Dr. Alan O'Sullivan

There's loads more to come on The Most Important Thing, and we can't wait to see you next time.

Thank you.

Investors should really understand that that strong realized return has come at the expense of lower future return.

Sometimes we say we have been borrowing returns from the future or we have brought future returns forward by having these very high valuations today.

We are again in a situation which is sort of a little brother of what I consider the classic example of 2000, the dot-com bubble peak.

Market valuations were very high, like the Shiller-Cape ratio was, I think, 45-47, all-time high, and we are sort of getting close to that now.

So high valuations...

to academics would mean low expected returns.

Even if you don't assume that valuations normalize, just the fact that you have got high valuations means that the starting yield is low because you are paying a high price for certain cash flows.

Yeah, it's true.

I had some doubts about that.

And by the way, I chose after 600 pages and 300 pages, I chose to do 10 pages.

So I'm sort of learning about the shorter attention spans and adjusting if not fast enough.

But yeah, I think the extra aspect that I wanted to bring with this series was the idea of looking at what I call subjective expected returns or return expectations with the logic that most of the things I had written and academics write about expected returns are really something what's objectively expected.

useful predictor, which could be market years or so on, things that have really had some forecasting ability.

But that can be very different from what people are actually expecting when they are asked about their expectations in surveys.

And they reveal, sometimes they coincide, but I will highlight some cases where subjective and objective expectations can be quite opposites.

So we are again in a situation which is sort of a little brother of what I consider the classic example of 2000, the dot-com bubble peak, where market valuations were very high, like the Shiller-Cape ratio that hopefully some readers know was, I think, 45, 47, all-time high, and we are sort of getting close to that.

Now, so high valuations to academics would mean low expected returns.

Even if you don't assume that valuations normalize, just the fact that you have got high valuations means that the starting yield is low because you are paying a high price for certain cash flows.