Stop Ruining My Perfectly Good Bear Market | TCAF 226

Summary

• Long-Term Themes: Grantham strongly advocates for Geothermal Energy, arguing fracking know-how can be transferred to unlock scalable, baseload renewable power.
• Energy Storage: He is bullish on storage cost curves, noting repeated underestimates and projecting dramatically cheaper storage enabling broader solar and wind adoption.
• Nuclear Fusion: He urges investors to watch fusion, citing extraordinary progress and increasing probability of commercial viability over time.
• Renewables Buildout: Expects much cheaper solar/wind plus storage over the next 10–20+ years, creating significant opportunities across renewable electricity producers and equipment suppliers.
• AI’s Market Impact: He views AI as a world-changing idea that halted the bear market via capex, but warns of bubble-like dynamics, especially in chip inventory.
• Key Companies: Discussion touched AI leaders and valuation dynamics around NVDA, MSFT, ORCL, META, as well as examples like KO and GM in historical bubbles.
• Market Structure & Risks: Highlights retail speculation, inequality, and rising concentration/monopoly power as systemic risks that can magnify future shocks.
• Overall Stance: Near-term caution on broad equities, but long-term optimism focused on cheap green energy and enabling technologies.

Transcript

Today's episode is brought to you by PIMCO. If you're a financial adviser navigating the fast-moving markets and geopolitical shifts of 2026, how are you leading your client conversations? PIMCO's advisor forum is built to give you an edge. It's your destination for timely insights, practical advisor playbooks, and a crude interest with Greg Hall, a podcast dedicated to financial adviserss and your clients. All of it designed to help you turn insights into action. Follow Acrude Interest on Apple and Spotify and learn more about advisor forum at pimco.com. >> Wow. Episode 226. Jeremy, is that unbelievable? Can you imagine how many times we've done this? >> 226 times. >> All right. >> Yeah, I'm good at numbers. >> No, I know. I know. Ladies and gentlemen, welcome to the best investing podcast in the world. I'm your host, downtown Josh Brown. I'm here with my co-host as always, Michael Batnik. Michael, say hello to the folks. >> Hello. Hello. >> Today, you are in for a very special treat. We have living legend, one of the most thoughtful highly regarded, respected people probably ever to have worked in this industry. His name is Jeremy Grantham. Jeremy is a co-founder and long-term investment strategist of Bostonbased asset management firm GMO, where he serves as chairman of the board. He's widely known for his Thank you, folks. You're too kind. He's widely known for his valuationdriven investing approach and his environmental philan phil philanthropy through the Grandanthm Foundation for the protection of the environment. Your team gave me even more stuff to read. Do you want to hear more about yourself or you want to hear me read more about yourself or should we start talking? >> All right. AP apologies folks. I think I think we're good on the intro. Uh let's start with this. You have a brand new book out. Um, and it's your like it's sort of like your life story. It is your life story. It's six decades in the in the industry and it's, you know, I could it could have been way bigger. I wanted to ask you about the title. This is the obvious uh thing. So, the book is called The Making of a Perma Bear. We're guessing because you don't really explain it in the book. We're guessing it's facitious or somewhat like um >> I think this is a middle finger to the industry. Is it a wink at the media or what what is the what is the the the reason for the name? >> It's a bit too subtle for me. I was outvoted for inverted commas around perma bear. >> Okay. >> Which would have said that's what people call me. >> Yes. >> They're idiots. But what the hell? >> Okay. I never thought of you as a perma bear. >> No, I don't think of myself as a perma bear either. >> Okay. What is a perma bear? >> Someone who's always bearish. >> Okay. like no matter what happens, they find the they find the mag. >> They find the worm in the >> Okay. >> And the apple. >> And you think a lot of people think of you that way or or what I I guess I've never thought of you that way. So I'm surprised to hear that you that you feel that. H >> how it works is that the patience and the time horizon of the average investor is extremely short. >> And that may be a very good way to make money. Uh maybe it is. So whenever you have a long drawn out bull market, it spends several years above trend value. Let's say a this is massive, right? Really? So almost 20 years if the if the low No, the low was 2009. So it's, you know, 17 years. That's far too long for anyone to to imagine anything else other than rising stock prices, >> right? And uh and so they think that anyone who has been four or five years saying that the market prices are way over normal um is a complete mad dog. Lost his way, >> okay? >> Etc. etc. And so they four or five years is so long it seems like a perma, >> right? And indeed, prices haven't been cheap for anyone with a a long history and a decent experience like I have. By uh by 2010, they weren't cheap, >> right? >> If you look at the previous hundred years, they were in the top 5%. By 2010, >> right? >> So, for 15 years, they've been way over normal. and for several years uh deep into bubble territory >> right >> as they typically are by the way the great bubbles don't don't get to be great by dent of going over normal for for six months they spend like Japan year after year after year going from high to very high to oh my god high 45 times earnings u um and then on their way to 65 >> right >> and no one could believe 45 I couldn't anyway but >> but to To your point, if you point out, okay, the stock market is expensive at 45 and then prices do get to 65 over the next year, you spend that whole year hearing from people about how you're a perma bear. >> Absolutely. It took two years, but the same. >> Yeah. >> Same but worse. >> Um I wanted to I wanted to uh we're going to get we're going to get into we're going to get into some of the career highlights just at a high level and then we're going to dive into some of um our favorite parts of the book. But uh before we even get there, um I wanted to ask you I So this is kind of my the way I explain this current bull market. Most people look at bull markets of the past and they can give you a one-s sentence explanation for why it was a bull market. So for example, they'll look at the 50s and the 60s and they'll say it's the reflation after World War II and which then turns into the space age. And of course there's so much more nuance to it, but it's like a shortorthhand for people who didn't live it. And then they'll look at the 80s and they'll say the personal computer um and and corporate raiders and they'll you know and then they'll think the 90s they'll say dot and and mobile phones. This bull market cycle which you point out you think started in 2009 it feels like it's four different bull markets all in one. >> I think it's very obvious that it starts off with the comeback from the crisis. So it's a it's a bounce. >> Yeah. >> But then it morphs into something else entirely. it becomes this like uh stock buyback thing where almost no matter what happens companies shrink their floats and the stocks are unsinkable and then we run right into co and it sort of becomes a brand new bull market that's about trillions in stimulus money going directly into people's bank accounts and now I think we're in the fourth um the fourth explainer of the same bull market which is the AI capex okay yeah >> I maybe I'm wrong and I wanted hear your take. But like are there other examples in history where you get four bull markets all in one almost like relentlessly uh enabling people to forget all about valuation for extended periods of time? Has this happened before? >> I don't think so. >> I don't either. >> So I'm very happy to take your summary. Saves me a lot of effort. >> Okay. >> And and uh but the first two were kind of ordinary. >> Yeah. >> And the second two were deep into bubble territory. >> Yeah. which means they're much more interesting to me. And there are certain strange things that happen at the end of the great bubbles that give you some indication that they may be about to break. And that happened 1929 and not again until 1972 and not again till 2000 and then not again till 2021. 