Biggest Bubble In History ‘Unwinding’ Now: 17x Worse Than 2000 Crash | George Noble

I think we're witnessing the unwinding of the biggest one of the biggest bubbles in history. I think this tech bust is far worse than do I think Oracle can go bankrupt. Open AAI will go bankrupt. This has the potential to be one of the most spectacular busts in stock market history. But I remember this quote and I dug it up especially for you, David. February of 2000, if it's not tech, it's DRE. When someone says something like that, it kind of tells you where you are in the cycle. The market lost its mind and the market's now going to start to come to its senses. >> Semiconductor stocks are selling off hard and our next guest believes this may be the beginning of the end of the tech and AI trade. He's George Noble, managing partner of Noble Capital Advisors. He was on the show two months ago in May. Check out the link down below for his last interview. and he's made a number of correct calls regarding the tech sector that's playing out right now. And he's going to give us his take on why tech is falling apart and why the entire market is at risk right now. This is probably one of the most perilous times for an investor in the last couple of years. He said this is the biggest unwinding in the history of bubbles. George Noble is going to give us his take on what's going to happen next and where to hide and where to invest. This video is sponsored by Koshi. It's the largest prediction market in the United States. Unlike a sports book, you're trading peer-to-peer on real world events, from economic data to political outcomes, and the price moves based on public opinion, not a house. Go to the link in the description down below or scan the QR code here to get started and use my code lin to get $10 when you trade $10. Right now, there's a trade for how high the NASDAQ 100's price will get this year. And the majority of traders are bullish with 77% thinking that it's going to go above 31,000. Well, George disagrees with that take. And he's going to tell us why and how high he thinks the NASDAQ will go or how low it will go this year. But if you do agree with the markets and if you do agree with the 77% chance, you can put $50 down. And if you do, that payout could be $81 if you turn out to be correct. Link down below or scan the QR code here to get started using my code Lynn. L I N. George, welcome back to the show. Good to see you again. >> Thank you. Appreciate you. Thank you. >> Let's start with uh this great rotation out of the semiconductor space. Right now, I'm going to show my screen and I'll get to SpaceX in just a minute. Um I know that's something you wanted to discuss. Uh so financials have been doing well. I'll get to that. So if you take a look at the biggest semiconductor names uh in the world, AMD peaked in early July. Um Qualcomm peaked in early July. Okay. Actually peaked in June. It started it started uh dipping sooner than the others. Nvidia uh peaked around May. Uh Intel peaked in early July. Okay, I'll show you this chart here. And just recently, SKH Highex in the last couple weeks dropped about 70% and uh 1.2 I was reading 1.2 million South Korean trading accounts got margin called. That's about 10% of all brokerage accounts in the entire country got margin called just in the last two weeks. Um this is a serious issue and not just are they completely underwater uh which may actually put some strain on the entire economy because 10% of all the accounts are margin calls but isn't a leading indicator for what's to come for the entire tech sector you think if uh the semiconductors are being rotated out and uh and is that is that is that a precursor to what's to come for the rest of tech or is that good for the rest of tech? >> Thanks for having me back David. Um huge fan of the show. I watch it regularly. Um, and thank you for citing some of my prior calls. My gold call didn't work out so great, but we'll talk about too. So, anyway, um, I think we're witnessing the unwinding of the biggest one of the biggest bubbles in history. Semiconductors, other things related to the AI trade got completely overcooked. Um, you know, the way bubbles start, usually there's an idea that captures the imagination of investors. It starts out as a good idea, but then it gets carried to an excess to an extreme. Whereas, I think it was Warren Buffett once said, "What the wise man does in the beginning, the fool does in the end." We've seen this movie before. South Sea Bubble, Dutch Tulipole Mania, I wasn't around for that, but uh I was around for that. Um housing bust. Um the pattern is always the same. It's fear and greed. Names change, people change, but the pattern is the same. sphere on and green and and so um you look at where we are say let's just focus on semiconductors for a second all right I don't claim to be the world's largest biggest expert on semiconductors but you look at the valuations you look at the positioning you look at the massive capacity that's coming online I mean people are talking about the incredible growth that's going to occur and you look about the unsustainable trajectory of spending by the hyperscalers we're going to see earnings in the coming weeks from the hyperscalers. I think it's only a question of time before one of them announces a cut back in capital spending. When that happens, the whole semiconductor food chain collapses in my view. You mentioned Korea, South Korean market. Uh Koreans like to do things with a little bit of gusto, shall we say. Um, there was a I don't know if call hilarious or sad article I meant to I read this morning referencing some things same thing you were talking about. Headline says, "Give me my money back," screams one Korean individual. "I want to go back to before I start investing in stocks. Give me my money back. You're determined to kill me." In another I saw that article, >> right? I'm like I'm like, "Okay, now here's the really I don't want to be a jerk, right? That's not the point. That's not the point." cuz some of us tried to warn people. All right, but everyone gets so Yeah, that's the article. Everyone gets so drunk on um you know the fact that prices are going up. There's another article I saw yesterday. The guy was blaming the