a those are all tech plays. B, tech right now is driven almost exclusively by AI. and the likelihood that AI is getting battered but one of the AI companies isn't uh is a mistake. So that often times makes people feel like they're diversified but they're not. So what he's getting at in the beginning is he's describing different economic forces. So a bond is going to perform differently which he will certainly explain is debt. Uh that's going to perform very differently than a growth stock will. Those are going to be different economic forces. When people are trying to risk off, they're going to go to things like treasuries, which are considered the risk-free rate of return because the US government can just print money. They're never going to default. So, it's like understanding, oh, when the market is euphoric, what's likely to happen? When the market is scared, what's likely to happen? Um, so making sure if there's a currency crunch, what's likely to happen? So, there's all kinds of different things that can happen. And so, you want to be diversified across those things. So there are typical relationships between these. When people are going risk off, they tend to be in things like gold, like treasuries. Uh when they go risk on, they're in things like AI, SpaceX, Pokemon. Uh and so it's going to be very different environments, but you want to make sure that you're not expecting yourself to get that timing right. So you're just wherever the market could go in reasonable quantities. We'll return to the show in just a second, but first I want to talk about the dozen loginins that are standing between you and a clear answer. Your money is likely to live in dozens of different places. A banking app, four credit [music] card portals, a brokerage login, a loan serer you check maybe once a year. 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If you're buying debt off of creditworthy people, then you should be fine. >> So if it's the US government, you'll assume it's pretty creditw worthy and you buy a bond from the US government. It's how the US government funds uh a part of its activities. You can buy a 30-year US government bond, a 10-year bond, a 2-year bond, a 90-day uh Treasury bill, they call them, when they get that short. Everything goes fine. You you receive this modest amount of money, your 5% or your 3% depending on the conditions. >> Okay? So, a bond is basically lending the government money. It could be a government, it could be a company, it can be a local government, can be the federal government. But yes, >> and if you want to lend the government money, you >> Oh, lending a corporation money. >> Okay. So, you can also lend like Apple money. >> Yes. >> And I I can go to this guy >> the government website or it says I was just reading here says if you want to lend money directly to the US government, you can bypass Wall Street entirely. Go to treasurydirect.gov. You open an account, link your bank and purchase directly. You can buy treasury, bills, notes, bonds, and series 1 savings bonds. You pay exactly face value with no commissions or fees, and the investment is backed by the full faith of the US government. >> The thing that people need to understand about debt, and the reason that I'm so paranoid about long-term debt is that yes, the US is a as high of a rated creditor as you're likely to find. Um, however, the reason for that is that they're the reserve currency and so the US Treasury can print additional money. Um, and that devalues the dollar. So, you have to be very careful in terms of all right, I've got this um, let's say you've got a 10-year uh, Treasury and you're getting paid 5%. To give you an idea, right now over the last six years, inflation has totaled 30%. So you can find yourself in situations where you actually make less in the interest that you're paid than inflation. Now, if it's being done intentionally, which it will often be done intentionally, it's known as yield curve control or financial repression. So, um, this is a trick that has been used by the government before, is almost certainly going to be used again by Kevin Walsh. Uh and the reason that I say that is that uh when we came out of World War II, we had a similar debt to GDP ratio that we have now, which is about 123%. Uh which is crisis levels. And the way that we were able to get out from under that debt post World War II was we held interest rates lower than inflation. So you were basically paying the government to own their debt. The reason that they were able to get away with that is that the economy was growing more than that. So the economy was outpacing the inflation. So people felt richer. I don't know what the exact numbers are, but let's say that inflation was 3%, rates were 2%, and the economy was growing at 5%. Uh it's going to be something like that. So the government is taking their piece to devalue the dollar which makes the loan easier to pay back because you're being paid back in inflated dollars is the right way to think about it. So with your newly inflated dollars, so you're getting more dollars than you were previously for the same goods that you're selling. So you're collecting a bigger tax base. You're now able to pay off that debt because that debt is locked in at pre-inflation dollars. So, um, that's how you end up using financial repression with a growing economy to get out from under insane debt. The