Billionaire Investor Says US Market Is Headed For A HUGE CRASH! | Tom Bilyeu Reacts

Summary

Impact Theory Podcast Summary

Episode: Billionaire Investor Says US Market Is Headed For A HUGE CRASH! | Tom Bilyeu Reacts
Host: Tom Bilyeu
Guest: Jeremy Grantham, plus financial analyst commentary
Date: July 2, 2026

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Main Theme & Purpose

This episode features Tom Bilyeu reacting to an interview with legendary investor Jeremy Grantham, who warns that the U.S. stock market is deep in a historic bubble that will inevitably result in a massive crash. The episode critically examines investment bubbles, market psychology, the sustainability of growth, and practical strategies for individuals to weather economic downturns. The overall tone is candid, sometimes unsparing, as Grantham pulls no punches about the risks facing investors today and the broader societal consequences.

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Key Discussion Points and Insights

1. Jeremy Grantham’s Warning on U.S. Markets

Grantham’s Opening Advice

• "Don't own U.S. stocks." (01:08)
• "If you have a big position in US technology stock...sell them all." (01:16)
• Grantham is unequivocal: the U.S. market is in an unprecedented bubble, especially in tech and AI sectors.

On Bubbles

• "Bubbles always occur around the very most important ideas. The railroads...the internet. The problem is, eventually they bust. And if you look at the great bubbles breaking in the past, you find that it's followed by really tough times. A miserable period for the economy. And the bigger the bubble, the bigger the bust." (01:50)
• Grantham traces the historic tendency for bubbles to form around genuinely transformative technologies – not scams – which makes them especially dangerous when optimism outpaces fundamentals.

2. Market Euphoria, AI, and the Psychology of Bubbles

• Grantham likens current AI mania to past bubbles like the railroads and internet: "Artificial intelligence is right up there with the railroads...It's going to change everything. And that is critical if you mean to have a bubble." (07:50)
• The financial analyst commentator expounds on "emotional contagion" (06:09, 09:35), stressing that bubbles are driven by narrative and emotion more than logic or optimism.
• "The excitement, that emotional contagion, ends up convincing people that fundamentals don't matter anymore. And I will just say the fundamentals always matter." (12:42, Analyst)
• Historic reference: Amazon rose 6-7x in the dotcom bubble, then plummeted 92%, before eventually inheriting the retail world (12:08).

3. Bubble Mechanics and Potential Market Outcomes

• "If you look at the data, it would be compatible with history for the peak to be very soon...This is, I think, the biggest investment bubble in American history." (17:35)
• On speculative companies: "SpaceX defines as its addressable market a quarter of the global GDP...In 50 or 100 years, people will look back and tell stories about SpaceX and its prospectus like they tell stories about the South Sea bubble." (17:35)
• The “narrative” is key: Bubbles crash not because of tech failures, but because investor narratives suddenly break. (25:08 Analyst)

4. The Reality of Diversification and Investment Advice

• Rule number one: "Always be diversified." (32:28)
• Grantham describes diversification: "Wholesome bonds, wholesome cash, perhaps a small amount of precious metals like gold and silver." (32:53)
• Analyst adds: True diversification means being diversified across economic forces, not just asset classes. Many investors mistakenly think owning multiple tech stocks is sufficient diversification, when all are correlated to the same sector’s volatility. (33:08)
• Bonds and property are discussed as diversification strategies: Grantham and the financial analyst break down how long-term bonds work, their connection to inflation, and risks (38:24–47:02).

5. The U.S. Housing Market

• Historical perspective: UK houses went from 3.4x family income in 1994 to over 10x today. (48:24-49:03)
• Grantham warns: Even if home prices fall 30%, they’ll still be historically expensive. (49:41)

6. Geography, Social Contracts, and Societal Stability

• Grantham advises considering where you live: "Absolutely" you should think about the country you live in. (67:12)
• Why not the US? "It holds out too much chance that the social contract is dissolving." (67:32)
• Contrast with Japan, where strong social trust and responsibility help mitigate the effects of economic downturns; in the US, Grantham fears erosion of civic trust is raising risks ("people are doing what they think is best for them and their family. And screw everybody else, really." 70:09).

7. Advice for Ordinary People

• "Brace yourself. Do not build up a little reserve of cash. Get yourself a useful job...upskill, change skills, learn something mechanical...engineering things that will need humans." (64:07)
• Grantham suggests avoiding the U.S. stock market, staying diversified, considering properties abroad, and cultivating personal resilience and skills that are less likely to be replaced by AI.

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Notable Quotes & Memorable Moments

• Jeremy Grantham on Crypto:
  "Crypto? No. It's an unnecessary piece of nonsense that facilitates criminals moving money. Do you think Bitcoin's going to go to zero? Yes, it will certainly go to zero." (01:23–01:37)

• On Historical Blind Spots:
  "The idea that you can have steady compound growth is ridiculous. One of my few heroes, Kenneth Boulding, an economist, said the only people who think you can have compound growth on a finite planet are mad men and economists." (05:08)

• On Long-Term Thinking:
  "I specialize in a longer term horizon than most people and trying to look at a higher and higher level of abstraction. What is really going on here and what are people missing? I've discovered over decades that humans are incredibly short term oriented." (04:19–04:41)

• On the Future of US Stocks:
  "I'm not confident that the US equities will be intact in five years, ten years." (58:34)

• On Social Disintegration:
  "When I arrived in America, corporations had this sense that they owed something to the community...Now they're all in a way, cold blooded profit maximizing international enterprises." (70:54)

• On Self-Reliance and Community:
  "Make friends. Make sure you live in a tight society, if you can...When you're in trouble, you're in serious trouble." (66:58, 78:04)

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Timestamps for Key Segments

• [01:08] — Grantham: "Don't own US stocks."
• [01:50] — On the nature of bubbles and their aftermath
• [07:50] — Artificial intelligence compared to railroad and the internet
• [12:08] — Amazon as exemplar of post-bubble survivors
• [17:35] — Historic scale of current bubble; SpaceX compared to past bubbles
• [27:37] — Expected 70%+ drawdowns in tech, precedent of Nasdaq's 82% drop
• [32:28] — Grantham: "Always be diversified"; definition of diversification
• [38:24-47:02] — Bonds, property, and inflation explored in depth
• [49:41] — Housing crisis, affordability, "If they (prices) come down 30%..."
• [64:07] — Career/life advice: resilience, useful jobs, and skills
• [67:12–67:32] — On leaving the US: "social contract dissolving"
• [70:54] — American social/corporate fabric fraying

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Additional Insights

• Retail Investors and Emotional Contagion:
  Retail investors tend to buy high, sell low, and are prone to emotional decision-making—emphasizing the need for diversification and humility (12:42, analyst commentary).
• Global Strategies and Outperformance:
  Grantham recommends looking at cheaper, better-valued markets outside the US, noting that "since the beginning of last year, they have handsomely outperformed the US." (52:59)
• Cultural and Social Factors:
  Societies with higher social trust, like Japan, weather crises better; declining trust in the US is a potential source of instability and risk (69:12, 70:54).
• Pragmatic Takeaways:
  Build skills, foster genuine community, and be skeptical of mainstream investment advice—which is always incentivized towards keeping you in the market. (61:07, 62:25)

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Tone and Delivery

The tone is blunt, sometimes alarmist but always grounded in historical precedent and years of experience. Grantham’s candor is matched by the financial analyst’s thoughtful interjections, providing context and practical advice for non-experts. Throughout, Tom Bilyeu maintains an accessible, curious, and direct style, ensuring the conversation is approachable for listeners not versed in finance.

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Summary for Listeners

If you haven’t listened: this episode is essential for anyone concerned about where to put their money in 2026 and how to ride out or sidestep a possible historic market crash. Grantham urges extreme caution in U.S. equities and stresses thoughtful diversification while advocating for a return to fundamental values—community, personal skills, and long-term prudence. The conversation is a stark reminder: Bubbles burst, and the consequences, both financial and societal, are real and lasting.

Transcript

[Jeremy Grantham]

Evening.

[Financial Analyst/Commentator]

Buyer's remorse. Buy a new car. I'll be moving in. Let's get started. Sorry, I think there's been a mistake. I bought it from Carvana. You what?

[Carvana/Shopify Advertiser]

Yeah.

[Audience Member/Interviewer]

Great price.

[Carvana/Shopify Advertiser]

I even have seven days to love it or return it.

[Interviewer/Host]

So there's no.

[Jeremy Grantham]

No, no.

[Carvana/Shopify Advertiser]

Buyer's remorse. More like buyers rejoice.

[Financial Analyst/Commentator]

I guess I'll let myself out. Congratulations.

[Jeremy Grantham]

I mean it.

[Carvana/Shopify Advertiser]

Buyers rejoice.

[Financial Analyst/Commentator]

Buy your car today on Carvana.

[Carvana/Shopify Advertiser]

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[Financial Analyst/Commentator]

This guy's about to destroy everything you think you know about investing in this economy. Let's take a look.

[Interviewer/Host]

Advice do you give for the average person that's looking to invest their salary or their wages.

[Jeremy Grantham]

Don't own U.S. stocks. That's a simple strategy that you can act on.

[Interviewer/Host]

But what about S and P 500?

[Jeremy Grantham]

No.

[Interviewer/Host]

Really?

