Remember when everyone was convinced the housing market would never crash? Yeah, well, we might be having one of those moments again. Except this time, it’s not McMansions causing the trouble—it’s AI and credit markets that are looking a little too bubbly for comfort.
David Roche, a strategist who used to run research at Morgan Stanley (so he’s seen some stuff), is basically waving red flags and shouting “incoming!” He thinks two major bubbles are already starting to deflate, and the aftermath could be as messy as 2008. Fun times ahead, right?
Bubble #1: The Credit Craze
Here’s the deal: everyone and their dog has been borrowing money like it’s going out of style. Total credit in the US now sits at around 250% of GDP. To put that in perspective, that’s like maxing out 2.5 credit cards for every dollar you earn. Not exactly what your financial advisor would recommend.
Bubble #2: The AI Gold Rush
Big Tech companies are throwing money at AI like they’re trying to build a rocket to Mars (which, let’s be honest, some of them probably are). Amazon, Meta, Microsoft, Alphabet, and Apple are on track to spend $349 billion this year on AI infrastructure. That’s more than the GDP of most countries, just to teach computers how to write better poetry and generate questionable art.
Roche says US tech valuations look “absurd” compared to similar companies elsewhere. When a seasoned Wall Street veteran uses the word “absurd,” you know things are getting spicy.
So, How Do You Not Get Crushed?
Roche’s got a “wealth protection” portfolio that’s basically the financial equivalent of a bunker. Here’s his survival kit:
1. Gold and Hard Assets
Gold is up 54% this year, which is pretty impressive for a shiny rock that doesn’t pay dividends or send you birthday cards. But when everything else is falling apart, people love their precious metals.
2. Real Assets (Oil, Strategic Metals)
Think stuff you can actually touch and use. The VanEck Real Assets ETF is up 20% this year, while their Rare Earth and Strategic Metals ETF is crushing it with an 82% gain. Apparently, the periodic table is having a moment.
3. Nuclear and Defense Stocks
With the world getting increasingly chaotic, Roche likes companies that make things go boom (in a controlled, profitable way). Nuclear energy ETFs are up 50%, and defense tech funds are up 72%. Nothing says “safe investment” like uranium and missiles, apparently.
4. Skip the Bonds
Roche is “negative generally” on bonds, which is finance-speak for “thanks, but no thanks.” With governments spending money like teenagers with their parents’ credit cards, bonds aren’t looking too attractive.
The bottom line? We might be in for a bumpy ride. But hey, at least this time we can see it coming. That’s got to count for something, right?