To The Moon

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Of late, the US stock market is showing valuation patterns that have historically preceded major downturns.

Just to be clear, it does not mean that a crash is imminent or certain.

Warnings.

Looking across key economic indicators and corporate valuation metrics, the US equity market exhibits several clear, historical warning signs of structural vulnerability:

(1) Metrics valuations.

a) The Shiller CAPE Ratio:

• Measuring price versus 10-year inflation-adjusted earnings, this ratio has consistently stayed above 40 since May 2026.

• Outside of recent trading, the late-1990s dot-com bubble was the only other period in US history where this metric remained above 40 for an extended time.

b) The Buffett Indicator:

• Total US stock-market value divided by US GDP, currently stands at a record roughly 232%.

• Historically, readings near or above 200% have signalled extreme market valuation.

• Warren Buffett once described such levels as investors “playing with fire”.

c) AI Bubble Concentration:

• In August 2026, $Bank of America(BAC)$’s latest Global Fund Manager Survey noted that 45% of respondents identified an AI-bubble as the single largest 2026 tail risk facing the financial system.

• Massive capex by technology companies has concentrated market gains, in a small group of mega-cap stocks.

(2) Fiscal Debt Load:

• US gross national debt officially surpassed $40 trillion, 2 years earlier than Congressional Budget Office (CBO) May 2023’s projection of “2028”. (see above)

• In the first 10 months of this fiscal year alone, the US government under Trump leadership has spent $1.8 trillion.

• Annual budget deficits remain at 6% - 7% of GDP requiring massive ongoing debt issuance, despite a growing economy.

(3) Long-Term Borrowing Costs’ severe spikes:

• On Tue, 18 Aug 2026, the 30-year US Treasury yield surged to a 19-year high of 5.34%, the highest level since 2007. The spike was driven by (i) Middle East conflict fears, (ii) high oil prices, and (iii) market anxieties over government overborrowing.

• Spiking long-term bond yields directly increase borrowing costs across the economy - (i) raising rates on home mortgages, (ii) corporate debt, and (iii) business loans, that squeezes corporate profits & economic expansion.

Above signals point to an expensive market and elevated risk, but such metrics cannot time a crash.

“Crash time” - history says.

• The Buffett indicator has been above 200% since July 2025, yet the S&P 500 still gained more than +27% in total returns since then.

• During the dot‑com bear market, the S&P 500 lost nearly -50% its value and Nasdaq fell almost -80%. Long‑term holders of broad indexes ultimately saw massive gains with the S&P 500 up more than +700% to +760% since 2000.

• The key lesson emphasized that staying invested in quality companies with strong fundamentals has historically been more effective than trying to exit ahead of a downturn.

In summary, US market is flashing rare, dot‑com‑like valuation warnings, but the sources do not (1) assert that a crash is now unavoidable or (2) specify when it would occur.

US Treasury Buyback Plan.

On Wed, 19 Aug 2026, US Treasury Secretary Scott Bessent announced that US Treasury Dept would double its liquidity-support debt buyback program - mainly at the long end of the yield curve, to (1) shore up market functioning and (2) ease pressure on long‑term yields.

The maximum size of buyback operations in the 10–20‑year and 20–30‑year segments will rise from $2 billion to at least $4 billion per action.

This will run thru the next quarterly refunding on 04 Nov 2026.

The move came as total US government debt hit more than $40 trillion, more than double the level a decade ago.

On announcement day, yields tumbled: the 30‑year yield plunged more than 10 basis points and the 10‑year fell more than 6 basis points, reversing the week’s earlier advance.

Just when one thinks the coast is clear, on Thu, 20 Aug 2026 morning, after traders digested the plan, yields edged back higher: , the 10‑year up 1 bp at 4.6723%, the 2‑year held steady at 4.1727% while the 30‑year was up 3 bps at 5.2256%.

Debt buyback mitigate US market crash ?

The buybacks are a targeted liquidity fix, not a macro cure, just to be clear.

Analysts’ initial reaction is the scale is modest relative to the roughly $32 trillion Treasury market. Some economists even argue the outsized market reaction reflected hopes of broader intervention rather than the direct effect of the buybacks themselves.

The move does not slow the underlying borrowing driving debt higher.

The US national debt with $32.27 trillion held by the public and $7.78 trillion in intra-governmental holdings.

Financial analysts (including $Jefferies Financial Group Inc.(JEF)$ and Citi strategists) pointed out that repurchasing long-term bonds while funding them through short-term T-bills simply shifts maturity dates around, it does not lower the overall $40 trillion national debt.

This makes US government’s interest costs more sensitive to rate changes and potentially complicating the Fed’s inflation fight. By dampening long‑term yields, the policy risks keeping inflation stickier.

This pressures the Fed to align more closely with fiscal objectives, which some economists say could lead to “large policy errors over time”. At the same time, it tests Fed chair Kevin Warsh’s vow to maintain the Fed’s independence.

Thursday rebound in yields suggests the initial relief may be partial and that traders are still weighing the plan’s limits against the broader debt and inflation backdrop.

In short: Bessent’s buyback expansion likely helps calm near‑term Treasury market stress and may support equities in the short run. However, the mechanism by it self cannot prevent US market crash if valuations and macro conditions deteriorate.

Investors’ Plan B.

To mitigate the metrics instability and calm sovereign debt markets, potential lines of defense for any rational investors includes:

• Stay invested consistently instead of sitting out at the first sign of overvaluation, because significant gains can still accumulate even when warning metrics are elevated.

• Quality stocks focus, with sustainable business models and healthy finances. This echos Buffett’s advice to assess competitive advantage and its durability rather than just industry hype.

• Accept volatility as part of long‑term compounding, noting that even severe bear markets have been followed by multi‑hundred‑percent returns for broad indexes over time.

• Long-Term Time Horizon: Historical analysis of S&P 500 rolling 20-year total returns since 1919 indicates a 100% success rate in yielding positive returns. This demonstrate that long-term asset retention remains the most reliable defense against short-term volatility.

Important Note:

The news prints do not offer a guaranteed backup plan to avoid market losses completely.

It only emphasize staying invested in high-quality assets for the long term, even while policymakers adjust interest rates.

My viewpoints : (mine only)

When debt, valuations, and policy interventions all stretch to extremes, the real danger is not a single “crash day” but :

• A slow erosion of resilience: markets priced for perfection.

• A governments reliant on ever‑smoother funding tricks.

• Investors conditioned to believe liquidity can substitute for discipline.

With long-term interest rates remain elevated and “expensive” stocks, especially in the heavy-tech and AI sectors are left with almost no margin for error.

All these will continue to drag on the real economy, a sharp market correction then becomes a matter of when, not if. Agree ?

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