I have been looking at the stock market and I am caught between two competing narratives. The first narrative is that we are in a new era. AI will create unlimited abundance where the old rules of value creation are forever broken. That we are at the beginning of a brand new technological revolution and one should ride the wave. The other narrative says that this is history repeating itself, a brand new innovation leads to wild speculation leading to an inevitable bubble. Tulips, railroads, Go-Go 50's, internet stocks, housing stocks. I decided to do my own research, let the data guide me. Here are 5 data points I found, I will let you interpret them as you will.
1. Buffett indicator is at 2.33 (.8 is considered to be good value, 1 is considered rational)
2. 10 year treasury rates have more than doubled from 2% to 5%
3. Credit spreads are as tight as they were during the dot com boom (AAA 42bps, BBB 98bps)
4. Margin debt is now 4.37% of GDP vs 2.1% before the 2009 financial crisis.
5. Investor optimism - pension funds state an expected return of 7% while stocks as whole are yielding 3.5%.
Let me know how you guys interpret these signals, I welcome the debate. Cheers!
Full Article: [https://capitaldecoder.substack.com/p/5-reasons-why-i-believe-the-stock](https://capitaldecoder.substack.com/p/5-reasons-why-i-believe-the-stock)
