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 AI and credit that are looking a little too bubbly for comfort.
David Roche, a veteran 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 massive bubbles are already starting to deflate, and the fallout could be as messy as 2008. Fun times ahead, right?
The Two Bubbles Ready to Burst
Bubble #1: The Credit Craze
Here’s a wild stat: total credit to non-financial sectors in the US is sitting at around 250% of GDP. That’s like borrowing $2.50 for every dollar you make. Even your most financially irresponsible friend would raise an eyebrow at those numbers.
Bubble #2: The AI Gold Rush
Big Tech is throwing money at AI like it’s going out of style. Amazon, Meta, Microsoft, Alphabet, and Apple are on track to spend $349 billion on AI infrastructure this year. That’s more than the GDP of most countries, just so ChatGPT can write your emails faster.
Roche points out that US tech valuations look “absurd” compared to similar companies in China. When a seasoned Wall Street veteran uses the word “absurd,” you know things are getting spicy.
How to Not Get Wrecked
The good news? Roche isn’t just doom-and-glooming us into oblivion. He’s got a “wealth protection” playbook that’s actually pretty smart:
1. Get Some Gold (Yes, Really)
Gold is up 54% this year, which is pretty impressive for a shiny rock. Central banks are hoarding it like squirrels with acorns, and it’s still the ultimate “oh crap” hedge when everything else goes sideways.
2. Real Assets Are Your Friend
Oil, strategic metals, stuff you can actually touch—these tend to hold value when paper assets get sketchy. The VanEck Real Assets ETF is up 20% this year, while their Rare Earth ETF is crushing it at 82% gains.
3. Nuclear and Defense Stocks
With the world getting increasingly chaotic, companies that make things that go boom (or power cities without going boom) are looking pretty attractive. Nuclear energy ETFs are up 50% this year, and defense tech is up 72%.
4. Skip the Bonds
Roche is “negative generally” on bonds, which is finance-speak for “these things are probably going to suck.” With governments spending money like drunk sailors, bonds aren’t the safe haven they used to be.
The Bottom Line
Look, nobody has a crystal ball, and market predictions are about as reliable as weather forecasts. But when a guy who’s been around Wall Street longer than most of us have been alive starts talking about bubble-bursting scenarios, it’s worth paying attention.
The key isn’t to panic-sell everything and hide under your mattress with gold bars. It’s about being smart, diversifying into assets that can weather storms, and maybe not betting the farm on AI stocks that are priced like they’re going to cure cancer and solve world hunger simultaneously.
Stay sharp out there.