The Worst Time for Yet Another Grotesque Stock Bubble…

By Egon von Greyerz

Founder and Chairman

February 22, 2024

In this critically important Gold Matters discussion, VON GREYERZ principals, Egon von Greyerz and Matthew Piepenburg, place the enormous risks of the current U.S. equity bubble within the much-needed context of unprecedented global economic factors.

Egon opens the discussion with a brief review of the unprecedented string-cite of global geopolitical, social, economic and debt risks. From a preventable and escalating land war in the Ukraine to conflicts in Gaza and the broader Arab world to nose-bleed global debt levels in the backdrop of now undeniable social tensions and de-dollarization, the need to be realistic rather than just “negative” is of common-sense importance. As we head into a year already marked by such massive fissures, any attempt to gloss over these facts with an S&P making record highs would be missing the forest for the trees. In fact, the current U.S. bubble is far more of a dangerous rather than safe indicator when placed into needed context.

Toward this end, Matt speaks to something all-too familiar, having managed a hedge fund as well as a family office during prior asset bubbles. Matt gives particular attention to the overt risk indicators of the current S&P bubble, which teeters on the twin edge of unprecedented concentration and over-valuation metrics.

Matt’s perspective is not theoretical, but hands-on, as he explains how the current asset bubble, like the dot.com bubble of 2000, is in fact driven by the same fundamentals. He compares the Magnificent 7 to equally profitable and “good” names like the Microsoft, Cisco and Qualcomm of 1999-2000, noting that such otherwise profitable companies rising on margin growth eventually experience inevitable contraction in net income once price, volume and cost advantages trend negatively. No one, of course, can time such shifts, but “this time is NOT different,” as all such bubbles end the same: They pop.

What makes the current bubble (AI mania) so much more dangerous, however, is that it is led by 5-7 names, and when they mean-revert, as all over-valued companies do, there’s nothing left to prop the S&P. In short, when these names fall, everything falls with it, and this time around, the entire global economy is already on its knees. This is bad.

Egon closes the conversation with his own, and equally hands-on, perspective of investing through asset cycles and bubbles, offering needed insights on the risks, as well as lessons, of prior manias. Naturally, the conversation turns to real money and real assets, namely the far less “maniacal” gold. As the foregoing risks continue their exponential growth, gold rewards the far-sighted investor in obvious ways not otherwise understood by speculators. Matt, though not averse to the speculative mind-set, warns of the seductive appeal of chasing (and buying tops) and makes an equally straightforward case for gold in a world losing perspective.