[Jeremy Grantham]

Yeah. And if you have a big position in US technology stock, my personal advice would be to sell them all.

[Interviewer/Host]

But I'm an investor.

[Financial Analyst/Commentator]

I can't wait to hear this.

[Jeremy Grantham]

Good luck. SpaceX is such a fabulous BS story and we can go into that crypto. No.

[Interviewer/Host]

Why?

[Jeremy Grantham]

It's an unnecessary piece of nonsense that facilities.

[Financial Analyst/Commentator]

I love this guy. Doesn't pull punches.

[Jeremy Grantham]

Criminals moving money. But they can't be seen.

[Interviewer/Host]

Do you think Bitcoin's going to go to zero?

[Jeremy Grantham]

Yes, it will certainly go to zero.

[Interviewer/Host]

So how many years have you spent investing?

[Jeremy Grantham]

60 years.

[Interviewer/Host]

And what's the most amount of money you've ever managed of other people's money?

[Jeremy Grantham]

165 billion.

[Interviewer/Host]

And one of the things you're famous for talking about is this idea of bubbles.

[Jeremy Grantham]

Yes. And bubbles always occur around the very most important ideas. So the railroads. Everyone could see that it would change the world. The same with the Internet. And everyone wanted to put their money in and so they over invested. But this is the problem. Eventually they bust. And if you look at the great bubbles breaking of the past, you find that it's followed by really tough times. A miserable period for the economy. And the bigger the bubble, the bigger the bus. And now we're in the biggest investment bubble. That arguably has ever occurred, and he's right about that.

[Interviewer/Host]

Are we on the verge of a collapse with AI over the coming years,

[Jeremy Grantham]

the next few days, the next few weeks, the next few months, but certainly the next few years.

[Interviewer/Host]

So if you're not someone that has a huge amount of savings, what kind of strategy should they be adopting when an economy starts to get bad and there's an economic bubble collapse?

[Jeremy Grantham]

So I will go through everything, but you will not receive this advice from investment advisors because they'll lose a lot of business.

[Interviewer/Host]

Would you be thinking about the country you live in at this moment in time?

[Jeremy Grantham]

Absolutely.

[Interviewer/Host]

Is there any countries you wouldn't live in?

[Jeremy Grantham]

I think I have to refuse to answer this on the grounds that it might tend to incriminate me.

[Interviewer/Host]

Oh, okay. So you're saying, don't live in the United States. I've just moved here, why not the United States?

[Financial Analyst/Commentator]

I can't wait to hear his answer on that one.

[Interviewer/Host]

Jeremy Grantham, your firm managed up to $165 billion at its peak, what we call AUM assets under management. So you know a lot about money, you know a lot about investing. How do you sort of self define your expertise? Because you traverse so many different subjects through your work. So if I said to you before,

[Financial Analyst/Commentator]

he answers that one thing that people need to think about when you're looking at somebody like a Ray Dalio or Grantham is understanding that when you have a massive team of researchers and you have access to deals that other people aren't going to get, if they're giving you the advice that they would follow, as long as it's the advice they would follow in your position, it can be useful. And that's one of the things I've always found interesting about Ray Dalio as he talks about this All Weather Fund. As far as I know, the All Weather Fund was him trying to answer that question for his own loved ones that weren't in his fund, but he wanted to give them something that would work all the time. Or it may have just been a thought exercise for people to ask him all the time. And he's saying, listen, if I were advising people that I know and love, this is what I would say. Knowing that that person's not going to be an active trader, knowing that they don't have fiber optic cable that can make transactions, you know, where shaving off a millisecond matters. So it'll be interesting to see if he calculates for that as he goes,

[Interviewer/Host]

you know, how do you introduce yourself professionally? What is the Answer.

[Jeremy Grantham]

I can't think I ever do introduce myself professionally, but I think of myself as specializing in a longer term horizon than most people and trying to look at a higher and higher level of abstraction. What is really going on here and what are people missing? I've discovered over decades that humans are incredibly short term oriented.

[Financial Analyst/Commentator]

Yes, they are.

[Jeremy Grantham]

And they have an enormous predisposition to optimism. They're looking for optimistic news.

[Financial Analyst/Commentator]

I don't know that I would say that it's optimism. I think that there are certainly certain people that are hyper optimistic, but I think a lot of people are something that people often round to euphoric. What I'll say is they're emotional. And so when there's a lot of hype that feels like I feel excitement, therefore, because I feel it, it must be real. This is a sure thing, I gotta get in. And they go way in all they're

[Jeremy Grantham]

looking to avoid unpleasantness. The idea that you can have steady compound growth is ridiculous. One of my few heroes, Kenneth Boulding, an economist, he said the only people who think you can have compound growth on a finite planet are mad men and economists, which is so accurate.

[Financial Analyst/Commentator]

I like this guy.

[Jeremy Grantham]

Economists simply believe you can have growth always. And everything comes down to just price.

[Financial Analyst/Commentator]

The reason that you're never going to have growth all the time. The thing that most people do not take into consideration when they're thinking about projecting forward what's going to happen in the economy. Economy is how emotional and irrational people are.

[Interviewer/Host]

One of the things you're famous for talking about is this idea of bubbles. And we're living in a moment where everybody's talking about the subject of artificial intelligence and everyone's getting very excited by it. Some people are getting very pessimistic about the impact it'll have on society. I wanted to start there because it's, it's an area where there is rife optimism on one side of things, but there's also a lot of money plowing into the market, which is I, I

[Financial Analyst/Commentator]

really do think optimism is the wrong level of analysis. I think they're groping for something. That's true. But the real stand in is humans navigate the world based on an emotion. When there is a contagion happening in culture that says this thing is a sure bet, you understand it now you get it, you're on the inside. Make a move fast. This thing is really going to happen. All your friends are telling you it's going to happen. You sit back, you watch it, you see it's happening. Maybe you See somebody get rich and then it's that emotion that captures people. I don't think that by default people are positive, because if pessimism is the thing that grabs ahold of people, then you'll see the entire herd run in a scared direction, which is exactly what happens in a recession. Look at Japan. So Japan has the bubble burst in like 1989, 1990, and even after that, as much as the government tried to create inflation, they couldn't create inflation because everybody was so convinced that they could get burned again. They just wanted to pull back, pull back, pull back. And that stuck with them for 40 years. So I don't think that's the Japanese being somehow uniquely pessimistic. I think that when a social contagion happens, you need something that breaks people out of that. And the thing that breaks people out of the social contagion of that excitement. Oh, my God, AI is going to work. This is going to be incredible. Will only be a lot of people losing a lot of money really fast, and then boom, people are snapped out of it. And it's not like in that moment their fundamental character ceases to be what they're calling optimistic. I just think they're confusing optimism for emotional contagion.

[Interviewer/Host]

What's your view on artificial intelligence? You said you're good at understanding what people are missing. What is it that people are missing?

[Jeremy Grantham]

Well, first of all, let me say I think artificial intelligence is right up there with the railroads. It's one of the defining great ideas of the last couple of hundred years.

[Interviewer/Host]

Agreed.

[Jeremy Grantham]

It's going to change everything. And that is critical. If you mean to have a bubble. People think that a bubble is mainly because it's a scam. And nothing could be further from the truth. The great bubbles always occur around the very most important ideas.

[Financial Analyst/Commentator]

This is really important. So I think the problem that people are having when they look at AI is they want it to be a debate about whether AI is going to end up being real or not. And so even the people that are going all in, they're going all in because they think the thesis that they need to bet against in the marketplace is that, oh, these dumb asses, that saying, you know, I'm betting against this, or it's overinflated. They think what they're saying is that AI isn't going to be real. What Grantham is saying, and I think that this is brilliant and people have really got to burn this into their nervous system. Is he saying the bubble is going to form specifically around something that is Real and what ends up becoming a question of is this game of chicken that people play between the debt that you have to take on in order to build out the infrastructure and it's staggeringly large on AI and then when is the revenue going to come in? Because. Because the euphoria in the markets will kick in a lot faster than the revenue from actual people adopting the technology.

[Jeremy Grantham]

One could see that it would change the world. And everyone wanted to put their money in and everybody put their money in. They over invested. And even though the railroads were a spectacularly powerful idea, the railroads collapsed and not just and everybody lost a ton of dough. The same with the Internet.

[Financial Analyst/Commentator]

Okay. The I'll assume that he's going to get to this but the actual pattern that plays out is you wipe out the early investors and then the later investors do end up winning massively. And that's what you see over and over. If you guys aren't looking at your screen you should. It's so interesting to see these bubbles rise and then fall, but then they rise. And so what they're mapping here, and this is I think how people think of it, which is a mistake but what they're mapping here is going from bubble to bubble to bubble instead of tracking the technology. So think about the Internet. So they show the bubble rise, they show the bubble fall but they're not mapping their the rise of companies like Google that end up generating freakish amounts of wealth or Amazon generating freakish amounts of wealth but all after they wipe out that first phase of investors. And so that's the thing I'm screaming at people to try to get them to understand about what's going on in AI is predicting the timing is going to be brutally difficult. He's already said it could be in a couple of days, could be in a couple months, certainly going to be in a couple years. The problem is the difference in there is the difference between getting the timing right and making a fortune and getting the timing wrong and missing the window. So this is why also holding your head. He's talking about I invest for the long term. That is going to be very, very important. He hasn't said it yet but I think hiding behind this stuff is I think he would fully acknowledge that retail investors tend to buy high and sell low. That speaks to my contagion theory which is in the excitement people are going to buy because it seems like it's going to go up forever. They don't understand that it may go up significantly from the high of the bubble but it's going to crash first and then build slowly over time as real companies are built on the back of the new technology. And so understanding that people panic when the price drops because in their excitement they come in on debt. And it's the debt that ends up biting them in the ass because they either get liquidated because they were just way out over their skis, or they didn't go in on debt, but they still needed a return on that money. Like they're like, I can put it in the market for a year, but I can't do more than that. If you put your money in the market for let's say 20 years, then you don't have to worry there. In the US stock market, there has never been a 20 year period, including the Great Depression, where you would not have come out if you were broad enough, you would have come out ahead even if you bought in at the height of the Depression and followed the crash all the way down. We have to hold and almost nobody can because they couldn't afford it or does because they emotionally panic and sell everything off.

