Jeremy Grantham on How to Tell If a Bubble Is About to Burst

**SPEAKER_2** (0:02)
Bloomberg Audio Studios, Podcasts, Radio, News.

**Tracy Alloway** (0:18)
Hello, and welcome to another episode of the Odd Lots Podcast. I'm Tracy Alloway.

**Joe Weisenthal** (0:22)
And I'm Joe Weisenthal.

**Tracy Alloway** (0:23)
Joe, I have a headline for you.

**Joe Weisenthal** (0:25)
Go on, there's a good day for headlines. We're recording this June 16th. You have a lot of headlines you could choose from.

**Tracy Alloway** (0:32)
But one in particular, I'm sure you saw this already, SpaceX extends gain to 17% set to overtake Microsoft in value.

**Joe Weisenthal** (0:41)
I had a feeling, I think at some point, did they also overtake Amazon and all of those? Yes. I think in the last week, I mean, we were traveling the week of the SpaceX IPO, but it just captivated everyone day after day. And there are any number of superlatives. You know, Bloomberg would really like superlatives. It's like the largest gain since X or the biggest.

**Tracy Alloway** (1:03)
These are more stats than superlatives, right?

**Joe Weisenthal** (1:06)
Well, I suppose. But there was also one I saw, I guess, yesterday, so June 15th, was the world's 500 richest people collectively added $366 billion to their wealth. There's the single biggest, the numbers get bigger over time. There are some big times for the market.

**Tracy Alloway** (1:23)
A nice day for them. But the crazy thing about SpaceX is, okay, you have this company that's now worth $2.7 trillion or something on $20 billion of revenue from 2025 And I can't even do, you know, if we're talking about valuations, you can't even do a traditional price earnings ratio because there's no earnings. There's just sales. And the price to sales ratio is more than $100, something like that.

**Joe Weisenthal** (1:48)
You know, look, like, I don't even know where to begin. I mean, you've seen-

**Tracy Alloway** (1:53)
Choose a superlative, Joe.

**Joe Weisenthal** (1:54)
Yeah, choose a superlative. I mean, the argument that's being made is that there's a lot of arguments being made. And people was like, oh, it's actually an AI company because of all the GPUs and data centers that they've built. They really do have, and we've done an episode on this, an extraordinarily commanding lead in space and satellites and Starlink, etc.
The revenue is what it is. I don't know.

**Tracy Alloway** (2:17)
But also, I think it's fair to say things feel a little bit speculative at the moment, right?

**Joe Weisenthal** (2:23)
Yes.

**Tracy Alloway** (2:24)
You see a headline like that, 17%. That's overtaking a stalwart of the tech industry in the space of, it's been less than a week, right?

**Joe Weisenthal** (2:34)
Yeah. I mean, look, I mean, the other thing is, look, these companies, and we're going to get these other big IPOs later in the year with OpenAI and Anthropic, presumably.
I mean, SpaceX has been around for a long time. Historically, companies came public much earlier, et cetera. So obviously, it does have 22,000 employees. It's a big company, but the revenue is what it is. And if you're looking at it from a sort of like valuation based metric, you would have to say at a very minimum, investors are, you would have to be banking on very rapid growth in the very short term in the coming years to expect good returns here.

**Tracy Alloway** (3:10)
Right. So obviously, one of the big talking points in markets.

**Joe Weisenthal** (3:13)
Do you know that like, I'm looking at the DES page for SpaceX. Do you know where it's headquartered?

**Tracy Alloway** (3:18)
No, actually.

**Joe Weisenthal** (3:19)
Starbase, Texas.

**Tracy Alloway** (3:21)
Oh.

**Joe Weisenthal** (3:22)
So they have their own town in Texas that they got to name, but that is their corporate info on the DES page, Starbase, Texas.

**Tracy Alloway** (3:29)
Well, that's definitely worth 2.7 trillion. So, all right, the big talking point in markets is obviously valuations, all of this AI frenzy. Is it a bubble? Is it not? But even if you think that a lot of this is speculative, my big question is, what do you actually do at this point, right? Because so much of the market has been momentum driven recently.
AI enthusiasm is pretty much everywhere. So we talk a lot about weightings in the indices, the benchmark indices of big tech, but also, as we discussed recently with Torsten Slock in his great presentation at our live show, the AI factor is basically embedded in pretty much every stock at this point in time.

**Joe Weisenthal** (4:10)
Look, the way I look at it from my own investing in my retirement, did I have very boring, normie, index-based investing? He's like, look, I may be missing out, but these are great returns, etc. I'm not managing other people's money.