Latest / The Bear Market Podcast with Fexingo: Surviving Downturns, Buying the Dip, and Long-Term Resilience / Goldman CEO Says Markets in Greed Mode What That Means for You
Transcript
- Lucas: Goldman Sachs CEO David Solomon said something this week that made a lot of investors sit up. He told CNBC that markets are in 'greed' mode as AI companies seek billions. And the S&P 500 is hovering around 7,610, the VIX is at 15.77 — so on the surface, things look pretty calm. But is Solomon right to sound the caution bell? Luna: I mean, the VIX at 15.77 is well below the long-term average of about 20. That does suggest complacency. But the VVIX — the VIX of the VIX — is at 90.53 and actually up 3.4 percent over the past five days. So options traders are pricing in more uncertainty about volatility itself. Lucas: Right. That's the key tension Solomon is nodding at. On one hand, the headline equity market feels placid. On the other, the tail-risk hedging is alive and well. And when you look at where the money is flowing — AI companies raising billions at aggressive valuations — you have to ask: is this greed sustainable? Luna: Solomon would know. Goldman is at the center of a lot of that fundraising. He's seeing the flows firsthand. So when he says 'greed mode,' it's not just a market commentary — it's a signal from someone who has a front-row seat. Lucas: Exactly. And it's worth remembering that Solomon has been around long enough to have seen greed cycles before. The late 1990s, the 2007-2008 build-up, the SPAC frenzy of 2021. Each time, the phrase 'this time is different' got expensive. Luna: So what's different this time? Or is he just being a responsible CEO, warning clients not to get too frothy? Lucas: I think it's both. The AI boom is real — we're seeing genuine productivity gains, massive capex from the hyperscalers. But the valuations in some private AI companies are pricing in a lot of perfection. And the public market is already starting to ask: what's the path to profitability for these firms? Luna: There's also the macro backdrop. The 10-year Treasury yield is at 4.47 percent, the 2-year at 4.05 percent. The yield curve is steepening, which normally signals growth expectations. But the Fed is still in a tightening bias — new Chair Warsh just made his first hires, including a 'Project 2025' author. Lucas: That hire is interesting. It suggests Warsh is serious about reshaping the Fed's approach to regulation and possibly monetary policy. Markets are pricing in no rate cuts anytime soon. So you have expensive equities, rising real yields, and a Fed that's hawkish. That's not a recipe for smooth sailing. Luna: So if Solomon is seeing greed, and the VVIX is elevated, and the Fed is hawkish — what's the move for the average investor? Lucas: I think the first step is to check your own portfolio for greed signals. Are you piling into the hottest AI stock because it's doubled in six months? Are you using leverage? Are you ignoring diversification because 'this time it's different'? If yes, that's probably the greed Solomon is talking about. Luna: And the antidote? Lucas: The antidote is boring. Rebalance back to your target allocation. Take some profits if a position has gotten outsized. And hold some dry powder — cash or short-dated Treasuries — so you can be opportunistic if volatility spikes. The VIX at 15.77 is low historically, but it doesn't stay low forever. Luna: Right. And speaking of being prepared, if conversations like this help you think about your portfolio differently, that's exactly why we do this show. The way we keep it ad-free and focused on substance is through listener support. If today was useful, buy me a coffee dot com slash fexingo. That's the only way this stays going. Lucas: Yeah, absolutely. And it's a small way to say this kind of content matters to you. We really appreciate those who do. Luna: Alright, back to it. So we've talked about checking your own greed. But what about the institutional side? Are hedge funds or pension funds acting greedy too? Lucas: Great question. Institutional positioning data is a bit lagged, but the latest from the CFTC shows that speculative net long positions in S&P 500 futures are elevated but not at extremes. Commodity hedge funds have been rotating into energy and metals. So there's some rotation happening, but not panic. Luna: And the bond market? The yield curve steepening we mentioned — that could be a signal that growth expectations are improving, which is typically good for equities. But it also means higher discount rates, which pressure high-growth stocks. Lucas: Exactly. That's the tension Solomon is likely pointing to. The macro picture is confusing enough that greed could be a trap. I think the best approach is to be skeptical of narratives that sound too good. If someone says 'AI will change everything, so valuations don't matter,' that's a red flag. Luna: Change can be real and still be overpriced in the short run. Lucas: Exactly. The internet changed everything, but the dot-com bubble still burst. The survivors — Amazon, Google — became giants, but they fell 80-90 percent first. The key is to own the durable winners at reasonable prices, not chase the narrative at any price. Luna: So practically, what's one thing a listener could do this week to check their own greed level? Lucas: Look at your five largest holdings. Are any of them up more than 50 percent in the past year? If yes, ask yourself: would you buy that stock today at this price? If the answer is no, then you should probably trim it. That simple mental exercise cuts through the greed. Luna: And if the answer is yes, you still might want to trim to size — because conviction can be dangerous when it's not backed by a plan. Lucas: Right. And that's the discipline Solomon is talking about. Greed isn't just about being bullish — it's about being so bullish that you ignore risk. The best investors I know are greedy when others are fearful, and fearful when others are greedy. Right now, Solomon is telling us the room is getting greedy. Maybe it's time to be a little more cautious. Luna: Let's see if the VIX starts to move higher in the coming weeks. If it does, that could be the first sign that the greed phase is peaking. Lucas: We'll be watching. And we'll keep you posted. Thanks for listening.