problem is we don't have a growing economy. Not like that. So, as they use financial repression now, people are going to find themselves in a very difficult situation, which is uh you're making it you're making me pay you for the privilege of owning your debt. However, uh the rate of inflation is higher than the rate of growth. And so that's how you just keep in this debt spiral of people don't want to be in the debt, so you've got to print more money to cover the gap. That drives the cost of the stocks up, tells everybody your dollars getting worth less, so you better invest in something. Pushes everybody into the economy, uh, into the markets, excuse me, because they're trying to escape the devastation of inflation. But that spins them off with the psychological contagion of convincing themselves that AI is really that valuable and we should all just p keep piling in. And so uh as I say, show me the incentives and I will show you the outcome. If you incentivize people to go in and buy stocks effectively at any price, people will just keep taking that risk, taking that risk, taking that risk until the narrative finally breaks and then everybody runs for the exit. It was not many years ago that I didn't know you could do this either. It is a scandal that somebody as smart as um Stephen Bartlett, somebody who is very I mean he is a bonafide entrepreneur, this is a guy that runs companies, makes payroll, all that stuff and yet doesn't know the basics about the economy, doesn't know the basics about uh bonds, um treasuries, like it it is crazy that we don't educate people around this. I think it's not a scop but like we have been intentionally kept ignorant. There's no doubt about that. Now the good news is we all live in the age of AI and the internet and so if you put the energy into learning about this you can transform your life. Uh but it is a complicated game and it will take your time and energy >> income section on your account and you can see what bonds are being offered and you can lend them money. >> What you're doing actually they have distributed it to the market. uh and you're acquiring it from one of the existing owners. >> What he's saying is these are sold on the secondary market primarily. Obviously, there is an initial market u but the vast majority of these are going to be purchased on the secondary market that can influence that's why they say the Fed can control the short-term interest rate but they cannot control the long-term interest rate. The reason being, long-term interest rate is controlled by the secondary market who will look at that and go, "Yeah, there's no way. You're going to have to pay me a bigger premium on that. So, whoever it is that got that first wave in the market, uh, I'll buy it from you, but I'm going to buy it from you at a discount." And so, you're going to give me um, like let's say it sold for $100. When they say it's a 5% return, they mean 5% assuming that you bought it for $100. But if you end up buying it for 80 or 60 and you're still paid the 5% on the 100, now the gap between that amount makes it seem not seem your yield is higher. The government is still only paying the 5% or the corporation is still only paying 5% on the initial sales price, but the person who buys it on the secondary market can get a bigger spread. And so you'll hear people talk about that a lot. >> Oh, okay. >> You're not actually giving them incremental money. They they come to the market with $10 billion in a particular bond with a particular coupon. It says we will pay you three and a half%. That's the coupon. >> And if you can hold it to get that buy some of that bond, you you go to your broker and he says it's no longer selling at the original 100. It's now selling at 92 or 107. And you you pay that and it transfers from one owner to you. There have been times in 1974 when you could uh you could get a bond that would pay 8 9 10%. >> Wow. >> So if I buy a US government 10ear Treasury bond >> essentially lending the US government money 4.46% a year and Apple's current yield on a 10-year corporate bond is 4.7% a year. So almost 5% a year. Which means if I put what $1,000 in I'll make $475. >> Yeah. >> Over 10 years. H interesting. I I never really knew how bond bonds work. So you're saying >> market's collapsing. Diversify. Get some money into bonds. Get some keep some money in cash and anything else in terms of diversified portfolio property. >> Property is fine except uh it's pretty darn expensive by historical standards. >> So I I am a little shocked that um he's going to let that slide in terms of that very brief explanation of diversification. This is one of those things I often think like I may need to really um buckle down and try to get a hold of some really great minds on diversification. Ray's done a lot of work here, but it would be [snorts] very interesting to try to cobble together people like Granthm, Dallio, etc., etc., and and get like a master breakdown of what each of these guys considers a diversified Ry will repeat at nauseium, you want 12 to 15 diversified streams of income um that are uncorrelated. Excuse me. that's the word [clears throat] that he beats to death. Uh, and so that is extraordinarily difficult. And so I'd love to know from their perspective like how often does that change? Like how often are you like, well, these now aren't uncorrelated. These are correlated