[Jeremy Grantham]

And then out of the wreckage, the railroads changed the world and the Internet changed the world. What we have to remember is that in 99, Amazon went up six or seven times in the crash. In the tech bubble, it went down 92%. As I like to say, check it, it's such a remarkably large number. And then out of the wreckage, it inherited the retail world. And that's how it works. The greater the idea, the more obvious the idea, the more money goes in and the bigger the bubble and the bigger the bus.

[Financial Analyst/Commentator]

Now here's the thing I'll be interested to see if he ends up touching on this. The reason that something becomes a bubble is that the excitement, that emotional contagion, ends up convincing people that fundamentals don't matter anymore. And I will just say the fundamentals always matter. And so when you start seeing, and I assume they're going to touch on this with SpaceX, when you start seeing that something is just getting way untethered from the fundamentals, that's what they mean, that we're in a bubble. It's not that one day that even that company like Amazon won't be worth more than it is at the height of the bubble. It's just that it isn't yet worth that it will be one day. And the investors can see that and they've gotten swept up in the excitement and so they put their money in according to that. But if the revenues don't match, then some very substantive number of those companies because they don't have the revenue coming in, but they almost certainly have the debt. They're not going to be able to survive and get to the other side of this. And the reason that Amazon could survive a 92% drawdown on its share price is because it had real revenue and the revenue was growing. We're hitting pause for a moment, but there's plenty more ahead, so don't go anywhere. Let's talk about why you're sweating. Summer is when bad fabric becomes too hot to ignore. That tea that felt fine in April is suddenly stiff, clingy and practically suffocating you by July. Most guys just suffer through the hot months, but you don't have to. Quince fixes that. I've got their Pima cotton tees and I am very impressed. The fabric, the fit, the construction, you can feel it just by touching it. That's what happens when a brand actually cares about quality materials. Quince builds everyday essentials like soft Pima cotton tees, breathable European linen shirts and pants, and lightweight cotton sweaters at prices 50 to 80% less than comparable brands. They work directly with ethical factories, cut out the middlemen and pass the savings on straight to you. There's no markup. It's just quality. Get the basics right and everything else gets easier. Make your summer wardrobe easy. Go to quince.com impact pod for free shipping on your order and 365 day returns. Now also available in Canada. Quince is spelled Q U I n c e.com impact pod for free shipping and 365 day returns. Quince.com impact pod let's talk about a line in the IRS tax code most people do not fully use. Over 40 million Americans have HSA accounts holding $159 billion in pre tax money. The average account holds around $4,000, and most of those dollars go towards routine costs like doctor's visits and prescriptions. But that's only a fraction of what's actually eligible. That's where Trumed comes in. Trumed helps qualified customers use pre tax HSA or FSA dollars on products that qualify as medical expenses under the IRS guidelines. Think strength training equipment, health trackers, daily supplements, the categories most people assume are out of their own pocket. Qualified customers save about 30% on average. The tax code already gives you the advantage. True Med shows you how to use it. Go to truemed.com impact and check what qualifies. It takes just a couple of minutes. That's T R u e m-e-.com/True Med is for qualified customers. HSA, FSA, tax savings are going to vary. We'll be right back to the show. But first let's talk about a number that should concern you. Data breaches have increased 211% in a single year. And every breach means more of your personal data, your address, your phone number, your Social Security number. It ends up on data broker sites where anyone can buy it. The question isn't whether your data is out there, it is the question is whether you're doing anything about it. That's where Incogni comes in. They track down your data across hundreds of sites and remove it automatically. You authorize them once, that's it, they handle everything else. Plus, with custom removals, you send them any link where your information shows up and their team is going to take it down. The threat is growing. Incogni is the response that grows with it. Go to incogni.com impact and use code impact for 60% off an annual plan. Try it risk free for 30 days. Now let's get back to the show. Thanks for sticking around. Let's get right back into the action.

[Interviewer/Host]

When I say Verge, I mean over the coming years.

[Jeremy Grantham]

If you look at the data, it would be compatible with history for the peak to be very soon. Everything is in line. This is, I think, the biggest investment bubble in American history. The indicators of pure crazy euphoria like SpaceX are all over the place. SpaceX defines as its addressable market a quarter of the global gdp. It talks about endless opportunities, mining, asteroids. It will be in 50 years, people in 100 years, people will look back and tell stories about SpaceX and its prospectus. Like they tell stories about the South Sea bubble. You know, an enterprise of such enormous value, but it cannot at this time be revealed.

[Interviewer/Host]

I want to keep on this train, but for the viewers that don't know your experience, we should probably pause and just tell them your experience, because that's the reference point, but also gives you credibility and authority to speak to this. What have you done with your life?

[Jeremy Grantham]

Well, I got into the investment business in 1968. There were very few serious people in the investment business. There were no mathematical models. There were kind of relatively failed sons, rich people who would worked for JP Morgan. And then over the next 10 years, it began to get a little more serious. T. Rowe Price introduced the idea of growth stocks. A few of us introduced the idea of value stocks. And a few years later, at my first firm, battery March, we really introduced the idea of small cap it hadn't existed before that.

[Interviewer/Host]

And for people that don't know a small cap is investing in smaller companies.

[Jeremy Grantham]

Yes. And a value stock is simply one that looks cheap.

[Financial Analyst/Commentator]

I have a feeling, I don't know if they're going to cover it, but I have a feeling what he's trying to get at is that each of these groupings of companies act differently, therefore need to be invested in differently. And so when the, the less granular your level of analysis, the less likely you are to be able to invest wisely because you might go into the right company but in the wrong way. So if you're expecting a certain outsized return from, you know, an AT&T at this stage in its development, that's nonsensical. But they may classify themselves as a value stock, something that's just going to keep going, keep growing over time. A small cap company, those are going to be far more ephemeral. They come in, they go out. I'll be interested to see how he covers it because on this I would say I don't have like a deep worldview about, okay, these ones act this way, this one acts that way. But I certainly get what he's trying to get to and getting people to differentiate between these, these different kinds of stocks. And if you don't understand them, this is where you go. Broad spectrum. Be as diversified as you can to cover for your ignorance.

[Interviewer/Host]

How many years have you spent investing?

[Jeremy Grantham]

60. Approximately 60.

[Interviewer/Host]

And what's the most amount of money you've ever managed for other people in a calendar year?

[Jeremy Grantham]

Yes. 165 billion. I had two partners, Mayo and Van Otolo. And when the smoke cleared, you know, I'd made a lot of money, over a billion dollars.

[Interviewer/Host]

Personally. Personally and how much?

[Jeremy Grantham]

And paid tax on all of it.

[Financial Analyst/Commentator]

Oh good, let's go tell em about it.

[Interviewer/Host]

How does your firm still manage today of other people's money?

[Jeremy Grantham]

It manages 85 billion.

[Interviewer/Host]

85 billion. So are you a billionaire?

[Jeremy Grantham]

I'm generally referred to as a billionaire, but that's only because they count the money you give away. Because I've given over 90% of my billion away to a foundation.

[Interviewer/Host]

Oh really?

[Jeremy Grantham]

Yeah.

[Interviewer/Host]

To which foundation?

[Jeremy Grantham]

It's called the Grantham foundation for the Protection of the Environment. We invest a lot of our principle in green tech to help combat climate change.

[Interviewer/Host]

And you're 87 years old.

[Jeremy Grantham]

And I'm 87 years old.

[Interviewer/Host]

You've given 90% of your money away to your own foundation that's focused on green tech?

[Jeremy Grantham]

Yeah, maybe in 95. Yeah.

[Interviewer/Host]

Wow. Okay, so coming back to this point that we were talking about, a lot of people won't even know what a bubble is. I think you've done a good job of explaining. A bubble is when everyone gets excited, they all see something obvious. They plow their money in, the stocks go up and then if you look at the graph that's in front of you there, which shows the history of asset bubbles, eventually there's a big collapse.

[Jeremy Grantham]

Yeah.

[Interviewer/Host]

And you're saying that we're. The collapse is on the horizon.

[Jeremy Grantham]

Yes.

[Interviewer/Host]

And what does that mean for the average person?

