Ending October 31, 2025
Video Overview
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THIS IS VERY IMPORTANT
"This remains the most expensive market we have experienced, & we don’t see a better option than continuing to be cautious.... When the tide turns, it does so quickly & without warning. Even 25 years later, it’s still not clear why the internet bubble popped when it did. Our view is that it was due to the last buyer buying & the last short seller covering—a phenomenon that is very difficult to time." David Einhorn (famous value investor)
Shiller P/E - tik tik tik
Short Stories
- Trump, trade and Terbium. Donald doing deals with rare earths focus.
- Gates reverses course. The power of politics. And then drops AI is a bubble.
- US rate cuts, but not for Oz.
- Nvidea's market cap reaches $5 trillion.
- Boom. Nuclear goes nuclear.
The Oz Economy
Property prices are reliant on leverage as stocks are reliant on margin. Once banks reduce lending, property prices fall. And once property investors realise that capital gains are falling and tax deductions don't cover the gap, then they sell. And the complaints will start.
Lesson of the Week
This is another mistake from those that don't understand how returns work. The idea here is to encourage investors to invest for the long term since you wont lose money. Well the reality is very different. There are 20 year periods and longer where stocks underperform bonds or just make extremely low returns thanks to starting high valuations.
Below shows periods when the estimated risk premium was negative. The total return of the S&P 500 lagged bonds from 1929-1950, 1968-1987, and the 22-year stretch from 1998 to 2020, among other sub-periods. That’s 62 years of the 96-year period since 1929 – nearly two-thirds of history.
This means that for most of the past century, stocks didn’t actually outperform bonds when you adjust for risk. In simple terms, there were long stretches where taking more risk in the stock market didn’t pay off compared to holding safer assets. It reminds us that markets move in cycles, and there are times when being patient and defensive can make more sense than chasing returns.
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