00:00:00
there's an idea promoted by many Western
00:00:04
economists and investors known as
00:00:06
American
00:00:08
exceptionalism now this is different
00:00:10
from the version of American
00:00:11
exceptionalism that is invoked by us
00:00:14
politicians who argue that the United
00:00:17
States is the greatest country ever with
00:00:19
the best democracy and they usually
00:00:22
invoke this term in order to justify
00:00:24
bombing or invading a foreign country
00:00:27
and overthrowing its government no this
00:00:30
version of American exceptionalism
00:00:32
advocated by the financial press is a
00:00:35
kind of economic exceptionalism
00:00:38
essentially it's the idea that the US
00:00:41
economy is exceptional and that the
00:00:44
United States has the greatest companies
00:00:47
in the world and this explains why the
00:00:50
US Stock Market dominates the world now
00:00:54
it is true that US capital markets are
00:00:57
enormous as of the end of
00:01:00
2023 the US Stock Market was more than
00:01:04
60% of the entire world's stock markets
00:01:08
by market capitalization and in
00:01:11
2024 the US Stock Market exploded yet
00:01:15
again there's a global stock market
00:01:18
index followed by many investors called
00:01:20
the msci world index that stands for
00:01:24
Morgan Stanley Capital International
00:01:27
World index and this includes large and
00:01:30
medium-sized companies from 23 developed
00:01:34
markets the idea is that investors
00:01:36
around the world can follow this index
00:01:39
and invest in the biggest companies
00:01:41
around the world however as of November
00:01:45
2024 if you look at the sectoral waiting
00:01:49
of This Global stock market index you
00:01:53
can see that the top 10 companies are us
00:01:57
companies and a stagger ing
00:02:01
74% nearly 3/4 of the entire Global
00:02:05
index consists of companies in the
00:02:08
United States if you start breaking down
00:02:11
these indexes you can see that they are
00:02:13
dominated by a small handful of us
00:02:16
companies which are largely monopolies
00:02:19
and oligopolies so yes it is true that
00:02:23
the United States has very large and
00:02:25
Powerful companies if you look at a list
00:02:28
of the top 25 companies in the world
00:02:31
these are publicly traded companies by
00:02:34
market capitalization as of August
00:02:38
2024 20 out of those 25 top companies on
00:02:42
Earth are us companies and they are
00:02:45
dominated by big Tech monopolies like
00:02:49
apple and Microsoft and alphabet which
00:02:52
is the parent company of Google or
00:02:54
Amazon or meta which is the parent
00:02:57
company of Facebook and Instagram and
00:03:00
what'sapp and in addition to Big Tech
00:03:03
monopolies you have large pharmaceutical
00:03:06
oligopolies and financial oligopolies so
00:03:10
it's not necessarily that the US has the
00:03:12
best companies in the world but rather
00:03:15
the US has established monopolies that
00:03:18
dominate much of the internet technology
00:03:21
and social media platforms and websites
00:03:24
and financial institutions that the
00:03:26
world relies on in the 21st century and
00:03:30
then there's also the fact which is
00:03:31
conveniently forgotten by people who
00:03:33
proze the idea of American
00:03:36
exceptionalism that the United States
00:03:38
has the exorbitant privilege of printing
00:03:42
the dollar which is the global Reserve
00:03:45
currency and that's not a coincidence
00:03:47
the US government helped to design the
00:03:50
International Financial system after
00:03:52
World War II in a way that guaranteed
00:03:55
that the US currency would be at the
00:03:57
Heth of this system
00:04:00
and this has guaranteed constant Global
00:04:03
demand for us assets so during decades
00:04:08
the United States has been able to
00:04:09
maintain a massive current account
00:04:12
deficit a deficit with the rest of the
00:04:14
world importing the Surplus produced by
00:04:18
workers around the world and whereas
00:04:21
most countries would suffer from very
00:04:23
high rates of inflation if they did that
00:04:26
because their currency would fall in
00:04:28
value and therefore it would be more
00:04:30
expensive to pay for imports the United
00:04:32
States has the exorbitant privilege of
00:04:35
the dollar and it can continue to import
00:04:38
and import and import and the US
00:04:41
essentially exports debt people around
00:04:44
the world who get dollars they invest in
00:04:48
US assets including US Government debt
00:04:52
which is treasury Securities US
00:04:53
Government IUS and US Stocks ownership
00:04:58
in US companies and this is one of the
00:05:00
main reasons why US capital markets have
00:05:03
done so well and indeed they have done
00:05:06
very very well in recent decades if you
00:05:09
look for instance at the S&P 500 which
00:05:12
is the index of the roughly 500 largest
00:05:16
companies that are publicly traded on on
00:05:19
us stock exchanges you can see that in
00:05:22
the past 30 years the S&P 500 has risen
00:05:27
by nearly 700
00:05:29
perc and this is even clearer if you
00:05:32
look at the NASDAQ which is an index
00:05:34
which is more heavily weighted toward
00:05:36
technology companies you can see that in
00:05:38
the past three decades the NASDAQ has
00:05:41
gone up by nearly
00:05:45
8,000% this does appear to be impressive
00:05:49
and many economists and financial
00:05:51
analysts look at this and they say look
00:05:53
how strong the US economy is and the US
00:05:57
economy has become very financialized in
00:05:59
recent decade so many people have
00:06:01
forgotten that the economy as a whole is
00:06:04
not the same thing as the financial
00:06:06
sector in the case of the S&P
00:06:09
500 35% more than onethird of the entire
00:06:14
weight of the index which follows
00:06:16
roughly 500 large US companies 35% comes
00:06:21