decline on deleveraging and um uh chasing momentum on the downside. Wait a second. Wait a second. Did leveraging and FOMO have anything to do with the price on the upside? So, and the problem is everyone's in. They're all in. And the worst thing, and you and I were talking about this before the show started, um I saw some data which suggested that since the peak in um on January 20, June 22nd in semiconductor stocks, if you look at the socks, the two leading the three leading um uh semiconductor ETFs, $25 billion have gone into those ETFs. That's not what you want to see if you want to get bullish on these stocks. So prices have come down the big deal. They're down 30 40%. They went up like forever for the last, you know, few years. Prices are down, but positioning hasn't changed in my view. And so I think you've got huge stale bull positions that are stuck. And now coming to value. So positioning is wrong, the momentum is wrong, the valuation is wrong. buying semiconductor stocks on eight times revenues or book or whatever. History shows that it's not a good value proposition. The cap the capacity increases are coming. It's just a question of when it's going to hit the bottom line. If you allow me just go on a little bit further, David, I'd like to just give an example that I've never given before, but I thought of this last week. If you think it's stupid, you can blame it on me. If you think it's genius, you can give me the credit for it. I liken what's going on in the semiconductor stocks to shipping stocks. People are going to say what shipping? Yeah, shipping stocks. Let me tell you why. Shipping is a very asset intense, capital intensive, asset heavy industry. And there are long cycles up and down. Remember, asset heavy, capital intensive. Geez, semiconductors fall in that category. And what tends to happen because supply is relatively inelastic in the short run. When demand increases, you get tremendous pricing. And so, imagine you're running, you and I are own a VLCC. We have David Lint tanker company, right? And it's costing us 10 20,000 bucks a day to operate the vessels, but now the day rate goes from 30,000 to 100,000. Costs are the same. All that acrrues to our profit margin. So you could have David Lint Tanker Company selling on, I don't know, 12 times earnings. The next thing you know, it's two times earnings because everyone knows those earnings are unsustainable. It's a pinch point. It doesn't last. You would never ever ever capitalize a shipping stocks earnings. Never. The way you value shipping stocks is you look relative to asset value, relative to book value. You can try to mark the book the calculate the real asset value by taking the book value and mark it to market for the current value of the ships. So anyone who values a shipping stock at a price earnings ratio, well, first of all, it doesn't happen in the shipping industry and they're financially illiterate if they do. I would humbly submit sub submit your consideration. That's exactly where we are as semiconductor stocks. It's commodity business. It's only a question of time before the I mean the capacity announcements already come and people say well look at the demand. Yeah. Well, what happens if hyperscalers stop spending maybe because there's no cash on cash return from what they're doing which I think is going to happen. Now Oracle is going to go bust going to go bankrupt this on this base at this rate. That's a stock by the way we called out as a short last year. It's worked out very well for us. And people say, "Well, George, you know, do you know more than Larry Elsa?" No, I don't. But whenever you see the combination of hubris and debt, run, don't walk. And so, um, the semiconductor stocks, yeah, they on a PE basis, they may look okay, but the bubble is really in the in in the E when you have gross margins going from 25% to 75%. And long-term average is, you know, is 25. And what'll happen is once supply catches up and you trust me, if you're in the finance department of semiconductor company, then you can make an obscene return on equity by opening a new plant, you'll do it. So these excess returns that the market's seeing right now and they're trying to capitalize, they're going to be arbitrageed away. Earnings will be good this year, they may be good next year, but that's really a oneoff. And so I would short this. I mean, look, they may bounce. They're very volatile. Uh I'll land this plane. I know most mo most people don't short, but what I would say in terms of the indices, the simple thing folks can do if you own SPY, get out of SPY and go into RSP because as you know, David, uh, tech is like 40 50% of SPY. It's a much lower waiting in RSP. If you run the switch chart, you'll see what I'm talking about. And a simple trade like that, just going from SPY to RSP, I think will add to your performance uh, immeasurably. Yeah, there's RSB and there's SPY. I want to I want to uh show you Intel one more time just to illustrate a point here. Um the ESTC here. Uh >> so if you take a look at what the stock is doing right now. >> Yes. >> Okay. It's it it's it's it's down about 33% from its top in late June. So in a matter of one month, it's down 33%. The Why is it not giving me >> Yeah. No, Dave, you know what the problem is? You got in the wrong currency. when I innt this happened was I was trying to find the last time this kind of pattern happened when it went up this quickly and went down this quickly. That was the tech bubble. This is literally a replay of the tech bubble except not to the same degree. It hasn't gone down 70%. But it's on the way there. If you haven't if So two questions, okay, one, right? Is this a repeat of the tech bubble? And two, if it's not, wouldn't this be a great buying opportunity if you're expecting a huge rebound, >> right? >> History history doesn't rhymes. It doesn't repeat itself. It's not always exactly the same. >> It's similar, but it's different. In particular, I think this tech bust is far worse than dot. Julian Garren who I think I've mentioned on this show before rather audite strategist who I've known for many years with macro strategy partners in the UK has made the calculation that the mal investment is 17 times 17 17 times what we saw in the dotcom era. The thing about this boom is that it's much more asset intensive and the sums of money involved are much greater relative to the economy as well. So that when this thing implodes, I think it's going to have a significant economic impact as well. So no, this is not a buying opportunity. Listen, can can Intel bounce 20% next week and all the haters are going to be throwing tomatoes at me and say, "Hey, George, we're wrong." Yeah, that can happen. Check back with me at the end of the year and let's see how this played out. >> Uh traders are still pretty optimistic on the NASDAQ overall. How high will the NASDAQ 100 price get this year? Is a trade on Koshi right now? 31,800 or above. 