Record Valuations. Hidden Opportunity | Tobias Carlisle on Finding Value in an Expensive Market

In this episode of Excess Returns, we welcome back Tobias Carlisle — author, host of Value After Hours, and manager of the Acquirers Funds. Toby shares his candid perspective on market valuations, value investing’s long struggle, and why he still believes mean reversion will eventually swing back in favor of small caps and value stocks. We also dive into AI, global markets, the Fed, housing, and where investors might find opportunity outside today’s expensive U.S. mega-caps. Market valuations: why today’s market may be more expensive than 1929, 2000, or 2020 The pitfalls of relying on single-year P/E ratios and better long-term valuation measures The divergence between the “Magnificent 10” and the rest of the market Small caps, mid caps, and value: where Toby sees opportunity despite an earnings recession AI as both a transformative force and a potential bubble-like capital cycle U.S. vs. international markets: structural advantages of American capitalism and where China is catching up The Fed, interest rates, inflation, and how they really matter for value investors Housing affordability and demographics as headwinds for the U.S. economy Why Toby believes the “value vs. growth jaws” will eventually close 00:00 – Are markets more expensive than 1929 and 2000? 04:00 – Breaking down valuation charts: S&P, Russell, and mid/small caps 10:00 – Why single-year P/Es mislead investors 14:00 – Lessons from past bubbles: Nifty 50, dot-com era, and now 19:00 – Large vs. small: the longest run for growth in history 24:00 – AI’s impact: transformative technology or capital cycle trap? 32:00 – Toby’s personal experience with AI (and why it disappoints him so far) 33:00 – U.S. advantages vs. international markets and China’s rise 41:00 – Are today’s U.S. valuations justified? 45:00 – The Fed, interest rates, and speculation 46:00 – Housing affordability and demographics as headwinds 55:00 – Should value investors care about macro? 59:00 – Closing question: Toby’s contrarian belief on value vs. growth