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