61% chance. We're currently at 28,000. So people are still slightly bullish. >> Yeah. And let me let me just jump in there. David, I had a I had a call the other webinar. John Ro, one of my favorite chartists who you should have on your show. I'll introduce you. Um he observed that and he's a smart cookie. He says too many people are asking him is it okay to buy? Is it okay to buy it? Is it okay to buy? You don't have people saying where's the bottom? Get me out. Panic sell. He goes, "Too many people want to buy this group." In the same way, to be fair, and I didn't listen to John, he says, "One of the problems with the gold stocks, the silver stocks, which you and I are both partial to, is be, you know, they overachieved last year. They got over the skis, so they're going through the spirit of consolidation. I still like them very much, but John thinks it could take longer for the consolidation. Why?" He goes, "There's too many people still looking to buy." Um, I But against that, and then in bonds, you want you want to see bonds, you want to see people just giving up on stuff, right? However, against John's observation, I would point out that the daily sement index on gold is at zero. So, I think gold is in the process of making a bottom. And again, check back with me in 6 to 12 months. These are investments. They're not trades. >> Yeah. Let's talk about gold now. We'll come back to the uh we'll finish off on the uh S&P, the tech sector towards the end of the interview. But gold, you said you were wrong on gold last time you were uh on the show. Why were you wrong on gold? Um the um Dave, it's always it's always obvious after the fact, isn't it? Okay. Well, the fact that you've had the dollar's been going up a little bit, a few percent, and you've had rising bond yields. I mean, if if you didn't know anything else, if that's all you knew, I said, "David, rates are going higher and bond yields are going up," you'd say, "Yeah, it's probably not good for gold." All right. So, um that's why I've been wrong. However, I think the strength in the dollar is going to be short-lived. And furthermore, I really like Luke Groman's quote. I mean, we all kind of know conceptually that rising rates are are all things be equal, are not good for gold because it's a non-income producing asset. But Luke had a great rejoinder. He goes, "Yeah, but rising rates in a country that can't afford rising rates are bullish for gold." In other words, how far can rates go up before the economy, you know, before they have to start easing materially? So, we we washed out all the tourists. They got rinsed. If you've been in gold as long as you have or I have, David, you know, this hasn't been a great year so far, but we're only in July and we've absolutely killed it the last couple years. So, I think before it's all over, you know, gold is at 10,000 or whatever. So, I I remain very the whole reflation complex generally, I'm still very positive on. >> Uh the notion that higher rates will be positive for gold is quite contrarian. If you take a look at uh what the big banks are doing, Bank of America cutting gold forecast because of the expectation that rates are going up, reduced forecast by 14% down to 4,3006 uh 4360 an ounce. We're currently at 4,000. So less than 10% bounce from here uh is their forecast. So not completely bearish, but slightly less bullish than they were before. Why would rising rates be positive for gold? >> Right. Well, so like I said, all things be equal rising rates are a negative for gold. However, if you're in a situation where you know, let's take the US or uh you're in a situation where you think the rise in rates is um it will be somewhat limited because rates can only go up so much because of the debt uh problem or there'll be like yield curve control. So, let's say yields start going up and as Michael How good mutual friend would point out, they're eventually going to engage a yield curve yield curve control YC um and suppress rates while inflation continues to drift up. I mean, real rates have been going up. That's negative for gold. It's a question as to how long can this go on for before they have to ease. And I actually think that ties into the technology. The two are related at the hip, the joint at the hip actually because as you know, David, pretty much all the growth in the economy has come from technology. largely driven by the AI you know the data center spending if that goes off the rails as I expect it will you're going to see growth really come down and with it I think rates will come down and that'll be great for the precious metals complex I've been hearing conflicting um opinions on what the Fed actually would do this year is the prediction market Koshi again 70% chance they'll raise rates before July July 2027 okay that's next year uh before 2022 27 55% chance. Uh some people have said that uh they don't agree with the markets. They don't agree with the consensus view. Um and there's no reason for the Fed to hike rates yet. What's your view? >> It's interesting. Trying to predict interest rates is almost as useless as trying to pick low prices. I remember I I did my senior thesis at Yale on on interest rate predictions and I back tested what the futures market was saying, what the predictions were, what came to pass. The tracking error was just insane. David, as the saying goes on X, you're old enough to remember when. Go way back to December of 25, seven months ago when it was on everyone's bingo card. How many rate cuts are we going to get? I got more rate cuts than you do, right? Where' those