☢ The GENERATIONAL CRASH Is Coming (No Clickbait!)

Summary

The video discusses market valuation concerns, drawing parallels between the dot-com bubble and current tech stocks like Nvidia. It compares Cisco's peak valuation to GDP with Nvidia's current valuation, noting the latter's at a concerning 11.7% of GDP. The presenter also examines the S&P 500's market cap relative to GDP, known as the 'Buffet Indicator,' which is at an all-time high, suggesting potential overvaluation. They recommend a diversified portfolio, including gold and silver, to hedge against market volatility.

Takeaways

• 📉 The speaker warns of potential market crashes, comparing current tech and crypto valuations to past bubbles.
• 🤔 Despite frequent incorrect predictions, doomsayers like Peter Schiff are occasionally right and are celebrated when they predict a crash accurately.
• 📊 Historical data shows that during the dot-com bubble, Cisco's market cap was 5.5% of US GDP, whereas Nvidia's current market cap is 11.7% of GDP.
• 💰 The opportunity cost of holding onto tech stocks like Cisco during a crash can be significant, with an 85% drop seen historically.
• 📈 Nvidia's stock has appreciated over 5,000% since 2015, driven by demand for AI chips and cryptocurrency mining.
• 🌐 The market cap of the S&P 500 relative to GDP has nearly doubled, raising concerns about overvaluation.
• 🚀 Nvidia's current market cap represents 14% of the US money supply, compared to Cisco's 12% during the dot-com bubble.
• 🤝 The speaker suggests that being well-informed and skilled in blockchain analytics is crucial for outperforming the market in crypto.
• 🏦 Diversification is key, with the speaker recommending having a portion of one's portfolio in gold or silver as a hedge against market volatility.
• 📚 The video script emphasizes the importance of rational investment strategies and understanding macroeconomic cycles.

Q & A

What is the main concern expressed in the video script regarding the current market?

The main concern is that various markets, including crypto, AI, and tech stocks, are in a bubble and may experience a significant crash, similar to past economic bubbles.

Who are some of the individuals mentioned in the script that are often warning about market crashes?

The script mentions Peter Schiff, Michael Burry, and Mark Farber as individuals who often warn about market crashes.

What is the comparison made between Cisco's market value during the dot-com bubble and Nvidia's current market value?

Cisco's market value at the height of the dot-com bubble was worth 5.5% of US GDP, whereas Nvidia's current market cap is worth 11.7% of GDP, which is over 200% higher.

What is the significance of the Cisco and Nvidia charts provided in the script?

The charts show that even after significant crashes, like Cisco's post-dot-com bubble, long-term investment in such stocks can still yield positive results, but with considerable opportunity costs.

What is the 'Buffett Indicator' mentioned in the script, and what does it measure?

The 'Buffett Indicator' measures the market cap of the S&P 500 relative to GDP. It is used to assess market valuation and is currently at nearly twice the annual GDP of the US, which is a point of concern.

How does the script suggest comparing market cap to the money supply to gauge market valuation?

The script suggests comparing the market cap of companies like Cisco and Nvidia to the money supply at the time to understand how much of the total money supply their valuations represent.

What is the current percentage of Nvidia's market cap relative to the US money supply according to the script?

Nvidia's current market cap is 14% of all of the US money supply (M2).

What is the potential issue with Nvidia's high valuation relative to the US money supply?

The issue is whether Nvidia's valuation, being as high as 14% of the US money supply, is justified and sustainable, especially considering historical comparisons and potential future growth.

What diversification strategy is suggested in the script for investors who are concerned about market crashes?

The script suggests having a portion of one's portfolio in risk-off assets like gold and silver to protect against potential market crashes.

How does the script analyze the historical performance of gold relative to the S&P 500?

The script analyzes gold's relative performance by looking at periods such as the Nixon shock, the tech boom, and the 2000s, showing that gold tends to underperform during times of economic growth but can outperform during crises.

What is the final recommendation for viewers in terms of investment strategy based on the script?

The script recommends being informed, skilled in blockchain analytics, and having a diversified portfolio that includes some risk-off assets like gold or silver to protect against potential market volatility.

Outlines

00:00

📉 Market Bubbles and Valuation Concerns

The paragraph discusses the fear of an impending economic crash, often propagated by figures like Peter Schiff, Michael Burry, and Mark Farber. It contrasts the stability of gold with the volatile rise of Bitcoin. The speaker expresses concern over market valuations, using Cisco's peak valuation during the dot-com bubble as a comparison to current tech stocks like Nvidia. The discussion highlights the market cap of Nvidia relative to GDP, which is higher than Cisco's at its peak, suggesting a potential bubble. The paragraph also touches on opportunity costs and the historical performance of tech stocks relative to broader market indices, like the NASDAQ 100 and S&P 500, emphasizing the risks of holding onto overvalued assets.