[Financial Analyst/Commentator]

Oh, so he's going to move on. The right follow up question there is what is the mechanism that makes this stuff collapse? Because once you understand that, it is merely investor confidence. So right now you have to differentiate between what makes a stock valuable and I'll say a stock is valuable purely based on narrative. People are going to argue with me to high heaven about that. But the reason that a stock can go up and then dramatically back down without there being any change to the business is simply because a share in a company is only worth what somebody else is willing to pay for it. Period. End of story. That is it. There's no like tangible value to that share unless it pays a dividend. And then you could certainly benchmark it off the dividend that it pays and how long that you think that it will take you to how long it will take for it to pay you back for what you put into the share. But most of the time when you get into bubbles like this, you're not talking about that. You're just talking about people getting caught up in the emotional contagion, buying a thing that people are excited about and they want. And it's getting in a bubble completely detached from the fundamentals. So you're not even able to point at anything to say, well, it's because the share price is tied to 10x, the revenue or whatever, it just starts blowing all of that out. So if these share prices are based on narrative, it's the narrative that breaks that causes that plummet. Now the question becomes what ends up breaking the narrative? Is it the first business crashing into the tsunami of debt? This is almost certainly what's going to happen in AI but we saw a massive sell off when Deep Seek first hit the market. So that was a pure narrative play. The narrative play was the US is dominating the world in AI. It's our future to hold. And so anthropic OpenAI, Google, with Gemini, these are going to be the big players and it's very expensive. We get it. But we're going to stomach the amount of debt that we're going to have to bring on to build the infrastructure out because we're going to have global supremacy in AI and it's likely to be one of these three or four companies. And then all of a sudden, deepsea comes out and it was a shot to the heart. It showed that China could create a model for a fraction of the price that was almost as good. And all of a sudden, the narrative wobbled and the price plummeted. People panicked, they got out. They want to be the first out. It causes another contagion of people freaking out. They start selling and it goes down. Now, the narrative ended up stabilizing and it came back up. But I think there's a whole lot more to look at with China intentionally targeting that narrative. And yes, I am hyper aware of the potential manipulation that's going on behind the scenes. That Deep SEQ wasn't necessarily just, oh, a cheaper model, that it's using a distillation process anyway. It's beyond the scope of this video, but important to understand that bubbles crash not because something breaks in the fundamental technology. Not even necessarily, though it could be, but not necessarily something breaking in the businesses themselves. Just something breaks that narrative really quick.

[Audience Member/Interviewer]

Do you think the stock market now is completely detached of fundamentals? Like, we're in 100% narrative territory.

[Financial Analyst/Commentator]

100% narrative territory. And this, this is where, man, would it be fun to sit across from somebody that's been in the game as long as Grantham has. But the really interesting thing is right now, how much of the overall stock market is driven by AI? It's about 40% in the U.S. massive. That means your entire economy outside of, you know, your actual productive assets, but the actual stock market is the core growth engine of your economy right now. And that's 40% tied to one bet, AI. And it's on shaky ground for a whole lot of reasons that I'll be interested to see how many they get into, but I'll catalog them if they don't. And so that's like already scary. But then you have, we are late stage money printing. We're late stage socialism. I know people want to think it's late stage capitalism, but the reality is we have deficits every year, $2 trillion a year just stacking to the debt. Almost $40 trillion of national debt. And so you're in a position now where anybody who's even mildly smart with their money knows I have to be in assets. And so now what asset do most people understand the best? The stock market. So beyond a house, a house is always a preference, but in terms of the markets, so people are just going to be flooding in. So now it's like any investor that understands the game is going, I can't sit in cash. Which he teased in the intro. So I have a feeling he's going to say, given inflation, you can't be sitting in cash. He specifically says the US dollar, so you can't be there. He may go so far as to say, you don't even want to be in US debt. I'm not going to go that far. But I will say don't be in long term debt, that's for sure. So when you get to that point, you've got to own something. And so even as the markets get irrational, you start going, but I've got to be somewhere. And so that's where this all gets scary.

[Audience Member/Interviewer]

Gotcha.

[Interviewer/Host]

What's going to happen?

[Jeremy Grantham]

What's going to happen is the High Flyers will probably come down a lot. The High Flyers, the stocks that have gone up the most, AI and SpaceX, the more exciting stocks with the biggest moves historically, would be expected to come down the most from these unprecedented levels. A 70% decline would not be unexpected.

[Financial Analyst/Commentator]

Dude.com was pushing Amazon to 92. So yeah, 70% is not, not crazy.

[Interviewer/Host]

70% decline in the stock price.

[Jeremy Grantham]

Yeah. And you have to remember the tech bubble. The Nasdaq, which is an index of the growth stocks, came down 82%. It is far from unprecedented to have these major declines.

[Financial Analyst/Commentator]

And an 82% drawdown is panicking, is people thinking they've lost everything. It's divorce, it's God forbid, suicide. I mean, it's like it is unhappy times. That, that is massive. It is catastrophic. And if it is long lived, ooh, it's not good.

[Jeremy Grantham]

The biggest bubble in history was in the Japanese stock market in 1989. Back then, Japan seemed to rule the world. All the technology, all the Toyotas were kicking bottoms, General Motors and so on, research and everyone bragged about their 12 inch Sony TV and the kitchen and the quality, et cetera, et cetera. Little things you put on your belt to play music. They were all Japanese. And for a second, Japan sold for more than the US in 89.

[Interviewer/Host]

That's crazy.

[Jeremy Grantham]

And it got to 65 times earnings, which means for every dollar of earnings, you have $65 of market value. And the US went to 35 in the tech bubble of 2000. You could argue, depending on how you do it, that it's 35 or 40 today, but it's not 65. So we have seen a much bigger bubble in Japan.

[Financial Analyst/Commentator]

But remember. Okay, she's about to say it. This is crazy. You gotta hear this happened.

[Jeremy Grantham]

It went up and up and up. And then it came down for 20 years.

[Interviewer/Host]

20 years.

[Jeremy Grantham]

20 years. They talk about the lost decade, but when you look at it closely, it looks more like a lost 20 years.

[Interviewer/Host]

So for the average person, what do they feel and how does it impact them? When there's a market crash like the

[Jeremy Grantham]

one that you're forecasting, the high flyers will lay people off and a lot of people will feel less rich. And as you acquire money in the stock market, a small fraction of that 2 or 3% is spent. And in reverse it goes back and people feel a little bit poorer, they spend a little less. So the economy tends to be under some stress. And if you look at the great bubbles breaking of the past, you find that it's followed by really tough times. 1929 is followed by the Great Depression. That lasts for several years. And of course there are many other factors that go into that. But it started with the crash in the market, which was in the end down about 80% or morph. And then the next one was called the Nifty 50 because it was the 50 great companies like IBM and Coca Cola.

[Financial Analyst/Commentator]

That's interesting. I don't know about this. Can you pull something up on that AI overview?

[Audience Member/Interviewer]

The Nifty50 bubble was caused by a dangerous mix of growth at any price mentality and loose monetary policy. During the late 1960s and early 70s, investors justified extreme valuations for 50 elite blue chip stocks such as Coca Cola and Disney by assuming their earnings were immune to economic downturns.

[Financial Analyst/Commentator]

That is so interesting. Okay, there's two interesting beats in that. So one, that investors are trying to justify the. That hey, we can just pile money into this like crazy. What ends up happening is money is always seeking a return. Always seeking a return. It will find a return in Pokemon cards if that is what is required. That's like, man, I don't think enough people pay attention to Pokemon cards and why that's become a thing, but also that easy monetary policy. So basically low interest rates. So the Fed holding interest rates low, potentially. I'm not sure why they were trying to spark the economy. So you make money cheap at that point, which you do because you want to get the economy roaring again. And on the back of that, then people are borrowing money, but they're looking for a return. So if you're borrowing money at 2 or 3%, then you're going to need north of that to pay back the loan and then have some sort of gain. And so that's where people start looking for anything and they end up convincing themselves that oh I get it, blue chip stocks, those we can just pour an infinite amount of money in and we can justify, I don't know if it's 20, 30x whatever, but you can start justifying these higher numbers. Be careful man, be careful. It's all narrative.

[Jeremy Grantham]

1972 it peaked, it declined by 65%. If you adjust for inflation, the recession associated with that was just about the worst since the depression.

[Interviewer/Host]

So for the average person, what kind of strategy should they be adopting? If you're not someone that has a huge amount of savings, say you're working for one of these big companies, are there any strategies that you should be thinking about now before the markets come down and there could be a recession?

[Jeremy Grantham]

I mean rule number one is always be diversified.

[Financial Analyst/Commentator]

People hate this advice, but this is the truest advice ever. The best advice when it comes to investing. Buy low, sell high. Nobody can do it. It's an emotional game, but it's so meme to death. People think they can do it and they really can't. And then be diversified. People ask me all the time how they should be investing their money and the answer is always going to be the same. Rule number one, be diversified. You're not as smart as you think you are.

[Interviewer/Host]

What does be diversified mean?

[Jeremy Grantham]

It means wholesome bonds, wholesome cash, perhaps a small amount of precious metals like gold and silver. Yeah.

[Interviewer/Host]

And what is a bond? And how do I buy one?