guys go? Now the story is, oh, we're going to get ready hikes. Okay. Um, I think it's wash, rinse, repeat. So, I don't put a lot of stock in these forecasts. And furthermore, your question about the Fed, the Fed just follows the market. They they follow the market. They don't, you know, they certainly can't influence the long end. Well, they can in indirect way by not issuing as much paper, which is what they're doing. They're trying to fund everything at the short end, but they generally don't control unless they're doing QE. They don't control the long end. On the short end, they follow the market. And David, look at this. I mean, since the war, by the way, we've had I've lost track how many ceasefires we've had, but now it's getting worse again. Since the war started, bond yields are up like 40 basis points. The two years up, I don't know how many basis points. I was reliably informed that rates were going to go down in time of war. That's usually what happens. It went up. And to me, that's very significant. That's a tell. That's a harbinger of things to come. >> What's to come? Harbinger of what? >> Well, that well that all these folks that have been claiming yields going down. Yield's going down. Yield's going down. No, I've been bullish. I've been bearish consistently on bonds for two, three years, and I'm not changing my tune. I think it's I think you think about it this way, David. given the surging debt we have the deficit out of control we know that but then the new piece of it is and I think he had Jay Powky on a while ago um his story of the capex boom so demand for funds coming from the private sector so demand for funds is surging while you know foreigners aren't buying our paper anymore and you look at the real yields I mean the 10 year 4 and a.5% with inflation sticky over three you know $2 trillion budget deficit actually 2.5 trillion now you We we take in five, we spend 7 and a half, we have 40 billion $40 trillion debt. We have 125 trillion offbalance off sheet balance offbalance sheet liabilities. This is not this is rates are too low in my opinion. Interest rates right now interest rates right now are not acting as a break in the economy because you got fiscal dominance and capex dominance. The way rates are going to go down if they go down, you're not rooting for that. In other words, the most likely way rates are going to go down. In fact, in my opinion, the only way rates are going to go down, and they may not go down because the bud is going to blow out, is if the economy goes into the tank. Economy goes in the tank, demand for funds is gets mitigated. But then on the other hand, you got the budget deficit surge. So, they're in this trap. I don't think the Fed has a lot of good has a lot of good uh options. Um, you know, I I the other day I was speaking with a smart fellow and and and he said to me, he goes, you know, he said, "What would you tell Kevin Wish right now if you were the Fed governor?" He advised him to quit. Yeah, >> they're no good. They're no good options. They're no good options. >> So, you say you won't turn negative on gold until you see responsible fiscal management, which probably won't be this year. >> So, you're still long-term. >> It's not it's not going to be in our lifetime, David. I mean, look, gold's gone, the dollar's gone down 98% against gold over the last, you know, 80, 100 years. It's not going to change. It's going to keep on going. And so, when people look at at their at their stock portfolio, we had this conversation before. It's like, yeah, you're looking at nominal dollars. Okay. Okay, you know, I gave a at a conference last year. It's a funny story. Um, I showed people a chart of the bond market, the TLT, and the TLT went down for four consecutive years, actually going down again this year. You know, it went down. It's going sideways. It can't rally. So, I asked folks, "What do you think of this chart?" They're like, "No, it don't look very good. It crashed, but it's not bouncing." Okay. Then I took the TLT and I divided it by Turkish LRA. The Turkish LE is like one of the world's worst currencies. So if you own a dollar name dollar asset like a bond and you measure it in Turkish LE, it's going steadily up from the lower left to the upper right. And then finally I took the TLT and I divided up by units of by ounces of gold. Now that's going from the upper left to the lower right. And I asked her and said, "What do you think of these three charts?" I go, "Well, the first one, you know, is kind of mediocre. Second one looks great. I like that it's going up. And the third one looks terrible. It's going down." I said, "Boys and girls, ladies and gentlemen, it's the same item. It's the same item. The only difference is union of account, American pesos, Turkish lera or ounces of gold." So, I think um you know, as is always the case, David, we're going to get a soft default. You know, the US government's not going to rag paying on its debts. We'll just print more money and we're just going to try to inflate the debt away. And that's really why you need to own gold to to preserve your wealth in real terms. So I I I just think right now there's just we're going to see money printing in in store as far as the I can see. >> Okay, let's talk about another trade idea here. This is on your own substack. The noble update. The world is running out of places to get oil in a hurry. Uh you commented that running out of uh oil in a hurry means short tech long energy is the one thing to remember. Tell us about this. >> Sure. So tech we've beaten to a pulp. Energy you know we were positive. We turned positive on energy end of last year in December had nothing to do with the straight silver moves. Straight silver moves wasn't even a thing at that point. It was just that as you know David energy suffered from years of underinvestment while uh energy consumption continues to go up year after year after year. And you know you're looking at a 5% 5% plus depletion rate. So you need to keep spending more and more on capex just to sustain production. And capex in real terms in the energy patch has gone down by 70% in the last decade. So there's a need for higher more investment. The way you get more investment is you got to have higher prices. And