In this week's Stansberry Investor Hour, Dan welcomes Dave Collum back to the show. He's the Betty R. Miller Professor of Chemistry at Cornell University. He's outspoken about many topics and issues ranging from finance to politics and everything in between. And he brings this same no-holds-barred attitude to today's podcast.

Dave kicks things off by discussing the "everything bubble," or as he prefers to call it, the "complacency bubble." According to him, previous market bubbles had logic behind their euphoria, but he says the current one does not follow logic because the companies' earnings are not as good as they appear. He then says that based on a report he received, passive investing could be reversing. The problem with this is that folks could build a passive portfolio and sell individual stocks if a company gave reason for fear. With index funds, investors are holding all the stocks and will sell the stocks they might like while trying to remove a stock they dislike. And Dave warns that the wave of trillion-dollar IPOs could be the breaking point due to passive investors not being able to support them...

One of the arguments that was made for why the [dot-com bubble] eventually broke was that there was a supply of shares coming out of lockout. And you just couldn't absorb them. And that began the bust. We've now got trillion-dollar IPOs coming. And I believe that the market is being jerry-rigged up the kazoo to get those out before something bad happens. And then the question is, what's going to happen when all of a sudden there's a multitrillion-dollar series of IPOs? We're not talking billions, we're talking trillions, in which the passive flows will not be able to buy them... Now the passive flows are going to go to SpaceX and whatever else they manage to shove in the index. Which means the other 498 stocks in the index will get less of the passive flows.

Next, Dave explains how the market is overvalued and says that while many folks won't mind a correction, they should be concerned. As an example, he says that the average Boomer-generation investor has $300,000 in their retirement savings account. And if the market collapses, that will halve their income flow. Dave shifts the focus to interest rates. Folks aren't quite certain what to make of Federal Reserve Chair Kevin Warsh and whether he'll raise or lower rates. Dave believes that he could be a "Paul Volcker 2.0" who makes America "take its medicine" and start things over despite the short-term pain. But regardless of how things are handled, if the market bubble bursts, it will cause a "multidecade secular bear market"...

Bring up an inflation-adjusted S&P [index]. They often go back to 1870... and go to the key market tops and draw a line across and ask how far across the x-axis does that line go before the market leaves that price for hopefully the last time, and the answer is 40 to 75 years. And so the average investor just can't fathom this. They're not ready for this... So everything will hurt. There's no way there's going to be very, very few people who come out of it.

Finally, Dave shares what kinds of stocks he owns. He says that he bought gold after selling off platinum. While he initially had a rocky period with the precious metal, it has served him well over the past few years. Energy has also been doing decently in recent times. Dave also says that he has given up on sentiment indicators because he was dissatisfied with them. But he says that engaging in reading outside of your comfort zone and the markets is a great way to get insight into multiple areas and learn about developments in the world...

Read outside your expertise and read outside the markets. Because from there, you learn about outsiders often looking in, and see a very different world. Charlie Munger's favorite book was Influence, which is a neurotic book. And I've read a ton of neuroscience and I've read a ton of books on authoritarianism, which I believe is heading our way in a serious way... You've got to understand these things, to understand the world, and... [learn] about the outside world. Then you'll understand that the markets are not to be trusted, either.

Click on the image below to watch the video interview with Dave right now. For the audio version, click "Listen" above.

(Additional past episodes are located here.)

The transcript is coming soon.

This Week's Guest

Dave Collum is the Betty R. Miller Professor of Chemistry at Cornell University. He has also served as director of undergraduate studies, director of graduate studies, associate chairman, and chairman while running a research program in organic chemistry for 40 years. In recent years, he has become interested in the interface where politics and markets meet. He compiles an annual Year in Review, does several dozen podcasts per year, and occasionally stirs up trouble on more mainstream media sources.

He received a Bachelor of Science from Cornell University in 1977 and an MA, MS, and PhD in chemistry from Columbia University in 1980.