[Jeremy Grantham]

Yeah, a bond is a loan that

[Financial Analyst/Commentator]

carries by the way, that is the worst list of diversification I've ever heard in terms of its incomplete. All of those things are true and I think if you ask the follow up question and push him, he obviously knows where to go. But the thing that I'll add here is diversify against economic forces. The problem is understanding what the economic forces are that are likely to be at play can be very difficult. But for instance, the easy way to give an example would be if you're in a NASDAQ index fund and you own some OpenAI and just because you don't want to be exposed, you own some stock in Anthropic as well and you're like, oh let me really like broaden out, I'm going to go with Google. You don't realize that a those Are all tech plays. B tech right now is driven almost exclusively by AI and the likelihood that AI is getting battered. But one of the AI companies is a mistake. So that oftentimes makes people feel like they're diversified, but they're not. So what he's getting at in the beginning is he's describing different economic forces. So a bond is going to perform differently, which he will certainly explain is debt. That's going to perform very differently than a growth stock will. Those are going to be different economic forces. When people are trying to risk off, they're going to go to things like Treasuries, which are considered the risk free rate of return. Because the US government can just print money, they're never going to default. So it's like understanding, oh, when the market is euphoric, what's likely to happen. When the market is scared, what's likely to happen. So making sure if there's a currency crunch, what's likely to happen. So there's all kinds of different things that can happen and so you want to be diversified across those things. So there are typical relationships between these. When people are going risk off, they tend to be in things like gold, like Treasuries. When they go risk on, they're in things like AI, SpaceX, Pokemon. And so it's going to be very different environments. But you want to make sure that you're not expecting yourself to get that timing right. So you're just wherever the market could go in reasonable quantities. We're hitting pause for a moment, but there's plenty more ahead, so don't go anywhere. We'll return to the show in a second, but right now I want to talk about the slowest part of running a business. It's not the work itself. It's getting the answers you need to do the work. You Message three people wait on two reports. Check four dashboards, and by the time you actually have the clarity you need, you're already behind. NetSuite changes that entirely. You probably already know NetSuite. They're the AI powered business management suite that's trusted by over 43,000 customers. It connects your financials, inventory, commerce, HR and CRM all into one single source of truth. NetSuite Next is the next massive leap for them. AI is now built into everything that you do. Whether your company earns millions or hundreds of millions, this is where Your business meets AI for the first time ever. You can now try NetSuite next for free. If your revenues are at least in the seven figures, go to netsuite AI Slash Theory. It's built for every industry, ready for every boardroom. Netsuite, AI Slash Theory. And now let's get back to the show. Let's talk about leverage. Effort doesn't grow a business, at least not alone. You need leverage. The same hours that get you 10 sales somewhere else can get you 100 if you're in the right place. Whatnot is where that math works. Whatnot is the largest live shopping marketplace in the country. Sellers on whatnot move 10 times more product than on other major marketplaces. Same inventory, same Hours spent, but 10 times the output. Because the format is built for selling. You go live, you show what you've got, you take questions in real time and buyers convert on the spot. If you've never seen it, Whatnot is incredible. Check it out. Buyers spend more than an hour a day in the app. They're engaged, they're loyal, and they almost never pay full price, which is exactly why they keep coming back. The number of sellers on Whatnot making over a million dollars a year has doubled. And live selling has crossed the line into full time work for many people. Beauty, collectibles, electronics, luxury, fashion, even cookies. If you have something to sell, the audience is likely already there. Search Whatnot wh a t n o t in the app store download and you can start selling right away.

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[Financial Analyst/Commentator]

Thanks for sticking around. Let's get right back into the action.

[Jeremy Grantham]

Let's say today he's explaining a bond. You invest your money in it and it will pay you 5% as long as the credit worthiness of the other side is there.

[Financial Analyst/Commentator]

So basically you're buying debt. It has a fixed amount that it's going to pay out. There's a secondary market, you can sell it. If you're buying debt off of credit worthy people, then you should be fine.

[Jeremy Grantham]

So if it's the US government, you'll assume it's pretty credit worthy and you buy a bond from the US government. It's how the US government funds a part of its activities. You can buy a 30 year US government bond, a 10 year bond, a two year bond, a 90 day treasury bill they call them when they get that short, everything goes fine. You, you receive this modest amount of money, you're 5% or you're 3%, depending on the conditions.

[Interviewer/Host]

OK, so a bond is basically lending the government money.

[Financial Analyst/Commentator]

It could be a government, it could be a company, it can be local government, can be the federal government, but

[Interviewer/Host]

yes, and if you want to lend

[Jeremy Grantham]

the government money or lending a corporation money.

[Interviewer/Host]

Okay, so you can also lend like Apple money. Yes, and I can go to the government website or it says, I was just reading here, it says if you want to lend money directly to the US government, you can bypass Wall street entirely. Go to treasurydirect.gov you open an account, link your bank and purchase directly. You can buy treasury bills, notes, bonds and series one savings bonds. You pay exactly face value with no commissions or fees. And the investment is backed by the full faith of the US Government.

[Financial Analyst/Commentator]

The thing that people need to understand about debt and the reason that I'm so paranoid about long term debt is that yes, the US is a as high of a rated creditor as you're likely to find. However, the reason for that is that they're the reserve currency. And so the US treasury can print additional money and that devalues the dollar. So you have to be very careful in terms of. All right, I've got this. Let's say you've got a 10 year treasury and you're getting paid 5%. To give you an idea right now, over the last six years inflation has totaled 30%. So you can find yourself in situations where you actually make less in the interest that you're paid than inflation. Now if it's being done intentionally, which it will often be done intentionally, it's known as yield curve control or financial repression. So this is a trick that has been used by the government before, is almost certainly going to be used again by Kevin Warsh. The reason that I say that is that when we came out of World War II, we had a similar debt to GDP ratio that we have now, which is about 123%, which is crisis levels. And the way that we were able to get out from under that debt post World War II was we held interest rates lower than inflation. So you were basically paying the government to own their debt. The reason that they were able to get away with that is that the economy was growing more than that. So the economy was outpacing the inflation. So people felt richer. I don't the exact numbers are, but let's say that inflation was 3%, rates were 2% and the economy was growing at 5%, it's going to be something like that. So the government is taking their piece to devalue the dollar, which makes the loan easier to pay back. Because you're being paid back in inflated dollars is the right way to think about it. So with your newly inflated dollars, so you're getting more dollars than you were previously for the same goods that you're selling, so you're collecting a bigger tax base, you're now able to pay off that debt because that debt is locked in at pre inflation dollars. So that's how you end up using financial repression with a growing economy to get out from under insane debt. The problem is we don't have a growing economy, not like that. So as they use financial repression now, people are going to find themselves in a very difficult situation, which is you're making it, you're making me pay you for the privilege of owning your debt. However, the rate of inflation is higher than the rate of growth. And so that's how you just keep in this death spiral of people don't want to be in the debt. So you've got to print more money to cover the gap that drives the cost of the stocks up. Tells everybody your dollar's getting worth less. So you better invest in something, pushes everybody into the economy, into the markets, excuse me, because they're trying to escape the devastation of inflation, but that spins them off with the psychological contagion of convincing themselves that AI is really that valuable and we should all just keep piling in. And so as I say, show me the incentives and I will show you the outcome. If you incentivize people to go in and buy stocks effectively at any price, people will just keep taking that risk, taking that risk, taking that risk until the narrative finally breaks and then everybody runs for the exit. It, it was not many years ago that I didn't know you could do this either. It is a scandal that somebody as smart as Stephen Bartlett, somebody who is very, I mean he is a bonafide entrepreneur. This is a guy that runs companies, makes payroll, all that stuff, and yet doesn't know the basics about the economy, doesn't know the basics about bonds, treasuries like it. It is crazy that we don't educate people around this. I think it's not a psyop, but like we have been intentionally kept ignorant, there's no doubt about that. Now the good news is we all live in the age of AI and the Internet. And so if you put the energy into learning about this, you can transform your life. But it is a complicated game and it will take your time and energy

[Interviewer/Host]

income section on your account and you can see what bonds are being offered and you can lend them money.

[Jeremy Grantham]

What you're doing, actually they have distributed it to the market and you're acquiring it from one of the existing owners.

[Financial Analyst/Commentator]

What he's saying is these are sold on the secondary market primarily. Obviously there is an initial market, but the vast majority of these are going to be purchased on the secondary market. That can influence. That's why they say the Fed can control the short term interest rate, but they cannot control the long term interest rate. The reason being long term interest rate is controlled by the secondary market. Who will look at that and go, yeah, there's no way. You're gonna have to pay me a bigger premium on that. So whoever it is that got that first wave in the market, I'll buy it from you, but I'm gonna buy it from you at a discount. And so you're gonna give me like, let's say it sold for a hundred dollars. When they say it's a 5% return, they mean 5%, assuming that you bought it for $100. But if you end up buying it for 80 or 60 and you're still paid the 5% on the 100, now the gap between that amount makes it seem, not seem, your yield is higher. The government is still only paying the 5% or the corporation is still only paying 5% on the initial sales price. But the person who buys it on the secondary market can get a bigger spread. And so you'll hear people talk about that a lot.

[Interviewer/Host]

Oh, okay.

[Jeremy Grantham]

Not actually giving them incremental money. They come to the market with $10 billion in a particular bond, with a particular coupon, it says we will pay you 3.5%. That's the coupon.

[Financial Analyst/Commentator]

And if you can hold it to maturity, get that 3.5%.