05:00

🤔 Assessing the Rationality of High Market Valuations

This section delves into the valuation of Nvidia, comparing its market cap to the US money supply and historical figures like Cisco during the dot-com bubble. The speaker raises questions about whether the high valuation is justified, considering factors like global demand for AI chips and the company's profitability. The discussion also includes a comparison of Nvidia's growth to Bitcoin since 2013, suggesting that both have performed similarly. The speaker plays devil's advocate, considering whether the current valuation is rational and what the implications are for future growth. The paragraph concludes with a suggestion to diversify portfolios with assets like gold and silver as a hedge against potential market downturns.

10:01

📈 Diversification and Risk Management

The final paragraph emphasizes the importance of portfolio diversification, especially in times of economic uncertainty. It suggests that having a portion of one's portfolio in assets like gold or silver can provide protection against volatility. The speaker recommends a balanced approach, with a mix of risk-on and risk-off assets, to manage expected returns and overall portfolio risk. The paragraph also encourages viewers to engage with the community on Telegram for further discussion and data sharing, highlighting the value of collective insight in navigating market trends.

Keywords

💡Bubble

A bubble in finance refers to a market phenomenon where asset prices rise dramatically and are considered overvalued based on fundamental metrics. In the video, the speaker mentions a bubble in crypto, AI, and tech stocks, suggesting that these sectors are overvalued and could be due for a significant correction or crash.

💡Fearmongers

Fearmongers are individuals who spread fear or alarm about potential negative events, often to influence public opinion or decision-making. The video references figures like Peter Schiff and Michael Burry, who are known for predicting market crashes, and how they are often wrong but celebrated when they are right.

💡GDP

Gross Domestic Product (GDP) is a measure of a country's economic output. The video uses GDP to compare the market capitalization of companies like Cisco and Nvidia to the size of the US economy, indicating that Nvidia's market cap is over 200% higher relative to GDP than Cisco's was at the peak of the dot-com bubble.

💡Opportunity Cost

Opportunity cost refers to the potential benefit an investor misses out on when choosing one investment over another. In the context of the video, it's mentioned in relation to holding onto Cisco during the crash, where investors missed out on potential gains from other investments.

💡Monetary Expansion

Monetary expansion is a policy where a central bank increases the money supply to stimulate the economy. The video discusses how monetary expansion can artificially inflate asset prices over time, which is why the speaker looks at relative valuations to understand true market conditions.

💡NASDAQ 100

The NASDAQ 100 is an index of the 100 largest domestic and international non-financial companies listed on the NASDAQ stock market. The video compares the performance of the NASDAQ 100 relative to the S&P 500 to analyze the tech stock bubble without the influence of monetary expansion.

💡Logarithmic Charts

A logarithmic chart is a type of graph that uses a logarithmic scale for one or both of its axes, allowing for the display of data over a wide range of values in a compact form. The video mentions that all the charts analyzed are logarithmic to accurately represent the growth and decline of assets like Nvidia and Bitcoin.

💡Buffet Indicator

The Buffet Indicator, also known as the Total Market Cap to GDP ratio, is a measure used by Warren Buffett to determine if stocks are overvalued or undervalued. The video discusses how the S&P 500 market cap relative to GDP is currently almost twice the annual GDP of the US, which is a point of concern.

💡Money Supply

Money supply refers to the total amount of money available in an economy at a particular time. The video compares the market cap of companies like Nvidia and Cisco to the US money supply to determine if their valuations are justified or inflated.

💡Risk-Off

Risk-off is an investment strategy where investors move their money from risky assets to safer assets in anticipation of a market downturn. The video suggests that having some investments in gold or silver can be a risk-off strategy to protect against potential market crashes.

💡Volatility

Volatility refers to the degree of variation in the price of an asset over time. The video discusses how holding a diversified portfolio, including assets like gold, can reduce overall portfolio volatility and protect against significant losses during market downturns.

Highlights

The fear of a market crash is common, but historically these predictions are often wrong.

Despite criticism, figures like Peter Schiff and Michael Burry are celebrated when their crash predictions come true.

Peter Schiff criticized for his long-term gold investment advice while Bitcoin's value surged.

Concerns raised by comparing market cap of tech stocks like Nvidia to GDP, similar to the dot-com bubble with Cisco.

