Let's talk about bubbles. But let's come in if we can through Tesla because you've talked so about Tesla in the past. I mean
last time I checked I think the market cap is something like 40 times what it was four years ago. Is Tesla a bubble. Yes that's
pretty easy. And having said that I'm the proud owner of the Model 3 and that I do think they're magnificent vehicles. And I
think Tesla has done extraordinarily well. But if you go back into the life cycle of the fans Tesla is many multiples of the
price to sales ratio that they were at this stage in their lives. And they have been brilliantly successful. So Tesla is a
assuming it will be brilliantly successful and B assuming it will be in addition to that multiples.
As successful as the other fangs and they are some of the great companies in the history of capitalism. So this is a big ask.
Yeah I'm always reluctant to say it might be different this time but let me ask that question. Could it be different this time
when it comes to Tesla. Because it is at the crosshairs of a fundable technological transformation. Electric vehicles and a
real fight for the climate globally apart are an important part of that. So is it possible that is different. There's a major
transformation going on here that that's bigger than what we've seen before. I think if you were defending the fangs you would
say in each case that they represented like Amazon a crucial fork in the road on retailing. If you were looking at Facebook
and Netflix all all of them represent these breakout major changes disruptive changes. And I'm very grateful for Tesla as a
dedicated green that they have pioneered Evie's. But now in phase two. Every great automobile company Holden Mercedes and
the BMW is and so on. And the VW are all gearing up to go electric. And we that that owes a lot to Tesla. But now in phase
two they're going to have to have some serious competition. And to live up to the expectations of the prize will be impossible.
It's interesting you mention the other auto companies because in looking at Tesla I wonder how much of the valuation has been put
in the stock right now is really dependent upon it being almost by itself. That is to say a very large moat around the company.
And how defensible that and also the question is what about disruption of Tesla. I think you're involved actually in a
company quantum scope that is success on the battery side could actually disrupt Tesla itself. Absolutely. The new technologies
come along all the time particularly in solid state lithium. And many many things can go wrong with Tesla. I think they're very
fast moving company and they'll handle that kind of problem and they'll be worth a lot of money. The question only is has as a
discounted 50 years into the future rather than 5 or 10. And I think it probably is also speaking more broadly. You've said
there were in something I think you called it an epic bubble right now. I think you've been very careful. I'm not going to
predict when it ends. I'm just saying that it does end. What's going to bring it to an end. The thing about the great bubbles
1929 Japan. No. No one knows after all these years exactly why the bubble peaked. You can say with hindsight it peaked at the
point of course of maximum euphoria. So there was no hint of of darkness at the end of the tunnel. Everything looked absolutely
splendid as the market peaked. And of course as long as it looks absolutely splendid everybody is happy. The thing about the
great bubbles is. How intensely do people buy into the idea that it can never
break. The prices will never decline. The housing bubble of 2000 and 5 2006 in America was a brilliant bubble in that
description. You had people going out and buying a second house to rent because house prices never declined. Indeed Ben Bernanke
said U.S. house prices have never declined at cost and they probably did. But that is par for the course for the Federal
Reserve. In 1929 there was a terrific buy in and you could read articles
in the Ladies Home journal saying all you had to do to get rich was to buy stocks and hold onto them. And the same thing
occurred in 2000. In the tech bubble and the same thing occurred in the biggest bubble of all which was Japan in 1989 when the
Japanese market went to sixty five times earnings. But in U.S. history I would say there is a bigger buy in this time to the
idea that prices never decline and that all you have to do is buy them.
Then there has ever been. Which suggests that when the decline comes it will be.
Perhaps bigger and better than anything previously in U.S. history. You've talked about the tech bubble in 2000 that you
famously really did anticipate but you paid a price for getting out of the market that place because other people continue to
make money. People who were were a value investors switched over. You stuck with it at the same time. The longer that bubble
goes the bigger gets. Does that represent the possibility for you to make more money when it does burst. If you can handle
going short getting out of the way. Yes you can make a lot of money. This bubble in part if it is in bubble as you describe it
must in part be because of the amazing liquidity pumped into the world market frankly. But certainly the Fed participate in that
fully. We now just this week have some pretty staggering numbers on consumer prices of over 6 percent annualized right now in the
United States. To what extent will the pricking this bubble come if the Fed needs to respond and really step on the on the brake
and maybe do it even a little abruptly back its peak when inflation is low and profit margins are high.
It's not about growth. They like GDP to be very stable. They hate it bouncing around it makes portfolio managers nervous. And
our model that goes back to 1925 explains almost all the ebbing and flowing of market bull markets and bear markets and until
until June of last year. Starting in June of last year is the first time that inflation
the number one predictor since 1925 is ignored. If you want to explain today's market level yes you have
handsome profit margins. Every bull market has a wonderful economy. Every bull market has a plentiful supply of liquidity.
But every bull market before this one had low inflation. In order to explain today's market you have to assume 100 percent.
Ignoring of the rising inflation which is quite remarkable. We've never seen anything like this. We've just hit 6 percent
today. That would have been enough in any market since 1925. And for all I know long before that it would have been enough to
have crashed the market. But this time the faith in the Fed is so complete that when they say it's temporary we believe it. The
Fed in my opinion hasn't done a thing right. Since Paul Volcker who was brilliant. All of the others have encouraged a chain
series of really dangerous asset bubbles. They rattled the economy. They're incredibly
disruptive. The decline in two thousand eighty two percent in the NASDAQ was a decline from 2000. The decline of the housing
market all the way back to trend and below dragging the world with it
and all of the problems from bad mortgages and a 50 percent decline in the S&P. These have a terrible wealth effect. They
make people feel poor and they make people spend less. It's the last thing you want. And yet they have not learned they
overstimulated to get to 2000. They overstimulated in the housing market. They got 3 or 4 percent more people to own
houses in 2000 and 7 than had ever owned houses before. And the consequent consequences were dire. And have they learned.
Absolutely not. So in this time they step in to Covid. And of course you needed to stimulate. But did you need to throw this
much money all over the world so that it flows into the stock market and
creates creates these meme stocks. This craziness that had Avis triple in one day
and in the last week. And why did it triple. Because in response to Tesla and Hertz and
Tom Brady et cetera Avis said hey dudes we're going to buy some electric cars to wham it triples. You know this is more extreme
in scale and size of market cap than anything that occurred in 1929 and even adjusted for the size of the economy.