Oh Look, Another Bubble Warning. Yawn.
I swear, if I hear “valuation bubble,” runaway inflation,” or “overstretched market” one more time, I might start charging rent for all the fear these financial DJs are trying to pump into my head. It’s not caution—it’s clickbait. The talking heads have been crying wolf for three years straight. And sure, eventually they’ll be right—just like even a broken clock is right once every 1,440 minutes.
Yes, the market is correcting. You heard me. We haven’t even had a 5% drawdown since the April low, and now the institutions are just doing what they always do post-fiscal year-end (October 31 for many): book profits, de-risk, and sit tight on a big pile of cash. That cash? It’s waiting to be redeployed. Remember: earnings power bull markets. Earnings and margins drive sustainable upside—and so far, both are holding strong.
Next year, we’re looking at tax relief in Q1. Translation: stimulus in disguise. Those refund checks won’t sit in savings accounts—they’ll chase consumption, investment, and yes, equities.
o while Bloomberg and CNBC trot out their usual doom brigade, I’m tuning out the noise. Let them scream “bubble!” into the void. I’ll be over here watching the data—and ignoring the fear-mongering masquerading as financial journalism
Are you tired of hearing about bubbles or the stock market being overvalued on financial news? I am! They are selling you fear. And many of them are old enough to be my father. ( scary I’m medicare eligible 😂 Here is the skinny we tell it the way it is in our eyes.. Because It is what it is. If one cries bubble over valued, recession, eventually they’ll be correct. Then again even a broken clock is correct once every 1,440 minutes. 😬 Grab your helmets — apparently, the sky is falling again. At least that’s what every talking head on CNBC and every half-retired value guru dusted off for Bloomberg would have you believe. “It’s a bubble!” “The market is dangerously overvalued!” they cry, waving around P/E ratios like pitchforks, run away inflation is around the corner. I say get the duck tape and tape their mouth’s shut. For three years straight, the headlines have warned us that doom is just around the corner — any minute now, this rally is going to collapse under the weight of its own irrational exuberance. Meme stocks, recession, AI companies, and those pesky Magnificent Seven are just froth, we’re told. But here’s the thing: while the media hyperventilates over every uptick in Nvidia’s market cap, retail and momentum investors just keep winning.
Maybe the bubble will pop eventually, THEY ALL DO! Warren Buffet, arguably one of the best investors of all time, has been raising cash for 3 years. Which indicates he may have missed a lot of those 3 years of huge gains where the S&P 500 has returned over 20% annually,and If you listened to the Financial stations with the fear-mongers the past few years, you’ve missed a historic rally. So the question isn’t just “is the market overvalued?” — it’s “are you willing to sit out another 100% gain waiting for someone’s bubble/overvalued thesis to finally be right?”
Bottom Line The Market Continues To Evolve, If You Don’t Adapt You Are Going To be Left Behind! Old-School Value vs. New-School Momentum: Overvalued Market or New Paradigm?
Old-School Alarm Bells: “This Market Is Overvalued!”
For the past few years, veteran investors – often the old school voices of Wall Street – have been sounding alarm bells about stock valuations. From their perspective, the market has looked dangerously overvalued by historical standards. Legendary value investor Jeremy Grantham warned as early as 2021 of “extreme overvaluation, explosive price increases, frenzied issuance, and hysterically speculative investor behaviour,” likening the mood to the Roaring ’20s and the dot-com mania Grantham dubbed it a “fully fledged epic bubble” and cautioned that U.S. stocks were in a “superbubble” primed to burst
Other graybeards have echoed the concern. Charlie Munger (age 97) said in early 2021 that the current stock market environment is “even crazier” than the late-1990s dot-com bubble and “must end badly” – though he admitted “I don’t know when”
Munger lamented the “dangerous” gambling mindset he saw in meme-stock frenzies, where people were recklessly betting on stocks like racehorses
Even the famed “Buffett indicator” (total stock market cap to GDP) – Warren Buffett’s favored valuation gauge – shot up to an all-time high of over 200% in 2021, eclipsing even the dot-com peak. Buffett himself had warned that crossing the 200% level meant “you are playing with fire”
In short, by old-school measures (price-to-earnings ratios, market cap vs. the economy, etc.), the market in the last 2–3 years has been off-the-charts expensive. These seasoned investors have essentially been yelling, “Bubble ahead – proceed with caution!” for years. They see historical red flags: stock prices racing far ahead of fundamentals, rampant speculation in dubious assets, and a generation of new traders seemingly dismissive of risk. To the old guard, it all feels like a déjà vu of past manias. As Grantham dryly noted, “history is not kind to ‘new paradigm’ thinking”, and he
expects this boom to meet a similar fate as previous bubbles Their thesis? Gravity hasn’t been repealed – eventually, reality will reassert itself in stock valuations (and it might hurt when it does). Eventually a correction will occur but a new paradigm has changed the way the market moves. If you don’t acknowledge it you will be left behind!
