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We're in a 'generational bear market': Roger McNamee

Roger McNamee joins 'Influencers with Andy Serwer' to discuss the current state of financial markets.

Video Transcript

ANDY SERWER: Let's get started by talking about big picture here. The market-- equities, that is-- down about 20% year to date. A lot of stuff going on in the greater economy. What is your perspective here, Roger?

ROGER MCNAMEE: Andy, none of us has a crystal ball, but it feels to me as though what's going on now is the beginning, the middle, or something of a generational bear market. Every 20 years or so, the market shakes a lot of extreme ideas out. And it feels to me as though that's what's going on here, that we're down far enough that a lot of things, reasonably, should be able to come back.

But I think we have systemic obstacles here. And I'm speaking specifically here about the issues with China and Russia from a geopolitical perspective, and the way that that affects not only supply chains, but the input costs of raw materials like petroleum. And then I look at the excesses of the financial markets themselves. And then I look at the political issues in the United States and go, wow. That is a stew of uncertainty that the market's going to have to work its way through here.

And it doesn't look to me as though we can avoid some period of higher interest rates. There is certainly a very high risk of the economy having at least a period of recession. And so we don't know whether inflation is structural or not. I'm hoping not. I can see paths through all this stuff. But I think if you're an equity investor, this is going to be a really challenging period of time.

ANDY SERWER: So not just a little bear market blip that we've been used to over the past several decades, really.

ROGER MCNAMEE: Well, I mean, it could be. It could be. But there are a lot of reasons to believe that it's not, because the rise in interest rates, the rise in inflation, are things we haven't had to deal with inside the professional experience of 99% of the people who are active in the markets. And when you have something that new, the probability that people will not handle it cleanly, I think, is very high. And so, I'm just saying, I think risk and reward right here are not where you'd want to be an enthusiastic buyer of the market.

Let me give you an example, Andy. So there is a fellow in a competing network who put out a list on what turned out to be the low day for tech stocks, the 24 stocks that were the market leaders that were down the most. And the best one was, I think, down 74 and the worst was down 91. And the thing that was really striking about the list is that after those stocks were down that far, I think the lowest one had a price to sales multiple of 7.

And if you put that in historical context, and I mean like 100-year historical context, a price to sales multiple of 7 is in the upper extremes long-term. And that's where we were after these stocks had gotten crushed. And many of them, the valuation is actually worse than that because the earnings aren't going to happen. I think four of the 19 companies were profitable, and that would be, like, Netflix and DocuSign and Zoom.

But a lot of them are still burning money. And I think a bunch of those guys just are not coming back. And in many ways, I think that's the best thing that could happen for investors, would be to kind of get us back to first principles again, because then, you begin a generational bull market. And that could last 20 or 30 years.