Wrong board, sorry

Well

Data for the US market, measured in the S&P 500, goes back to 1881. Over that period, the mean Cape has been 17.8, which indicates a healthy average real return of 5.6 per cent. There have also been three huge peaks: September 1929, at 32.6, December 1999, at 44.2 and, crucially, July 2026, at 41.4.

I think the article understated things, if anything.

First, everyone is looking for a USD crash, right? As China stops becoming ascendent, and the CNY takes share as the global reserve currency, our debt will be harder to manage. The tension as all the "patient" money waits for the crash, the party keeps going, and large USD positions get uncomfortable - is getting thick.

At the same time, crypto has create a massive pool of capital off of a comparably minuscule based of liquidity. It's the same trick as SPCX - selling a few of percent of something is not a signal of the whole thing is worth when there are fools with money to be parted. Even ignoring stablecoins, ethereum, and other things like it bitcoin by itself is notionally worth more than the gold reserves of the United States (or two Exxon sized companies).

And this inflated value is real. AOL bought Time Warner 26 years ago. SPCX paid $60B for Cursor in SPCX shares a month ago.

I am not a permabear, but there's a reason I've been posting what I have in Falling Knives. AI is real, and I'm deeply concerned and fascinated by what we've done. I expect that very soon, if not already, that humans will be the second most intelligent entity on Earth. If we are wise, can improve life for everyone.

This moment really is not very different now than 1929 and 1999, and not just talking about CAPE. It is easy to take it for granted, but the world before and after the Great Depression was almost equally disruptive. You can almost line up the ultrawealthy figures today to the ones of the Gilded Age - Henry Ford with the advent of mass market automobiles and modern manufacturing processes; John Rockefeller with with the age of petroleum; Andrew Mellon and JP Morgan in modern financing; Carnegie with steel; the fortunes made in radio, electricy, agriculture advances, and so on. We take these for granted today. Just like young people take the internet and the instant flow of information for granted.

The potential in 1929 and 1999 was real, the impact was real, and the money lost overshooting investment was real. Once a technological revolution is happened, it's just the fabric of daily life. Inflation is also a great tool to allow a nation to adapt and reshape itself. What is Google or Facebook worth in 1995 dollars? US Steel is gone. What are Verizon, AT&T, Alcoa, Westinghouse, GE, Western Union, railroad companies, and Esso/Exxon worth in comparison to their peaks?

What is different this time is that intelligence is not scarce. We can't get an edge by being clever because Jane Street, Millenium, Two Sigma, RenTech, and all ones we don't even know about all know more than we can hope to and act that information faster.

I suspect, what they lack is a global view, and even more so treat each other in a zero-sum and adversarial way. My half baked hypothesis is that, given a large unregulated capital base in DeFi and private credit, we are in for a "mother of all" S&L and LTCM style crisis, maybe soon.

I think this board will come in handy. That was a timely and pertinent FK article.