so that was the fundamental backdrop. Then the stocks are very cheap. Um I was using at the time I said you know look at Schlumbumberj against Microsoft just as an example of energy versus um uh technology. And that trade like blew out like 100% Schlumbumber Schlumbumber's favor. Okay. So energy was doing really well up until February 28th. Uh the war came and from end of March on the energy went through a really rough patch. It's kind of counterintuitive. The price of oil went up but then it came back down but price the energy stocks went down anyway. And a couple weeks ago with crude WTI down I don't know 70 sub 70. I was like enough. There's a complete disconnect between the stocks and the oil price. and they said, "Watch, wouldn't it be something if you get a truce and the price of oil goes up, not down?" It's exactly what happened. What we didn't know, none of us knew. One of the big imponderables was the fact the Chinese, if you had guests in your show talking about this, the Chinese cutting back on their imports of oil uh to the tune of about I think five or six million, four or five million barrels a day. And that reduction in demand from the Chinese help offset a lot of supply problems from elsewhere. On top of that, you had, you know, the SPR being drained. Um, you know, in various places, inventories being depleted. So, the world econom has been shielded from the uh uh reduction in uh oil coming out out of the Gulf. However, the Chinese um will only reduce their imports for so long. They're not going to announce. They're not going to issue a press release saying, "Hey, we're buying." Just like they didn't issue a press release when they stopped buying, but you look at the price action the last few days. Uh there's good reason to suspect they're at it. You combine um the fact that inventories are way down, need to be depleted, SPRs need to be depleted along with at the same time you look at retail positioning. It's almost like alltime speculative max shorts. It's absolutely perfect. What could possibly go wrong, David? You got the squeeze on the oil price, right? And you got the retail guys all short. So, look, I hope the situation gets sorted out in the Straits of War. It's terrible what's going on. My crystal ball is no clearer than anybody else's. If anyone thinks they really know what's going on, to paraphrase Alan Greenspane, you're not paying close enough attention. All right. Um, there's a lot of uh misdirection going on and a lot of lie lying going on, a lot of manipulation going on. But I guess I had finished by saying who knows what the oil price is going to do. I think it's flat to up. But you can look at what's priced in the stocks. If the stocks are very expensive as tech stocks are, you'd say well big expectations could potentially lose a lot of money. But when expectations are really low and the stocks are cheap, okay, if it doesn't work, you're not going to lose much. I I very very very much like energy. Mind folks, energy is still only 3 and a half% of the S&P, roughly half of the market cap of one tech stock, Apple or Nvidia. >> Let's take a look at this Reuters oped for some of the reasons why oil didn't go up. We talked about this already. Chinese surprise oil imports went down. We you just mentioned that US pumping more gas and oil. Uh strategic reserve, you talked about that being depleted. Trump burns bulls. US President Trump repeatedly wrongfooted oil markets by making statements about peace agreements and the resumption of flows through the street of formos. Interestingly, interestingly, just today on the 20th of July, oil prices turn lower after Iran says US talks could be pursued based on national interest. Every time a headline like this comes out, almost every time oil moves down. Okay, so that's number three. Number four, um do we have a number four? Yeah, hormuse flows rebound. Yeah. >> And then I mean how many of these assumptions do you think? Okay, that's it. So how many of these assumptions turn around number five say the last one. Hormoo's go back to that graph there. Hormoo's traffic rebounds. Yeah, cuz you had 1,800 vessels trapped in the Gulf. Once they were able to leave, you get this glut of oil all over the place. But that's a one that's a non-recurring oneoff. And more importantly, think about it. You got David David Lyn oil tanker company. So, you got your vessel out. Fine. It didn't get bombed. David, are you going to send the vessel back in to get more cargo? I don't think so. >> So, talk about it being a one-off. Yeah. No, I I think most of, if not all these are one-offs. They've cost terribly suppressed the price of oil. Uh, that picture is now rapidly changing. >> Makes sense. Tell us about SpaceX and why you're still short of SpaceX. We're at least bearish in SpaceX despite the stock falling significantly already since I >> So, so, so I want to I want to give you credit. You you pushed my buttons last time in a good way. In a good way. And it's great even if you only half bleed what you were saying to have a back and forth. It's like imagine we're at Oxford debate. You have to Okay, fine. So the valuation was never a question. We wrote this piece that got a million views on on X. We're one of the first ones back in May. >> Yeah. 11 times sales blah blah blah. Everyone knows all that now. Okay, fine. But we didn't tell people to short the stack cuz we also acknowledged it was going to go into the indices. And so we're very clear on that. I have no position. But I said wait to short. And sure enough, stock comes public 135. It went straight to I think it opened at 170, 175, where it was 225. And you had retail FOMO and you had index inclusion. The stock I'll give S&P credit. They did not change the rules for SpaceX, but Footsie Russell did. And that's an important index because there 12 trillion of money indexed to footsie Russell 20 trillion indexed to the S&P NASDAQ higher name recognition but not as important only to 600 billion. So once it got into the indices those indices are forced to buy they bought stock peaked at 225 waiting for the chart to roll over. Um we pulled the trigger to our subscribers at 145 150 on the way down. Now, we didn't call the top, but again, we're investors. We're not traders. We said the