The Magnificent Seven and the Momentum Mania
And yet – despite those dire warnings – a new school of investors (retail traders and flashy fund managers alike) has been busy laughing all the way to the bank. Instead of shunning high valuations, they have piled into them, driving a handful of superstar stocks to stratospheric heights. The poster children of this rally are the so-called “Magnificent Seven” mega-cap tech stocks – Apple, Microsoft, Google (Alphabet), Amazon, Nvidia, Tesla, and Meta – which have dominated market gains recently. These seven behemoths, riding on powerful themes like AI, cloud, and electric vehicles, soared roughly 75% collectively in 2023, while the broader S&P 500 returned about 24%
- In fact, just these 7 stocks accounted for nearly 60% of the S&P 500’s entire return in 2023
- That is an astonishing level of concentration – at one point in late 2023, the Magnificent Seven made up almost 30% of the S&P 500’s market value
- Talk about putting the “cap” in market cap! What’s fueling this momentum mania? In short, growth at any price. Many of these meme-era investors believe that companies like those in the Magnificent Seven are unique scale-eaters – dominant platforms that can keep growing revenues and earnings exponentially. They’ve also branched out into other hot themes – pouring money into AI startups, electric vehicle (EV) makers, and robotics firms – even when some of those companies are losing money today. The rationale is that these are the future winners that can “scale up” fast, so traditional metrics (like current profits) matter less. It’s a story-driven market: if a company is working on the next big tech breakthrough, buyers swarm, fundamentals be damned (at least for now). We’ve seen this movie before, and it’s a wild ride. Retail traders on Reddit and TikTok, Robinhood armies, and even professional “meme money managers” (looking at you, Cathie Wood) have adopted a YOLO (“you only live once”) approach. They piled into Tesla when it had barely any earnings, bid up Nvidia to 10x price/sales because AI is the future, bro, and generally chased anything with a flashy growth narrative. One value fund manager quipped in mid-2025 that “momentum has been the single best factor in investing for 15 years” – a tongue-in-cheek admission that hype-chasing has trounced stodgy value investing for a long time
- This crowd isn’t ignoring the warnings of the old guard accidentally; they’re actively thumbing their noses at them. “Boomer, quit whining about P/E ratios – it’s different this time!” could well be their mantra.
Value Stocks: Bargains Nobody Wants?
In the shadow of this growth frenzy lie the value” stocks – the market’s wallflowers. These are the slower-growing, often lower-priced companies that once upon a time were considered solid investments (think dividend-paying consumer companies, industrial manufacturers, banks, energy companies, etc.). Over the last decade-plus, however, value stocks have chronically underperformed their sexier growth counterparts. To put it in perspective, from 2010 through 2021, U.S. growth stocks doubled the performance of value stocks – a huge gap
- Value had a brief comeback in 2022 (when rising interest rates and a tech slump made investors rediscover boring profits; value beat growth by ~22% that year), but 2023 erased that advantage. In 2023, the pendulum swung back hard: growth stocks trounced value by 23 percentage points, wiping out the prior year’s gains for value investors
- It’s been a decade-long drubbing for the “buy cheap and hold” crowd. The result? Many traditional value plays are sitting out the party. They’re “cheap for a reason,” say the momentum believers. Why invest in an old-school retailer or an oil producer struggling to grow earnings 5% a year, when you can buy a slice of the next AI revolution? Indeed, by late 2023 and 2024, a lot of solid-but-unexciting companies were trading at low valuations and still getting no love – essentially neglected while the speculative money chased the hot stocks. As one value-focused fund noted, “Ironically, there are many companies being neglected because of the interest in popular and/or speculative stocks.”