from just seven companies which are
00:06:24
called The Magnificent s and these are
00:06:26
Big Tech monopolies alphabet or Google
00:06:30
Amazon Apple meta Microsoft Nvidia and
00:06:35
Tesla in
00:06:37
2014 these magnificent s or mag s big
00:06:41
tech companies represented slightly
00:06:44
under 10% of the overall market
00:06:47
capitalization of the S&P 500 I made a
00:06:51
spreadsheet showing the waiting of the
00:06:53
largest companies in the S&P 500 and in
00:06:57
the msci world index these are two of
00:07:00
the most important stock market indices
00:07:03
on Earth the top 25 largest companies by
00:07:07
weight in the S&P 500 which the way we
00:07:11
you can measure this is by looking at
00:07:12
the main ETF the exchange traded fund
00:07:15
for the S&P 500 which is called the the
00:07:17
Spy the Spy you can see that the top 25
00:07:21
companies represent
00:07:24
50.3% of the weight of the entire index
00:07:28
25 companies represent over half of the
00:07:32
index just the top 10 companies
00:07:36
represent
00:07:39
37.6% of the entire weight and really
00:07:42
it's actually nine companies because
00:07:44
alphabet divided its shares into voting
00:07:47
shares and non-voting shares so Apple
00:07:51
Microsoft Nvidia Amazon meta Tesla
00:07:55
broadcom alphabet and birkshire haway
00:07:58
together repres presentent
00:08:01
37.6% of the weight of the entire S&P
00:08:05
500 and the list of the top 10 companies
00:08:08
in the msci world index is basically the
00:08:12
same the top 10 companies are us
00:08:16
monopolies that represent
00:08:18
26.3% of the entire Global index managed
00:08:23
by Morgan Stanley Capital International
00:08:26
if you want to get an idea of just how
00:08:28
cartoonishly overvalued us companies are
00:08:32
look at the market capitalization of
00:08:35
Tesla in
00:08:36
2021 Tesla's market cap was $1 trillion
00:08:41
making it larger than all of the
00:08:43
following market caps of these companies
00:08:46
combined Toyota Volkswagen byd damler GM
00:08:53
BMW Ford stellantis Honda and saic all
00:08:58
of them combined
00:09:00
had a slightly smaller market cap than
00:09:03
Tesla a single car company now Tesla's
00:09:07
stock price has been very volatile
00:09:09
because it's basically a speculative
00:09:12
Financial investment this is not based
00:09:14
on the fundamentals of the company
00:09:16
people invest in Tesla because of Elon
00:09:19
Musk the CEO and especially now that he
00:09:22
will have a senior role in the Trump
00:09:24
Administration after Trump won the 2024
00:09:28
presidential election
00:09:29
Tesla stock once again skyrocketed and
00:09:33
as of January
00:09:34
2024 the stock was around
00:09:37
$380 us which is roughly the same level
00:09:41
as the previous peak in late
00:09:44
2021 which was when Tesla's market cap
00:09:48
was larger than the market cap of the 10
00:09:51
large car manufacturers around the world
00:09:53
combined so earlier I mentioned that the
00:09:56
stock market is not the same thing as
00:09:58
the economy this is a clear example why
00:10:01
in
00:10:02
2021 Tesla produced 930,000 cars
00:10:07
worldwide in contrast just Toyota
00:10:11
produced 10 million cars in the same
00:10:14
year 20121 so Toyota produced more than
00:10:18
10 times as many cars but Tesla's market
00:10:22
cap was 4 times the size of Toyotas in
00:10:26
2021 so why is Tesla so cartoonishly
00:10:30
overvalued it's not because Tesla makes
00:10:33
the best electric vehicles on Earth
00:10:35
there are multiple Chinese companies
00:10:37
that make electric vehicles that are
00:10:39
better than Tesla cars and also way
00:10:41
cheaper like byd for instance although
00:10:44
many people in the United States will
00:10:45
never be able to even try a byd car
00:10:48
because the US government put 100%
00:10:51
tariffs on Chinese electric vehicles but
00:10:54
no that's not why the price of Tesla
00:10:56
stock is so absurdly high now Defenders
00:10:59
of Tesla will say that Tesla is not
00:11:02
actually a car company it's a technology
00:11:05
company but I would go a step further
00:11:07
and say really Tesla is a financial firm
00:11:11
that makes a few cars in reality the
00:11:14
purpose that Tesla serves in the global
00:11:16
economy is it produces a financial asset
00:11:20
called Tesla stocks which investors
00:11:23
around the world hold their wealth in
00:11:25
because they expect that Tesla stocks
00:11:28
will go way up up in price Tesla's stock
00:11:31
has become like Bitcoin the fact that
00:11:34
Tesla produces cars is not super
00:11:37
relevant many people are simply
00:11:39
investing in Tesla stock because they
00:11:41
expect capital gains it's pure
00:11:43
speculation it's not based on any
00:11:45
fundamentals they think that by
00:11:47
investing in Tesla they'll get rich
00:11:50
because the price of Tesla stock can
00:11:53
only go up supposedly we have been led
00:11:55
to believe and this is of course why
00:11:57
Tesla stock has been extremely volatile
00:12:01
but the point I'm getting at here is
00:12:03
that Tesla and other big tech companies
00:12:06
in the US the price of their stock is
00:12:10
not really based on fundamentals it's
00:12:13
rooted in the financialization of the US
00:12:15
economy the role of the US dollar as the
00:12:18
global Reserve currency and the fact
00:12:21
that investors around the world wealthy
00:12:23
people around the world are holding
00:12:25
their wealth in the form of stocks in
00:12:28
these huge us corporations because they
00:12:32
think that this is going to make them
00:12:34
even richer so these companies really
00:12:37
are Financial firms that maybe produce a
00:12:40
few cars or make a few phones or design
00:12:43
some software but their real purpose is
00:12:47
to maximize shareholder value that's the
00:12:50
purpose they serve they are at the
00:12:53
center of the largest financial bubble