squeeze is over. The squeeze is over. Now, here's the important point. Forget about the value valuation. Forget about the fact that SpaceX bonds can't find a bid to go down every day. Forget about the horrible fundamentals. Forget about the fact that SpaceX is an AI play with a rocket company attached to it. You look at the breakdown of of of of the revenues where the TAM is, they talk about $29 trillion TAM. 22 trillion is from AI. It really is an AI play with a rocket thing attached to it. The rocket thing is kind of irrelevant in the overall valuation. Then you've got um uh the mobile communications thing. Starlink. Here's the here's the problem. I don't know if this been discussed on your show. Problem is the float. The they only listed 5% of the shares. So I think the billion7 shares only 85 million were listed some number like that. Maybe a little bit more because the green shirt. What's happening now? uh shortly after their earnings which in the next week or two 20% more of the shares are going to become unlocked. So the float free float is going to go from 5% 25%. In the ensuing months it's going to increase by 7% every few weeks. So that eventually you're going to have 100% of the shares freely traded. I would argue that in no other universe in no other universe would a stock sell on a 100 times sales certainly with a market cap of a trillion four or whatever it is right now. The only reason it is is selling here. The only reason is because of this manipulation where they got included the indices and there was forced buying because of the index inclusion. So grandma's 401k owns SpaceX. Okay, the average retiree who owns index fund owns SpaceX. This is not in the public interest. I don't care if nothing illegal is done. It's not the issue. It's wrong. If it's not legal, if it's not illegal, it should be illegal. Furthermore, the regulators and the thought leaders in the finance community sleep at the wheel. The head of the SEC should be drawn in quarter, Mr. Atkins. David Salma, the head of Goldman Sachs, should be fried. So shouldn't Ted pick the head of Morgan Stanley. So shouldn't the head of of Footsie Russell. So shouldn't the head of of NASDAQ is irresponsible. People are going to get hurt. People losing money. And now, wait for it. Just last week, SpaceX broke broke the issue price. We went through 135 like a hot knife through butter. Before we came on the show, I think I saw 125. All right. Everyone's a bag holder. Now, anyone who bought in the public, now this comes the last most important part. People bought SpaceX in the private market in private placements. the prior few years, you know, they instead of 135, they bought it at $10, $20, $50. And now all of a sudden, it's worth 125 and everyone knows it's overvalued. David, if you bought SpaceX 5 years ago at 20 in a private trade and now it's worth 125 and you look at it, you go, "This is ridiculous." As soon as you're able to sh sell the shares, as soon as they become locked unlocked, you're going to hit the bid. And that's why that's why a collapse in the SpaceX price is a feature, not a bug. It's set up to fail. So, you know, I think SpaceX is worth about $30 a share. I've done a lot of work on this. >> $30 a share. >> $30 a share. >> So, you're not So, you're not buying into the long-term vision. Elon Musk responded to this tweet of another skeptic of another SpaceX skeptic. He said, "You don't seem to understand that SpaceX will be worth more than the rest of Earth if we accomplish our goals." Yeah. And David, you don't seem to understand that if David Lynn wins the lottery, he'll he'll he'll become the richest guy in Canada. Yeah. I mean, pigs can fly. What else you want to tell me David? >> So, you're not Okay. All right. But >> I'm not a buyer. I'm not a Listen, listen. Listen, listen. I'll say it right here. Elon Musk is a disingenuous, lying grifter. I'll say that. He's been convicted. Well, the penalty wasn't enforced on the whole 420 tweet takeover thing a number of years ago. Okay. Elon Musk is not being held to account for his misstatements of fact. Elon Musk companies do not earn their cost of capital. David, I think I said this to you last time. Do you realize that in the whole history of Tesla, they've only made $ 38 billion cumulatively in the whole history of the company, but yet the thing's worth a trillion five and he's the richest guy in the world. Tell me the market's not broken. And by the way, he's made only the company's only made $38 billion in its whole history. That's despite tens of billions of dollars of tax incentives and emission credits. Elon Musk does not make profits. The Elon Musk produces opium. And >> if the valuation is based on what investors think or believe in statements like that, what does that tell you about the market? What does that tell you about the investing public right now? >> David, David, David, you must have talked to my grandfather. He always he always used to say, "David, only ask questions you already know the answer to." Okay. Okay. Listen, we've seen this movie before. Okay. Again, there's always a kernel of truth in the original idea, but then it gets carried to an excess, right? And and Tesla, honestly, 14 times sales for an auto company should be on one time sales. Tesla's worth maybe 50 bucks, 40 bucks, I don't know, 30, 40, 50. By the way, it's funny. It's kind of like the same target valuation for SpaceX. Meanwhile, SpaceX is worth, you know, instead of 30, it's worth 135. Tesla, instead of 40, it's a 380 where everything is saying. By the way, we're short Tesla from 25% higher from last year. So, I would short Tesla. I would short SpaceX. I'd short the semiconductor stocks and all the other stuff in the food chain. Just wait until the first hyperscaler cuts their capex budget. I think I think Oracle can go bankrupt. >> You think Oracle can go bankrupt? That's a statement and a half. Uh-huh. >> Okay. Uh, so Oracle is the next Cisco. >> I mean, is that >> Yeah, kind of. I mean, look, Cisco avoided going bankrupt. I hope I hope Oracle doesn't go bankrupt, but in terms of a gross misallocation of capital, the extraordinary amount of debt they've taken on, and the extent to which they're they're faced inextricably linked to Open AI, which I think will