In other words, plenty of bargains languish unloved because everyone’s fixated on the fashionable names. This is deeply frustrating to old-school investors. They see classic value opportunities gathering dust – for example, in mid-2025 that same fund argued the oil & gas sector was a “once-in-a-20-year opportunity” due to low valuations – but the market’s attitude is “meh, who cares, oil is boring; have you seen what Nvidia’s doing?!” It’s a sentiment divide: value investors insist these underpriced, slower-growth stocks will eventually have their day in the sun (or at least won’t crash as hard if the market tumbles), whereas growth aficionados view them as value traps – cheap for good reason, with no catalyst to ever re-rate higher in price. In essence, money has flowed out of “old economy” stocks and into “new economy” darlings, leaving the former starved of investor enthusiasm (and their prices reflect it).
A Market Split by Generation and Philosophy
This stark divide has taken on an almost generational character. Seasoned investors who remember the pain of past bubbles are on one side, constantly pointing out how ridiculous some valuations have become. The younger retail crowd and iconoclastic fund managers are on the other, retorting that “this time is different” – that technology and network effects justify high valuations, that winner-take-all dynamics mean a few big winners deserve to dominate the index, and that old metrics can’t capture the new reality. It’s Boomers vs. Zoomers in the stock market. So far, in the short term, the new-school momentum chasers have been “winning” – at least if winning is measured by stock gains. Despite three years of bubble warnings, the S&P 500 and Nasdaq surged to new highs by the end of 2021, again in 2023, and even into 2024/2025 with those mega-cap tech stocks leading the charge. Every time skeptics said “it can’t go higher,” it did. Investors who heeded the old-school warnings and sat out (or stuck to value plays) severely lagged behind. A great example is the fate of Cathie Wood’s ARK Innovation ETF, a poster child of meme-stock-style “disruptive tech” investing. ARK soared in 2020 by betting on Tesla, Zoom, and other story stocks, only to crash -67% in 2022 when the bubble briefly burst
Yet by 2023, many of ARK’s favorite names had bounced back, and dip-buyers were vindicated (at least for a while). This kind of volatility and revival only emboldens the momentum crowd: “See, every dip is a buying opportunity! The old guys just don’t get it.” However, the story isn’t over. While momentum has dominated, there are signs the exuberance might be reaching a tipping point. By 2025, even some retail investors started rotating – shifting from the Magnificent Seven into even riskier small-cap AI stocks and other speculative bets, essentially “going off-menu” in search of higher thrills
Charles Schwab’s data showed that in late 2025, “retail investors are now actively allocating to more volatile stocks” – chasing newer AI plays and dumping some of the big tech names That kind of behavior (rotating out of proven giants into fringe speculative names) often happens in late-stage bull markets, when confidence is off the charts. It suggests that the “meme” mentality is alive and well, perhaps even overextending. One Wall Street Journal piece in mid-2025 noted that shares of unprofitable companies were suddenly outperforming – up 36% on average in just a few months – as investors were “speculating like it is 2021” again In other words, risk appetite hit fever pitch once more, with people snapping up stocks with zero earnings purely because they’re going up. If that sounds like bubble behavior, the old-school folks would say, that’s because it is! Grantham, for one, remains utterly unconvinced by the tech rally. In late 2023, after the AI-driven surge in mega-cap stocks, he flatly called it “a head fake”. “A dozen giant American stocks have had a hell of a run on the back of AI… The problem is prices are incredibly high and the economy is beginning to unravel. So it’s a head fake, but it’s a hell of a head fake,” Grantham said To him, the Magnificent Seven’s boom didn’t solve anything – it just delayed the day of reckoning. This encapsulates the old-school view: no matter how high these momentum darlings fly, they are still tethered to an economy and profits that ultimately must justify their valuations. And if they can’t, reality will eventually catch up, just as it did in past eras of exuberance.