2021. This phenomenon is that the stocks that just had a hell of a rush, they went up, let's say, two or three times in 28, they then go down before the market breaks. And and the blue chips keep going up. >> Yeah. >> And I in my mind, it's the music's playing. I've got to keep dancing, but I don't have to keep dancing with the crap. At least if I'm going to go over the cliff, I'm going to dance off the cliff with Coca-Cola. And so in 1929, you dance off the cliff and it works. Coca-Cola goes down 80% and the crap that I'm talking about goes down infinitely or 95. >> Zero. Yeah. >> And from 95 to get from five to 20 to catch up with Coca-Cola is something you never do. That's just too much, >> right? And uh we had that again perfectly in uh 2021 in indeed led by my infamous old friend QuantumCape that peaked out. >> Yes. >> In in the first one to peek out and >> you were trapped in it >> and I was trapped in it but it peaked out in December uh 2000 and 20. >> Yeah. >> The irony is rich with that story. >> Yeah. the first one to peak out. And it peaked out with a market cap bigger than General Motors, just to let you know. And it it was not pre- earnings. It it wasn't even pre-sales. It didn't have a dollar of sales for several years to come. >> Yeah. Pre-revenue. >> Pre pre-revenue. And uh and even in a sense prefinished idea, it was still only a half-finished idea. And and they're still chugging along and they're still perhaps uh full of potential. Who knows? But um that whole cycle, you know, Kathy Woods fund falling like a stone all the way through 21 and the S&P marching upwards just like 1929. It wasn't that they underperformed, they went down. And um that's unbelievably unusual. We had a we had a crash in one segment of the market, but the overall market, I think the worst we were down in 22, >> correct me if I'm wrong, was it 20 22%. >> No, 25. S&P down 25, growth stocks down 35. >> Yeah, the Q was down 35. >> Mag 7 down 50. It was not insignificant. And the bond market the worst year in its entire history, >> right? >> It Yeah. So, >> so it was nice as far as it went. And then this AI crap to your mind gets in the way of the bare market >> but that doesn't reset the the the bare that doesn't reset the the bull market the secular bull market and put us in a new market. >> What it did is it took the let's say the rolling average PE the Schiller PE it took it down from literally a world record over over 2,000 way over 29. It took it down to merely badly overpriced. It didn't take It needed to go down 50% plus. It went down 25. >> Yeah. >> And down 25. You introduced chat and you introduced the concept of AI and uh magnificent moments in the future where machines will do everything for you. >> Yeah, >> it's a outrageously important idea. And we discussed last time that I think that people think that bubbles are crappy ideas that are overhyped and bubbles are absolutely the opposite. Bubbles are magnificent ideas that are overhyped. >> So Jeremy, we're going to we're going to come back to the current markets because obviously we want your your opinions. I think we know what your opinions are, but I want to unpack that before we do. for the newer listener or the younger generation that has only seen you be bearish from 2015, whatever it was. Now 2018, you did say a a great meltup is coming. You did. >> Hey, and I debated that it was not a bubble. >> Yeah. >> With with um Edward. >> Yes. >> Okay. So, I want to I want to ask about him, too. But for people that aren't familiar with the incredible career that you've had, you were one of, and I think we spoke about this briefly last time, but you were one of the first ever to actually implement and suggest the idea of an index fund to the point that half of your assets with Dean Learon at Battery March were invested in the index fund. We're talking the early '7s. So before Vanguard, you were there. You were a pioneer in small cap value before that was a thing. Then you I don't want to say you discovered but you were very instrumental in quantitative investing well before that was a thing on Wall Street and you were maybe the first ever to combine the ideas of value and momentum. Uh you called the top of Japan and the do bubble. You were bearish in the GFC. You made money in 16 of your first 17 years at GMO. So to say that you deserve your flowers the last decade notwithstanding has been tough for some of your public statements, but what an incredible incredible career that you've had. And one of the things that I appreciate about you more so than people that have that are grouped with you as perma bears is a you're not a perma bear. Although it's been a it's been a while, >> but but you're a gentleman. And the way that I see it is you are positive on humanity. You are trying to make a difference to better not just this generation but future generations. And uh and that's you you stand out from the crowd doing that. So I applaud you. >> Thank you. >> You're welcome. All right. So um the the devil takes the high most is one of my favorite books ever on the history of markets. I think your co your co-author Edward Chancler for this book did an incredible job. How did you get synced up with him and what was the process like of because this is your autobiography? Like what was that like for you? >> Um I got synced up with him over Hyman Minsky. He uh kind of reintroduced Hyman Minsky to the financial world. He got the Poke Prize for Journalism in the institutional investor and I called him up and we had lunch in Manhattan and and we discussed Hyman Minsky and following quarter before anyone else of my type. The quarterly letter focused on Hyman Minsky. Stability is unstable. >> The Minsky moment. >> No, before the Minsky moment, >> just 18 months before that, um, stability is unstable. If it's if it's really low, if it's really stable, you take more risk. If it's still stable, you take even more risk. Why shouldn't you? You've got to, etc. And then eventually when a bump in the road arrives, everyone is taking too much risk. And as Minsky said, periodic financial crises are well n inevitable," unquote. And u it's pretty simple. It it doesn't it agree with how we view human nature? I think so. And so I was very impressed with Heyman Minsky and I admired the fact that Edward had written it up and promoted it before anybody else. So I was quick to jump on his bandwagon. And uh he he'd worked on another expose of financial distress which was kicking around for $10,000 a copy. And being a cheap Yorgman, I got a free copy. >> Okay. and um and I offered him a job. That's his $10,000, I guess. I hadn't thought of it that way before. >> Has he written uh has he written with anyone else besides you? >> No. And he won't again. Okay, >> that's a given. >> So, he obviously saw that opportunity with you as being like a special a special opportunity that doesn't come along very often. >> I would say he was kind of backed into a corner. >> Okay. whatever it takes >> between friends and you know okay etc. And uh GMO >> kind of pushed him into it. I didn't push him into it. This was a a GMO project. >> He does write about financial history and your life is running in tandem at at a minimum, but very often you're mixed up in some of the biggest events in financial history. So you're a significant figure in his subject matter regardless. Yes. >> Okay. So, this gave him a chance to revisit some of those prior instances, but through your eyes. >> Yes. Okay. >> And and as it turned out, it comes out with exactly my voice. I'm sure you picked that up. So, Edward put in all these thousands of hours and then it it reads like me. >> Okay. >> There was a few parts that maybe left. You you say dude a lot in the book. >> Yeah. No, there there uh Edward has his own language and here and there it sticks out pretty clearly, doesn't it? >> So, all right. My favorite part in the book was on page 390 and I could picture you thinking this, writing this, and let me read it to the audience. I'm interested in thinking about things that have a much longer horizon than is professionally useful. my own time horizon interest barely overlaps with anything in the market. Mine is several years and the market's outlook turns out to be very short. It's a very bad characteristic for a money manager to be so out of sync with what is moving the market. It's not good for clients nor the manager. I'd have made a lot more money for my clients and myself and had a more carefree existence if only my time horizon hadn't been a bit shorter. That's my confession. Yeah, it's a good confession. It's all true, I think. >> Could you could you explain Could you explain what you mean by um your time horizon? Because you're talking about over over the years. You're not talking about today, right? >> You're just saying there have been times where you were thinking about the market differently than everyone else was. >> Yeah. And the market can make money and you can cash in your chips and I'm still waiting for some longer term thing. And even if it works, I like to say it will eventually return to trend, but there is no guarantee that you will return with the same book of business you left with, >> right? >> Because they'll fire you. >> And then the question is, how do you how do you get them back? And that business of operating, let's say, on a long-term bubble that will take five years or four years or three years. And the client's patience, I have every reason to think, in a bubble, is like two, two years, two and a quarter, >> that you're dead before you're right. And even if you're right, and we were very right in Japan, made tons of money on the round trip, however you measure it. We were very right in in in 2000. Same thing. But we lost half our business, half our market share, bang, in two years. Who who thought it would >> You had a hilarious line. You said that like your market share, it was as if you were doing it intentionally. >> I know. I mean, everyone else was doubling their money and we were going backwards. >> Yeah. >> I mean, we went from 30 billion to 20 billion in in just 97, I'm sorry, 98, 99, early 2000. We went from 30 billion to 20. >> And your competitors went 30 to 70 or >> they went from let's say 30 to 50 probably. But you you must have had people along the way either u colleagues working with you or maybe even rival fund managers at other firms who had a similar outlook as you did in some of those moments but chose to um plate the crowd and just all right they want tech stocks give them >> a few tech stocks >> give them some tech stocks shut them up like and it's so it's it's actually more understandable than what what you were able to um which is stay out of some of these bubbles. It's almost like you can understand we're talking about real people who have bills to pay. They have a spouse at home who's counting on them not losing their job. Um they've got employees they don't want to have to fire. And