Hedge fund manager Mark Yusko sees sign of 'very unhealthy markets,' warns stocks are overvalued

One hedge fund manager sees indicators of an unhealthy market. Mark Yusko is CEO and chief investment officer at Morgan Creek Capital. He managed about $1.5 billion in assets. Mark, great to have you with us. We're just talking about NVIDIA. And I'm just curious what what you make of that action, that kind of action, if it signifies anything about this market. I think it signifies a lot about the market. You guys summed it up really well. Look, I am young enough or old enough to remember when Intel went up 20 fold, not 20% twenty fold in a little over a year in 2000 because their chip was going to revolutionize AI, right? AI is an 80 year overnight success story and we're seeing it again. So today Intel's 40% lower than it was 24 years ago. I don't know. So in no accounts you own it, you own NVIDIA. No, we own it and and we have owned it, but we trim into strength. We've owned it for a long time. And look, I think right now the most important thing, Melissa, in all of investing is discipline, disciplined rebalancing, taking your profits on things that are running, rotating into other things. Now, look, the passive industry is exacerbating the momentum effect every single day. The passive indices where the four O 1K money goes in every two weeks, they don't get a choice to say, hmm, is NVIDIA expensive or cheap? Doesn't matter. They have to buy it. And the bigger it gets, the more they have to buy. That works until it doesn't. Yeah, Mark, I'm with you. Now, we talk about that a lot and I appreciate you bringing it up. But part and parcel with that is the dampening of volatility to what I think is extraordinary is a little maybe hyperbolic, but interesting levels given everything that's going on in the world. What are your thoughts on that? Look, I think that's a really, really insightful point that dampening of volatility is normal when everyone's doing the same thing and everyone's doing the same thing because the capitalization weighting mechanism forces it. So as the percentage of passive money, and remember, it's not passive, it's slow active. Over the last 30 years, 85% of the S&P has rolled over. It takes a while, but it does roll over. So I think volatility is interesting and that people fear it. Yet volatility is your friend. What you want to do is own volatile assets that are uncorrelated with one another because all volatility is, is disagreement about the future prospects for a company. So one of those assets for you is our digital assets. Mark. I mean, you think digital assets, cash and gold are the way to go for the next 12 months. What does that say about your outlook for the markets? So look, I think you guys have done a great job breaking this down. You know, I was in the waiting room last week before the Trump news broke. So they they kind of moved me to today, but I was listening to the breakdown of evaluation across the markets. I mean, 27 times trailing earnings, we haven't seen very many times in history. So that's why I think discipline is really important and cash is a choice, right? It's an asset that today yields about 5% while you wait. It gives you the buying power to buy things when they go on sale. Human beings do two things really, really well. We buy what we wish we would have bought and we sell. We're about to need commodities broadly, despite the fact that they're making new highs every day, are at the cheapest price to paper assets they've ever been. And you know, in the kids game, right, paper beats rock, but in real life, rock beats paper. So we favor commodities. And you know how I feel about digital assets. Digital assets, to me, everyone needs to have some in their portfolio. They add diversification benefits because they're uncorrelated, because they don't derive their value from the same thing as traditional financial assets. And one last question mark. Do you think that the volatility in digital assets will be dampened as more and more ETFs are approved? Again, really, really great point. Absolutely. If you think about $58 billion of, you know, mostly retail and advisory money coming into this space and as they call it, the boomer wrapper, right? So you don't have to deal with hardware, you don't have to deal with software, you don't have to deal with self custody. You just buy an ETF just like anything else in your portfolio. I think that number goes to 300 billion over the next couple years from the 58 today. I think that will dampen volatility. I think it'll lead to much higher prices.