go bankrupt. OpenAI will go bankrupt. You know, they already put off their IPO till next year if there ever is going to be an IPO. Um, and so I I I think this has the potential to be one of the most spectacular busts in stock market history. >> By the way, just on that, the most spectacular bust in stock market history is what happened with the SpaceX IPO, which is that it's down from its preo price in just a month. Is that a cautionary tale to future tech IPOs this year next, or is that just unique to SpaceX? No, that's a very good point you make, David. I mean, and by the way, by the way, if all these IPs were to come to pass, SpaceX, Anthropic, Open AAI, you read the same stuff I do, the amount of new issuance that we would be looking at would be extraordinary. One feature of the market in recent years, that's one of the many reasons the market's gone up has been the supply demand situation. Specifically, there's been very little issuance and a lot of buybacks. Well, if you look at the uh projected issuance if all these things were to come public, not just in dollar terms, but in relationship to the market cap, the total market capitalization, it's an enormous number, enormous number. So aside from fundamentals, aside from growth, aside from valuation, supply demand balance for equities because this heavy new issue calendar be going to exact a huge negative impact on the market in my opinion. >> Do you think there's any sector within the tech space that is truly disruptive right now? >> Oh, there will be winners for sure, but I think it's very hard to uh identify uh what they are. I think many of the stocks that people are um chasing, they like to find choke points, things where there's a temporary supply demand imbalance. The company has a very high strong market position and high profitability, but most of these things are commodities and um so I I think it's too early to tell. Um, you know, I'm reminded I read a story a few months ago. Warren Buffett back in the 50s, one of his first big investments was into the textile industry. And the story back then was there was some new technology type of loom or some machine that was coming out that were going was going to reduce cost substantially for the textile companies. So, this was going to improve profitability. It costs go down and margins are going to improve. Well, guess what happened, David? First company got it, second company got it, third company got it, everybody got it. And as a result, again, it's competition, it's capitalism, costs all came down, everybody's prices came down. Profitability for the textile industry did not did not improve. Went up being one of the worst investments. He he tells the story. So I think this whole AI thing, yeah, we're going to use AI. We are using it. You're using it. I'm using it. That's not the point. The point is, are the companies selling this stuff going to make any money? in the same way. And David, he used to work at Bank Credit analyst. I had Peter Barers on who's the head presently the editor of BCA. I had him on my show a few weeks ago and he made the point, it's really interesting. He's like, you know, back in 99 2000, people predicting big things for the internet. And it actually turned out internet traffic grew at 43% compound. 43% compound for the next 25 years. So something like it's up 25 million%. So So if I said to you, David, if someone said to us, hey David, you know what? should buy his internet stocks. Internet traffic is going to go up going to go up 25 million% in the next 25 years. Oh, that's pretty good. Well, guess what? Nortell, Lucent, Cisco, you lost 80 90%. You got you got bankrupt. So, the issue isn't whether or not the internet was going to become a big thing. The issue isn't whether or not AI is going to come big thing. The issue is are the companies going to make any money out of it and is it going to is it is it a commodity? And I've not seen any credible path to profitability for these companies. Uh and and I think all just rushing into it and and and and the market's just chasing it and it's like show me the money. So I I remain abjectly again they can bounce any time we check back 6 months a year from now I think this stuff is a lot a lot lower. Prior to um starting your own firm, you were uh at Fidelity. What are some of the biggest lessons you've learned about um categorizing investments or stocks or asset classes um during your time there? >> It's a good question. Um well, first off, you know, my mentor, Mr. Lynch, he's famously known for know what you own. Don't just chase momentum. Don't chase stories. Do the work. know what you own. And I would humbly submit for your consideration, a lot of these folks don't know what they had. I'll tell you a funny story. In 1999, summer of 99, I was at a technology growth conference, Boston Marriott Hotel, Adams Harkness Technology Conference. And I'm sitting there trying to learn and the CEO one of these things as it gets up there and he's going on and on about this technology, that technology and I lean over to the institutional sales guy, a friend of mine who was there with me and I said, "Bill, Bill Crane, Bill, I don't understand the word this guy's talking about." He says, "George, neither does anybody else in this room." Sounded good. A lot of buzzwords, a lot of word salad, but it was like, okay, at least I knew I didn't know what I was talking about. The other people were fooling themselves. Peter, this is one great video. I should go find it on on on YouTube. Peter at the National Press Club makes fun of technology stocks. So, one, know what you own. Keep it simple, stupid. Do not go for the long shot. It's also usually better to own an okay house in the best neighborhood than than the best house in a crappy neighborhood. So, in other words, what that means is groups and sectors tend to move together. All right? Um, I learned that it's usually better to go with trend. Price, not that price is truth. I hate that saying, but price represents the sum of all information known to all market participants at any one point in time. And so, if you're convinced that tech is going to go down and it's going up, you have to ask yourself why you the only one believing it should go down. like explain what it is