now. Uh, so like for instance, for a long time, Bitcoin was seen as being uncorrelated to the stock market, but in reality, it acts a lot more like a tech stock that people only go to when they're out on the yield uh when they're out on the risk curve. So I imagine people's thinking changes relatively dramatically uh from week to week, month to month around what's correlated, what's not. Um what a truly well- diversified portfolio looks like. This is the problem with the markets. They are so complex and so ever evolving. >> Engineered a situation where house prices tend to rise. Great for the people who have a house >> and terrible tell us how they do it. people who would like to buy a house. Back in 94 in England, >> a typical house sold for 3.4 times your family income. That was about as low as it had been rigs in the economy. >> And then from 94 until today, um it rose from 3.4 times to over 10 times depending on where you live. >> And at 10 times income, a reasonable young couple are in big trouble. They can't really [clears throat] afford to buy a house, >> especially if interest rates are going. >> And that same high prices are reflected in rents. So they're really squeezed on living costs. >> Can we use the word screwed, punished, abused? Squeezed feels a little too >> And the same is true. >> Even worse, crushed >> in China, in Canada, Australia, yes, >> most of Europe. True. >> House prices have simply been allowed to go up for the last 30. They didn't, you know, traditionally >> they they traded flat or down 60, 70, 80 years until 1994 in the UK, but since then house prices have ridden everywhere. >> So So do you are you expecting house prices to to come down sharply? I think I heard you say that they might come down 30%. >> Even if they come down 30%. They're really still very expensive, aren't they? >> Yes. So, okay. Um hopefully they're going to get into this. But the interesting thing with the housing is uh if you want to be angry at the system, housing is a very good place to start. It is being weaponized against you through political means. And it is very simple. A house is the only asset that both men and women intuitively understand. They're not going to intuitively understand the bond market. They're not going to intuitively understand stocks. Uh but they will intuitively understand I can live in a house. And if you're telling me that that house is the way that I store my wealth so I can pass it on to my kids, it's like, "Oh, wow. I can raise my kids inside of this thing and pass it on and it will make sure that they have money after I'm gone, sign me up." And then once you do that and you ratchet it up up up up up, you create a voting block known as homeowners. And the homeowners just want you to say the words that are going to make their house go up in value. And now, like he said, great for the people that literally life-changing for the people that got in and own the property and absolutely horrific to everybody else who gets locked out of it. And if you want to know why the pitchforks are coming out, it is largely because the one asset that people actually understand, they can't get into. Now, I think we need to go back to what he was talking about where houses are basically flat. keep up with inflation, sure, but basically flat and that nobody thinks of it as a way to get rich. They think of owning a house as a piggy bank. It's a thing that they can buy. That as long as I keep it up, is going to hold its value against inflation. They might not know to add that part, but that's what they mean. So that when they die, whatever the value of that house is, cool. As long as I upkept it, then my kids have access to that value. But it's trending with inflation. It's not just getting more and more valuable the way that you might expect a growth stock. So, at some point, we started telling people that your house is like a growth stock. Get in, baby. Get it. Whatever it takes. Take on that debt. Hold on to it. It's going to the moon. But to do that, you've got to stop building. Uh you've got to create more demand than you're going to be able to satisfy with the actual inventory, the housing. And to me, that is amoral. Uh not amoral, that's immoral. It is actively bad. So getting people to pass laws, you're going to hear the phrase nimiism, which it's just an acronym that stands for not in my backyard. So, uh, anybody that's saying, "Hey, like this is cool, but just not here." Um, that's the enemy. So, you want to put people in a position where houses are being built, that you're deregulating and making sure that there's more and more supply coming on the market. >> They've come down to six or seven times family income, they'd still be twice what they used to be in the good old days. >> So, I've got diversify, I've got reduce position, >> just build more. >> Um, there is a probably going to be a bit of a job disruption as well. >> And particularly if you have to own stocks, own them outside America. Don't own US stocks. >> That's wild. >> That's a nice simple [laughter] strategy that you can act on. >> Why? They're much cheaper and u since the beginning of last year they have handsomely outperformed. >> There we go. I was gonna say just being cheaper is not interesting but if they're cheap and outperforming now you're in a good place. All right. So this is where listen full disclosure obviously Grantham has way