Investors Are "Pretty Drunk Right Now" On Gains Despite Risks | Ted Oakley

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**Ted Oakley** (0:59)
You have to remember, it's been a long time since we had, basically, it's been going on 17 years, almost since the last, what I call generational bear market. So somewhere in this next year or two, you're probably going to get to that point and then the game changes again. But right now, everybody's pretty drunk on where they are, so you can't sober them up right now.

**Adam Taggart** (1:37)
Welcome to Thoughtful Money. I'm its founder and your host, Adam Taggart. Stock valuations are pretty much at their highest ever by many metrics. So much so that a recent guest on this channel called them pornographically overvalued. And these lofty valuations come at a time when the macro data reveals the economy is slowing down. How long can this dichotomy last before either stocks must reprice downwards or the economy picks up? For seasoned expertise, we've got the good fortune to welcome back to the program, High Net Worth Financial Advisor Ted Oakley, Managing Partner and Founder at Oxbow Advisors. Ted, thanks so much for joining us today.

**Ted Oakley** (2:17)
You bet, Adam. Good to see you again.

**Adam Taggart** (2:19)
Great to see you, Ted. Look, a lot has happened since the last time we talked. I think we talked right where we were kind of coming out of the April lows, the chaos of Liberation Day. We're a lot farther along now. Of course, the market's totally different from where they were back then. They have roared back now to all-time high price levels, but also all-time high valuation levels.
Let's kick it off here, Ted. Are these valuation levels sustainable or are they crazy?

**Ted Oakley** (2:58)
Well, they could be sustainable for a while, but it's not a long-term phenomenon. And so, I think what happens when you get to this stage of the market, and this has been going on for a number of years now, you just keep getting more and more and more speculative. And when nothing bad happens, it gives you the ability to say, well, I'm going to get more speculative. And that's really where we are. But if you look at the numbers, I mean, if you look at the numbers they have for the S&P next year, earnings-wise, it's like 16 percent. And we're still selling out of 24, 25 times forward, 28 plus, trailing 12 months. I mean, you can have people play this market like that on a speculative basis. But if you're buying a company and you're buying something that's going to be a really great producing asset, you can't pay that kind of money for it because in the long run, it won't work. So yeah, you could keep them going for a while.
But you have to remember, it's been a long time since we had, basically, it's been going on 17 years, almost since the last, what I call generational bear market. So somewhere in this next year or two, you're probably going to get to that point, and then the game changes again. But right now, everybody's pretty drunk on where they are, so you can't sober them up right now.

**Adam Taggart** (4:30)
All right. And that's kind of where I'm going. So let me put up a couple of charts that you prepared.
The first is a chart of just US stock valuations, and this is sort of a composite valuation metric, brings trailing PEs, CAPE ratios, all sorts of things in here. But basically, looking back over the past 125 years, this is the highest this index has ever been, and that's eclipsing the height right before the 1929 crash, before the market rollover in the mid-60s, and then obviously right before the dot-com crash as well. How much of a warning sign is this to you, and how worried does it make you about where the market could go from here?