Top Performing Value Investor Explains Why the Market Isn’t Overvalued and Hasn’t Hit the Blowoff Top Phase | Charles Lemonides | ValueWorks LLC
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This market has gone up into the right without a more than a 25% correction for eighteen years. It's sort of silly to think it's gonna be eighteen years in two weeks instead of eighteen years in six months or nineteen years in two months or twenty two years in seven months. And the important thing to consider there is that the best returns are earned in the final years of a bull market. Bull markets have massive blow ups to the upside before the downside happens. And I don't think we've seen that liftoff quite yet in this in this cycle.
This episode is brought to you by Sarmaya Partners, who manages a return to tangibles ETF LENS, ticker l e n s. The Sarmaya thematic ETF built for a return to tangibles. Learn more at sarmayaetf.com and see the show notes for disclosures. Let's get into it. Welcome to other people's money. I'm your host, Max Wheatley, and I am joined today by Charles Lemonidis, CIO and founder of ValueWorks LLC. Charles, thank you for joining me today.
Thank you ever so much for having me, Max.
Let's just start with the big picture. I mean, S and P 500 forward earnings at '18, let's call it, historically elevated, but not elevated to what we've seen in other periods of time, other tech bubbles. Are we in a tech bubble? Is the market overvalued?
The market is not necessarily overvalued, but it is an awful lot more fully valued than it once was. And I I I think we can talk about the PE, and it's okay. It's a little on the high side. But I think the bigger picture is that we're in an eighteen year bull market. This market has gone up into the right without more than a 25% correction for eighteen years, and it's starting to show in what is working and where investors are are paying attention.
When you see eighteen year run like that, everybody naturally wants to call the top, call the end, get positioned for a crash. Do you think about it that way?
It's sort of silly to think it's gonna be eighteen years and two weeks instead of eighteen years and six months or nineteen years and two months or twenty two years and seven months. Yeah. We're far in, but there's no reason to believe that that the clock has has struck. And the important thing to consider there is that the best returns are are earned in the final years of a bull market. You know, bull markets have massive blow ups to the to the upside before the downside happens. And I don't think we've seen that that lift off quite yet in this in this cycle. So I think you have to, on the on
Well, I think one of the other things that makes this most recent surge interesting, a lot of the bull market has been multiple expansion. We've actually seen multiples contract over the last year or so because earnings growth has been just so strong. Does that correspond with what you would see in a sort of blow off environment to actually see multiples coming down while prices go up?
No. That's a very good point. You know, there are a lot of reasons to believe that from a fundamental perspective, this economic cycle can continue, and this market cycle can continue. Look, our concern on the interest rate front is that we're growing too fast, right? And, you know, we're trying to raise rates to curtail growth. That's not, you know, that's not the beginning of the end. Typically, it takes a while for higher rates to slow down growth, and we're not seeing that growth having slowed down yet. And and there's nothing to indicate the growth will slow down six months out from now e
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