[Jeremy Grantham]

Buy some of that bond. You go to your broker and he says it's no longer selling at the original 100. It's now selling at 92 or 107. And you pay that and it transfers from one owner to you. There have been times in 1974 when you could, you could get a bond that would pay 8, 9, 10% a year.

[Interviewer/Host]

So if I buy a U.S. government 10 year treasury bond, essentially lending the U.S. government money, remember, people pay for risk 4.46% a year. And Apple's current yield on a 10 year corporate bond is 4.7% a year, so almost 5% a year. Which means if I put what, $1,000 in. I'll make $475.

[Jeremy Grantham]

Yeah.

[Interviewer/Host]

Every 10 years. Interesting. I never really knew how bonds work. So you're saying market's collapsing. Diversify. Get some money into bonds, keep some money in cash, and anything else in terms of diversified portfolio property.

[Jeremy Grantham]

Property is fine, except it's pretty darn expensive by historical standards.

[Financial Analyst/Commentator]

So I am a little shocked that he's going to let that slide. In terms of that very brief explanation of diversification, this is one of those things I often think, like, I may need to really buckle down and try to get a hold of some really great minds on diversification. Ray's done a lot of work here, but it would be very interesting to try to cobble together people like Grantham, Dalio, etc. Etc. And get like a master breakdown of what each of these guys considers a diversified. Ray will repeat ad nauseam, you want 12 to 15 diversified streams of income that are uncorrelated. Excuse me, that's the word that he beats to death. And so that is extraordinarily difficult. And so I'd love to know from their perspective, like, how often does that change? How often are you like, well, these now aren't uncorrelated. These are correlated now. So like for instance, for a long time Bitcoin was seen as being uncorrelated to the stock market, but in reality, it acts a lot more like a tech stock that people only go to when they're out on the yield, when they're out on the risk curve. So I imagine people's thinking changes relatively dramatically from week to week, month to month, around what's correlated, what's not, what a truly well diversified portfolio looks like. This is the problem with the markets. They are so complex and so ever evolving.

[Jeremy Grantham]

Engineered a situation where house prices tend to rise. Great for the people who have a house and terrible.

[Financial Analyst/Commentator]

Tell us how they do it, Grandpa.

[Jeremy Grantham]

Who would like to buy a house back in 94, in England, a typical house sold for 3.4 times your family income. That was about as low as it

[Financial Analyst/Commentator]

had been for 50 rigs in the economy.

[Jeremy Grantham]

And then from 94 until today, it rose from 3.4 times to over 10 times, depending on where you were. And at 10 times income, a reasonable young couple are in big trouble. They can't really afford to buy a

[Financial Analyst/Commentator]

house, especially if interest rates are going up.

[Jeremy Grantham]

And that same high prices are reflected in rents. So they're really squeezed on living costs.

[Financial Analyst/Commentator]

Can we use the word screwed? Punished, abused, squeezed. Feels a little too unintentional.

[Jeremy Grantham]

And the same is true even worse. Crushed in China, in Canada, Australia, most of Europe, house prices have simply been allowed to go up for the last 30. They didn't. You know, traditionally they traded flat or down 60, 70, 80 years until 1994 in the UK. But since then, house prices have risen everywhere.

[Interviewer/Host]

So are you expecting house prices to come down sharply? I think I heard you say that they might come down 30%.

[Jeremy Grantham]

Even if they come down 30%, they're really still very expensive, aren't they?

[Audience Member/Interviewer]

Yes.

[Financial Analyst/Commentator]

So, okay, hopefully they're going to get into this. But the interesting thing with the housing is if you want to be angry at the system, housing is a very good place to start. It is being weaponized against you through political means. And it is very simple. A house is the only asset that both men and women intuitively understand. They're not going to intuitively understand the bond market, they're not going to intuitively understand stocks, but they will intuitively understand I can live in a house. And if you're telling me that that house is the way that I store my wealth so I can pass it on to my kids, it's like, oh, wow, I can raise my kids inside of this thing and pass it on and it will make sure that they have money after I'm gone, sign me up. And then once you do that and you ratchet it up, up, up, up, up, you create a voting block known as homeowners. And the homeowners just want you to say the words that are going to make their house go up in value. And now, like he said, great for the people that literally life changing for the people that got in and own the property and absolutely horrific to everybody else who gets locked out of it. And if you want to know why the pitchforks are coming out, it is largely because the one asset that people actually understand they can't get into. Now I think we need to go back to what he was talking about, where houses are basically flat, keep up with inflation, sure, but basically flat. And that nobody thinks of it as a way to get rich. They think of owning a house as a piggy bank. It's a thing that they can buy that as long as I keep it up, is going to hold its value against inflation. They might not know to add that part, but that's what they mean. So that when they die, whatever the value of that house is cool, as long as I upkept it, then my kids have access to that value. But it's trending with inflation. It's not just getting more and more valuable the way that you might expect a growth stock. So at some point we started telling people that your house is like a growth stock. Get in, baby, get it, whatever it takes. Take on that debt, hold on to it. It's going to the moon. But to do that, you've got to stop building. You've got to create more demand than you're going to be able to satisfy with the actual inventory, the housing. And to me, that is amoral. Not amoral, that's immoral. It is actively bad. So getting people to pass laws, you're going to hear the phrase NIMBYism, which it's just an acronym that stands for not in My backyard. So anybody that's saying, hey, like this is cool, but just not here, that's the enemy. So you want to put people in a position where houses are being built that you're deregulating and making sure that there's more and more supply coming on the market.

[Jeremy Grantham]

They'd come down to six or seven times family income. They'd still be twice what they used to be in the good old days.

[Interviewer/Host]

So I've got diversify, I've got reduce

[Financial Analyst/Commentator]

your position, just build more.

[Interviewer/Host]

There is probably going to be a bit of a job disruption as well.

[Jeremy Grantham]

And particularly if you have to own stocks, own them. Outside America. Don't own U.S. stocks.

[Financial Analyst/Commentator]

That's wild.

[Jeremy Grantham]

That's a nice, simple strategy that you can act on.

[Audience Member/Interviewer]

Why?

[Jeremy Grantham]

They're much cheaper. And since the beginning of last year, they have handsomely outperformed the U.S. there we go.

[Financial Analyst/Commentator]

I was going to say just being cheaper is not interesting. But if they're cheap and outperforming now, you're in a good place. All right, so this is where, listen, full disclosure, obviously Grantham has way more experience in this than I do. And so I will offer my opinion as a counterpoint. I think it's an important counterpoint, and that is that there's no way to know that the outside world is going to continue to outperform the US So take China. China was absolutely murdering it for a long time. Now China is in real economic distress. What initially they were hoping to contain to the housing market is now spilling over and they are wiping out obscene amounts of individual household wealth in China right now. So what does that end up being in the long term is anybody's guess. As we've seen with the war in Iran, International dynamics can change on a dime. So while I think it is is extremely wise to treat the US As a region that May go up, it may go down, maybe in a bubble, may absolutely implode. But it, it could do either of those. It could keep going up for years. And so far better to say I don't know if the US is going to go up forever or down. So I'm going to be a little bit here. I don't know that emerging markets are going to keep emerging. So I'm going to be a little bit there, but not all in. And so you're just diversifying a little bit more roundly than what I hear him saying now. Again, I approach all of this with a freakish degree of humility and a serious lack of trust in my ability to see the future. So I would just advise the same. This is one of those times where I feel like he's not being, he's not able to recognize he's got a team of researchers. I can only imagine how big that team of researchers is, at least at his company. And that certainly when he was running his company he would have people looking at this stuff every day, all day, all the time, making trades in real time. Again, fiber optic cable. How close are we to like the main servers that are actually doing the trade? How fast is our cable? Like they actually look at this stuff because they can make or lose money just based on the speed of the transaction. Nobody listening to this right now is in that kind of position. So try to make sure that you're mapping the difference between how he is set up to make all these trades and how you're set up. So if you're not paying attention to what region was hot, maybe it's declining now, constantly making all these changes even more diversification becomes the solution.

[Jeremy Grantham]

Foreign stocks, foreign stocks of emerging countries, of European countries, Japan, Canada, Australia and so on. You can find good broad indices, kind of the world ex, US or emerging

[Interviewer/Host]

markets, and invest outside of America.

[Financial Analyst/Commentator]

I'm going to say it in a slightly different way. It's not invest in America or outside of America. It is where am I likely to get the return. And so if you're looking at America and you're like, hold on, all this inflation stuff is driving so many people into the market. This is way overpriced and likely to be a bubble. Other places though, because so much money is going into the U.S. maybe there are better deals elsewhere. And as long as you don't calcify the. I don't invest in the US and you instead think I'm looking for a certain risk to return ratio. So I'm looking for the guys that are slightly underpriced or at least are a deal compared to America, but you still do need them to go up, otherwise you've gained nothing right now.

[Audience Member/Interviewer]

Compared to his strategy, the US Growth potential isn't as high as other places, so you'll go there temporarily while the US Corrects.