00:12:57
in history the US stock market is in the
00:13:00
largest bubble ever significantly larger
00:13:04
than the bubble in 1929 that crashed and
00:13:07
ultimately led to the Great Depression
00:13:09
in the 1930s now there are two main
00:13:12
measurements that economists typically
00:13:14
use when they try to determine whether
00:13:16
or not a market is in a bubble the first
00:13:19
is looking at the overall market
00:13:22
capitalization of the companies in the
00:13:24
stock market as a percentage of GDP the
00:13:28
gross domestic product of the entire
00:13:30
country which consists of the value of
00:13:33
all of the goods and services produced
00:13:34
in a country in a given year that ratio
00:13:38
the market cap of the stock market to
00:13:40
GDP is called the buffet indicator the
00:13:43
other measurement that is typically used
00:13:45
is called the PE Ratio the price to
00:13:48
earnings ratio which looks at the price
00:13:52
of a company's stock in relation to its
00:13:55
inflation adjusted earnings especially
00:13:58
over a longer period of time like 10
00:14:00
years to see whether or not the price of
00:14:03
a stock is very overvalued compared to
00:14:06
the fundamentals of a company I will
00:14:09
look later at the PE Ratio but I want to
00:14:12
start by looking at the buffet indicator
00:14:16
if you look at the market capitalization
00:14:18
of all of the publicly traded companies
00:14:21
in the United States which you can track
00:14:23
on an index called the Willshire 5000 as
00:14:26
of December 20 24 it was
00:14:32
206% of GDP this is the highest level
00:14:37
ever recorded I repeat the market
00:14:40
capitalization of all of the companies
00:14:43
and the US stock exchanges together is
00:14:46
more than double the size of the entire
00:14:50
economy 206% of the value of all of the
00:14:54
goods and services produced in the US
00:14:56
economy in one year back in 2000 before
00:15:00
the bubble burst the peak of the com
00:15:04
bubble was
00:15:06
138% of GDP in March 2000 here we are
00:15:11
today at over 200% the current bubble in
00:15:15
the stock market makes the do Bubble
00:15:19
look like Child's Play for comparison if
00:15:21
you go back to the late
00:15:23
1970s before the rise of neoliberalism
00:15:27
of free market fundamentalism with
00:15:29
people like Ronald Reagan in November
00:15:33
1978 the market capitalization of the US
00:15:36
Stock Market was just
00:15:38
36% of US GDP but you can see that in
00:15:42
the decade since that has exploded as
00:15:46
the US economy has become financialized
00:15:49
and essentially the US economy today is
00:15:52
built on a huge financial House of
00:15:56
Cards now that data I was just
00:15:58
discussing in was looking at the market
00:16:00
capitalization of publicly traded
00:16:03
companies if you go further and include
00:16:05
the value of both publicly traded
00:16:07
companies and private equities so this
00:16:09
is the value of privately owned
00:16:11
companies that are not sold in stock
00:16:13
exchanges the total value of public and
00:16:16
private equities is more than
00:16:20
300% of US GDP at the peak of the dot
00:16:25
bubble it was just over 200% now it's
00:16:28
over over 300% and what's incredible
00:16:31
about this data is if you look at 2008
00:16:36
during the financial crisis obviously
00:16:38
the stock market collapsed in 2009 it
00:16:42
reached a low point of 100% of GDP and
00:16:47
since the great financial crisis the
00:16:50
previous bubble that had been deflated
00:16:52
has been inflated to levels never seen
00:16:55
before in history we're talking about
00:16:58
the biggest bubble
00:16:59
ever and this was not simply an act of
00:17:02
nature one of the main reasons is that
00:17:04
the US government intentionally inflated
00:17:08
that bubble because it made Rich donors
00:17:11
who fund the campaigns of politicians
00:17:14
from both the Republican and Democratic
00:17:16
parties it made them way way richer
00:17:20
especially after the 2008 financial
00:17:23
crisis the US Federal Reserve the US
00:17:25
Central Bank implemented an easy money
00:17:28
policy flooding the economy with money
00:17:31
especially the financial sector and when
00:17:33
the FED reduced interest rates to zero
00:17:36
they decided it wasn't enough to
00:17:38
stimulate the economy so they
00:17:40
implemented quantitative easing that is
00:17:43
the US Central Bank the FED bought up US
00:17:47
Government debt treasury Securities and
00:17:50
the balance sheet of the FED exploded
00:17:53
from under $1 trillion during the
00:17:56
financial crisis to a peak of nearly
00:17:58
nearly $9
00:18:00
trillion in
00:18:02
2022 and where did all of that money go
00:18:05
those trillions of dollars went into
00:18:08
asset price inflation into inflating the
00:18:12
stock market and real estate and other
00:18:15
Investments where the wealthy were
00:18:18
parking their wealth looking for higher
00:18:20
yields and this easy money policy is a
00:18:23
kind of drug for the financial sector
00:18:25
they need this liquidity in order to
00:18:28
continue in inflating the bubble or
00:18:30
everything might collapse and the
00:18:32
speculative Financial house of cards
00:18:34
that the US economy is built on could
00:18:36
come crashing down so even though in
00:18:39
2022 the FED raised interest rates and
00:18:43
implemented quantitative tightening to
00:18:45
try to ostensibly reduce the money
00:18:48
supply in reality the money supply
00:18:51
actually continued to increase in this
00:18:54
period and this was largely due to the
00:18:57
other sources of liquidity that were
00:18:59
provided to the financial sector an
00:19:01
example of this is that while the
00:19:03
Federal Reserve was implementing
00:19:05
quantitative tightening and raising
00:19:07
interest rates the US Treasury was
00:19:10
emptying the treasury general account in