more experience in this than I do. And so um I will offer my opinion as a counterpoint. I think it's an important counterpoint and that is that there's no way to know that the outside world is going to continue to outperform the US. So take China. Uh China was absolutely murdering it for a long time. Now China is in real economic distress. What initially they were hoping to contain to the housing market is now spilling over and they are wiping out obscene amounts of individual household wealth uh in China right now. So what does that end up being in the long term is anybody's guess. Um uh as we've seen with the war in Iran, uh international dynamics can change on a dime. So while I think it is extremely wise to treat the US as uh a region that may go up, it may go down, maybe in a bubble, may absolutely implode, but it it could do either of those. It could keep going up for years. And so um far better to say, I don't know if the US is going to go up forever or down, so I'm going to be a little bit here. I don't know that emerging markets are going to keep emerging, so I'm going to be a little bit there, but not all in. Uh and so you're just diversifying a little bit more. um roundly than what I hear him saying. Now, again, I approach all of this with a freakish degree of humility and a serious lack of trust in my ability to see the future. Um so, um I would just advise the same. This is one of those times where I feel like he's not being he's not able to recognize he's got a team of researchers. I can only imagine how big that team of researchers is, at least at his company. Uh and that certainly when he was running his company, he would have people looking at this stuff every day, all day, all the time, making trades in real time. Uh again, fiber optic cable, how close are we to like the main servers that are actually doing the trade? How fast is our cable? Like they actually look at this stuff um because they can um make or lose money just based on the speed of the transaction. Nobody listening to this right now is in that kind of position. So try to make sure that you're mapping the difference between how he is set up to make all these trades and how you're set up. So if you're not paying attention to what region was hot, maybe it's declining now, constantly making all these changes, um even more diversification becomes the solution. >> Foreign stocks, >> foreign stocks of emerging countries of European countries, Japan, Canada, Australia, so on you can find good broad indices um kind of the world xus. Okay. >> Uh or emerging markets and uh >> invest outside of America. >> I'm going to say it in a slightly different way. You're you're it's not invest in America or outside of America. It is where am I likely to get the return? And so if you're looking at America and you're like, "Hold on, all this inflation stuff is driving so many people into the market. This is way overpriced and likely to be a bubble." Other places though, because so much money is going into the US, maybe there are better deals elsewhere. And as long as you don't calcify the I don't invest in the US and you uh instead think I'm looking for a certain uh riskto-re ratio. So I'm looking for the guys that are slightly underpriced or at least are a deal compared to America, but you still do need them to go up otherwise you've gained nothing. >> Right now compared to his strategy, the US growth potential isn't as high as other places. So you'll go there temporarily while the US corrects. What he's talking about is he's like, "All right, there are fundamentals and you should," he hasn't said out loud what they are, but I imagine he has an internal mechanism for like, "All right, maybe five to 7x, maybe 10 if it's like really growing 10x on um the revenue to share." So, okay, if that makes sense, but we're at 20 or 30x revenue. That doesn't make any sense at all. like the the distance people would have to travel as a company to actually end up making good on the valuations of today because a valuation that's overrevenue you're reaching into the future and saying I believe so strongly that that revenue is going to come in I'm going to pay for that revenue today >> and when you start paying for 30 years of that revenue in advance yo that's crazy so that's where he's like waving the flag and he's like uh-uh this is not a good idea go look elsewhere where maybe we're back to the 7 to 10 range, less scary, way more tied to fundamentals and historicals, but that requires people to actually do that. Like they have to go figure out where are those things trading. You can't just go no US foreign. You've got to hear what he's really saying, which is look for deals. So you could find those same deals here in the US. Um but he's talking specifically at indices. So, if you're looking at an index, which is somebody else saying, "Hey, here is a set of criteria, I'm I'm going to invest strictly according to that criteria, and I'll boot companies out that no longer meet the criteria, and I'll bring new companies in that meet it." And so, it's a brilliant way to get broad exposure while not paying attention to the like specifics of a market. You're letting those guys, the Wall Street guys who are paying attention to it, do that. And so he's just saying find those indexes where you see more realistic prices. >> Gotcha. >> Over the next 10 or 20 years. And I am not confident that the US will do that. >> You're not confident in which part that the US >> I'm not confident that US equities will be intact in 5 years, 10 years. >> Yeah. >> So US a US equity is a US stock? >> Yes. >> Why are there's so many terms in all of this? It's maddening. >> You confident that they'll be intact in five or 10 years? >> Because they're so badly overpriced today. Back in the tech bubble of 2000, we had a 10-year forecast for US equities of minus 2% a year for 10 years and they came out with minus3. The period from 2000 to 2010, you simply lost money in the US market. 