Stocks are now officially the most expensive ever in history. Using a combination of measures (trailing/forward P/E, CAPE, P/B, P/S, EV/EBITDA, Q ratio, market cap-to-GDP) a Bloomberg chart shows that stocks are more expensive now than at the 1929 and 2000 peaks.
Yet stocks continue to power higher, lifted by a wall of cash courtesy of US government deficit spending, Treasury interest payments (now running at an annualized rate of $1.6 trillion), and Federal Reserve money printing (technically, the RBM program, but printing all the same).
Which makes this period of investing as risky as any before, if not riskier.
Planning and discipline are essential in times like these, and being able to do the opposite of current emotions is often the right long-term move.
And it’s not just an AI bubble. Housing remains at elevated prices and are as unaffordable as it was at the peak of the prior housing bubble. How did we get here again, and so quickly? Usually, bubbles only come along once in a generation.
On the oil front, we once again saw record U.S. crude draws last week, leading to critically low inventories (Cushing nearing operational floor), amid continued supply disruptions from the Iran conflict.
It remains unclear how and why oil prices continue to slide, unless we are willing to invoke the effects of an invisible hand helping them go down.
On the inflation front, the PPI came in blazing hot again, which means CPI will be inching higher over the coming months.
The new Fed Chair, Kevin Warsh, faces conflicting pressures. Trump wants interest rate cuts while the bond market is signaling hikes.
So which is it? An energy crisis as ‘evidenced’ by falling oil inventories, or a nothing burger, as indicated by falling oil prices? Is the economy about to soar as the stock market seems to be indicating, or is the economy actually weak as the falling oil prices would suggest?
Talk about difficult investing decisions!
Timestamps
00:00 Market Valuations at Historic Highs
05:42 The Impact of Federal Policies on Wealth Disparity
10:40 Challenges for Younger Generations
14:14 The Importance of Tactical Investing
21:47 Market Emotions and Investment Strategies
31:15 Transition / Break
33:16 Oil Markets and the Iran Deal
38:00 Oil Supply and Demand Dynamics
42:29 Shipping Challenges and Market Reactions
49:31 Future Energy Demand and Market Opportunities
53:18 Investment Strategies in a Changing Market
55:28 Inflationary Pressures and Economic Indicators
56:53 Federal Reserve’s Rate Decisions and Economic Implications
01:01:02 The Role of AI and Speculative Bubbles
01:06:05 Historical Context of Inflation and Interest Rates
01:09:38 Japan’s Economic Challenges and Lessons for the U.S.
01:12:23 Future Inflation Risks and Supply Chain Dynamics
01:17:35 Adaptability in Investment Strategies
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by phecksel