Even after a peak purchase, Cisco's stock value didn't decrease significantly over time due to dollar devaluation.

The opportunity cost of investment in tech stocks like Cisco is highlighted by significant market downturns.

Relative valuations show tech stocks like Nvidia have appreciated significantly against Bitcoin since 2013.

Nvidia's market cap is currently 11.7% of US GDP, a worrying comparison to the dot-com bubble.

The 'Buffet Indicator' shows the S&P 500 market cap is nearly twice the US annual GDP, a potential warning sign.

Nvidia's current market cap as a percentage of the US money supply is similar to Cisco's during the dot-com bubble.

The argument that global expansion justifies high market caps is countered with historical data.

Nvidia's potential future growth is questioned, suggesting it might only keep pace with money supply expansion.

The suggestion to diversify portfolios with gold or silver as a hedge against market volatility.

Historical data shows gold has underperformed during tech booms but can offer protection during market crashes.

The importance of rational portfolio management is emphasized over predicting market crashes.

The video encourages viewers to be informed and skilled in blockchain analytics for better market performance.

A premium membership offering is introduced for those seeking advanced market insights and community support.

Transcripts

the big crash is coming everything is

going to zero we are in a bubble in

crypto we are in a bubble in Ai and tech

stocks we should sell everything now and

buy gold and silver now that's what the

fearmongers of this world tell us people

like Peter Schiff or like Michael burry

or like Mark Farber right Professor boom

Doom and Gloom they always say that the

crash is going to come and of course

most of the time they're wrong but at

one point when they are actually right

then they highly celebrated and so I do

like that people are making fun of this

this is Peter shiff aging over the

decades gold staying aging over the

decades gold staying at

$1,700 while Bitcoin went from $1 to

10,000 to then in the end a million but

there are numbers that made me worried

and I looked at the data in a bit more

detail there was a post here in the

public telegram channel of Bitcoin

strategy if you want to join the link is

down below and in this message written

by ca he shared a tweet at the height of

the dot bubble Cisco was worth 5.5% of

US GDP today Nvidia market cap is worth

11.7% of GDP over 200% higher and so

here are the GDP adjusted charts Cisco

was the most expensive of the stocks at

the peak of the com bubble and so this

is the Cisco price over time it seems

like even if you bought the peak it's

not really that much of a problem we'

