Value Investing with Sven Carlin, Ph.D.|10. Juli
MARKET BUBBLE, ECONOMY ON DEBT = 80% CRASH AHEAD! (pure data)
Market Valuation
- The forward P/E of 20 is still 80% of the dot-com peak, but far above the 2007 bubble level.
- The cyclically adjusted P/E (CAPE) stands at 40 – well above the 30-year average.
- Historically, the CAPE averaged 16–17; a reversion to the mean would imply a 50–60% market crash.
- Current earnings growth expectations (25%) are overly optimistic and unsustainable.
- The top 10 companies account for 37–38% of market cap – a historically high concentration.
- Since 2015, only two companies from the original top 10 remain; over 20 years, only Microsoft stayed in the top 10.
- Buying the broad market today means buying the most expensive, crowded trades – with high risk of underperformance in a decade.
- Mindless passive inflows, buybacks, and global allocation keep pushing markets higher despite overvaluation.
- The inelastic market hypothesis suggests each $1 billion inflow lifts market cap by $5–8 billion.
- 64% of global pension fund allocations go to US stocks.
- US growth is driven by AI capex and government spending, both funded by unsustainable deficits.
- National debt is approaching $40 trillion; at 4% interest, annual interest payments would be $1.6 trillion – 60% higher than current levels.
- Interest rates cannot fall to the 2% target; the 10-year Treasury yields 4.44%.
- Comparing the S&P 500 earnings yield (3%) to bond yields shows historical norms would require a 6% yield, implying a 50% drop in stocks.
- The US comprises 20% of global GDP but 30% of global market cap – a clear valuation gap.
- Emerging markets trade at P/Es of 10–13; the author recently bought a business with an 8% dividend yield and 5% growth.
- Growth exists outside the AI bubble, e.g., oil (bought cheap, partially sold higher).
- The current environment mirrors past bubbles (1920s, 1990s). A 60% real decline over a decade is possible.
- The author doesn't know when the crash will come but is defensively positioned: value investing, focusing on fundamentals.
- He believes 99% of market participants are gamblers – creating opportunities for disciplined investors.