00:19:13
May of 20122 the treasury general
00:19:16
account was at nearly $1 trillion it was
00:19:20
$946 billion over the next year that was
00:19:24
emptied to almost zero in June of 202 23
00:19:29
it reached the the low point of just $45
00:19:33
billion so it went from
00:19:35
946 billion to 45 billion that is an
00:19:40
injection of $900 billion of liquidity
00:19:44
into the economy into the financial
00:19:46
sector by the treasury Department by the
00:19:49
Biden Administration and this easy money
00:19:51
policy was totally bipartisan it was
00:19:54
started by the Obama Administration
00:19:56
after the financial crisis it was
00:19:58
continued under Donald Trump in his
00:20:00
first term and it was continued under
00:20:03
the Biden Administration and why is that
00:20:05
it's because large billionaire oligarchs
00:20:08
the financial sector big corporate
00:20:10
monopolies fund the campaigns of
00:20:13
politicians from both parties and then
00:20:16
there's also the fact that in the US
00:20:18
Congress insider trading is absolutely
00:20:21
rampant nearly oneth of US Congress
00:20:24
members have been caught buying and
00:20:26
selling stocks with in many cas is
00:20:29
private information they have access to
00:20:32
this is corruption and yet it's so
00:20:34
common in the US system it's a systemic
00:20:37
problem and then these same companies
00:20:40
that are profiting from the easy mon
00:20:42
monetary policy are funding the
00:20:45
campaigns of US Congress members from
00:20:48
both parties and they themselves the
00:20:50
actual politicians are also profiting I
00:20:53
mean it the corruption goes so deep so
00:20:56
the inflation of this massive bubble the
00:20:59
largest bubble in history was not just a
00:21:02
product of nature it was a product of US
00:21:06
government policy on behalf of the
00:21:09
corporate oligarchs because as I've been
00:21:11
repeating here just because the stock
00:21:13
market grows doesn't mean the overall
00:21:16
economy is healthy in fact in many ways
00:21:18
the stock market and the real economy
00:21:20
have an antagonistic relationship and
00:21:23
you can see this very clearly when you
00:21:24
realize that 93% of stocks in the states
00:21:29
are owned by the richest 10% of
00:21:33
Americans in fact the richest 1% of the
00:21:36
US population owns 1 half 50% of all
00:21:42
corporate equities which is stocks and
00:21:45
the richest
00:21:46
0.1% of the US population owns nearly
00:21:50
one quarter of corporate equities that
00:21:53
is
00:21:54
23.6% of stocks owned by the top
00:21:59
0.1% of the population meanwhile the
00:22:03
bottom 50% of the US population only
00:22:06
owns
00:22:07
1% of stocks again that is
00:22:12
170 million people the bottom 50% owning
00:22:16
1% of stocks whereas the top 1% owns 50%
00:22:21
of stocks now earlier I mentioned that
00:22:24
the measurement that is often used to
00:22:26
decide whether or not a market is in a
00:22:28
bubble is called the buffet indicator
00:22:31
this is the total market capitalization
00:22:33
of the stock market as a percentage of
00:22:35
GDP it's called the Buffett indicator
00:22:38
because of course it's named after the
00:22:40
renowned billionaire investor Warren
00:22:43
Buffett and back in 2014 a decade ago he
00:22:47
warned that investors should be wary if
00:22:51
the buffet indicator was at greater than
00:22:54
100% of GDP today it's well over
00:22:59
200% of GDP an editor of the financial
00:23:02
media Outlet Forbes and a former
00:23:05
investment banker Robert lensar
00:23:07
published an article back in 2014
00:23:10
warning that US Stock markets were
00:23:13
entering a new bubble and it's exploded
00:23:16
much further since then and he pointed
00:23:18
out in this article that in
00:23:21
1929 on the eve of the Great Depression
00:23:24
with the famous collapse of the stock
00:23:27
market in
00:23:29
1929 the market capitalization of the US
00:23:32
Stock Market was
00:23:33
81% of GDP and during the Great
00:23:37
Depression it collapsed from 81% in 1929
00:23:41
to just 25% in
00:23:44
1933 again today it is over 200% of GDP
00:23:50
which makes the stock market bubble of
00:23:53
1929 look like nothing so as it's become
00:23:57
more and more more obvious that the US
00:24:00
Stock Market is in the biggest bubble in
00:24:03
history what are wealthy oligarchs doing
00:24:06
you know these are people who have
00:24:07
hundreds of billions of dollars of
00:24:09
wealth they want to manage it they don't
00:24:11
want to lose it in another crash well as
00:24:14
you can expect we see some of the most
00:24:16
powerful oligarchs in the world have
00:24:18
been quietly cashing out and selling
00:24:23
many billions of dollars worth of stock
00:24:26
Warren Buffett after whom the Buffett
00:24:28
indicator is named has sold
00:24:32
$66
00:24:34
billion of stocks through Buffett
00:24:37
himself and through his investment
00:24:39
company birkshire Hathaway in 2023 and
00:24:43
2024 alone they sold
00:24:47
$66 billion of stocks in the second
00:24:51
quarter of
00:24:53
2024 Warren Buffett's birkshire Hathaway
00:24:56
sold 75 .5 billion of stocks and in the
00:25:01
third quarter they sold another
00:25:04
34.6 billion so just in one half of
00:25:08
2024 they dumped more than $100 billion
00:25:13
dollar of stocks so what are Warren
00:25:16
Buffett and birkshire haway doing with
00:25:18
all of this money they're sitting on a
00:25:21
huge stash of
00:25:24
$325 billion in cash now when investors
00:25:29
say cash they don't mean actual cash in
00:25:31
a bank account because if you don't have
00:25:33
your money invested anywhere it's going
00:25:35
to lose value over time with inflation
00:25:37
so when investors say cash they usually
00:25:39
mean that it's invested in cash-like
00:25:42
assets usually treasury bills so these
00:25:45
are shortterm US Government debt
00:25:48