only only be down by 35% compared to

that Peak but the issue is of course

opportunity cost from top to bottom

we've seen a crash of more than 85% and

if you look at Cisco relative to the

NASDAQ 100 since that Peak we've seen an

underperformance of similar magnitude

minus 88% and so that's the problem with

US dollar charts right the money supply

is expanding over time and so pretty

much any asset over time gets bailed out

because the US dollar devalues over time

but we can have a look at at relative

valuations what we have here behind me

is the NASDAQ 100 relative to the S&P

500 so we take away the effect of

monetary expansion 100% because monetary

expansion has impact on both tech stocks

and regular stocks and what we see over

here is the com bubble when theom Bubble

Burst the NASDAQ 100 underperformed

regular Stocks by 69% less than what

Cisco underperformed but still quite

impressive now we are at similar

relative valuations again and so let's

look at what Nvidia has been doing this

is the Nvidia chart by the way all the

charts we looking at are logarithmic if

we don't look at them in a logarithmic

way this is what we get and we see our

com bubble here as well Nvidia crashed

during the time also by more than 80% it

recovered faster and since 2015 where we

initially ried because of crypto Mining

and then subsequently because of AI

Nvidia appreciated by more than 5,000 %

you put in $10,000 you get half a

million back in less than 10 years I

have a look at this this is NVIDIA

relative to bitcoin Nvidia was able to

grow as quickly as Bitcoin since April

of 2013 so if in April of 2013 so it

would have made zero difference if you

bought Bitcoin at around $100 or if you

bought Nvidia stock in the first quarter

of 2013 both assets performed similarly

now there's something that's not fair

comparing a company's market cap

relative to the GDP because the market

cap of all of stocks relative to GDP

increased a lot and that's potentially

another reason to be worried this is the

buffet indicator this looks at the

market cap of the S&P 500 relative to

GDP and that market cap was at around

130% of GDP during the com bubble then

we had theom Bubble Burst then we had

our Global financial crisis with the

subsequent recovery we also had a c

crash along the way but now the S&P 500

is almost two times the annual GDP of

the US the big question is whether or

not this is Justified the big question

is whether or not this can hold are us

companies simply just more International

now and do they simply just make their

money much more offshore and that's

comparing the market cap of something

that's inherently International to

something that's geographically limited

is not necessarily Fair should this

actually over time rise and Rise further

as us companies expand more and more

globally but then on the other hand we

didn't see that ratio Rising during the

1970s and 1980s and this was where a lot

of globalization actually happened and

so I find this number rather worrying

but instead of comparing to the GDP what

we can also do is we can compare the

market cap of Cisco and of Nvidia

relative to the money supply at the time

so Nvidia has currently a market cap of

2.92 trillion Cisco had a market cap of

546 billion at the peak of the Doom

bubble so here we've got the money

supply over time we're currently at a

bit over 21 trillion and in the first

quarter of the year 2000 we had roughly

4.6 billion so I've run the numbers

right now Nvidia is

14% of all of usm2 and in the year 2000

Cisco was 12% of all of money supply so

again very worrying this needs to go to

1 million or March buyers now will make

millions this is how you get the clicks

on YouTube but this is not how you beat

the market to beat the market in crypto

you need to be better informed than the

rest you need to be better skilled than

the rest you need to do better

blockchain analytics you need to track

other people's wallets and know what is

the Smart money doing it's the boring

educational content that forms skill

that doesn't perform so well on YouTube

though that's why created the premium

membership feel free to check it out we

are tracking influencer wallets to find

out what they are buying before

promoting this on YouTube we've got a

lot of tutorials to help with onchain

analytics to help with wallet Discovery

and of course there are also plenty of

chats where we help each other and also

one-on-one conversations with me so I'm

messaging every premium member oneon-one

directly once you're joining you will

get a message from me and you have the

opportunity to directly pick my brain

feel free to check it out the

bitcoin.com link is down below people

say that there's something fundamental

behind nvidia's rally of course there's

a lot of demand for the AI chips but the

question is at the time Cisco was also a

highly profitable company I'm not

doubting that Nvidia has value but the

question is is it as valuable as

14% of all of the dollars floating is

this a rational number now let's play

Devil's Advocate and let's say yes this

is Justified it should be at 14% in that

case Nvidia stock would only appreciate

by 6.8% per enm going forward right if

this ratio stays because US money supply

expands by only 6.8% now is it worth it

to hold something as risky and as

volatile as Nvidia to just get

6.8% probably not the reason to buy

something risky is to get outperformance

in other words when we are buying Nvidia

now and we expect it to grow faster than

that implies that it should be even more

of glow Global money supply that should

be soaked up in nvidia's valuation so

you're betting on this number to go up

further to go maybe to 20% to go maybe

to 28% if you want to get more than

those 6.8% money supply growth I don't

want to be a party pooper and I don't

want to be compared to the alarmist that

I just started this video off with I

don't talk about crashes all the time

and I don't pretend to be able to time

the top perfectly but some numbers are

simply worrying Tech stock have never

been as expensive relative to all other

stocks and stocks in general have never

been as expensive relative to the US

production capacity and the most hyped

stock has never been as expensive

relative to US money supply ever and by

the way Bitcoin never lived through a

serious crisis Bitcoin was born out of

the global financial crisis so it exists

since here during a time when the S&P

500 market cap relative to US GDP more

than then tripled I don't dare to

predict what's going to happen but I do

think it does make sense to have some

gold have some silver have some things

that are risk off it doesn't have to be

the majority of a portfolio and we don't

have to go 100% X lever short on Nvidia

but just have a look at those macro

Cycles right this is gold relative to

the S&P 500 so again we take away the

effect of monetary expansion because

that has an impact on both gold and the

P 500 this is just relative valuations

we had gold rallying massively after the

Nixon shock so after the US dollar

couldn't get directly converted into

gold anymore that's where people wanted

hard money then the tech boom came and

gold underperformed stocks massively

then theom Bubble Burst and gold

outperformed and in the last 13 years

gold tended to underperform Again by the

way those swings are very very large

gold relative to the S&P 500

underperformed in the 80s and 90s by

97% and so I think it's simply

reasonable based on the data to have

some money stashed away if you're very

cautious 20 30 40% if you're not that

cautious if you still want to go risk on

then at least 5% in something like gold

or silver I believe makes sense if

you've got 5% in gold and that then

outperforms by 800% then those 5% turn

into 45% and you survive that crash

quite well again it's simply about being

rational right having 5% of your

portfolio in an additional risk on BET

like Nvidia or having this somewhat

lowly correlated in an asset class

that's going to potentially appreciate

during a time I think will not make that

much of an expected return difference

but it does make a difference in terms

of volatility and it does protect an

overall portfolio quite a lot if you got

something out of this video please help

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