📉 Stocks Cost 41x Earnings. Here's Why That's Scary.

Added: 2026-05-26

[00:00:00]Most people do not understand what they actually [music] buy when they invest in the stock market. When you're buying, say a stock, you're buying a part of the company. When you're buying the S&P 500, you're buying a part of America. But really, what you're buying is future cash flows. You're buying future profit.

[00:00:19]Now, that's important to understand because when we measure how expensive are stocks relative to earnings, we get an idea whether or not it currently makes sense to buy stocks another asset class. Maybe instead we should rather buy a property or rather buy gold. What we see here is the Schiller PE ratio.

[00:00:37]So, a 7-year moving average of the price to earnings ratio. We are now very close to the heights of the dot-com bubble peak. It has never been so expensive to buy those forward earnings in the stock market. It now sits at 41. So, we have to wait 41 years to break even. $1 of forward earnings per year cost us $41 today. And there had been times at the beginning of the 1980s where this was only 6 years. The full-length video is on the channel, so feel free to check that out. A like on this short is also very much appreciated. Thank you.