at a certain point, yeah, the people who are paying you, you may think they're dead wrong and you may think that you're saving them, but they're still the people who are paying you so long as their money is in the fund and they sort of get a vote. >> This is my confession. Yeah. Yeah. >> You know, we had I I was pretty friendly. We'd done so well for so long. I was pretty friendly with a lot of these >> uh pension fund officers and and endowment managers. >> Yeah. >> And they were calling up and saying, the pension fund guys in particular, Jeremy, give me some material. I know you're right, but they they're going to shoot me or shoot you or whatever. >> And and eventually it was, I'm sorry, dude, it was you or me, and I'm afraid you're fired. >> Yeah. Everyone has career risk. >> Everyone has career risk. and and the uncertainty in a great bubble Japan and so on 2000 is longer than the client's patience and if you can say that you know why the Goldman Sachs Morgan Stanley's JP Morgans all of the professionals cannot fight a major bubble >> they will never say get your asses out they will always say I'm thinking of that uh famous woman from Goldman Sachs Uh Abby Joseph Cohen. >> Abby Joseph Cohen torturing the data to convince the audience that it was reasonable. >> So Jeremy, with the benefit of hindsight, because you you understood momentum, right? Like just basic principles of physics of of human nature. Do you wish that you had because you were you you trust value. You're a dot in the wool value investor. Do you wish that you were able to have a little bit more faith in momentum than you did? Actually, I had more and more faith and and all of my division was called quant and all of our funds had a a stream of momentum and it was 40%. It was like a separate portfolio, 40% momentum, 60% value. And value itself had a very high quality component. So, it had a different flavor to many people. And and so it was in a way designed to hang in. That's the irony. And the funds were getting left behind because they were so monolithic. They were so focused on Cisco and and pet dos that even though we had deliberately much more diversification than normal for a value fund. It wasn't enough. We were not up zero, by the way. We would go up 12, the market would go up 18, and Fred would go up 32. >> All right. So, it's not like you weren't participating. >> No, we were participating. But in a great bubble like that that these these fellas are having playing golf with their neighbor, another pension fund officer who's up 41 and you're up 16. And this is this is hell. >> You can never give in a true bubble. You can never give people enough of what's working. >> That's right. And one of the most interesting aspects of what we all do for a living is I actually the intuition tells you you're like you're more likely to be fired when you lose clients money. But I I've seen the opposite. I I feel like people are most at risk of being fired. And I don't know if it's the same for a financial adviser as it is for a mutual fund manager, but I just feel like um not having enough exposure in an environment where everybody has fear of missing out and everybody is feels like I feel like that's so much easier to get fired. >> I think we we we covered that quite a bit. >> Yeah. >> You don't get fired for underperforming on the downside. No, no one gets fired, by the way. They become paralyzed. >> Right. Exactly. >> They retreat into a kind of state of shock. every everything seems to be hurting them and and only when they've had six months or a year to regroup do they start to fire one or two maybe. But in a bull market, as I say, they're active. They're full of it. They're they're playing golf. They're listening to the stories. >> Yeah. Their fingers on the trigger. They're looking for targets. They >> And you cannot stand your neighbor getting rich. You cannot stand your competitor doing better than you. >> Yeah. Yeah. >> And so they pull the trigger much more >> quickly. It's not a viable business strategy to fight the great bull bull markets. You can't do it and no one does it. You you have to be somewhat free of career risk. And we could do it because perhaps we were stupid, but but we were independent. So why that that that part about your meeting with Cororsine and the team there and then you had another opportunity later to sell any regrets or I mean it sounds like you did it your way but I thought that was really fascinating. >> Yeah the uh the Corsine thing is is is really fascinating because obviously Goldman Sachs exciting firm then and now and >> Cororsine was the CEO of Goldman Sachs at the time. >> Yeah. >> Okay. and he wanted to have a quant shop and thought it was quicker to buy one, give it a certain amount of autonomy to start with and then build up all the quant products and um and downplay perhaps the asset allocation elements and market timing. Forget it. Just develop a a broad array of quant products. And we could have done that. Yeah, >> we were called the sausage factory because a handful of us cranked out small cap value, large cap growth, done. >> And uh yeah, we we could have done that. And and uh the guy who ran the deal for Goldman Sachs, a junior nonpartner who uh had a nice tea at the tennis club in Nantucket with Corine and me. um when the deal slipped away at the 12th hour was pissed off. You know the these are competitive guys and so four years later when they went public he called me up to rub it in to rub salt in the wound >> that oh that Goldman came public and you would have made all this money. >> We would have been the largest selling stockholders in Goldman Sachs. >> Wow. Oh wow. No one told me that and and onethird of what they offered us was partnership interest and that went up by 12 times. >> One/ird was preferred stock which went up eight times and one/3 was cash which we might have turned into 80 cents on the dollar but >> I know some of those preo partners they're uh they're not unhappy. >> But it's an interesting what if because then Cliff Assets came along and built it for them. >> Built their quant strategy inside. >> Did he? >> Yeah. That's my understanding. I I I have no idea. But um >> I wanted to ask you uh >> I haven't really finished this one, have I? Because >> continue. >> Do do we have regrets? >> Um when he called up um I said, "Oh, well, but the good news from my point of view is I would have been fired by now because it was now it was uh 98, right? And we were deep into the bubble." to which he said, "Oh, Jeremy, you'd have been fired long ago. >> You never would have made it that long." Right. >> You probably would have been fired in 96 around the Netscape IPO, >> right? And and would I have been able to hold on to my partnership units? I have no idea. >> Yeah. >> And when I say I, I mean we we'd have they they'd have gotten rid of the the old fogies and and run with the idea of quantity. wanted to ask you a behavioral investing question um that that I think bumps up against this idea. So, one of the things that financial adviserss say, including uh my partner Barry and uh a lot of people that work directly with individuals, is that there's really no such thing as an optimal portfolio. There's only the best possible portfolio that the client can live with. So, obviously that works in both directions. If you have too much risk on, you're in a bare market. It might be the right holdings, it might be the right allocation, but if the client gives up, it was the wrong portfolio. Yeah. Right. The client goes to cash, you you lose. Even if you think you were right. Same thing on the upside to in my opinion. You have a client that you know is very market sensitive. They watch CNBC and Bloomberg. They read Baronss. They talk to all their neighbors about their holdings. If you know that as the financial intermediary, >> do they watch this podcast? most likely. But if you so if you know that's who you're dealing with, I sort of have always felt that you have a little bit of a responsibility to let them sin a little. Give them enough so that they don't go all the way whole hog with someone else. >> Rewriting my book for me, don't you think? >> This is my confession. >> Sort of. >> You know that we were not >> we were too damn pure. Why? >> I don't know why. That's just the way we were. We were a little too quant, a little too academic, a little too >> a little too rational in an irrational world, maybe. >> Thank you. A little too rational in a in a irrational world. And we and you pay a high price because the client does need a little more tender loving care, a little more sympathy, >> candy. >> You can't they need some candy. >> You can't expect your clients to be >> to be able to chew on career risk that much. They just can't do it. >> Yeah. >> With the school fees. And >> so obviously you wrote a whole book about your experience. One of the things that I I don't know what you could have said differently or more. This must have been an incredibly challenging personal time in your life just going home day after day emotionally raising a family running a business. I'm sure that was hell. >> What was what? >> The the the late 1999. >> Yeah. Yes, it was because um a lot of people who I wanted to help, friends at GMO were feeling the stress of their clients, you know, it felt like a personal betrayal and you let them down. >> Oh, the salespeople that you hired. >> Yeah. >> And they were taking the brunt of it. >> They were taking a terrible toll. And on a Friday evening, you know, they'd kind of the ones more friendly to me who who'd been there longest would kind of come in wanting or needing a a blood transfusion. >> Yeah. >> You know, tell me the story once again, make me believe in it. >> And and and