Hi Gang
We escaped the dreaded September! What was the number one topic among “Wall Street Gurus” during September? Comparing this current “AI bubble” to the “dot com” bubble of the 1990s. If we are ready for any outcome, whatever happens, we will be okay. The biggest winners of the dot.com bubble were not the companies who benefited mostly from the internet. To see if a stock is over-valued, we have to look at the PE (price to earnings). Is the PE too high? However, valuations are not driving these stocks. NVIDIA, the #1 AI stock has a PE of 53. For most companies, it is too high. TESLA has a PE of 270- way too high by any measure but it a vote on Elon Musk to grow the company in the future. Tesla is a tech company and not a car company. When insiders buy back their own stocks, it is a good sign. Musk just bought back $1 billion of Tesla stocks! Just before the dot-com crash Yahoo (the then Google) had a PE of 1,000! After the crash it went down to about zero. What happened in the dot-com crash? NASDAQ or tech stocks peaked in the Spring of 2000 and it went down 78% and bottomed in 2002. For me this is good news. Let us hope that all crashes take 2 years to bottom. I always keep a few “shorts” (put options the SPY index) as a hedge. As the market goes down, I sell some at a gain and buy more and I keep repeating the process. Using this method, when the markets crashed in 2020 due to covid, I made a 1233% gain. Prior to 2000, investors avoided tobacco stocks due to litigation risk. Then I did a “deep dive” in to Phillip Morris. It was paying an annual dividend of 9%. They were well reserved for their litigation risks they faced. Only 40% of their revenue came from US tobacco. They owned a beer company and a food company-if they operated as separate public companies, they would have had a higher market cap than the market cap the market was willing to give PM at that time. Over the next 5 years the stock price of PM tripled and their dividend remained above 5%. NVIDIA with its market cap close to $5 Trillion has become a bank to all AI companies. “Vendor Financing” is a scary concept and this is something that happened during the dot-com crisis. There is also “circular movement” of money within the “AI industry”. Now they are also getting in to debt financing. That too is scary. At the tail end of the dot-com crash, tech stocks (NASDAQ) doubled within 6 months (October 1999 to March 2000)! If that happens again, I will sell most of my stocks and triple my SPY put options to short sell the market. As it happened 2000 to 2002, we could see a 78% correction. Non-AI stocks are going up too. Pretty soon, JP Morgan will become the first trillion dollar bank! Current market cap- $841B.
All markets are in a bubble and we know how they all end. Gold just went over $4,000 per ounce for the first time. Now some experts advising all investors to have 5% to 25% in gold. Very bad idea! When you take the “inflation adjusted” price, it was only a few days ago that gold surpassed the top it reached in 1980 ($850/ounce) at $3950. In other words, inflation adjusted, $3950 in 2025 is equal to $850 in 1980. Scary! What happened when gold peaked in 1980 at $850/ounce? After that gold fell for 20 years! Gold does not act a hedge against market crashes. After bottoming around 1999, gold rose till 2011. Once again gold kept drifting lower for 5 years. I am very tempted to short sell gold.
In my previous newsletters I talked about the Quantum Computing craze to be the next tech craze after AI. AI is taking so much energy, it will increase the utility/energy costs for all humans. On the other hand, quantum computing will use less energy. As I mentioned previously, many months ago I got in to some of the quantum computing stocks and I saw very good gains and then the CEO of NIVIDA stated that it would take 15 to 30 years to see a benefit in this area, and all those stocks crashed. As stated before, when experts say something will happen in 15 years, it is sure to happen in 5 years and the stocks will see a benefit in one year. Later CEO of NVIDIA reversed himself and invested money in quantum computing. Now the experts are saying that the quantum computing will bear fruit within the next 3 years. Already some are generating positive revenue and net income. Last week was a very good week for these stocks. Over the past few months, my quantum stocks have been up 100% to 800%!. These are the stock symbols of my quantum stocks- QBTS, QTUM, IONQ and RGTI.
What would create the next 70%+ crash? In my mind, that would happen after China takes ownership of Taiwan. Computer chips are not all made equal. Even though US companies make the best chips, 99% of the most advanced chips get manufactured in Taiwan through the Taiwan Semiconductor foundries. China had been bullying and blackmailing the world with their advantage on rare earth for the past 40 years. We have been banning US companies from selling the most advanced chips to China for decades. Don’t you think China will do the same to us when they “own” Taiwan? There could be a time lag between China taking over Taiwan and China using this “chip advantage” to bully the US and the world. Now China has the biggest navy in the world. What will I do with this information? When China invades Taiwan, I will short sell the market in a big way by buying put options on the S&P 500 index. All the advanced chips get manufactured at Taiwan Semiconductor foundries in Taiwan.
Jeffrey Edward Gundlach is the founder and CEO of DoubleLine Capital, an investment firm. He graduated summa cum laude from Dartmouth College with degrees in philosophy and mathematics, and also studied mathematics as a PhD candidate at Yale. In 2011, Barron's named him "The New Bond King" and in 2013, Institutional Investor called him "Money Manager of the Year". On 9/17/25, soon after the 0.25% rate cut by the Federal Reserve, Jeffrey made the following comments:
· Within the Board, there was no support for 0.50% cut.
· Fed Reserve is confused about the labor force going down by 1.7 million.
· They should focus on the unemployment and not on inflation.
· There is a risk of over easing.
· 0.25% cut was the right amount and not 0.50%.
· Long Bonds do not like rate cuts as they fear inflation.
· Huge divergence of views at the Federal Reserve.
· The future will be more inflationary.
· Wanting 5 more cuts in 2025 is absurd.
· Gold and non-US investing is recommended.
· We could have an interest rate below the inflation rate.
· Mexican bond market is better than the US market. All foreign stock markets did better than the US- even Canadian and the Mexican markets.
· Investing in China is not recommended.
· People should have 25% of their portfolio in gold.
· He has a anti- US dollar policy. 2024 November the US dollar index was at $110, it recently fell to $96. This kind of drop is very unusual. Worst since 1973.
· We could get another rate cut in October 2025.
Have a nice month!
Fernando