[Financial Analyst/Commentator]

What he's talking about is he's like, all right, there are fundamentals and you should. He hasn't said out loud what they are, but I imagine he has an internal mechanism for like, all right, maybe 5 to 7x, maybe 10, if it's like really growing 10x on the revenue to share. So, okay, if that makes sense. But we're at 20 or 30x revenue. That doesn't make any sense at all. Like the, the distance people would have to travel as a company to actually end up making good on the valuations of today. Because the valuation that's over revenue. You're reaching into the future and saying, I believe so strongly that that revenue is going to come in. I'm going to pay for that revenue to date. And when you start paying for 30, 30 years of that revenue in advance, yo, that's crazy. So that's where he's like waving the flag and he's like, this is not a good idea. Go look elsewhere where maybe we're back to the 7 to 10 range. Less scary, way more tied to fundamentals and historicals. But that requires people to actually do that. Like, they have to go figure out where are those things trading. You can't just go, no U.S. foreign. You've got to hear what he's really saying, which is look for deals. So you could find those same deals here in the US but he's talking specifically at indices. So if you're looking at an index which is somebody else saying, hey, here is a set of criteria. I'm, I'm going to invest strictly according to that criteria and I'll boot companies out that no longer meet the criteria and I'll bring new companies in that meet it. And so it's a brilliant way to get broad exposure while not paying attention to the, like, specifics of a market. You're letting those guys, the Wall street guys who are paying attention to it, do that. And so he's just saying, find those indexes where you see more realistic prices.

[Audience Member/Interviewer]

Gotcha.

[Jeremy Grantham]

Over the next 10 or 20 years. And I am not confident that the US will do that.

[Interviewer/Host]

You're not confident in which part that

[Jeremy Grantham]

the U.S. i'm not confident that U.S. equities will be intact. In five years. Ten years, yeah.

[Interviewer/Host]

So a U.S. equity is a U.S. stock.

[Carvana/Shopify Advertiser]

Yes.

[Interviewer/Host]

Why aren't.

[Financial Analyst/Commentator]

There's so many terms in all of this, it's maddening.

[Interviewer/Host]

Are you confident that they'll be intact in five or 10 years because they're

[Jeremy Grantham]

so badly overpriced today? Back in the tech bubble of 2000, we had a 10 year forecast for US equities of minus 2% a year for 10 years and they came out with minus 3. The period from 2000 to 2010, you simply lost money in the US market. 10 years later you had less money than you started with. And this is a higher price market, I believe, than 2000.

[Interviewer/Host]

So you think it's going to be

[Jeremy Grantham]

even worse in Japan you went 20 years.

[Financial Analyst/Commentator]

So to answer that question, and I'm surprised he didn't. But to answer that question, you have to ask mechanistically, what are we saying? And it goes back to what I was saying a minute ago about if you're paying 10x the revenue, you're saying at the current rate that this company earns money, it will take them 10 years to earn as much money as I just paid for. So that becomes a big gamble. You start talking 20, 30 years, it becomes like absolutely ridiculous. Now the companies could grow. So to be clear, and this is part of the euphoria message that people grab onto is people are looking at AI and there's like they're saying to themselves, there's no universe in which these Companies aren't worth 10x what they're worth now in 10 years. There's no way. So to pull forward 10 years of revenue to today. Yeah, no, I totally believe that. Easy peasy. AI is going to change everything. Now the great irony is the AI industry might be generating 10x those revenues. The question is, are you into the companies that will survive all of that and will you be able to stay in the market long enough to get to the point where it starts doing that? That now, for the most part, you should assume the companies that are big now are going to get wiped out and it's going to be a future set of companies. It won't be entirely true, as Amazon has shown, but a lot of The Early.com companies just poof, they ceased to exist because the debt was just too

[Jeremy Grantham]

crushing and you lost money. You went 30 years and you still hadn't gotten back. It took 35 years for the Japanese market to recover.

[Interviewer/Host]

So what are you saying?

[Jeremy Grantham]

What I'm saying is it's quite typical to get beaten around the head in the stock market when it becomes crazily overpriced, as it is today, and that it's a very good idea to take some responsibility and watch your tail. Now, let me just say you will not receive the advice from investment advisors to get your tail out of the market ever. It is not good business for them to do that and they will not ever say it to you. So from 1929 onwards, the Goldman Sachs of the world have never said to you, get out of the market. It's overpriced. Never. So they went through the crash of 29, they went through the crash of the Nifty 50 in 72, the crash of 2000. In the tech bubble, they never ever say it because it's bad business. If you fight a bubble, you lose a lot of business. And because the uncertainty of the timing is so great, the client's patience is shorter than the uncertainty of the market. So sooner or later you will be advising people to be careful. The market will keep going and going and going like it did in Japan.

[Financial Analyst/Commentator]

This is so important. So right now, Berkshire Hathaway is underperforming the market. And as you can imagine, people are going to be like, yo, I remember when Berkshire Hathaway was good. I remember when they knew what they were doing.

[Audience Member/Interviewer]

What are these messed up now?

[Financial Analyst/Commentator]

Yeah, these fools are just sitting on the sideline. They've lost their touch. And so now Berkshire Hathaway has to go, yeah, the market could remain crazy for years and we've still got to sit on the sideline because we know what fundamentals look like. We have an investing strategy and we're not going to bend for anybody. But they'll watch their assets under management just go down and down and down. And they'll watch people screaming at them at the investor conferences and all that stuff. And they've got to say, listen, we got to stay the course. Ah, but it's hard, man. It's hard when you see everybody getting rich to just. And imagine they're getting rich for years and imagine your friends are getting rich for years and your wife is in your ear like, oh, I thought you were Mr. Big Shot. How much we made, you know, the Sally, her husband they made. And now it's like, I'm going to show my wife, I'm going to get in this shit. And then they get fudgeing, clobbered. It is wild. It's wild, man. And yeah, it. Oh, God, this market is rough. It's a scary market.

[Audience Member/Interviewer]

Let's jump to 135 hour and 35 minutes. That's when he talks about what country should you move to.

[Jeremy Grantham]

Times are tougher. It is more difficult to buy a house or afford to rent. And jobs are getting scarcer. It's likely to get worse.

[Interviewer/Host]

What does brace yourself mean for them? Because brace yourself sounds like you. But does it mean plan your life

[Jeremy Grantham]

as if times will not be easy, do not build up a little reserve of cash. Of course, my advice to other people is and get yourself a useful job, something that will in a larger sense pull your weight in society, upskill, change skills, learn something mechanical, fixing, repairing things

[Interviewer/Host]

that engineering things that will need humans.

[Financial Analyst/Commentator]

Yo, this is wild. Hold on. So, okay. I love his advice. I think it's actually very good advice. It is going to be. It's going to hit people like a 10 year. They're definitely not going to like the message. But what is really interesting is understand that right now, America's greatest skill set, America's greatest like contribution to the world is financialization. We have turned everything into a financial instrument. And when one of the kings of Wall street is telling you now's not the time to be into financialized instruments, that you should be out there working with your hands, that, that is wild. Wild. People are going to feel some type of way about a guy who's had as much success as he has had saying that. Nonetheless, my advice is going to be a little bit different. So certainly if you're in the I've got a hard Scrabble to make ends meet part of your career, then yes, building things, creating things, manufacturing, working with your hands, being the last to be replaced by AI, I think is very good advice. I don't think that's the only path forward. I think that one, the world is financialized, that's not going anywhere. People that understand the way that economies work are always going to be the ones that are going to be able to get themselves ahead the fastest. Part of the reason, like during the Japan gets frozen phase, one of the biggest investors in the world is still Japanese because there are people that are able to get access to the capital that is huge. That is very difficult. There's no doubt about that. There are people that are able to get access to the capital and able to make magic work. So I would learn as much about the way that the world works as possible. Understand the economy as much as you can, even if only to avoid the calamity because you have a better. No one's going to be, I don't think great at this, but you're going to have a better understanding of how to dodge some of the obvious bullets. But then beyond that. Yes. Having a job that fills meaning and purpose, all of that stuff is going to be very, very important. And I love what he's saying about taking responsibility. Do not expect the government to fix this for you. Don't think that the freebies and the handouts are going to be the thing that solve your real problem. They're not. And. And if the economy falls hard, then the government won't be able to save you.

[Jeremy Grantham]

Research science in general, make friends. Make friends. Make sure you live in a tight society, if you can. Very difficult today, obviously.

[Financial Analyst/Commentator]

Same way.

[Interviewer/Host]

Would you be thinking about the country you live in at this moment in time?

[Jeremy Grantham]

Absolutely.

[Interviewer/Host]

Really? Is there any countries you wouldn't live in if you were Dave or Jenny?

[Jeremy Grantham]

I think I have to refuse to answer this on the grounds that it might tend to incriminate me.

[Interviewer/Host]

Oh, okay. So you're saying don't live in the United States.

[Jeremy Grantham]

Well, I have American children and grandchildren.

[Interviewer/Host]

Why not the United States?

[Jeremy Grantham]

It holds out too much chance that the social contract is dissolving. You know, the thing about Japan and my joking Rule 21 in investing is never extrapolate from the Japanese. They are extremely different in every way. But one of the ways they're different is they have this amazing social contract. The thing that really upsets the Japanese is if they're put in a position where they can't act in a socially responsible way.