the boss then of of marketing didn't really believe that we were right. He thought we just made a mistake which meant that the the second in command and and all the others that was added stress. So no it was terrible stress for them and feeling that I I felt bad for them. >> Can I ask you another emotional question about about investing? So I Michael Steinhard said there's nothing there's no better feeling for a money manager than to make money when everybody else is losing theirs. So you are a humanitarian. you care about people and civilization. I'm sure as a human being you must have felt like I told you in 2001 when it burn in 2001 when it bursts. Like you must have felt like a million bucks tap dancing to work every day that you were right cuz how could you not feel that way but and also there were serious problems in the economy like people are losing their jobs. That's got to be a weird push and pull. >> Yeah. and and um and and you have a job to do. And and I have to say it was nice, but we took it for granted. It my one of my secret regrets is that in the era for the first 25 years when we walked on water, I just didn't appreciate it enough. If it happens from the beginning, >> yeah, >> we won the first nine years in a row by an average of eight points a year. Oldfashioned alpha. I know it's unreal. >> So you don't know any different. >> You don't know any different. So, you know it's good. You just don't know that one day when you've entered the real world, you'll look back and say, "Holy cow, why why didn't I go out and party?" >> Do you know that's why we stopped hiring kids out of college? Because we think we're the greatest firm uh in the industry. But how do they know? >> So, like, so, so I want to be somebody's second job or third job. I want you to go somewhere else before before I bring you here because I want >> call and sell life insurance and they come here. go sell life insurance for 2 years, then come see me. I want you to appreciate this. If you come right to school to me, how do you know this is good? >> Yeah. >> So, I I definitely I definitely get that. >> And maybe all of us don't appreciate our successes as much as we should do. >> Well, I do. I failed first. So, I I I definitely appreciate it. Um I failed first. And >> because we seem to feel the pain, we feel the pain every last delicious little drop. Right. Yeah. And then the pleasure if it comes particularly if it comes bunched up and particularly if it comes early you kind of coast over it. So can I ask you? So the so the so the market in 99 March of 2000 comes negative catalyst negative catalyst negative catalyst finally NASDAQ breaks takes the rest of the market with it although not to the same extent >> and not yet >> and not yet it happens >> through September the rest the rest of the non-growth was up 12% more >> right so now so now like Warren Buffett is back on the covers and they say oh we were wrong to ridicule him in 1999 that he doesn't get it. I guess he gets it after all. Right. He had spent 98 and 99 buying um companies that make carpeting and you know like uh aluminum siding and they laughed at him and then Okay. Um but you're in that same camp. >> Yeah. We made money in 20201 and 2002. >> So market is down 50%. And we've made cumulatively maybe. >> So are people who abandon you coming back? >> Not one. Nobody, >> not one solitary person. >> Amazing. >> It isn't amazing. It's human nature. I I like to say I completely get it. It's like selling a stock at three and buying it back at 12. >> Can't do it. >> Humans can't do it. Someone I mean on paper it's all sunk cost. It doesn't matter if you're an economist. You don't even know that you sold it at three. >> But humans can't do it. And it's a bit like that. You had these guys, you fired them, you bought a growth manager, you lost half your money, and they made a few percent. And now you're going to go back. No way. >> Can't do it. >> It was such a cataclysmic shift. >> Yeah. >> Where we went up and they halfed that there's no way we'd get We didn't get one back. I don't know how many there were. 80. Would you have taken many of those people back or those organiz You would have >> absolutely would love to have had them back because they were kind of seasoned people who had been through hell like we had and I was sympathetic. I I I got why they fired us. I would love to have made some money for them. >> Would they have become more well behaved for what what was to come next? >> It's not them by the way. It's their committees. >> Sure. >> They were pretty cool. They they kind of got a storyline. They understood value. They understood the time horizon problem. They understood career risk >> by they just understood paying the rent. >> By 2003 though, we're blowing the next bubble in real estate and housing and mortgages. Would those people have um stuck with you again rolling into the next >> crisis? They might have done particularly since the housing bubble was the one exception in our career where we made money on the upside because we played uh emerging markets and emerging markets didn't just outperform. It was 2.8 times the S&P. >> Oh, that decade was Yeah. Yeah. >> It's It's impossible to diverge that much that quickly, but they did. And we played it not up to the peak, but also down for the only time in our history, we actually overstayed our welcome a bit. Instead of getting out here and regretting the miss, we got out just a little bit later than the peak. Okay? So, almost maximized the return. So, we made a little bit of money being much, much more conservative. And the housing market was a perfect bubble. Perfect. 3 years up, 3 years down. Home ownership goes up by three or four percentage points to the highest in history and gives it all back. So, that was mean reversion triumph and uh and very nice too. >> Jeremy, I want to ask about market structure. So, one of the reasons why you identified index funds as being a good solution is not that you thought markets were efficient. I'm guessing you still don't think markets are efficient. It wasn't that. >> It was the the nature of active management being a zero sum game and any frictions that you take out are now in the investor's pocket, >> right? >> And so you you you told the story basically about think about like a poker table. Well, if you lose enough, you come to the game, you're not going to come to the game anymore. you're going to stop playing. So, there's this weird dynamic in the market where on the one hand, John, if you could throw some of these charts on when you get a chance. On the one hand, you've seen that exactly. You've seen active outflows persist. Um the cumulative outflows are $3 trillion out of active mutual funds, $2.8 trillion into index funds. I'm sure you've seen this chart a million times to the point where ETFs and passive mutual funds have now passed over active. So there's more there's less people playing the active management game. But on the other side, you have the rise of the retail trader. So you have this one dynamic with with professional investors and retail investors. And then you have something like this. So we grabbed some we grabbed charts from Rob, data from Robin Hood, and we're showing that since the third quarter of 2023, the total equity value traded on Robin Hood is up 273% $647 billion in the third quarter alone. And I'm using Robin as a proxy, but whatever the point stands. And if you look at options contracts, it's the same thing. Up 103% since the third quarter. So you have people trading their ass off. It's estimated that the retail trader is now 25% of the market. But then you also have people that are saying, I'm not playing the game anymore. So how do you think about market structure today? And is it so much harder than it used to be to win max 7 notwithstanding just the level of competition? Because there's no more suckers. I mean, there are these suckers, but it's a messy story. It it is said that in 29 there was an awful lot of ordinary people for the first time playing and losing their shirts. And I think that was a wasn't that a big echo for decades how easy it was to get buried in a professional market and that the professionals would kill you. And people in the 50s,60s 70s, 80s really stayed out. They played re real estate with their money. But if you were the median rich person, you didn't bother with stocks and then COVID and that incredible uh issue of money to keep the economy ticking with everyone hiding at home that and the fact that they had nothing to do but get on websites and and learn a bit about speculation. >> Couldn't even watch a sporting event. There weren't any. >> Right. To the moon. To the moon. Yeah. Let's play these games. And it's an exciting game. Let's face it. tell the story of getting sucked in when I should have known better and making a fortune and losing it. >> And and that's what they were doing. And they're and that's what's going to happen to them. They they've a lot of them will have made a fortune. A lot of them will have lost everything by now, but they're all going to lose almost everything sooner or later. It's a setup. They are being set up beautifully by circumstances. And um >> that's a major theme in this market. You know, Edward will be writing in 15 years with any luck about that aspect of the market that a big chunk of ordinary people who had for the first time their hands on enough money to to trade a bit and some of them a third of them made a lot of money and they went on to trade a lot. >> Can I offer an optimistic take on these people? I think not I think most people know what's happening. Most people understand that they're gambling. I don't I think that there is of course some level of delusion within those traders. Of course, right? For the people that are just starting that have seen nothing but success, of course there's a lot of delusion in there. But these people have seen a bare market because a lot of them got killed in 2022. >> And my optimistic take would be that these are people that are contributing to their 401ks. They're buying index funds. They're eating their meat and potatoes and this is their fund money and they're not >> You're the one who said it's 25%. Th this this 25% is not their 401k trading. >> This isn't their mutual funds that they bought. This is their their crazy money is not insignificant is my point and your point too. Really, >> it's enough to count. >> And it's but it's only one chunk, one game, one subgame in a in what has become the world's most complicated bull market ever. >> You're right. 