Stocks Near the Endgame, Shiller Edition

There are many ways to value stocks.

Earnings are a great way to cut through the noise of revenues, sales, customer growth, and other metrics that may work for some industries but not others.

Value investors focus on PE ratios. Today, the S&P 500 P/E ratios are nearing historic highs, which is cause for some concern.

The Shiller PE ratio uses a metric that adjusts earnings based on economic cycles, or the CAPE ratio.

Using that metric, the S&P 500 has a Shiller PE ratio of over 40 today – a level only ever seen before in 1999.

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Today’s Shiller PE ratio is higher than the 1929 peak for stocks, and 2021’s peak before the 2022 bear market. (Source: Multpl)

This high level still has some room to go before topping the dotcom peak. But not much. Markets remain priced for perfection – and in the next few months may go past perfection.

Should any narrative slow the AI growth story, stocks are setting up for a quick dive. If you’re invested in index funds, be aware that “prices to perfection” means exactly that: everything has to go according to plan to keep your money growing in this market.

~ Addison

P.S. While the stock market is priced for perfection, commodities still aren’t. Gold is well over $3,700 per ounce, but has only just broken to new inflation-adjusted highs in the past few weeks. Silver has topped $44 overnight, looking to retest its old highs at $48.

Plus, commodities such as uranium are breaking out after consolidating over the summer, and copper remains near highs. There’s still room for the commodity space to run.

This week on Grey Swan Live!, Portfolio Director Andrew Packer and contributor Shad Marquitz will review the latest developments in the commodity space and determine the best commodity plays through the end of 2025 and into 2026.

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If you have any questions for us about the market, send them our way now to: feedback@greyswanfraternity.com.

There are many ways to value stocks.

Earnings are a great way to cut through the noise of revenues, sales, customer growth, and other metrics that may work for some industries but not others.

Value investors focus on PE ratios. Today, the S&P 500 P/E ratios are nearing historic highs, which is cause for some concern.

The Shiller PE ratio uses a metric that adjusts earnings based on economic cycles, or the CAPE ratio.

Using that metric, the S&P 500 has a Shiller PE ratio of over 40 today – a level only ever seen before in 1999.

Turn Your Images On

Today’s Shiller PE ratio is higher than the 1929 peak for stocks, and 2021’s peak before the 2022 bear market. (Source: Multpl)

This high level still has some room to go before topping the dotcom peak. But not much. Markets remain priced for perfection – and in the next few months may go past perfection.

~ Addison

Plus, commodities such as uranium are breaking out after consolidating over the summer, and copper remains near highs. There’s still room for the commodity space to run.

Turn Your Images On

If you have any questions for us about the market, send them our way now to: feedback@greyswanfraternity.com.

Altman’s claim is that not only will people get more done with less with AI, they will be happier because their work is easier and…more fun. This follows a report from Anthropic, responsible for the Claude AI, that said AI increases productivity.

I will say I’m skeptical. But we’ve been told the nature of exponential change is that it comes at you faster than you can measure or observe. And if that is true, it will have consequences in 2026 for employees and investors. Big ones.

For employees–those who are not replaced by automated processes and robots–it will mean secure employment and higher wages. A small number of winners getting richer.

American consumers don’t feel – or are at least unaware of – monetary nuance. They’re just getting the bill.

Trump declared last night that “affordability doesn’t mean anything to anybody,” dismissing the term as a “Democrat scam”— this despite recently proclaiming
himself the “Affordability President” on Truth Social.

That’s the current state of political messaging on cost-of-living: part whiplash, part vaudeville. But voters aren’t confused. Grocery prices are still 30% higher than 2020. Tariffs add daily friction. Utilities, rent, houses, tuition, healthcare continue their daily grind upward.

During a Fed rate cut cycle, bond yields follow, which typically means bond prices tick higher. If you buy bonds now, you’ll be getting in ahead of the crowd.

And if this tech wreck shapes up anything like 2000-01, investors will want to get out fast. Despite the debt mess in Washington, bonds will again look “safe.”

One minor bonus: if you buy now, you’ll lock in higher yields before the next Fed rate cut, which is expected to come one week from today.

But Green is describing more than just a new calculation. He’s talking about a new form of misery.’ It’s a poverty where you may still have most of the accoutrements of middle-class life. But your relationship with the financial elite has changed: you are indentured to the credit industry — for life.

For employees–those who are not replaced by automated processes and robots–it will mean secure employment and higher wages. A small number of winners getting richer.

American consumers don’t feel – or are at least unaware of – monetary nuance. They’re just getting the bill.

During a Fed rate cut cycle, bond yields follow, which typically means bond prices tick higher. If you buy bonds now, you’ll be getting in ahead of the crowd.

And if this tech wreck shapes up anything like 2000-01, investors will want to get out fast. Despite the debt mess in Washington, bonds will again look “safe.”

One minor bonus: if you buy now, you’ll lock in higher yields before the next Fed rate cut, which is expected to come one week from today.