[Financial Analyst/Commentator]

Guys, I know I said this earlier, but please, I'm begging you to research Japan and the Japanese. I'm curious to reach inside his mind and hear more about what he thinks about Japanese culture. But Japanese culture is one thing before. Before World War II, and it is something radically different after World War II. And so understanding what Japanese culture is today, you really have to understand a mix of who were they coming into the war? What did losing the war mean to them? Who were they angry with? Did they blame themselves? Did they blame the emperor? Like what. What was their. How did they think through that? There are answers beyond the scope of this video. But that plus the U.S. basically saying, this is who you're going to be moving forward. And they adopted of a lot, a lot of that. It is absolutely fascinating. And while I agree extrapolating from the Japanese, which is a very unique situation, would be very high risk and you shouldn't do it. Nonetheless, I think there's a lot to learn about human psychology, about economics, about how they go from having two nuclear bombs dropped on them to becoming the biggest economy in the world briefly in the 1980s. Like yo, it is a tale that must be studied.

[Interviewer/Host]

What does that mean?

[Jeremy Grantham]

It means an agreement that I will behave in a way that helps my neighbors and society, that I'm doing what people expect me to do. I'm not going to misbehave.

[Financial Analyst/Commentator]

America has given up on its values. Nobody knows what they are. Nobody. Even the people that know what they are refusing to say what they are. We're not willing to put up borders and fight for our identity. So from that perspective, he is 100% right. And then on top of that, as you bring in more and more people but stop being a melting pot and you start being these very disparate communities, they will start pulling against each other. And that is exactly how the social contract unravels. Because you go from a high trust society to a low trust society, meaning you instead of looking across the street and seeing somebody that, oh, they're going to be like me, you just have a default assumption. You look across the street and you assume that that's the other, that's some sort of warring tribe. And so yeah, this sits heavy in my mind as well.

[Interviewer/Host]

Think that's not the case here in the United States.

[Jeremy Grantham]

I think the case here is that people are doing what they think is best for them and their family. And screw everybody else, really.

[Financial Analyst/Commentator]

Everybody does that. And you're only going to bat for your country when you think that is good for you and your family. But when it proves to be true over and over and over, a decade after decade, then it can be confused with people actually thinking beyond themselves. But the reality is everybody, what's the saying? You're only nine meals away from riots in the streets. The second people are hungry, the second there isn't enough to go around, you will find out very quickly, everybody's running the same algorithm. Protect me, protect mine. And that narrows precisely in relationship to the amount of resources.

[Jeremy Grantham]

When I arrived in America, corporations had this sense of that they owed something to the community. They operated in, the city they operated in, they'd build the stadium, they'd do this, they'd be part of the community. Now they're not. They're all in a way, cold blooded profit maximizing international enterprises.

[Financial Analyst/Commentator]

I think this might be a little bit of revisionist history. I'd like to point you to the Dutch East India Company. I would like to remind you that Columbus was on an economic run, took some hands in gold with him. So yeah, I get what he's saying. It's certainly the vibe of America, I'm sure was different back in the day when we had a higher trust society. We were more of a melting pot and we were still transitioning from rural to urban. And all of the sort of things that get maximized in an urban area hadn't completely taken over. The mind virus is that are sweeping through the different institutions that we have. Those hadn't taken hold. We weren't in a populist moment. So it wasn't us versus them yet. So there's a lot there but that that's maybe a little too speed runny.

[Audience Member/Interviewer]

There's one thing to that though, on the social aspect, immigration, mind virus, universities, indoctrination. I'll give you all of those things. I do think that there is a lack of corporate responsibility to the communities that was once there. Even when as simple as my first job, we literally used to have 10% of profits or maybe it was just a tax write off that they did fancy. But there was community days. You would go into the community and do something local. We partnered with local schools. All the old tech we didn't sell, we would give to the. So there was at least the sense of this corporation is in this community. I'm going to give to the people that are right there. And that's not necessarily a need anymore that has kind of pushed to other institutions in other places. So while yes, we need to curtail immigration and things like that, do you think that there also could be a benefit if we were to redefine the corporate community contract that's currently in place?

[Financial Analyst/Commentator]

I think it would resound to our benefit in a massive way. I'm just a mechanism guy. So then I go, but what's the mechanism that you pull that off? And I would say that is not a top down thing. The people around you don't love you because you're out there doing benevolent things. You can create like a really localized relationship by being rad by being out there just constantly like doing your thing. But if the broader culture is that we're not on the same page, you're not like me. That's when all of this stuff starts to be. People look for the opportunity to take advantage. And so now all of a sudden you're trying to do community days but suddenly you realize that people are actually taking the donuts and the coffee and they're just wandering off with it. And so then eventually you go, why are we doing this? Like this isn't landing the way that it used to be. It is all of that stuff is downstream of culture. And so it becomes a question of, well, how do we spark that back in the culture? So that there's a. I'm giving you the benefit of the doubt. And if I roll up and I see that people are giving free stuff, I don't immediately think I'm going to snatch all that and, like, go do my thing. And so now companies, maybe we want them to take that first step. I think that's pretty reasonable. So, hey, extend that. But if it's rebuked or abused, don't expect it to stay. And what I'm saying is I've even seen this in my own lifetime, and I'm only 50, so I can only imagine at 87, the distance he can feel that we've traveled as a culture. But these kind of things repeat over and over and over. And the biggest thing you see is the move from rural, where it's like, no, for real. We have to look out for each other. And so if I see a wolf going for your livestock, I'm going to step in, I'm going to stop it. It's not my livestock. But, like, I need to know you'd look out for me the same way. Or like, we're out hunting and you're going to. We've talked about this before. You're going to store calories on my body by letting me eat when I don't do well, and you did well so that I'll let you eat when I do well and you don't. Once you get to a city, man, it's like, I don't even know you. It's like you're in these huge high rises. There's, you know, in some of our biggest cities, there's millions of people crammed into these tiny little areas. You are truly anonymous. You're anonymous oftentimes in your own building, let alone in your block, let alone in, like, you know, the Upper east side or whatever. So it's like that kind of thing. It just, it. It begins to change people. And then, especially if you're bringing in, like, very diverse communities, which people need to understand, I think diversity is a thing you have to overcome. It is not intrinsically valuable. And so now it's like you've got all these different cultures, all these different people that you already weren't going to know them well anyway. They start cloistering up. But the people who look like them have their same cultural values. And so now you might be in the same building, but you're not even Sharing the same culture. And so. But that's an urbanization thing. So if you understand that there are already forces like, homeboy's 87, so he's seen a lot of people move from rural farming towns into the cities. He actually watched that happen. So I'm sure for him, this feels like a way bigger thing. I went from a small town to a big city, so I really feel it. But not crazy. Like, somebody who grew up rural coming into the city would feel it. And even in my life, I've watched the demographics of Los Angeles change. And so the demographics of America are changing like crazy. And so there's a lot of things at play here. It won't be, unfortunately, as easy as, well, let's just get back to corporations doing cool things. Partly because the corporations are downstream of the culture. So it's all staffed by people who are like, what? Like, I've never been a part of a company that did that. Like, that's so weird. Like, I don't think I'm gonna get anything from that. Most people that will walk up won't even know we're here. Like, how much outreach would we have to do to, like, really make a name for ourselves? Like, I'd rather go sponsor a team or something. And then a lot of people see our names. Or I want to give. Like, this guy put built a whole charity around helping the ecology, the environment. I was like, why am I playing? So that is, like, that's his play, right? Because he's intuitively obviously going, like, just trying to do this really high touch thing that's going against the vibe of culture. That's not going to be a win. But I can actually scale up my impact on the environment by donating 95% of my billion dollars to this thing. And so I think you'll see that fighting back against culture, like, that is very, very hard. You would first have to plant the seeds, starting in the family with, this is how we do things here. You'd have to have entertainment and narrative that tells the story of what it means to be American, what values we promote. Like, you'd really have to go hard in the pain on that. Then you could echo it in a corporation, Then you can echo it in policy and things like that. But if you don't, if you're fighting against culture, bonchons.

[Interviewer/Host]

Why is that a bad place to live? Because you're saying, you know, you probably wouldn't recommend Dave or Jenny living in the United States. Why would that be a bad place for them to be? What happens? What's the downstream impact of that?

[Jeremy Grantham]

That your neighbors aren't as interested in you and your well being.

[Interviewer/Host]

Fine, I won't talk to my neighbour.

[Jeremy Grantham]

And that's a lonely place to be. And when you're in trouble, you're in serious trouble.

[Financial Analyst/Commentator]

That's whatever. Your neighbor is not caring about you. Not as cool as your neighbors caring about you, that's for sure. When your neighbor wants to take you out, now you've got a problem. And that's what I see America racing towards. I see any country that's grabbed in populism racing towards that. Remember the. In Rwanda, the Houthis and the. Or the Houthis and the something. I forget the exact name. They hacked each other to death with machetes bodies, man, like wild. It was something like 750,000 people killed in like six days. It was just absolute pandemonium. And now Rwanda's rebounding and getting back on track. But it's like it can go savage real fast. I'm not saying that America's gonna have a genocide, but I am saying that we are right now beginning to separate out into red and blue states. That's step number one. So that's where it's like, oh, God, I worry about that. I think this guy is amazing. I think he's saying a lot of incredible things. Getting the amount of years behind him that he has this kind of wisdom is incredible. I second everything he said in terms of being diversified, that this is a bubble. Be very careful out there, boys and girls. I will reiterate. No one can see the future clearly. It is very hard to know. Diversify, protect yourself. This is a time to play defensively. All right, love you guys. See you on the next one.

[Interviewer/Host]

Peace.

[Financial Analyst/Commentator]

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