25% of the volume. It's not an insignificant amount of money. And certainly there are people that will lose everything. Yeah. But I think that there are people that are maybe learning the right lesson because they are trading and if they lose, they stop playing. They graduate to more professional. >> I think of myself at at 28. I'm a semi-professional for heaven's sake. I'm a good quant. I understand life. I'm a historian. I've always been interested in history. I knew about 1929. I knew I was speculating. But the speed of with which I got wiped out, I was not ready for. And and no one ever is. When was this? >> This was uh >> was this the Nifty50? >> 69. >> Okay. >> Before the Nifty50 had really settled in, before people really knew there was a bare market, by the way, uh there was a magnificent bull and bare market in not just small cap, but pink sheets under the counter tiny tinies. >> Do you remember which stocks wiped you out? I'm sure you do. >> Yes, of course. But they had these wonderful names, too. Palms of Pasadena was my favorite, but the one that killed me was American Raceways. Sterling Moss, the world champion, was on the board and they were going to introduce Formula 1, which is now ticking over decently in America. Yeah. Formula 1 to America. >> You were early. You were right. >> I was right. >> Five decades early. >> I was five decades early. But the next one because I got out with half my fortune and I immediately went into market monitor data systems which was going to put a little monitor i.e. etc. machine on every broker's desk so that he could trade futures I'm sorry options on individual stocks. >> It's hilarious. >> And it was a brilliant idea but it was 20 15 to 20 years too early. the technology which now makes it trivial and people trade them couldn't handle it and so they had these machines but no orders came in >> right >> and and so the company went bust and and took me >> I I got a I got a package in the mail in the middle of the pandemic >> and somebody said they were a letter they said I I don't have much time left and I'm giving away everything I have and I don't know what to do with this but I thought you would and it was boxes and I opened the lid and it was I don't know maybe a thousand maybe 2,000 issues of a little magazine the New York Stock Exchange used to put out and it was like a had a very beautifully illustrated cover and it looked like it was a weekly digest of everything that happened on the New York Stock Exchange that week. So every cover would be about whatever stocks they were talking about. Now I still have these things in boxes. I did not. it turns out know what to do with these things. Um, but I was looking through them and I think I saw something like that device you described. But like it's amazing when you look at the history and it feels like oh that was the 60s nothing like today. It's incredible the degree to which things repeat and you could just randomly pull one of these magazines out, flip to any page and it's an article about something where if you just change the name of the company it's almost identical to something that's happening. We had the seat you're sitting in. We had Andrew Russin sitting in two weeks ago and he of course wrote 1929. He said the same thing. I'm researching this book about the 20s, but like it could be the 2020s. >> It's it's it's it's almost remarkable. Do you still find it remarkable after all these decades that you've witnessed? In some ways, I find it even more remarkable because in into the things that I was kind of used to, even expert in, we've had this extra spin of a subset with real money speculating and then a much bigger subset of AI changing the economy. It wasn't just back in November they interrupted my nice bare market, >> right? >> And for 10 months, 11 months, only the Mag 7 went up. By the way, >> 2023 >> in in in in 2023, only the Mag 7's going up. The other stocks are drifting >> a tiny bit down and then they throw in the towel and they start to go up uh in about October, November 23. >> Um but it changed the economy. If you take out the one and a half percent of extra capex, >> yeah, >> we would have been almost flat. And then my hero Kane says, "What happens to animal spirits?" The animal spirits were not great in in 22. >> Mhm. >> Without that one and a half% without that oomph in the stock market from AI, we would have had a recession and the market would have continued down and it might have hit trend minus 50. We'll never know. There's no doubt that the bare market would have continued. Whether it would have gone down 50 is up for debate. But isn't this such a great lesson in capitalism? >> It didn't have to go down another 50. It had gone down 25. Right. Right. >> All it had to go down then was another 20. >> But isn't But I guess to Josh's earlier point, like it's always something, especially in America, which you wrote about in the book. >> We are so delusionally optimistic. our willingness to take risk to fund these early stage companies, which I know you do a great deal of. Um, it's really hard to bet against the long-term nature of this. >> You never know the next chap. So, in other words, people look at valuations and they say the market's expensive. And I I'm a little bit sardonic about it. I say, "Yeah, we'll find out why." >> And that was a really good example of we found out we found out why we weren't in a 50% draw down. Um because people were willing to bet that something would happen and then nobody knows what it is and then this thing comes out of nowhere. >> But the market hadn't turned in anticipation. Market was nicely going down. Yeah. Bang. >> They introduced chat. Day three I'm on there saying >> this is something. >> No, I I I said please summarize war and peace in 12 points. >> Yeah. I thought, "That's very cool. Now try it in German." >> Yeah. >> I thought, "Holy this is going to be something, isn't it?" >> You've ruined my bare market. >> And and and you've ruined my bare market. And and it meets every every condition of a great bubble in itself. So this is a new game but becomes almost immediately meeting the conditions of of the truly great bubbles which is everyone on his dock can see that it's unbelievably significant. >> Yeah, >> it is completely obvious and it's going to change the world. It's as obvious as anything since the railroads. In fact, I think historians will say you had the railroads in the 19th century, nothing much in the 20th century, and you had this one. >> You think it's that you think in the 21st century? >> You think it's that significant that it's dwarfs everything that came before it in the last 50 years. >> Yeah. >> Including the original advent of the internet. >> Yeah. Yeah. Yeah. But the market's rejecting the bubble >> in many ways. Like if you look at now the you could find speculation all over the place but Oracle for example and Microsoft uh these are two of the stocks that are the epicenter of the AI bubble and you would think that they would be bit up to but Oracle's down like almost 40%. And Microsoft since chat has gone has barely outperformed the market. I'm shocked that we're not that these stocks aren't >> is selling at 24 times this year's earnings. Meta is in a 15% draw down. >> Yeah, I'm very surprised. It doesn't look bubbish yet. >> Nvidia, the bubble is not in the PE for heaven's sake. The bubble is in the fact that they have bought millions of these ultra expensive chips on which they have not yet made a buck. >> The customer >> that is a classic classic bubble. You want them to also bubble the PE? I mean, give me a break. >> It would be it would be it would be neater. It would be needed. It's not necessary. >> It's hard to it's hard to blow the bubble on the PE for Nvidia when it's already at 54$4.5 trillion. In other words, how big should it be? 9 trillion. Like to have a 70p would be completely absurd, >> right? Well, it does in fortunately for all of us. So Jeremy, I think one of the things that you got the most wrong, no fault of your own, but with the benefit of hindsight, and I don't think anybody could have seen this coming, part of your work that made you so successful was the fact that, and this was a fact, that margins would mean revert. It was one of the most mean-reverting series in business and in life. And you said the fact that a company's depressed profitability reverts to its average level seemed to me just the fortunes of war and that all changed really with the mag 7. They have broken the laws of profitability. John, throw this chart on, please. And I know you wrote about this in the book and you have a similar chart. And actually, it is kind of funny that this stopped going down in 2023 when chat came out here, but the level of margins and the fact that they didn't mean revert to previous norms for a million reasons that are now obvious back in 2013, 2015 was very hard to see coming that this would