Securities that are up to one year or
00:25:51
maybe some treasury notes of two years
00:25:54
maybe three years but Warren Buffett and
00:25:56
birkshire haway are sitting on hundreds
00:25:59
of billions of dollars of cash-like
00:26:02
assets because they don't want to invest
00:26:05
in the US Stock Market because they can
00:26:07
see that it is extremely overvalued and
00:26:12
there is likely going to be some kind of
00:26:13
major correction sometime soon this is
00:26:17
why the Wall Street Journal published an
00:26:18
article in November 2024 titled does
00:26:22
Warren Buffett knows something that we
00:26:24
don't it noted that birkshire hathway is
00:26:27
hoarding cash in a pattern seen before
00:26:30
the financial crisis but it's not just
00:26:33
Warren Buffett some of the most powerful
00:26:35
billionaire oligarchs in the United
00:26:37
States have also been dumping stock in
00:26:40
February of
00:26:42
2024 Jeff Bezos the founder of Amazon
00:26:46
sold $8.5 billion of Amazon stocks that
00:26:50
was in February then in July Jeff Bezos
00:26:55
announced in a regulatory filing that he
00:26:57
planned on selling another $5 billion of
00:27:02
Amazon shares in November Jeff Bezos
00:27:05
then dumped $3.4 billion of Amazon stock
00:27:11
so as of November
00:27:13
2024 bezo sold $ 12.5 billion of Amazon
00:27:19
shares in 11 months you know who was
00:27:23
also doing the same Mark Zuckerberg the
00:27:26
founder of Facebook which K meta which
00:27:29
is the parent company of not only
00:27:30
Facebook but also Instagram and WhatsApp
00:27:34
Mark Zuckerberg sold two billion dollar
00:27:37
of meta stock in
00:27:40
2024 and what this is very reminiscent
00:27:42
of is when Elon Musk the founder of
00:27:45
Tesla sold $7.5 billion of Tesla stock
00:27:50
back in
00:27:52
2022 when Tesla stock had gone to the
00:27:55
moon and he wanted to capitalize on that
00:27:57
and he was actually sued a lawsuit
00:28:01
accused Elon Musk of insider trading
00:28:04
when he sold the $ 7.5 billion of Tesla
00:28:07
stock so what is going on here why are
00:28:10
these billionaire oligarchs some of the
00:28:12
most powerful people on Earth dumping so
00:28:15
many billions of dollars of stock in
00:28:18
their own companies well I think it's
00:28:20
pretty clear they can see that the US
00:28:23
Stock Market is in a massive bubble and
00:28:26
they want to cash out before before
00:28:28
there's a major correction or even
00:28:30
potentially a crash don't just take my
00:28:33
word for it in 2024 a prominent Wall
00:28:37
Street hedge fund manager Mark
00:28:39
spitznagle warned that the US is in the
00:28:43
quote greatest bubble in human history
00:28:47
end quote the financial times also
00:28:49
published a very good article in
00:28:51
December 20124 titled the mother of all
00:28:55
bubbles the US has never been so
00:28:58
overhyped relative to the rest of the
00:29:01
world the author of the column rucher
00:29:04
Sharma wrote that in the investing world
00:29:07
the term American exceptionalism is
00:29:10
hotter than ever Global Investors are
00:29:13
committing more Capital to a single
00:29:15
country than ever before in modern
00:29:18
history and he noted as I mentioned
00:29:20
earlier that the US accounts for 70% of
00:29:25
the leading Global stock market index up
00:29:28
from 30% in the 1980s he warned that
00:29:32
this problem is much bigger than just an
00:29:34
AI bubble focused on artificial
00:29:36
intelligence technology and he wrote
00:29:39
quote thoroughly dominating the Mind
00:29:42
space of Global Investors America is
00:29:45
over owned overvalued and overhyped to a
00:29:48
degree never seen before as with all
00:29:52
bubbles it is hard to know when this one
00:29:55
will deflate end quote I agree with him
00:29:59
it's impossible to know when the bubble
00:30:01
will burst the only thing that is
00:30:03
certain is that at some point the bubble
00:30:06
will burst as all bubbles have always
00:30:09
done in history however if we look back
00:30:12
at recent Financial bubbles we can see
00:30:15
that they have often continued to
00:30:17
inflate much longer than some of the
00:30:19
most brilliant Financial analysts
00:30:21
thought they would this is especially
00:30:23
clear when you look back at the com
00:30:25
bubble that burst in 2000 back in 1996
00:30:29
the chair of the US Federal Reserve the
00:30:31
Central Bank Alan Greenspan famously
00:30:35
warned of what he called irrational
00:30:38
exuberance in stock markets when
00:30:41
Greenspan said that in December
00:30:44
1996 the market capitalization of the US
00:30:47
Stock Market was 86% of GDP however over
00:30:52
the next four years after he warned of
00:30:55
irrational exuberance the stock market
00:30:58
got even more and more irrational until
00:31:02
in March 2000 the bubble peaked at
00:31:07
138% of GDP so the bubble had only just
00:31:11
started inflating when greenpan warn
00:31:14
that there was likely a bubble there are
00:31:16
striking parallels to what's happening
00:31:18
today in March of 2024 the president of
00:31:22
the Atlanta fed made comments that were
00:31:25
obviously referencing the famous remarks
00:31:29
by Greenspan the Atlanta fed president
00:31:32
Rafael bosk wrote that quote this threat
00:31:36
of what I'll call pent up exuberance is
00:31:39
a new upside risk end quote so pent up
00:31:43
exuberance he did not just pick the word
00:31:45
exuberance for no reasons I'm sure he
00:31:48
knows the history of Greenspan warning
00:31:50
of irrational exuberance and this was a
00:31:53
way for a top monetary official in the
00:31:57
US to send a signal out that they are
00:32:00
concerned about the possibility of a new
00:32:02
bubble like the bubble in 200 and the
00:32:07
pent up exuberance has only continued
00:32:10
with the election of Donald Trump after
00:32:13
Donald Trump won the November
00:32:15