Who Will Have the Last Laugh?
Is the market truly overvalued and poised for a fall, or have we entered a brave new world where traditional valuations don’t matter? The honest (and somewhat infuriating) answer is that in the short run, markets can defy gravity – and the last few years have proved that. As the saying (often attributed to Keynes) goes, “the market can stay irrational longer than you can stay solvent.” The meme investors and momentum players have enjoyed sweet gains by riding that irrationality. Those who kept shouting “this is unsustainable!” too early have looked foolish (or at least missed out on big profits). Indeed, some veteran pessimists have been spectacularly wrong on timing – for example, Grantham predicted a 50% stock plunge in 2023, but instead the S&P 500 surged over 20% that year
Being early in calling a bubble is almost indistinguishable from being wrong. However, in the long run, the laws of financial physics likely still apply. Gravity hasn’t been repealed. The more valuations stretch and the more investors convince themselves “it’s different this time,” the more dangerous the situation becomes. Every bubble in history – from tulips to dot-coms – has shared that mentality that old metrics no longer mattered… until suddenly they did. The current market has all the hallmarks of late-stage euphoria: narrow leadership (just a few stocks driving everything new paradigms touted (AI will cure all ills!), retail frenzy (YOLO traders leveraging up on call options), and veterans saying “I’ve seen this movie before.” When it flips, it can flip fast – just look at 2022’s mini-crash that humbled many high-fliers (the Nasdaq 100 fell over 30%, and the hottest tech ETF plunged nearly 70% in a year. That was a harsh reminder that trees don’t grow to the sky. My opinion, based on the facts, is a bit nuanced (with a side of attitude): The old school skeptics are right about the risks – this market has been overvalued by any classical yardstick, and a lot of the froth is going to end in tears. But the new school traders were right that you could make money despite that, for a good long while, by riding the wave of liquidity and optimism. It’s a classic case of “the market can stay crazy longer than you expect.” The mistake the curmudgeons made was underestimating just how much fuel (low rates, exuberance, FOMO) was in the tank to keep the party going. On the flip side, the mistake many meme-stock apes are making now is assuming the party will never end, or that they’ll be able to exit gracefully when it does. As one veteran fund manager put it, “we are in the late stages of a speculative episode that is highly likely to end badly”
The when is uncertain, but signs point to excess. If and when a reckoning comes – be it triggered by rising interest rates, a recession, or just a loss of faith – those high-flying momentum stocks could come crashing down to earth. At that point, the neglected value stocks (the ones with real earnings and modest prices) may suddenly look attractive again, and could outperform simply by losing less. The old-school investors, who’ve been sitting out the mania (and perhaps sitting on their hands in frustration) are betting that their patience will be rewarded. As Smead Capital Management wrote, they have “almost no exposure” to the greedy glamour stocks and expect to “stack up quite well when the markets return to their natural order.”
In plainer English: we’ll have the last laugh when this bubble pops. Bottom line: For the last three years, many older, traditional investors have decried the market as wildly overvalued, and many younger or aggressive investors have kept piling into the hottest tech names and growth stories – avoiding “boring” value stocks. The facts back that up: valuations hit historic extremes, a handful of momentum stocks have dominated gains, value has lagged badly and speculative behavior (meme stocks, crypto, AI startups, you name it) has been rampant. The “meme investors” essentially thumbed their noses at the “old school”, and so far have been rewarded. But the game isn’t over. In markets, fundamentals can be ignored but not banished forever. The clash between these two mindsets – cautious valuation-based investing vs. high-octane growth chasing – gives this market its drama. In the end, I’ll channel a bit of that attitude you requested: Sure, the kids are saying “OK boomer, keep your dividend stocks – I’m buying the next Nvidia!” And the boomers are retorting “Laugh now, kid, but gravity’s gonna get you.” One of these days, one of those groups will be eating crow. My bet is that the laws of investing gravity will win – the only question is when. Until then, strap in and enjoy the ride, because this market showdown is one for the ages