CAPE Cried Wolf

Research

Verdad - Too Small to Matter? (5 pages)

Verdad argues public microcaps look neglected rather than fundamentally broken, especially compared to private equity. They compare similar small-company opportunity sets and finds microcaps trade at steep discounts despite comparable dispersion and decent fundamentals.

Man Group - The AI Bubble: Hidden Risks and Opportunities (20 pages)

Paul Kedrosky & Man Group argue that AI’s technology is durable, but its financing architecture may be unsustainable. They focus on recursive hyperscaler demand, off-balance-sheet data-center leverage, falling token economics, and how AI risk is migrating into private credit, utilities, insurers, REITs, and retail vehicles.

Schroders - Fixed income markets now demand a mix of tactical offense and resilient defense (17 pages)

Schroders argues fixed income requires active management as inflation, growth, and policy cycles diverge across major economies. They highlight opportunities in global rates, high-quality US duration assets, and EM debt, while warning that tight corporate spreads and AI-linked market concentration argue for patience and selectivity.

The CAPE that Cried Wolf (59 pages)

Dino Palazzo examines why the traditional CAPE ratio has overstated U.S. equity valuations since the early 1990s. He introduces CAPE-H, which adjusts earnings for accounting changes related to R&D and special items, restoring historical comparability and improving long-term return forecasts.

McKinsey & Company - From access to assets (17 pages)

Investing in children’s financial futures can narrow disparities and expand opportunity. Different scenarios for the new 530A account, also known as the Trump account, highlight the factors that can shape its impact.

Uncle Sam's Cut: A Century of the Federal Tax Drag on US Equity Returns (44 pages)

Andrew Ang examines how federal taxes have affected U.S. equity returns over the past century. Simulating the tax code from 1925–2025, he finds taxes reduced long-term equity wealth by more than one-third, with dividend taxes proving especially costly for investors.

Bonus Content

The dollar’s demise has been predicted for 55 years. Philipp Carlsson-Szlezak, BCG’s Chief Economist, says it’s still overstated. Link

Emerging markets stocks may be entering a longer term rebound, supported by stronger fundamentals and attractive valuations. Link

The faucet and the well: cash flow with a lower tax bill. Link

At the end of Q2-2026, the combined market capitalization of Samsung and SK Hynix reached 135% of South Korea’s GDP, up 5x from year-ago levels. Link

Home bias can increase concentration risk and reduce diversification. A case study on Brazil found that global diversification improved risk-adjusted returns. Link

In the Warsh Fed's new era of two-way risk, bonds offer something rare: potential downside risk mitigation that investors get paid to hold. Link

Podcasts

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