presidential election the stock market
00:32:17
once again skyrocketed and there are
00:32:20
some Financial analysts and investors
00:32:22
who are saying oh it's not a bubble we
00:32:25
can continue to invest more and more to
00:32:28
justify their argument instead of
00:32:30
looking at the buffet indicator they
00:32:32
look at the PE Ratio this is what I
00:32:35
mentioned earlier which is the price to
00:32:38
earnings ratio this looks at the price
00:32:40
of Company's stock in relation to the
00:32:43
inflation adjusted earnings for those
00:32:46
companies over the previous 10 years
00:32:49
when you Analyze This previous 10-year
00:32:51
period it's known commonly as the
00:32:53
Schiller PE ratio and the argument that
00:32:56
some investors make is that well in
00:32:58
December 2024 the Schiller PE ratio was
00:33:03
only in scare quotes only 37 but what
00:33:07
they don't mention is that at the peak
00:33:09
of the stock market bubble in 1929 the
00:33:12
PE Ratio was 33 so lower than it was in
00:33:18
2024 and the price to earnings ratio for
00:33:21
us companies listed in the S&P 500
00:33:24
peaked in December 1999 before the
00:33:27
Bubble Burst at 44 so the PE ratio of 37
00:33:33
in December
00:33:34
2024 is getting very close to the peak
00:33:39
of the dotom bubble so I would be very
00:33:42
skeptical of the people who say the
00:33:44
party will never end now that Donald
00:33:46
Trump has been elected the markets are
00:33:48
going to continue to Roar stocks will go
00:33:50
to the Moon everyone should go out and
00:33:53
continue to pick up pennies in front of
00:33:55
a
00:33:56
steamroller now OB obviously
00:33:58
geopolitical economy report is not an
00:34:00
investor focused website not at all our
00:34:03
focus is on geopolitics and economics
00:34:07
we're not focused on giving investment
00:34:09
advice to anyone this is not investment
00:34:11
advice but I would be very very careful
00:34:14
you can see the billionaire oligarchs
00:34:16
are already cashing out I think they can
00:34:19
see very clearly that the party is
00:34:21
ending but then again the whole point of
00:34:23
a bubble is that it's based on
00:34:26
irrationality that invest s are behaving
00:34:29
irrationally and markets are behaving
00:34:32
irrationally that's the first half of
00:34:34
Greenspan's famous quote on irrational
00:34:38
exuberance and especially with Donald
00:34:41
Trump's pledge to cut taxes on the rich
00:34:44
and to cut taxes on corporations it's
00:34:47
very possible that the bubble will
00:34:48
continue to inflate more and more into
00:34:52
more and more irrational territory of
00:34:54
course the first time Trump was
00:34:56
president during his first term he cut
00:34:58
taxes and it benefited the ultra rich in
00:35:02
fact in 2018 the richest 400 families of
00:35:06
billionaires in the US paid a lower
00:35:09
effective tax rate than the bottom half
00:35:13
of people in the United States and
00:35:15
furthermore economists at the institute
00:35:17
on Taxation and economic policy analyzed
00:35:20
Trump's proposals for his second
00:35:23
Administration and they estimated that
00:35:26
Donald Trump's policies will result in a
00:35:29
reduction in taxes on the richest 5% of
00:35:33
the population especially the richest 1%
00:35:37
of millionaires and billionaires in the
00:35:39
US but meanwhile taxes will slightly
00:35:43
rise on the bottom
00:35:45
95% of people and why is that it's
00:35:49
because Donald Trump's tariffs will
00:35:51
increase the cost of consumer goods that
00:35:54
people need for their everyday lives and
00:35:57
the less money that a person makes the
00:36:00
more of a percentage of their overall
00:36:02
paycheck they spend on consumer goods
00:36:05
and food and other services that are
00:36:08
needed for everyday life this is known
00:36:11
as the marginal propensity to consume
00:36:14
and lowincome workers have a larger
00:36:17
marginal propensity to consume than the
00:36:20
ultra Rich because if you have billions
00:36:23
of dollars and you get another billion
00:36:25
dollars you're not going to buy
00:36:27
significant ific L more food or clothes
00:36:29
I mean you're already super rich but if
00:36:31
you're living paycheck to paycheck if
00:36:33
you're barely making ends meat and then
00:36:35
your paycheck slightly increases you are
00:36:38
going to buy better food more food you
00:36:41
are going to buy things that previously
00:36:44
you would not have been able to buy so
00:36:46
in other words Donald Trump's policies
00:36:49
are going to result in a reduction in
00:36:51
taxes on Capital and an increase in
00:36:54
taxes on labor average working people
00:36:57
are going to have to pay more through
00:36:59
tariffs and rich people are going to pay
00:37:02
less as their taxes are reduced so this
00:37:05
is going to be a redistribution of
00:37:07
wealth from the working class to the
00:37:10
capitalist class the rich are going to
00:37:13
get much much richer and what are they
00:37:16
going to do with that wealth well they
00:37:18
may invest it in the bubble in the stock
00:37:20
market or maybe they'll invest it in
00:37:23
private equity and they'll buy at more
00:37:25
businesses more doctor's clinic and
00:37:28
dentist offices and veterinarian clinics
00:37:30
and nursing homes and properties which
00:37:33
is what private Equity has been doing
00:37:35
cannibalizing the economy buying up
00:37:38
everything the private Equity bubble is
00:37:40
also very likely to continue to inflate
00:37:44
as the rich have more and more money and
00:37:47
they're looking for Investments to park
00:37:49
that money to get some kind of yield to
00:37:52
make themselves even richer because what
00:37:55
Donald Trump's really doing is trying to
00:37:56
bring back reaganism and there are some
00:37:59
people who say well Trump is different
00:38:01
than Reagan because Trump is a
00:38:02