10 years later, you had less money than you started with. And this is a higher price market, I believe, than 2000. >> So, you think it's going to be even worse? in Japan, you went 20 years. >> So to answer that question, and I'm surprised he didn't, but to answer that question, you have to ask me, what what are we saying? And it goes back to what I was saying a minute ago about if you're paying 10x the revenue, you're saying at the current rate that this company earns money, it will take them 10 years to earn as much money as I just paid for. So that becomes um a big gamble. you start talking 20 30 years, it becomes like absolutely ridiculous. Now, the companies could grow. So, to be clear, and this is part of the euphoria message that people grab on to is people are looking at AI and there's like they're saying to themselves, there's no universe in which these companies aren't worth 10x what they're worth now in 10 years. There's no way. So, to pull forward um 10 years of revenue to today, yeah, no, I totally believe that. Easy peasy. AI is going to change everything. Now, the great irony is the AI industry might be generating 10x those revenues. The question is, are you into the companies that will survive all of that? And will you be able to stay in the market long enough to get to the point where it starts doing that? Now, for the most part, you should assume the companies that are big now are going to get wiped out and it's going to be a future set of companies. It won't be entirely true as Amazon has shown, but a lot of the early uh.com companies just poof, they ceased to exist because the debt was just too crushing >> and you lost money. You went 30 years and you still hadn't gotten back. It took 35 years for the Japanese market to recover. >> So, what are you saying? >> What I'm saying is it's quite typical to uh get beaten around the head in the stock market when it becomes crazily overpriced as it is today. and that it's a very good idea to take some respon responsibility and and and watch your tail. Now, let me just say you will not receive >> the advice from investment advisers >> to get your tail out of the market ever. It is not good business for them to do that and they will not ever say it to you. So from 1929 onwards, the Goldman Sachs of the world have never said to you, get out of the market. It's overpriced. Never. So they went through the crash of 29. They went through the crash of the Nifty50 and 72, the crash of 2000 in the tech bubble. They never ever say it because it's bad business. If you fight a bubble, you lose a lot of business. And because the uncertainty of the timing is so great, >> the client's patience is shorter than the uncertainty of the market. So sooner or later, you will be advising people to be careful. The market will keep going and going and going like it did in Japan. >> This is so important. >> So right now, Burkshire Hathaway is underperforming the market. And as you can imagine, people are going to be like, "Yo, I remember when Birkshire Hathaway was good. I remember when they knew what they were doing. >> It's messed up now." Yeah. >> These fools are just sitting on the sideline. They've lost their touch. And so now Birkshire Hathaway has to go, "Yeah, the market could remain crazy for years >> and we've still got to sit on the sideline because we know what fundamentals look like. We have an investing strategy and we're not going to bend for anybody." But they'll watch their assets under management just go down and down and down and they'll watch people screaming at them at the investor conferences and all that stuff and they've got to say listen we got to stay the course. Ah but it's hard man. It's hard when you see everybody getting rich >> to just and imagine they're getting rich for years and imagine your friends are getting rich for years and your wife is in your ear like oh I thought you were Mr. Bigshot how much we made. You know the Sally, her husband, they make and now it's like I'm gonna show my wife like I'm gonna get in this [ __ ] and then they get [ __ ] clobbered. It is wild. It's wild, man. >> And yeah, it Oh god, this market is rough. >> It It's a scary market. >> Let's jump to 135, an hour and 35 minutes. That's when he talks about what country should you move to. >> Times are tougher. It is more difficult to buy a house or afford to rent. and and jobs are getting scarcer, it's likely to uh get worse. >> What does brace yourself mean for them? Cuz brace yourself sounds like you >> Yes. >> But does it mean >> plan your life as if times will not be easy? >> You know, do not build up a little reserve of of cash. Of course, my advice to other people is and and get yourself a useful job, something that will in a larger sense pull your weight in society. >> Upskill, change skills, learn something >> mechanical, fixing, repairing, >> engineering, >> things that need humans. >> Yo, this is wild. Hold on. So, okay. Um, I love his advice. I think it's actually very good advice. um it's it is going to be it's going to hit people like a tin ear. They're definitely not going to like the message. But what is really interesting is understand that right now America's greatest um skill set, America's greatest um like contribution to the world is financialization. We have turned everything into a financial instrument. And when one of the kings of Wall Street is telling you now is not the time to be into financialized instruments that you should be out there working with your hands. That that is wild. Wild. People are going to feel some type of way about a guy who's had as much success as he has had saying that. Um nonetheless, my advice is going to be a little bit different. So certainly if you're in the I've got a hard scrabble to make ends meet part of your career, then yes, um building things, creating things, manufacturing, working with your hands, being the last to be replaced by AI, I think is very good advice. Um I don't think that's the only path forward. I think that one, the world is financialized. That's not going anywhere. People that understand the way that economies work are always going to be the ones that are going to be able to get themselves ahead the fastest. Uh part of the reason like during the Japan gets frozen phase, one of the biggest investors in the world is still Japanese because there are people that are able to get access to the capital. That is huge. That is very difficult. There's no doubt about that. But there are people that are able to get access to the capital and able to make magic work. Um so I would learn as much about the way that the world works as possible. Understand the economy as much as you can, even if only to avoid the calamity. uh because you have a better no one's going to be, I don't think, great at this, but you're going to have a better understanding of how to dodge some of the obvious bullets. Um, but then beyond that, yes, having a job that fills meaning and purpose, all that stuff is going to be very, very important. And I love what he's saying about taking responsibility. Um, do not expect the government to fix this for you. Don't think that the freebies and the handouts are going to be the thing that solve your real problem. They're not. And if the economy falls hard, um, then the government won't be able to save you. >> Research, science in general, >> make friends. >> Make friends. Make sure you live in in in a a tight society if you can. Very difficult today, obviously. >> Would you be thinking about the country you live in at this moment in time? >> Absolutely. >> Really? Is there any countries you wouldn't live in >> if you were David Jenny? I I think I have to refuse to answer this on the grounds that it might tend to incriminate me. Um >> Oh, okay. So, you're saying don't live in the United States? >> Well, I have American children and grandchildren. >> Why not the United States? >> It holds out too much chance that the social contract is is dissolving. You know, the thing about Japan and my joking rule 21 and investing is never extrapolate from the Japanese. They are extremely different in every way, but one of the ways they're different is they have this amazing social contract. The thing that really upsets the Japanese is if they're put in a position where they can't act in a socially responsible way. Guys, I know I said this earlier, but please, I'm begging you to research Japan and the Japanese. Um, I'm curious to reach inside his mind and and hear more about what he thinks about Japanese culture. But Japanese culture is one thing before World War II and it is something radically different after World War II. Um, and so understanding what Japanese culture is today, you really have to understand a mix of who were they coming into the war, what did losing the war mean to them, who were they angry with, did they blame themselves, did they blame the emperor, like what what was their how did they think through that? There are answers uh beyond the scope of this video, but that plus the US basically saying this is who you're going to be moving forward and they adopted a lot of that uh it is absolutely fascinating and while I agree extrapolating from the Japanese which is a very unique situation um would be very high risk and you shouldn't do it. Uh, nonetheless, I think there's a lot to learn about human psychology, about uh, economics, about how they go from having two nuclear bombs dropped on them to becoming the biggest economy in the world briefly in the 1980s. Like, yo, it is a tale that must be studied. >> When you say social, >> does that mean? >> It means an agreement that I will behave in a way that helps my neighbors and society, that I'm doing what people expect me to do. I'm not going to misbehave. >> America has given up on its values. Nobody knows what they are. Nobody, even the people that know what they are, are refusing to say what they are. We're not willing to put up borders and fight for our identity. So from that perspective, he is 100% right. And then on top of that, as you bring in more and more people, but stop being a melting pot and you start being these very disperate communities, they will start um pulling against each other. And that is