just continue to go up and to the right. >> Let me just say the 5663 when you put on the series to the left of it, you find noise, >> right? Okay. So what we're really talking about is starting in the 21st century. There is apparently a paradigm shift or something very much like that which for a number of decades causes the profit margins to go up and the share of GDP to go up and uh that that happens pretty seldom because in order to do that you have to squeeze individuals you have to squeeze regular income and what has been happening in the 21st century in particular is the share of money going to average go hasn't moved. So that the real wage for an hour's worked has barely changed since 1975. Look it up. If it's up 15%, I'd be amazed. The average Frenchman whose bottom we have been kicking. I know from reading Business Week over the years we have been kicking consistently and who suffer from you know this sort of problem and that sort of problem eurosclerosis and so on. uh is is up uh is up 140%. And we're up 15 and the lowly Brits are up 50 or 60. >> So why are they the ones protesting in the streets? Why are the why is the Frenchman who's up 140% in in what what is that? Uh take home quite a lot of time. Yeah. Yeah. Take home pay. Why Why are we so wimpy? Why is it that the American worker has been screwed and screwed and royally screwed and has not really objected? What do you think? >> Well, they're badly organized. The opponents are more powerful, better organized, systematic, have a plan. It's not an accident. It's not just a drift. The rich and powerful actually use their resources to maintain the current system because it's working fine. So, they have not moved to stop the squeezing of the bottom 50, have they? What legislation was effective in changing? >> Well, Trump has run on that, but he hasn't actually done it. >> Exactly. >> Yeah. >> And and other people have run on it without doing it. There is no president since 1975 where the pendulum swinging for uh 60 70 years in favor of the rich away from the poor. There is no president who moves that back for four years, eight years. Clinton holds it, right? It stops moving for eight years and then it starts to move again. Every other Democrat, it keeps moving. >> Was that legislation or circumstances the economy or >> everything? Everything together. Point is Clinton stopped it. Good for him, Obama, etc. They didn't stop it. It continued to move. We've lived in a world that is simply favorable to the rich and powerful. Okay? And that I say rich and powerful because that was the exit poll language at at Trump won uh 16. And I it was longer than this table and it was full of every question you could possibly imagine and there was 623 Hindus on this and Protestants and Catholics and so on and rich and poor and Republicans and they asked them all the questions and you had the red blue effect on everything except this one which nearly shook me out of my seat. this country needs to be saved from the rich and powerful. And every goddamn group on that table agreed. And I'm saying, you know, it would be 91% of the Democrats and 89% of the Republicans. And even the rich agreed and I agreed >> it needed to be safe from the rich and powerful in 2016. >> And what has happened since then is just you look at the data, it's more of the same. >> But it's a stock market. How do you fix that? Because the rich people own the stock market and it's going up. It's not you don't you don't pick one element of it. How how do you fix the stock market? It's how do you fix the whole game and it's it's been how did we get here from 1975? From 1935 to 1975 the pendulum moved slightly in favor of the poor. They got richer slightly faster than the rich got richer. But everybody got rich. So you had this very high productivity 3 and a half% GDP for 100 years. >> What what era is this? >> This is 35 to 75. >> And what's the top marginal tax rate during that period of time? >> Who knows? >> It's higher than it is today. >> But one thing one one thing at a time. >> Okay. >> So you have this 40-year period with the highest productivity gains in American history. Three and a half% a year for 40 years. Maybe closer to four. Uh a 100red years was three and a half on average. So this was even better. Let's say 4% maybe even 4.2. Magnificent increase in wealth and and the poor were just slightly higher. So the poor were like four and a half and the rich were four. And you can keep that up for 40 years and no one's going to take to the barricades. It's a perfect environment for the poor. It's a perfect environment for everybody. And because it just goes on so smoothly and such a long time, it creates enormous harmony in the economy. And and that was that was the golden era. And then when you look from then on from 1975 for 50 years until 2025 and uh >> was it the gold standard that >> the rich take it all in round numbers. But there must be a catalyst or two that you could think >> the bottom half take nothing. >> What do you think? >> But first of all, we should not have the income. It's like a a slope, isn't it? Between the very rich and very poor and some countries like Japan is quite modest and some countries like Brazil and now we have moved up to be like Brazil. We're we're very steep. We shouldn't allow that to be decided by the random features around the world. Oh, China has a lot of people going into the cities. Should we allow that to make inequality in America? It's easily fixed. You fix equality by a tax structure, don't you? What we did is we allowed Chinese farmers to go into the city to make our goods for us. we stop making them, we just put the brand on it, our profit margins go through the roof, etc. That's a random fact and there are several of those things, but outsourcing was a powerful factor. They're easily corrected. You're corrected by the government. The government decides that they will tax capital a little higher, income a little lower. You're meant to tax anyway. Taxing income is not the world's greatest idea because >> there are some things away from the >> you tax things you don't like like tobacco. You don't tax things you want to encourage like like work >> but government is run by the rich people and they will never do this. >> I was I was going to say like doesn't power always >> the key difference between the 3575 era where there was a sense of no bless the local companies ran as if it mattered the the city they were in their well-being mattered to them. It really did when I was first here and and there was a minor undertone of no bless oblige in Congress. When I Eisenhower left, he opens his famous retirement speech with, "I've got to thank both parties for the serious uh cooperation that they gave me." Holy >> nobody. >> Serious cooperation. >> Yeah. >> And and then he goes on and on like that, you know, we mustn't squander the resources of our grandchildren. No Obamas of the world have not said anything that enlightened about long-term uh sustainability for example >> that profit margin chart though very specifically like you say it's a 21st century phenomenon and I agree with you and it is the hardest thing to have foreseen like why won't this go back to the way it it it used to be I think we just we stopped doing antitrust in we never had companies this size that could acquire anybody that competes with them until the point where can't compete, >> right? >> And that keeps profit margins abnormally high relative to history. >> Absolutely. >> And then the second thing is >> writing my book again. >> Uh Citizens United. >> Yeah. >> So all right, from 1930 to 1970 or 1975, >> votes actually mattered. Now we have super PACs and and media time and the only thing that matters is who raises the most money. And there are no limits. >> Citizens United is like a dagger in the back of democracy, isn't it? I think it's g I think it's gasoline on the pre-existing fires that were already burning, but there's almost no way back now. >> And the Justice Department does not have to go to sleep in the earlier period. It it was out and about from time to time. It broke up imagine it, you know, completely broke up uh Standard Oil. It's massive. And then it broke up the steel syndicate and then it etc. And and it broke up telephone. A single company owned the whole telephone system, >> right? and it broke it all up and and then it went to sleep in in the last 50 years. It it occasionally shapes up so that you'll think it's not asleep but then it does nothing and backs off. So it will threaten to break up a Microsoft it will threaten to break up and etc etc etc and then it will in basic basically do nothing material. So every industry had has had an increase in concentration. Every industry, some a lot, some a little, but they've all become more concentrated. And monopoly is the very essence of profit margin. What is our definition of quality? Stable, high return, and no debt. And and why is it that? It's because that's a workable definition of monopoly. You're a price setter. You have stable pricing because you're setting the price. You have fat profits because you're setting the price. You have no debt because you're making so much money you don't need any. Quality has outperformed instead of underperforming. It's the AAA bond for heaven's sake. It should be minus one. Everyone knows the AAA bond returns a percent less. But the AAA stock does not. It's for a 100 years it's returned half a percent a year more. >> Should not be getting a premium return for buying the highest quality product Apple. >> But you do. >> It should be so obvious. But you do. >> And and why? because they're the essence of the creeping increase in monopoly. Those Coca-Cas of the world and and and uh Nvidia are