U.S. equity markets are significantly overvalued, posing a risk of economic collapse, while geopolitical shifts and declining confidence in the dollar suggest a potential rise in the value of hard assets like gold.
Market Overvaluation and Economic Risks
Markets are overvalued by 150% based on 25 metrics, with current P/E ratio of 36 being 200% above the historical average of 12 from 1880-1994, indicating a potential catastrophic correction.
A 60% market correction may be required to bring prices to rational levels, reset investor attitudes, and make investors truly suffer enough to stop buying.
Inflation and Economic Metrics
Official inflation metrics are likely manipulated, with real inflation potentially 5% higher than reported CPI; alternative measures like the Chapwood index show 8% inflation vs 3% official.
Long-Term Market Outlook
Over the next 40 years, US equity markets are expected to regress to the mean, with inflation-adjusted returns near zero as the current 150% overvaluation burns off.
Investment Strategy
Collum’s 40-year investment strategy includes 20% gold exposure, 10% gold funds, and physical gold, with a preference for gold miners run by trustworthy management.
Global Economic Shifts
De-dollarization is accelerating, with 25 countries shifting alliances away from the US, potentially leading to a collapse of the US dollar and a “gruesome decade” ahead.
Digital Currencies and Gold
Central banks are buying gold at record levels, with expectations of a gold-backed currency emerging soon, while Collum remains skeptical of Bitcoin’s long-term value due to state intervention risk.
Societal and Political Concerns
Collum warns of potential civil unrest and authoritarianism as society struggles, citing concerns over the weaponization of the justice system against political opponents and extreme legal actions like 870-year sentences for January 6th defendants.