Time for a pause.
Dear readers...
Dear Readers,
I will be stepping away from writing on Substack, for some time.
I have personal reasons that require my attention. To be fair to my paid subscribers, all subscriptions have been “paused”, for the foreseeable future. This means you will continue to have access to previous articles, without any charges, until the writing has resumed in the future. I will leave you with a few thoughts.
The equity landscape in 2026:
As a whole, the U.S. market is historically expensive and frothy. Elements of speculation are obvious and include: the SpaceX IPO at 100x sales, the creation of Special Purpose Vehicles (SPVs) to offload debt (xAI), rebranding of shoe companies to focus on AI (e.g. Allbirds), circular financing between tech leaders, fundraising that is obscured by Private Credit, and overall concentration in a single sector.
The concentration of capital in the AI sector is in-line with previous bubbles. While the tech giants are profitable and cash-rich businesses, their fundamentals are rapidly deteriorating under the weight of endless capex. Buybacks have disappeared, once pristine balance sheets are deteriorating, and fierce competition does not suggest this is a “winner-take-all” type of game.
This level of capital investment is mirroring the rail road boom of the 1800s and the telecom investments of the 1990s, as a percentage of GDP.
The optimism of future earnings forecasts contradicts physical realities; this includes supply chain disruptions, the limits of energy infrastructure and elevated inflation. The world is spending trillions of dollars on a technology, while the economic returns of this investment remain unproven. Fear of disruption has replaced rationality. In addition, high debt loads limit the maneuverability of many central banks in times of crisis.
The SP500 now has a PE valuation that is well into the 30s. If history is our guide, markets peaked about 1 year after these type of valuations in 1999 and 2001.
To make things more interesting, investors have piled into equities with capital they do not possess. Here is a chart that examines the level of margin-debt, which is at a historical high:
I do not claim to know when (or even if) the stock market will fall. Instead, I feel uneasy deploying further capital in a market that is becoming further disconnected with economic realities. I remain invested in equities, particularly e-commerce companies, but I now feel the need to pause. My foot is off the gas pedal, as I feel there is a tight turn coming up ahead.
Where I stand:
Although the general market is expensive, there are still pockets of value to be found. From an investing perspective, readers will be familiar with my top 3 holdings. I have written multiple articles on Kaspi (KSPI), Wise Plc (WSE) and PDD Holdings (PDD). It is not secret that these are my highest conviction picks, as they offer a rare combinations of compounding power and an appealing valuation. My efforts have been concentrated on studying these companies. They are not hidden from retail investors by any means, as they are all listed on large U.S. markets.
I plan to hold these 3 stocks for many years. A long-term holding period provides an advantage in the modern era, where the span or our attention is best represented by Tik Tok videos. This parallels the Nifty-Fifty period of the 1960s, when Warren Buffett retired his partnership and wrote: “A swelling interest in investment performance has created an increasingly short-term-oriented and... more speculative market."
I have also written about international small cap companies, that constitute smaller positions. With these companies, the small investor may truly have an informational advantage, as these businesses are often ignored by larger players. I would encourage investors to looks at undervalued markets (or sectors) across the world. In the words of Charlie Munger, “fish where the fish are.”
Finally, I think it is prudent to accumulate cash in an expensive market. Cash offers optionality, cash is a bet on future opportunities. I find myself lacking liquidity at this time, and will spend the rest of 2026 accumulating cash. This is the way I see things, at this time.
I will be stepping away from the noise of public markets.
It is time for a pause.
Until next time,
- Stock Doctor
***(Oh yes, I almost forgot. This is not financial advice)
Hey Stock Doctor, love your work and sad to see you go for a while. I also think this is the time to be accumulating cash, and knowing when to simply step back and do nothing is a hallmark of a great investor. Hope to see you soon though and look forward to your future endeavors
Excellent article, I agree with almost everything you describe. But there's one variable that's not being considered: excess liquidity. That liquidity is a constant source of fuel for the fire that is the market. Sometimes it's good to take a step back and look at the bigger picture from a calmer, more analytical position. I hope you can resolve your personal issues outside of work; health and family always come first. Since you mentioned e-commerce, I'm wondering if you're aware of Mercado Libre. If it's not on your radar, I've dedicated an article and several posts to the company on my website. Cheers!