Renowned investor Ray Dalio warns that markets are deep into a bubble, reaching 80% of conditions seen in 1929 and 2000. He cautions against selling, noting bubbles often rise higher before bursting due to sudden cash needs. The real danger is not valuations or AI hype, but liquidity crises.

Dalio believes bubbles form from wealth creation through inflated stock issuance, leverage, and unsustainable buying. He warns against treating long-duration assets as predictable, emphasizing uncertainty. Bubbles don’t burst from earnings disappointments but when cash is urgently needed. Weak ownership and forced selling are key risks.

The market’s vulnerability lies in ownership and leverage, not just prices. Dalio points out that bubbles form when assets are in weak hands, such as leveraged retail investors who panic easily. Strong hands, like founders and smart money, can hold on. Concentration in mega-cap tech stocks and AI enthusiasm amplifies risks.

Dalio’s warnings highlight the danger of leveraged investing and crowded tech stocks. The focus on AI and vendor-financing arrangements contributes to market concentration. Bubbles end not from realizing valuations are wrong, but when cash is needed. Monetary tightening, wealth taxes, and political instability pose risks to the current market situation.

Read more at Yahoo Finance: Legendary investor Ray Dalio drops most shocking take on stock market