What If It’s Still Early? | Erik YWR on $10,000 S&P 500 by 2027 Case, Hyperscaler ROIC, AI CapEx, Semis, Exchanges, and Reverse Crash Risk In “Project Zimbabwe”

**Jack Farley** (0:00)
I'm joined once again by veteran fund manager, investor, Erik from YWR, your weekend research. Erik, great to see you. The last time you were on Monetary Matters in the middle of November, you said that by the end of 27, you were looking at the S&P 10,000, very lofty.
We're a little bit further towards your goal. The market is up 10% since there, a lot has happened. Remind us your bull thesis, and what's your thesis right now?

**Erik** (0:28)
It's still the idea that we're in an incredible bull market that's going to exceed all of our expectations. And this was an idea I started last year in July, and I really wanted to put it out there as a counterpoint to, I think this was the origin was it was post-liberation day when we had that big sell-off in April with the tariffs, and the market had made it back kind of up to where it was before. And everyone was like, oh, can we hold the gains? Is it going to roll over when the tariffs finally? It was all this. I mean, I'm in a lot of chats like you, right? And so I could just feel this everywhere I looked, it was this bearish view on the market. And it really triggered my imagination about something totally different. And it also went back to a theme, and I apologize for explaining all this, but it is a kind of important background that and a change I had to go through was I spent some time in Zimbabwe as part of an Africa fund. And the country was, I saw such a weird situation to be where the country was totally unraveling, everything was going wrong. And yet the market started to go up incredibly. So at first I thought the investors were getting it wrong, they were being delusional, too hopeful. And then what I saw in hindsight, what started to kick in was inflation.
And the investors had seen it before, and so they were kind of anticipating what would happen. What I saw was that it was a country that was struggling, everything was, there was no rise in employment, there were no, the government was disappointing, and the nominal inflation was carrying stocks up to unimaginable levels. And this has been something I call Project Zimbabwe, that I'm like, we're in a higher inflationary era, and you're going to be surprised how high the market goes, even when you might not think things are very good. That was something I started a while ago. But then I kind of, last year with the S&P 10,000, I kind of layered in a lot of, one comment that was going around a lot was, we're almost at 1999 levels. And like that was, I kept hearing that, like, you know, the S&P is over 20 times earnings, and like, it's almost like 1999 And I was thinking, okay, first of all, who says like I was around in 1999 and traded? I remember, I was in San Francisco, in fact, and lived the whole thing. And I was like, okay, but who's to say in the history of stock markets, we can't have an even bigger bubble than 1999? Just to say, you know, who says that's gonna be the biggest bubble ever? We had, the internet was kind of interesting, right? Connecting computers at the time, right? But maybe we have kind of a revolutionary technology now. Like, maybe this is even bigger than the internet. And the other thing was, I'm like, where is this thing around 20 times? Like, what, why is that a limit for a PE? Why is that the right PE? And really, it's a rule of, it's kind of a shortcut rule of thumb that people use. One of the things that I talked about in my note, Jack, is that earnings are actually accelerating. The earnings growth of the SMP, going back from 2000, the last 25 years, averaged 8% a year, nominal. We're doing like 12 to 15 now.
So, I'm like, if there was ever a time to rerate to a higher multiple of maybe 25 or 30 times, you could kind of justify that now. And I think another thing to bring in here that's part of that, is that I'm really amazed at the bonds. And that we have, you know, almost 3% GDP growth. We have very low unemployment. We have the stock market on a meltup. We have 4% inflation and the 10-year bonds at 4.5%. That's like almost no real yield.
And I'm like, look, if you're gonna, if those are my two choices, the S&P growing at, you know, 15% a year and or a 4.5% tenure with inflation at four, that is a massively positive thing for the S&P. And, you know, just going back to your like Wharton MBA stuff, you know, you know, what's the fair multiple for in a DCF or a Gordon growth model and what you put on the top, I'll debate, people wanna use free cashflow or the EPS, whatever, I'm just gonna use the EPS.