exactly how the social contract unravels because you go from a high trust society to a low trust society. meaning you instead of looking across the street and seeing somebody that oh they're going to be like me. You just have a default assumption, you look across the street and you assume that that's the other that's some sort of waring tribe. Uh and so yeah, this sits heavy in my mind as well. I >> think that's not the case here in the United States. >> I think the case here is that people are doing what they think is best for them and their family and screw everybody else. Everybody does that and you're only going to bat for your country when you think that is good for you and your family. But when it proves to be true over and over and over, decade after decade, um then it can be confused with people actually um thinking beyond themselves. But the reality is everybody uh what's it saying? You're only nine meals away from uh riots in the streets. The second people are hungry, the second there isn't enough to go around, you will find out very quickly uh everybody's running the same algorithm. Protect me, protect mine, uh and that narrows precisely in uh relationship to the amount of resources. >> When I arrived in America, corporations had this sense that they owed something to the community they operated in, the city they operated in. They they'd build the stadium, they'd do this, they they'd be part of the community. Now they're not. They're all in a way cold-blooded profit maximizing international enterprises. >> Uh I think this might be a little bit of revisionist history. I'd like to point you to the Dutch East India Company. Uh I would like to remind you that Columbus was on an economic run. Uh took some hands and gold with him. So yeah, I get what he's saying. It's certainly the vibe of America, I'm sure, was different. uh back in the day when we had a higher trust society, we were more of a melting pot and we were still transitioning from rural to urban and all of the sort of things that get maximized in an urban area hadn't completely taken over. Um the mind virus is that are sweeping through the different institutions that we have, those hadn't taken hold. Uh we weren't in a populist moment, so it wasn't us versus them yet. Um so there's a lot there, but that that's maybe a little too speedr runny >> there. There's one thing to that though on the social aspect. Immigration, mind virus, universities, indoctrination. I'll give you all of those things. >> I do think that there is a lack of corporate responsibility to the communities that was once there. Even when as simple as my first job, we literally used to have 10% of profits or maybe it was just a tax write off that they did fancy. But there was community days. You would go into the community and do something local. We partner with local schools. all the old tech we didn't sell we would give to the so there was at least the sense of this corporation is in this community I'm going to give to the people that are right there and that's not necessarily a need anymore that has kind of pushed to other institutions and other places so while yes we need to curtail immigration and things like that do you think that there also could be a benefit if we were to redefine the corporate community contract that's currently in place >> uh I think it would resound to our benefit in a massive way I'm just a mechanism guy so then I go But what's the mechanism that you pull that off? And I would say that is not a top- down thing. The um the people around you don't love you because you're out there doing benevolent things. Um you can create like a really localized relationship by being rad, by being out there just constantly like doing your thing. But if the broader culture is that we're not on the same page, um you're not like me, um that's when all of this stuff starts to be people look for the opportunity to take advantage. And so now all of a sudden you're trying to do community days, but suddenly you realize that people are actually taking the donuts and the coffee and they're just wandering off with it. And so then eventually you go, why are we doing this? Like this isn't landing the way that it used to be. It is all of that stuff is downstream of culture. And so it becomes a question of well how do we spark that back in the culture so that there's a I'm giving you the benefit of the doubt. And um if I roll up and I see that people are giving free stuff, I don't immediately think, I'm going to snatch all that and like go do my thing. And so now companies maybe we want them to take that first step. I think that's pretty reasonable. So hey, extend that. But if it's rebuked or abused, don't expect it to stay. And what I'm saying is I've even seen this in my own lifetime, and I'm only 50, so I can only imagine at 87 the distance he can feel that we've traveled as a culture. But these kind of things repeat over and over and over. And the biggest thing you see is the move from rural where it's like, "No, for real, we have to look out for each other." And so if I see a wolf going for your livestock, I'm going to step in. I'm going to stop it. It's not my livestock, but like I need to know you'd look out for me the same way. Or like we're out hunting and you're going to, we've talked about this before, you're going to store calories on my body by letting me eat when I don't do well and