Stocks Now In “The Biggest Bubble Of Modern Times”
Mark Spiegel lays out why he's short the broader market, and long some individual names.
As I’ve said before, my friend Mark Spiegel sometimes feels like the last living value investor in history.
I love talking to Mark because, in his mind, our markets and the laws of economics haven’t been coopted and usurped by the insanity of Modern Monetary Theory and money printing yet. Well, Mark understands those concepts drive markets nowadays, he has just not given in to the idea that they will forever — which is sadly, an idea I have been giving credence to more than I’d like to admit.
In other words, Mark believes that markets will again revert back to historical averages and normalcy at some point. And while his fund has had a difficult run over the last few years and is down -5.4% so far this year, I still value his opinion on macro and individual stocks and think his letter is worth a read every month when he updates it.
My main thesis for being bullish heading into 2026, as I see it, is simply: the rules don’t apply anymore and everything is broken, so the market will never again trade on historical fundamentals or with any semblance of sanity ever again.
So far, this is the case that has been winning out in markets over the last few years, thanks to caustic monetary policy and an unsophisticated retail investor base, layered on top of a passive bid that doesn’t care about P/E ratios or the like.
That’s why I value Mark’s perspective. It’s a view of markets I see less and less as I drift toward the idea that, because of QE, maybe we never revert to the mean. Mark is the counterbalance to that thinking. And deep down, I’m still a fundamental investor—far more so than many market participants today.
Mark’s April letter is out, and in it he continues to explain why he believes the market is overvalued. This letter is dated April 30, 2026 and has been edited slightly for length and clarity.
“The Biggest Bubble Of Modern Times”
Following the stock market’s big April 8th “gap up” upon the announcement of the ceasefire with Iran, I once again got us very net short (via various ETFs and individual stocks) this biggest bubble of modern times.
Yet the S&P 500 continued running after the ceasefire to a level well above where it was before the war started, as if (wrongly, in my opinion) there won’t be extensive economic fallout from that war even afterthe Strait of Hormuz finally reopens(which, as of this writing, it hasn’t). Why did stocks keep running? The “AI mania,” of course:
Yet the current AI infrastructure buildout is almost certainly a massive, cash-incinerating bubble that will depreciate before it ever earns a decent return on its cost. In fact, AI providers are beginning to realize that, and some of them now try to charge by usage rather than at a fixed monthly cost. It will be interesting to see if demand growth slows when AI is no longer an “all you can eat buffet.”
If AI demand does continue to soar, we’ll have an even bigger problem. Multiple CEOs (most recently Verizon’s) expect “AI firings” to cause U.S. unemployment to reach 20% to 30% within the next few years. Those are “Great Depression level” job losses and mean that whatever corporate America gains on margins by firing humans will likely be lost many times over as consumer discretionary spending plunges. If one company replaces lots of employees with AI, that company becomes extremely profitable. But if every company does it few companies can remain profitable, and that’s before the inevitable “AI taxes” that will be imposed to subsidize the unemployed workers.
Some people claim this outlook is that of a “Luddite,” as past new technologies expanded employment in new, unforeseen ways. But what’s different about AI is that those older technologies replaced “non thinking human tasks,” while AI (especially AGI, when it’s reached) is often smarter than humans. Thus, in most cases why would you hire a human vs. a cheaper “smarter than human” for anything??? It will be ironic if the main driver behind this massive asset bubble (AI) becomes the very thing that pops it. If my thesis is correct we should start seeing evidence of this (via rising unemployment claims) quite soon.
Now, about that bubble: “It’s a Blowout Earnings Season. Here’s Why That Might Be a Bad Sign.”
Interest rates clearly won’t be coming down much (if at all) and thus PE multiples need to decline significantly. Factset’s latest estimate for Q1 2026 S&P 500 earnings is $72.49, which is $289.96 annualized. The S&P currently sells for nearly 25x those annualized earnings, yet the traditional “rule of 20” (which says that its PE ratio should be 20 minus the current roughly 3% rate of inflation) would put a 17x multiple on them, thus bringing that index down to just 4929 vs. the current 7209, a drop of over 30%. And if inflation continues to accelerate it will pressure that multiple down lower.
Now for our long positions.