 Good day, fellow investors, and welcome to the weekly stock news that rock the investing world. Today we'll discuss a tech non-tech bubble company that has valued at 20 billion. What's going on in Spain and is it relevant? We'll discuss the age of Yellen, Janet Yellen, Mario Draghi, because that's very important for something. Then we'll discuss the credit economy, how that evolves over time. We'll conclude with a discussion about a few bonds that have been recently issued, a 100-year maturity bond with 2.1% interest rate from Austria, and we'll conclude all with a discussion about moral hazard. Moral hazard has been a famous topic in 2008-2009, but in the last nine years has slowly faded and nobody cares. However, you'll see how now it is at the highest point. So let's start with this new WeWork future IPO that the company is currently valued at 20 billion. So WeWork is a company that says uses technology to improve the office space of startups and reached recently a 20 billion valuation. However, the business is simple. They lease office space to startups and startups are excellently secure long-term paying customers, right? Nevertheless, a company that does the same has five times the square footage, has much more work stations, has three times the annualized revenue, has a valuation that is one eighth of WeWork. Valuation per square foot is 40 times lower. So how is that possible? How can a company that does the same have such a huge valuation? Because this company is sexy. This company is discussing new environments, going into social networks, blah, blah, blah, blah, blah, and therefore the big valuations. Because the investors that invested now, I think it was 4.4 billion, a fund invested in the company that led to that valuations, expect to sell that company at an IPO at double the valuation next year. And who will buy at an IPO? A pension fund, because they have so much money now and they have to buy everything. So pension funds like Fidelity bought into Snapchat before the IPO, they lost money on that. But who cares? Is it their money? No, it's the money of the retirees. So first impact of moral hazard. Second question is now companies that have revenues of 2 billion and no income, no profit are valued at 20 billion. Does this mean that this company are extremely valuable or that the money that's buying those companies is extremely overvalued? So we have now a discrepancy here between asset prices and money. I somehow start believing that money, cash, dollars, euros are worth much less than what we think they are worth now. So that's also something to take into consideration when investing. Secondly, Catalonia crisis, Spain, autonomy, we have been talking about the Brexit in the last two years, so a lot of political unrest in Europe. But then you see Pimcos, Europe portfolio manager, General, Geraldine, Sandstrom at an interview with Bloomberg. Oh, the market impact is localized. It can be only localized. Nothing can happen. Nothing can impact investment funds or the risk of Europe. Now let me ask a question. What is she supposed to say? Is she supposed to say, oh yes, that Catalonia issue can tip over Spain, send it into bankruptcy, then send Europe into bankruptcy and unravel the European Union? If she would say that, if this is a risk, everything is a risk, then all the investors in Pimco would pull their money out, she would lose her job and a lot of managers at Pimco would not get a bonus at the end of the year. By saying that everything is cool, they will still keep getting their bonuses year after year until there is the next crisis and fund managers lose a lot of money. But by then, with all the bonuses that they will get until then, the managers will have a nice life. Pension funds, retirees, investors, who cares? The only important thing is that managers get their fee at the end of the year. Perhaps you don't know this, but half of the mutual funds in the U.S. are run by portfolio managers who don't invest one single dollar of their own money in their products. Most are Vanguard, BlackRock, Schroders, Aberdeen. Three out of four funds at Vanguard have managers that don't invest anything, anything in their funds. So how crazy is that? So managers don't invest anything. They get a fee, they get a bonus at the end of the year. If things go south, nobody cares. Perhaps you lose your job, but you already have so much accumulated bonuses invested all over the place that you don't care. Now, let's go forward on the moral hazard. How old is Janet Yellen? How old is Mario Draghi? Janet is 71 and Mario Draghi is 70. And they are the decision makers about European policies and Federal Reserve policies. So they hold the monetary policies of the two largest economic powers in the world, 70 and 71. And they make a lot of speeches, as we have seen in the last weekly news. They make constantly speeches, they preach what they think is the best. However, they don't know. This experiment of eight years of monetary easing has never been tested in history. We don't know what will be the outcome. However, if the outcome is negative, let's say eight years down the road, do they care? They will be 78 and 79. No, they don't care. They will be retired, they will have a nice cozy life, their investments, their money, blah blah blah, and they don't care if 90% of the population will be poorer because of the decisions they are making now. This is called moral hazard and something that nobody talks about now. Further on the economy, easy money leads to higher credit. Higher credit leads to a better economic growth. However, this is the total consumer credit growth in the UK. You can see that it's constantly growing much faster than nominal income, which means, of course, economic cycle, more credit, more economic activity. However, household income growth is much slower. This means that eventually there will be an inflection point and credit will tighten, income will go down, and there will be a recession. Similarly, in the US, total consumer credit has jumped from $2.8 billion to current $3.7 billion, so more than 30% in the last five years. However, total income has jumped only 5-6%. This means that credit is really expanding and pushing the economy forward, and at sooner or later, this credit will inflect and push the economy downward. This is normal in human history in credit cycles, boom and bust cycles, so expect the cycle. When will it inflect? Well, if the Fed keeps pushing rates higher, the inflection will come sooner. Nevertheless, consumers are more and more comfortable, they have money, everything is going well, the economy is going well, and they are at the same level where they have been in 2007. And as we know, everything was perfect in 2008, 9, 10, 11 and 12, because consumers can really predict what will happen and feel comfortable about it, right? Another topic that I want to address Austria recently issued, 3.5 billion euros in 100-year bonds at the yield of 2.1%. 100 years. If we go back 100 years in history, Austria changed 4 or 5 currencies, the Austro-Hungary crown, the Deutsche Mark, the Schilling, the Euro, so somebody is buying those bonds and bought 3.5 billion of those bonds, hoping that the situation in the next 100 years won't change, that there will be euros, that they will get their money, and who cares? So, who bought those bonds at 2.1% interest rate? A pension fund, because the pension fund manager A doesn't have money in that fund and doesn't care what happens in 20 years when that bond will be trading 10-20 cents on the euro when interest rates are at 5, 6, 7%, he doesn't care. He doesn't care of the return of his employee, the pension, the retiree that owns the pension fund, he only cares, so I look, see 2.1% is higher than 0.5% here, my bonus will be higher at the end of the year. Thank you, Hasta la vista. Again, a huge example of moral hazard. Another example, Tajikistan, do you know where is Tajikistan? Just issued international bonds and they plan to issue them at 8%, but they managed to issue 7.25%. Tajikistan, they issued 3 billion of bonds, so somebody in the world bought Tajikistan bonds for 3 billion. This means that money is worthless, believe me. Similarly, just a quick note, US high yield bond issues in the last week have been 11 billion, 11 billion. So, there is plenty of money, it's crazy how much money there is, so I call money worthless. Think about it, and think about the moral hazard of the financial institutions and the people who work there, just some food for thought. So, to conclude, and here is the surprise, what to do? Just follow the trend. Take loans, money is worthless, it will be much easier to repay it, take moral hazard, look, okay, I'll make money here, whatever happens, the risk is not mine. That would be the most logical thing to do. I have some issues with that, because I would like to remain noble, but that will probably cost me a lot of money in the future. Nevertheless, really think about what's going on, if you have a pension fund, think about creating your own pension. It's extremely important. Don't give your financial life in the hands of the people that don't care about you and your financial life. That's the message for today, thank you for watching, subscribe, and I'll see you in the next video.