Excess Returns Sold At "Irrational Exuberance". Still Lost Money | Sam Ro on the Bubble Paradox
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Jan 10, 2026 Join market commentator Sam Ro, known for his insights on long-term investing, as he shares wisdom on valuations and the impact of AI on the economy. He debates whether traditional valuation tools still hold weight in a market buzzing with tech innovations. Discussing profit margins, he highlights why mean reversion hasn’t materialized post-COVID. Sam raises questions about the potential overbuild in AI capital and warns that bubble timing is notoriously tricky. He emphasizes the lessons from past market exuberance and the importance of framing uncertainty without relying on short-term forecasts.
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Valuations Matter Over Longer Horizons
- Valuations matter for long-term investors but offer little timing power over short horizons.
- Use P/E as a starting point and dig into business durability, not as a final buy/sell signal.
Higher Margins Help Explain Higher P/Es
- Elevated market P/E partly reflects structurally higher operating efficiencies and margins.
- Improvements in credit quality and productivity justify paying higher premiums for earnings today.
Why Profit Margins Stayed Elevated
- Profit margin strength is multi-causal: technology, pricing power, and healthier household/business finances.
- Margins could revert, but current balance-sheet strength supports continued absorption of price increases.