protectionist but Reagan was also a
00:38:05
protectionist actually although Reagan
00:38:07
had a rhetoric claiming that he
00:38:09
supported free markets and was against
00:38:12
protectionism in reality in 1987 the
00:38:15
rean administration imposed 100% tariffs
00:38:19
on Japanese electronic products
00:38:22
especially semiconductors which is once
00:38:26
again deja vu one of the big parts of
00:38:28
the US trade war against China in the
00:38:31
21st century and of course this is
00:38:33
bipartisan it's both Republicans and
00:38:35
Democrats who are imposing heavy tariffs
00:38:38
on China Donald Trump first in his first
00:38:42
term put heavy tariffs on China and then
00:38:45
Joe Biden the Democrat expanded those
00:38:47
tariffs further putting tariffs on
00:38:49
Chinese electric vehicles and batteries
00:38:53
and solar panels and semiconductors but
00:38:55
again the point is is that Donald Trump
00:38:58
is continuing the same economic Playbook
00:39:01
that Ronald Reagan used in the 1980s
00:39:04
this is the same old trickle down
00:39:06
economics they claim that if you cut
00:39:09
taxes on the rich and cut taxes on
00:39:11
corporations they will supposedly use
00:39:14
that money that they saved for
00:39:16
productive Investments to create jobs
00:39:19
but that narrative is simply not true a
00:39:21
2014 study found that
00:39:25
95% of the earnings of SNP 500 companies
00:39:29
were spent on share BuyBacks and
00:39:32
dividends that is to say when rich
00:39:35
people and corporations have their taxes
00:39:38
cut they're not spending all of that
00:39:40
money on productive investment to create
00:39:42
new jobs a lot of that money simply goes
00:39:45
into inflating the bubble in the stock
00:39:48
market companies buy back their own
00:39:51
stocks in order to increase the price of
00:39:54
stocks which means that Executives the
00:39:56
CEO and other Executives of the company
00:39:58
get larger bonuses because typically
00:40:01
their pay and their bonuses are based on
00:40:04
the stock price of the company or they
00:40:07
they give dividends out which encourages
00:40:10
more investors to buy stocks because
00:40:13
they think they'll get higher dividends
00:40:15
so in reality cutting taxes on the rich
00:40:17
in corporations often does not lead to
00:40:20
productive investment creating new jobs
00:40:23
it leads to further inflation of
00:40:25
financial bubbles which which is exactly
00:40:28
what we've seen in the United States
00:40:31
since Ronald Reagan and the rise of
00:40:33
neoliberalism free market fundamentalism
00:40:36
in the 1980s and it also explains why
00:40:39
private Equity is now buying up
00:40:41
everything and cannibalizing the economy
00:40:44
because the stock market is so obviously
00:40:46
overvalued in a big bubble so these
00:40:49
billionaires and these oligarchs have so
00:40:51
much wealth they're looking for
00:40:53
something to invest in so they've been
00:40:55
buying up the entire economy they've
00:40:58
been buying up hundreds of thousands of
00:41:00
homes they've been buying up clinics
00:41:03
offices small businesses they're not
00:41:05
investing it in creating new businesses
00:41:08
and innovating they're buying up
00:41:10
existing businesses and cannibalizing
00:41:13
them destroying them selling them for
00:41:15
parts and this is why I think it's still
00:41:18
very possible that that the bubble can
00:41:20
continue to inflate at some point it's
00:41:23
gonna pop but no one knows when and
00:41:25
given that Donald Trump has nominated as
00:41:28
his treasury secretary the billionaire
00:41:31
hedge fund manager Scott bessent it's
00:41:34
possible that investors will continue to
00:41:37
inflate the bubble because the US
00:41:40
Treasury is going to tell them they
00:41:41
should do so and when Trump was
00:41:43
president the first time he constantly
00:41:46
sent out tweets boasting about how much
00:41:49
the Dow Jones was rising and how the US
00:41:52
has the strongest economy in the world
00:41:55
because for a billionaire oligarch like
00:41:57
Trump Trump he sees the stock market as
00:42:00
the same thing as the economy and
00:42:03
although the financial sector and the
00:42:04
real economy are not the same thing it
00:42:07
is true that in recent decades the US
00:42:11
economy has become extremely
00:42:13
financialized according to data from the
00:42:16
US Bureau of economic analysis the Bea
00:42:19
in the early
00:42:20
1950s manufacturing represented 28% of
00:42:25
US GDP and the Finance insurance and
00:42:28
real estate sector known as the fire
00:42:30
sector was only around 10% of GDP
00:42:34
however with the rise of neoliberalism
00:42:36
of Market fundamentalism the US economy
00:42:40
de-industrialized and by 1997 the
00:42:43
manufacturing sector only represented
00:42:45
16% of US GDP and the fire sector
00:42:49
represented more than 18% of US GDP now
00:42:54
what's annoying is that the US Bureau of
00:42:55
economic analysis SE operates its data
00:42:58
from 1947 to 1997 and then they have a
00:43:01
separate section of their website from
00:43:03
1997 until today but if you look at the
00:43:06
second half of this data you can see
00:43:07
that this trend has continued and as of
00:43:11
2023 the finance insurance and real
00:43:14
estate sector the fire sector represents
00:43:17
21% of US GDP whereas manufacturing
00:43:21
represents just around 10% of GDP so
00:43:26
more and more the entire US economy
00:43:28
depends on the further inflation of
00:43:32
these Financial Bubbles and the US
00:43:35
economy produces fewer and fewer actual
00:43:38
products actual tangible manufactured
00:43:41
goods that people need to have a better
00:43:43
life and of course one of the reasons
00:43:46
Donald Trump won the election both the
00:43:48
first time and the second time is
00:43:49
because he tapped into the anger in the
00:43:52