that those guys believe that you don't believe and how and when will what they believe cease to be true. Um so you know investing in stock market's not gambling. It's it's it's know what you own. All right. And I what I really afraid of in this market there's so much retail involvement FOMO just chasing momentum. Valuation doesn't mean anything for them until it does. Now here's here's the problem too. Valuation didn't mean anything on the way up, i.e. prices could go well beyond what a fundamental fair assessment would be. So valuation was irrelevant on the way up. It's also going to be irrelevant on the way down because the guys buying and selling this stuff aren't looking at aren't looking at uh momentum. They're just looking at trends and drawing crayons on pieces of paper. And so the the market's become a real casino. Um, I think I'm safe in saying that if Peter was around, if Peter was freshly managing money, he's managing his own money right now. But knowing Peter as I do, he would not own any of this stuff. He would be in energy stocks. He'd be in metal stocks. He he'd be maybe in some of the consumer staples, while they're not sexy right now, the ones that have good balance sheets, and there's a self-help story involved. Okay, >> final final question to you. Uh, >> right. Let's take Peter Lynch for example. Um >> if you take a look if you if you use traditional valuation metrics price to book price to earnings uh price to free cash flow. Yes, you would have assessed that a lot of these a lot of these stocks we talked about way overvalued shouldn't shouldn't touch them but they were overvalued since a long time ago. >> One could argue if you use those metrics you would have missed out on this bull run. How how would you respond to that? >> Yeah. So again markets rhyme. They don't repeat themselves. >> Yeah. All right. Um, at the end of the day, prices follow earnings. Peter would famously give the example Coca-Cola. They went up 30 times over third over a long period of time. It's cuz earnings went up 30 times. Stocks prices follow earnings. Oh, Tesla boomer. You missed it. Well, trust me, Tesla Tesla stock price has a date with its $1 earnings per share. And the number is not going to be 375. it'll be 30 or 20. Um and so stock prices in the long run average follow earnings. So you're totally right. A more traditionally um uh focused investor would have missed all this. Um however you I go back to and I'll finish with one quote which the as Yogi Bear famously once said you can you can observe a lot by watching a lot of the best and most accomplished investors in 99200 were humiliated. They were forced out of the business. Julian Roberts basically had to close his doors. George Vanderhid who you never heard of the second best manager at Fidelity was had his fund taken away. Chuck Clow was deposed as a as a chief strategist at Meil Lynch. All right. Sometimes the market makes you look smarter than you are and sometimes it makes you look dumber than they are. Depends where you are in the cycle. I would argue that some of the best investors been made to look stupid and some of the most inexperienced investors made look like geniuses. And I'm going to finish with a quote. I I prepared this especially for you Dave because I anticipated this question will come up. Um, and I, you know, sometimes you remember like where were you when this happened? Where were you in the Toronto Blue Jays, you know, won the World Series or the Raptor? Okay, so where was I in February of 2000? Pulling my hair out cuz the month for tech was finally going to peak. I started shorting tech stocks in the fourth quarter of 99. I was early, but I remember this quote and I dug it up especially for you, David. February of 2000. If it's not tech, it's Dre. I repeat, if it's not tech, it's Dre. This was uttered by Nancy Nearman who was a portfolio manager of the of Warberg Pinkis asset management global growth fund like the best performing fund in the world. If it's not tech, it's direct. People always so when someone says something like that, it kind of tells you where you are in the cycle. All right? And you're seeing a lot of this similar arrogance now. You're seeing, as I said, run from hubris and debt. And I think I I think I think we're we're in the beginnings we're we're in the beginnings of of the demise of this whole trade. It would not surprise I mean SanDisk are you kidding me? Sandis guy I think it pe it went from like nothing to over 2,000. It's now 1500. It's going back to 400. You had an IPO. This Japanese chip thing that came public last year benefiting from the whole chip boom was an IPO. An IPO for a couple of months. Not just recently it was the biggest market cap in in the Japanese stock market bigger than Toyota. So going back to 1992 2000 did George did George Van become dumb? Did Julian Robertson become dumb? No. The market lost its mind and that's what I think is going on right now and the market's now going to start to come to its senses. >> Excellent talk George. Thank you very much for that update. Uh where can we follow you? I mentioned your Substack. Where else? >> Substack X. Also, David, as you know, we're having a conference this Wednesday. No stock ideas conference. 15 of the smartest guys in the business. Well, 14 of the smartest guys in the business plus me. Each coming with one pick $99 rapid fire session, money-making, hard-hitting, actionable, no blowing fireside chats, replays available within 24 hours. The alpha generation in past uh conferences has been phenomenal. You mentioned Fresh Pet. Um, last last time we had Astera Labs, it was up over 100%. So, it's really it's it's like a stock ideas dinner except it's for the people. So, don't miss it. We This is like the fifth one we've done. They've been a lot of fun and there's been a lot of alpha generated. So, yeah, I'm on Substack. I'm on YouTube, Twitter. Uh, you can find me Gobble79. >> Thank you very much, George. Please do follow George and uh follow his uh Substack as well as his conferences. Great lineup he's got every time. So, check that out. Thank you, George. We'll speak again soon. Take care. >> Pleasure. >> Thanks for watching. Please do like and subscribe. 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