are allowed to have more power. >> Well, Amazon's a great example. I mean, it's not enough that they were the biggest retailer in the world, then they dominated cloud computing, they bought Whole Foods, they bought MGM studios, >> now they're getting into pharmacy. I mean, >> um they'll basically get into what they'll get into whatever they want. And the case that they can make in an antitrust conversation is, well, we're not the only player in the industry. There's Walmart. And it's legitimate. There is Walmart. It's true. >> Yeah. >> Right. >> So, what slows us down? Forget about reversing it. I mean, >> is is investor preference going to change all of the sudden? >> I I don't want to rain on the parade. I mean, I think history would say what happens is an unexpected stumble. Hyman Minsky arrives back into action and it is revealed that the size of the bezel is a lot higher, that the level of leverage is a lot higher, that the stability of the global system and the dollar is a lot flakier than you thought it was. And you don't know where the strut cracks on this elaborate ridge. >> So, here's one potential. Um, and this is not necessarily a pin prick or a catalyst. It's it's a gradual thing. I think Jeffrey West is is the is the author. Jeffrey West wrote a book called Scale. And there is a limit to how big things can get, whether it's society or animals or companies or cities before they start to buckle under their own weight. And maybe we're not too far away from that where things just start to deteriorate. There's too much glut. There's too many people. There's too many too much bureaucracy. Whatever the case may be, where investors say, "Hey, you know what? Why why am I paying a premium for this size? It can't grow anymore. It's only going to shrink." And and it may be something as intangible as that. What I think about is is Henry Ford. He was a pretty good capitalist. You know, I have to spay pay them a decent wage. Otherwise, they won't be able to buy car, right? >> If you think of the bottom half, they need cars. If you only sell cars to the top half, GM and Ford toast. You have to sell to more than the richer people. >> Can I ask you a follow-up question to that though? >> No, you can't. >> Okay. Eventually. Eventually. >> Eventually. um we're in danger. If you look at if you look at the number of poor people who can't pay their uh their auto loans, they're defaulting at an abnormally high rate in a strong economy. Why? Because they're not the part of the strong economy. They they're the excluded part of the economy and they're beginning to hurt. If they stop buying cars, that's a strut that can just crack. No one talks about it. It's just the poor are squeezed so much they stop supporting those parts of the economy that echo right through. And auto is of course a classic, but it could be what you're saying. It's such a complicated system that you you build it up and you build it up. And I could list unfortunately a lot of things. Climate change used to be just a kind of bad idea for ruining your evening. the last two years. It is big enough in damage, fires and floods and bad farming conditions. It's big enough to affect the GDP just the last two years that the accumulative damage is running at something sometimes in excess of half a percent of global GDP. And I'm not vouching for this data, but it was worked out by somebody that from 2000 about a quarter of the growth in GDP was preparing to fix or fixing uh climate damage. So doing stuff to reduce the risk, building better or fixing the village that got burned down. half a percent um I'm sorry a quarter of the GDP growth. So that is squeezing. Now you have the population thing which is what I came back at the end of last time to harang everybody. If you're reading the paper you will see that there is shocking every week there's some shocking tidbit that whoops China was meant to decline in gross population in three years a declined this last year. It's actual total population decline. That's a lagging indicator because of old people living long. Their their workforce is declining all over the place. Japanese workforce, get this, 20 year olds entering the workforce 50% of what it was at the peak in 1948. 50%. If we were down seven, we'd be in a panic mode. They're down 50 and they're leading the charge. Followed by South Korea, followed by China at unbelievable speed. followed by India who is 20 years ahead of the game to get down to 1.9. They weren't meant to get to below 2.1 until about 2040. What the hell's going on? >> So, which side are you on? Because on the one hand, you could say that that's putting less pressure on our natural resources. >> It is. But, but it's putting more pressure on this bloody bridge that I'm talking about >> because the demand is going there. People aren't applying to college, schools are closing down and so on and so forth. and and villages are are being abandoned in Japan and South Korea getting for the same thing and and and the same in in China. And my argument is if you live in a country where two or three decades of decline, you lose your moxy. If you kind of grow up and the nursery schools are closing and now the grammar schools are closing in Japan. I went on a bicycle tour and we got fed by the local old ladies very nicely sandwiches in a closed grammar school. Uh when you grow up in that world, how are you expected to be as bullish as you used to be? Why would you reach for extra debt, open another factory when you know everywhere in Japan there are fewer people? Yes, you go for exports, but there are limits to how much you can do that. And they're they're terrific in Japan. They have a social contract from heaven. And yet I think they had real moxy in 1980. We were terrified of the Japanese. They, you know, we would have 5% failure rate in chips and they would have four. Oh, that's that's unusual. Three and a half, three, what? What the hell is going on? Two and a half. Two. They got it down to one before we really woke up to the fact they were kicking our ass. Every television set was becoming Japanese. St. you stuck these things on your belt that the first kind of high techy things of walking around listening to music and and everything they did they seem to do better and now they don't they're competent they're professional they've just lost it haven't they so one by one China's enter entered this it spreads around they used to say France was the exception last year was 1.6 America 1.6 at 1.6 96, you're you're losing a quarter of your babies each 30-year generation. For the last 14 years, global baby production has dropped by a million. This year, the year just ended, China went down by a million babies, 1.2 by itself. and and and we've gone down from you like 150 million babies globally to 138 or 137. How many years do you want to keep doing that? So global vitality is going to start going anyway. So these are two climate damage already much faster than we thought. Population bust much much much faster than we thought. No one's prepared. We're such we're so profoundly into wishful thinking. was simply not prepared to talk about stuff like that. >> Elon Musk said that by 2027 he'll be selling humanoid robots to families, households. Japan has been experiencing this demographic ice age for a few years now. And as a result, they're basically the world leader in robotics. >> Uh China, you said China will be next. Okay. And then eventually it'll get around to us where it'll become apparent that we're just not growing the population. So do we turn to more immigration? That seems doubtful. It sounds like we're going to turn to robots >> and and the source of immigrants uh is pretty short term anyway because Africa has actually in the last 40 years lost more babies than we have. It's just that they started so high. So they've gone from six to four minus two, >> right? >> And we have gone, you know, from three to one and a halfus one and a half. What do those numbers represent? Are you talking about percentage >> baby babies u u >> replace that like how many how many babies you replace yourself with? >> You need 2.1 >> and they were you know six. So they were had a generous lot of babies. >> A lot of babies. And now they're four, which is still a lot of babies. And people tend to, oh well, they have a lot of babies. At that rate of decline, which is every year, >> how long did they have? And and the answer is about 25 years. But every time anyone works out the 25 years, it happens in 21 these days. So we we have a couple of decades where on paper a lot of Africans could could immigrate, but someone has to pay for them. Someone has to receive them, be willing to receive them and integrate them. So I don't know whether one should hold one's breath or not. >> This is all very uplifting. Um, Jeremy, I >> I know that you are you are investing a lot of money >> into um causes that will long outlive you and maybe even the next generation to make the world a better place. Can you give us can you leave us with something optimistic? Is there technology that you're seeing? Is it too late for us? Like where are you putting your money for our for all of our benefits? >> I mean, the good news is we're crap at at long-term thinking. We don't do serious analysis of long-term problems. We don't address it in in a very emphatic way. On paper, we could, we just don't. But we are very inventive. Okay, we can all agree on that. So, the thing that we really do well, particularly in America, is we take risks, we get together, we experiment. Fracking is just a minor miracle when you think bloody solid rock. They have to get just amazing. and and uh if you take fracking out of the US extra performance in GDP it becomes a very modest component by