US about the loss of good manufacturing
00:43:55
jobs and dustrial ization which has
00:43:59
destroyed the economies of areas of the
00:44:01
US like the Rust Belt however Donald
00:44:04
Trump has no actual solutions to
00:44:07
de-industrialization just look at his
00:44:09
his cabinet look at the top officials he
00:44:12
has nominated for his second
00:44:14
Administration there are at least 13
00:44:18
billionaires in his second
00:44:20
Administration Trump himself is a
00:44:22
billionaire these are not people
00:44:24
involved in manufacturing for the most
00:44:26
part
00:44:27
most of them are billionaires invested
00:44:30
in finance or in the pharmaceutical
00:44:32
industry in the case of Vic ramaswami or
00:44:35
again Trump picked as his treasury
00:44:38
secretary Scott bessent who is a hedge
00:44:41
fund billionaire from Wall Street so
00:44:43
Donald Trump claims that he wants to
00:44:45
bring back manufacturing jobs and
00:44:48
reindustrialize the US and yet he
00:44:50
surrounded himself with financial
00:44:53
speculators and oligarchs from Wall
00:44:55
Street who have a direct direct vested
00:44:58
interest in not
00:45:00
reindustrialize in further
00:45:02
financializing the US economy in further
00:45:05
inflating the financial bubbles that the
00:45:08
US economy has relied on and it is in
00:45:11
their economic interest to have an
00:45:14
overvalued US dollar Wall Street wants
00:45:17
an overvalued US dollar because when
00:45:20
other currencies fall against the US
00:45:21
dollar it encourages investors around
00:45:24
the world to exchange their currency for
00:45:26
dollars and to invest in US assets which
00:45:29
is another reason why there's been this
00:45:31
big bubble in not only the US Stock
00:45:33
Market but in many other assets this is
00:45:36
referred to as the everything bubble
00:45:38
real estate is another example in a
00:45:40
conservative estimate at least 30% of us
00:45:44
residential housing is bought as an
00:45:47
investment not to actually live in so as
00:45:50
investors not only in the US but around
00:45:52
the world buy up real estate the price
00:45:54
of houses goes up further and further
00:45:57
average working people cannot afford to
00:45:59
buy a house and this is a key reason for
00:46:01
why homelessness has become such a
00:46:03
horrific problem in the US which you can
00:46:06
see in every major city just in 2024
00:46:09
alone the number of homeless people the
00:46:12
official number which is a conservative
00:46:13
estimate increased by 18% in one year
00:46:17
and in 2023 it increased by an
00:46:20
additional 12% and why can't average
00:46:23
people afford homes because rich people
00:46:25
are buying them all up as Investments
00:46:28
which they then rent out to people on
00:46:30
Airbnb or they just find someone to rent
00:46:33
their home that they buy in not to live
00:46:35
in but as a speculative asset so if
00:46:38
Donald Trump truly wants to
00:46:40
reindustrialize the US he will have to
00:46:42
take on Wall Street but he surrounded
00:46:45
himself by people from Wall Street and
00:46:47
Trump himself is a billionaire who is
00:46:50
Heavenly invested on Wall Street and
00:46:52
furthermore if Donald Trump truly wants
00:46:55
to reindustrialize the US he will have
00:46:57
to bring down the value of the US dollar
00:47:00
now Trump has claimed at multiple points
00:47:03
that he does want to devalue the US
00:47:06
dollar however at the same time he's
00:47:09
constantly threatening other countries
00:47:11
that are trying to dollarize which would
00:47:12
help to bring down the US dollar if
00:47:15
there's less Global demand for the US
00:47:17
dollar its value should go down against
00:47:19
other currencies and yet Donald Trump
00:47:21
has repeatedly threatened countries that
00:47:23
are dollariz he threatened to impose 100
00:47:26
% tariffs on bricks countries if they
00:47:30
dollarize if they try to create an
00:47:32
alternative to the US dollar so Trump
00:47:35
has to pick is his loyalty to Wall
00:47:38
Street and the billionaires he
00:47:39
surrounded himself with in his
00:47:41
government or is his loyalty to Main
00:47:44
Street does he actually want to
00:47:47
reindustrialize the country it's pretty
00:47:49
obvious that I'm skeptical I think at
00:47:52
the end of the day it is going to be
00:47:53
Wall Street that wins because it's Wall
00:47:56
Street that has has won for decades US
00:47:58
government policy for decades by both
00:48:01
Republicans and Democrats has been made
00:48:03
on behalf of Wall Street that's
00:48:06
precisely why the richest 1% of people
00:48:09
in the US own 50% of stocks and it's why
00:48:15
the richest 0.1% of people in the US own
00:48:19
24% of stocks the ultra Rich have been
00:48:23
the beneficiaries of this US government
00:48:26
policy
00:48:27
of the inflation of a series of
00:48:30
financial Bubbles and as soon as they
00:48:32
pop the US government helps to
00:48:34
re-inflate those bubbles which is
00:48:36
exactly what happened after 2008 so if
00:48:40
the big Financial bubble bursts during
00:48:43
Trump's second Administration which is
00:48:45
quite possible it's likely that his
00:48:48
Federal Reserve and his treasury will
00:48:50
just re-inflate the bubble just like the
00:48:53
fed and treasury of the Obama
00:48:56
Administration
00:48:57
inflated the bubble after the 2007 to
00:49:00
2009 financial crisis the US economy is
00:49:03
built on this financial bubble so
00:49:07
unfortunately I will be ending here on a
00:49:10
pessimistic note but it's a realistic
00:49:12
note I'm Ben Norton the editor-in-chief
00:49:14
of geopolitical economy report I want to
00:49:17
thank everyone for joining me today for
00:49:18
this very long analysis I hope you got
00:49:21
something out of it please like And
00:49:23
subscribe please share this I will see
00:49:25
you all next time time
