US equities face multi-decade valuation reversion
The guest argued that US stock markets are in a massive complacency bubble and face a multi-decade period of poor returns to revert to historical valuation means.
The argument
He pointed to a Shiller PE of 42 compared to the historical average of 15, arguing that current valuations are 200% above historical norms. He expects a long-term grind downward or sideways rather than a single crash, eventually returning to historical valuation levels on an inflation-adjusted basis.
The thesis, stress-tested
✓ What validates it
- ✓Shiller PE ratio begins a sustained decline toward historical averages
- ✓A prolonged period of flat or negative inflation-adjusted returns
▸ Risks discussed
- ▸Dip buyers could continue to support the market short-term
- ▸Government intervention or federally sponsored market support could delay the reversion
Hear it yourself
"And so SpaceX is trading at not only a $4,000,000,000 loss, which you get I mean, Exxon has you has periods where there's losses. So so, it's trading at a 100 times sales, which is 10 Scott McNeeley's. Right? He said he said 10 x sales and asked rhetorically what what were investors thinking, testifying to to to congress about the .com bubble. And and so a 100 times sales is, you know, forward looking 2055 earnings, if anything. Some people think SpaceX will go bankrupt, but I don't because it's a department of defense company, basically."
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