the way people are very bad at doing that they don't really know how to do it but it it spread out its tentacles it's not just every manufacturer because natural gas is local every manufacturer has cheap energy onethird the price that they're paying in Europe or Japan This is not an insignificant advantage. So people are building chemical plants in America because they have cheap natural gas, cheap energy. And then natural gas is the feed stock for plastics. So we're all building plastics factory. Everyone wants to buy our natural gas. It's coming out of our ears. So we're building these very complicated uh transshipment systems which are unbelievably expensive. those those domes, >> the LG terminal, >> LNG terminals, LNG tankers, unbelievably expensive. And that technology waffles around so that uh you know the the guy at the coffee shop is benefiting from the from the drilling activity and and the cheap building that's going on, not the cheap building, but the building based on cheap energy. I digress, of course, but I'm just making the point that uh that u fracking was amazing and and accounts for a lot of the American uh success against the rest of the world and we will keep doing that. But if you could take the fracking genius and transfer it to geothermal. Geothermal is just about digging holes lateral laterally to capture more heat, send the heat up, steam, generate electricity and so on power. And um it is a natural if we could do it. And now we're showing signs that we are transferring talent, trial and error, money, resources. We're also working on can you get the temperature down with which uh you can make uh you can make useful energy. And uh maybe we'll do both of them. If you do that, we could wake up in 13 years to pick a random number and find that instead of 1% of of the planet you can dig in New Zealand or Iceland where it's close to the surface, it's 13%. Because you only you can dig twice as deep and you have more skillful ways of catching it. And it's infinite. You never run out. mankind will be long long gone before you could show any rounding error of loss of energy from the heat of the in interior of the planet. So that's amazing. We have the skill set. We have a brilliant example. All we have to do is transfer it. Our foundation has quite a few investments in this area, not not surprisingly. And people are beginning to fund it. They're beginning to perk up. It's interesting. Are you are you impressed by any other technologies that you think our audience should read about or or try to learn about? >> You should keep your eye on fusion that they there's plenty of jokes about fusion, but that's life. Things often happen very very slowly and then quite rapidly. >> Nuclear fusion. Yeah, nuclear fusion. >> That's a new energy source that we could harness. Yeah, they have made progress beyond the imagining. You know, thousand times progress over 15 years in this particular part of the technology, you know, 10,000 times, 400 times. It's just all over the place. They just miscalculated. When you go back and you think they thought it was around the corner, that isn't because we did badly. That was because they were idiots when they made it was next to impossible in 1955. We shouldn't have even bothered. It looks so impossible. We have done so well. It is now more than possible. I think it's probable. Now, how long will it be before and will it be cheap enough? And the other thing which is really bullish um is solar and wind and storage, but particularly storage over 20 years is 5 cents, eight cents on the dollar. It's just come down much more. And there's a kind of a joke as one of the energy institute people who crank out energy numbers every year have under have underestimated the improvements in in energy storage for something like 17 consecutive years. I mean wow >> and you think why don't they change their model that's what we used to do in quantering. >> Um >> and it's going to keep going. I mean we will have energy 10 cents on the dollar from today. I guarantee it may take 20 years. It may take you know 12 years but it will be in the end it will be there and it may take 35 years but we will have incredibly cheap storage even cheaper uh solar and wind and the question will be you might come up with fusion and just the capital intensity will mean that uh other alternatives are are cheaper but there's backup there's layers of energy and energy is one of the if you wanted to survive as a species in a world where we're living beyond our means. What you need is fewer people. What a coincidence and infinite cheap green energy. And frankly, >> sounds like we're getting both. >> We might get both. And and the real experts in in the rise and fall of empires have missed those two points. They're really good. I agree with them on everything more or less except I think they've missed cheap green energy combined with fewer people. If you only have cheap green energy and you power ahead growing like a weed in population, you just still run off the cliff. You run out of everything, you poison all your water, you run out of resources, you crowd the world until People don't realize compound math is not one of our skills. you know, we we we drive around the the Arctic trials, >> right, >> with unbelievable skill. We do compound growth like idiots. And uh I I was giving a talk at the at the uh supercomputing center at NYU and I got to the part where I wanted the the PhDs in in computer studies and math to make an estimate. I said, "Okay, ancient Egyptians 3,000 years, 4 and a.5% a year uh is the growth rate we've had the last three years." When I gave the talk, 05, 06, 07 was four four and a half% a year globally, the peak of Chinese explosive growth. Imagine keeping that up for 3,000 years, which is the length of the Egyptian Empire. same language, same pheras, same religion. And what would it be if you started with a cubic meter of physical possessions and you increased them? 4 and a half% >> for 3,000 years. >> For 3,000 years, how much do you have? And I'm not going on. There was this embarrassing silence and finally someone says, "Uh, oh, it's a lot. You know, it'll be several miles deep." >> Yeah. >> Around the earth. Several miles deep. That's a lot. And then another voice says, "Oh, Fred, it's going to be much more than that. Perhaps from here to the moon." >> And that is a lot lot. And so I'm able to say, "How many times do you get a room full of PhDs?" And they and they can't come up with one billionth of the right answer. It is more than a billion times that. It is billions of solar systems full of our crap at a lousy 3,000 years of 4 and a half% compounded. And if you don't believe me, you can now check it on your phone. You could not that year, but you can now pull out your iPhone and dial in. >> Yeah. >> And it will tell you instead of error, it will tell you that what I say is correct. >> Jeremy Grantham. Ladies and gentlemen, did you have as much fun this time as we did? >> Did you Did you get He's just getting warmed up. >> Oh, dude. I got all the time in the I got all the time in the world for you. I I just I just think that uh I just find you to be s such a remarkable thinker and speaker and we just we appreciate it so much. So we want we want to be respectful of your time. But um I love I love that we can have a sort of uplifting answer like how we get out of this. And those are two really good answers. >> He's not done yet. >> I do want to say that I I uh I think uh that the first goound here was the most fun I had. Right. So that's something. >> Okay. >> And and secondly, you are talking to the only person who reads the comments on these things. >> Oh >> yeah. I am a big mistake blanking expert at comment reading. >> Steve, you got to talk them out of it >> because the comments reveal the flavor of your audience. >> Okay. >> And you have no reason to know this, but you have the best audience out there. >> Amazing. >> Oh wow. >> This is not me sucking up to them because I have no career risk. I don't give a Sorry. What you think about me? I'm just giving you the facts. The comments are your audience is really interested in the stock market, really interested in giving someone a decent hearing and thinking about what they say. And a lot of audiences are just kind of pro-former simple, you know, oneliners that you have heard 800 times, 8,000 times. It's it's it can be very disappointing and you can't you can't tell. It sounds pretty dignified. You'd imagine they'd have a good audience and they have all these morons. >> Yeah. >> And uh whereas your guys I thought they'd all be No, I'm just kidding. >> Right. Never judge a book by Never judge a book by its cover. >> What a nice way to end. Thank you. >> Our audience will absolutely love hearing that. As do we. So, thank you so much for saying that, Jeremy. We appreciate it. Um I want to tell people where they can buy the book. So, Amazon, Barnes & Noble, >> go to the Monopoly. The usual places, um, airports, gift shops, etc., right? This is everywhere. We're good. All right. For those of you listening, not watching, it's called The Making of a Permab Bear: The Perils of Long-Term Investing in a Short-Term World, and it is written by the legendary Jeremy Granthm with the help of Edward Chancellor. Uh, and I highly recommend it. And I hope you buy at least one copy. And if there's someone in your life that you think would enjoy it, buy two. Like, what's what's what's the big deal, right? What's the big deal? All right, guys. Thanks again for listening. We appreciate it. Thanks for watching. We'll talk to you soon. >> And it is fair to say that it reads rather like our kind of rambling uh session. >> It sure does. >> I really It sure does. Thank you, Jeremy.