you did well so that I'll let you eat when I do well and you don't. Once you get to a city, man, it's like I don't even know you. It's like you're in these huge highrises. There's, you know, in some of our biggest cities, there's millions of people crammed into these tiny little areas. You are truly anonymous. You're anonymous oftentimes in your own building, let alone in your block, let alone in like, you know, the upper east side or whatever. So, it's like that kind of thing. It just it it begins to change people. And then especially if you're bringing in like very diverse communities, which people need to understand. I think diversity is a thing you have to overcome. It is not intrinsically valuable. And so now it's like you've got all these different cultures, all these different people that you already weren't going to know them well anyway. They start cloistering up the people who look like them, have their same cultural values. And so now you might be in the same building, but you're not even sharing the same culture. And so, but that's an urbanization thing. So if you understand that there are already forces like homeboy is 87 so he's seen a lot of people move from rural farming towns into the cities. He actually watched that happen. So I'm sure for him this feels like a way bigger thing. >> I went from a small town to a big city. So I really feel it but not crazy like somebody who grew up rural coming into the city would feel it. And even in my life, I've watched the demographics of Los Angeles change. And so the demographics of America are changing like crazy. And so there's a lot of things at play here. It won't be unfortunately as easy as, well, let's just get back to corporations doing cool things. Partly because the corporations are downstream of the culture. So it's all staffed by people who are like, "What? Like I've never been a part of a company that did that. Like that's so weird. Like I don't think I'm going to get anything from that." Most people that will walk up won't even know we're here. Like how much outreach would we have to do to like really make a name for ourselves? Like I'd rather go sponsor a team or something and then a lot of people see our names or I want to give like this guy put built a whole charity around um helping the um ecology the environment. I was like why am I playing? So that is like that's his play, right? cuz he's intuitively obviously going uh like just trying to do this really hightouch thing that's going against the vibe of culture. That's not going to be a win. But I can actually scale up my impact on the environment by donating 95% of my billion dollars to this thing. And so I think you'll see that fighting back against culture like that is very very hard. You would first have to plant the seeds starting in the family with this is how we do things here. You'd have to have um entertainment and narrative that tells the story of what it means to be American, what values we promote. Like you'd really have to go hard in the paint on that. >> Then you could echo it in a corporation, then you can echo it in policy and things like that. But >> if you don't, if you're fighting against culture, uh bon, >> why is that a bad place to live? Because you're saying, you know, you probably wouldn't recommend Dave or Jenny living in the United States, why would that be a bad place for them to be? What happens? What's the what's the downstream impact of that? that your neighbors aren't as interested in you and your well-being. >> Fine. I don't I won't talk to my neighbor. >> And that's a lonely place to be. And when you're in trouble, you're in serious trouble. >> That's whatever. I Your neighbor is not caring about you. Um not as cool as your neighbors caring about you. That's for sure. When your neighbor wants to take you out, now you've got a problem. >> And that's what I see America racing towards. I see any country that's grabbed in populism racing towards that. Uh remember the in Rwanda the Houthies and the or the Hoodies and the something I forget the exact name. They hacked each other to death with machetes, man. Like wild. It was something like 750,000 people killed in like six days. It was just absolute pandemonium. Uh and now Rwanda's rebounding and getting back on track, but it's like it can go savage real fast. I'm not saying that America's going to have a genocide. But I am saying that we are right now beginning to separate out into red and blue states. That's step number one. [snorts] So that's where it's like, oh god. Uh I worry about that. I think this guy is amazing. I think he's saying a lot of incredible things. Getting the amount of years behind him that he has this kind of wisdom is incredible. Uh I second everything he said in terms of being diversified, that this is a bubble. Uh be very careful out there, boys and girls. I will reiterate, no one can see the future clearly. It is very hard to know. Uh, diversify, protect yourself. This is a time to play defensively. All right, love you guys. See you on the next one. Peace. If you like this conversation, check out this episode to learn more. The most emotional economist in the world, Gary's Economics, is going to tell us why wealth taxes are good. >> Okay, welcome back to Gary's Economics. Today we are going to talk about why the economist hates wealth taxes >> and why Gary loves them. I have recently been interested