Why the Next Stock Market Boom Won’t Look Like the Last

During their recent episode, Jake Taylor and Tobias Carlisle discussed Why the Next Stock Market Boom Won’t Look Like the Last. Here’s an excerpt from the episode:

They just tend to happen. But then there’s also a boom that comes after that. And so the worst thing that you can do is blow yourself up in a crash.

You just want to make sure you’re positioned for what comes next. And this is the final point that I just wanted to make about the book. The thing that worked in a preceding boom is rarely the thing that works in the next boom.

So in the seventies, it was gold. Gold went sideways. In the eighties, it was private equity, leveraged buyouts.

Nineties was tech. Japan, yes. Emerging markets.

Emerging? Japan? Maybe it’s developed.

[Jake] Nah, developed.

[Tobias] And then the 2000s, probably tech, maybe private equity again. EM.

[Jake] Big EM.

[Tobias] 2010s, tech again. 2020s, still tech. Meme stocks and now AI.

Everybody’s still got their board, I got club NFTs.

[Jake] Ooh. Yeah. How are those doing?

[Tobias] Not cheap enough to buy yet. They’re holding their value. Uncorrelated.

[Jake] Yeah. Oh boy. I don’t know.

Not so sure about that one.

[Tobias] So folks, I got all of my, I said to Jake, I’ve got all of my crash anxiety into this one book. And I looked at every single thing that I’ve ever looked at from like all the way back to greenbacked, looking at valuation, moving averages, instability, hedging, different asset classes in different countries and what has worked and what hasn’t worked. And I put it all into one book and that was the, that’s Crash Test Dummy.

So if you’re interested in what causes crashes, what happens when crashes happen, what the other side of the crash looks like, then take a look at Crash Test Dummy and let me know what you think about it.

[Jake] We’re going to have to send a copy to Russell Napier at the Library of Mistakes in Edinburgh. That’s where it’s, it needs to have a copy there for sure.

[Tobias] I’ll personally deliver it.

[Jake] You should. It’s a good visit.

[Tobias] Yeah. So I’m, and then I want to do, I want to do one more book too. I want to do something on the singularity because I get this feeling that the singularity is like, by the definition that we’ve discussed today, the singularity is close if it’s not already here.

And this is the point that every single science fiction writer since like 1965 has pointed to as being this like momentous event beyond which humanity’s irrevocably changed. And it seems to me that it’s like, it’s happening now, it’s happening this year, it’s happening very soon.

[Jake] What do you think of the, it does, it feels like to me, some of the, there’s like a bit of religious overtones that kind of creep into some of these discussions. You know, like a rapture and maybe even like, I mean, I’ve heard Peter Thiel talking about like antichrist as a thing right now. I don’t, do you have any thoughts on that?

Or is that still a big blank spot in this chapter?

[Tobias] I haven’t, I don’t think that’s going to make it in the book. I don’t think that’s, might be beyond my pay grade.

[Jake] Yeah. Okay. Fair enough.

[Tobias] I think that politics and religion, generally, I try to avoid them. Um, for the most part, publicly.

[Jake] Yeah.

[Tobias] Because it’s just too, the upside downside skew is bad. Yeah. And it’s, there’s, it’s partially, it’s not rational.

So it’s not something that you can really bring to bear reason to sort of pick the outcome or determine what’s going to happen. Like it’s, it’s not that anything is predictable, but it’s entirely unpredictable. I don’t know if that’s like a different type of predictability, but it’s just not predictable at all.

[Jake] 10 people will be like, love to hear what you said. And then a thousand people will send you hate mail.

[Tobias] Right. Or even if it’s 10 to one, 10 to one’s the ratio. I don’t like the one.

[Jake] Still bad.

[Tobias] It’s equally not a good ratio.

[Jake] You, so you don’t want you, you like 10 people agree with you, but if one person sends hate mail, that cancels out 10.

[Tobias] Well, I wouldn’t even see the 10. They just like nodding behind the screen. And then one person’s like.

[Jake] Idiot. Yeah.

[Tobias] Yeah.

[Jake] That’s fair.

[Tobias] What do you think?

[Jake] I mean, that’s also.

[Tobias] Yeah.

[Jake] Yeah. Above my pay grades. I think anytime.

We have. A really hard time looking past two weeks into the future. We look for other explanations that maybe go outside of.

You know, normal explanation, whether that ends up being mythology or. You know, we would. You know, crop failures.

We would say it was because, you know, Apollo was mad at us or, you know, you didn’t do the right sacrifice. And I think we’ve slowly been chipping away at those for most of our history.

[Tobias] We’ve just got a scientific explanation, a scientific sounding explanation for exactly the same, like exactly the same feeling.

[Jake] But I think we’re, we’re, we’re wired to create stories out of things. And we’ll match, we’ll force fit whatever data we can find or facts we can find into a narrative. And, you know, that, that lends itself for good reason.

Like we, you know, our evolution was such that we. I’m like telling each other stories around the campfire helped us survive. And so stories feel good.

They, they make sense for us. And then they, that, that conveyed some, you know, survival advantage. When some story helped you survive that, you know, we were wired for story.

And so we shouldn’t be surprised then when big things that are happening around us. We look to attach stories to them.

[Tobias] In the science fiction book by Good, where he talked about ultra-intelligent machines building the next more intelligent machine. He said that it would be the last tool that humanity builds. So we’ve been good at building tools.

We’ve got to this point where we’re no longer gonna be needed to build tools. But I still think ultimately the machines serve our wants and needs and desires. And so as you sort of come up with new, they’re a limitless run.

What do you want? There’s a limitless, limitless desire, pneumatic desire. Somebody gets something you’re going to want it to.

[Jake] And so we’re going to be powering the- Is it a future of there’s no more rivalrous goods anymore?

[Tobias] Possible.

[Jake] That can’t be true though, because geography creates like- Abundance, right?

[Tobias] Super abundance. That’s the claim. Yeah, but if- That’s what big, that’s what big AI would have you believe.

[Jake] Yeah, but if I’m going to a sports game or a concert in person- That’s true. There’s only so many spots that you can sit. I guess you can go into like 3D.

[Tobias] Yeah, they look pretty good, those bars where you’re like right up close to the screen.

[Jake] Yeah, maybe. But I think you’ll still, like the human will, might still want to have actual real experiences in the real world with other humans. I don’t think that necessarily goes away.

[Tobias] I mean, let’s hope.

[Jake] Let’s hope.

[Tobias] That’s it, folks.