"There's A Lot Of Room For Stocks To Fall" | Eric Cinnamond

Profit margins are unsustainable, says value investor

Growth stocks have far out-performed value stocks in recent years.

Similarly, large cap stocks have trounced small caps.

Will that dichotomy continue?

Or will the pendulum finally swing back to give value & small cap investors their day in the sun?

For perspective, we welcome Eric Cinnamond to the program today. Eric is founder and co-CEO of Palm Valley Capital Management.

Eric thinks value investing will come back into vogue once the market experiences a substantial correction, as he concludes “There’s a lot of room for stocks to fall” given the unsustainable nature of today’s profit margins.

To learn why, click here or on the video below:

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Adam’s Notes: Eric Cinnamond (recorded 6.16.25)

EXECUTIVE SUMMARY:

• Overvalued Markets: Eric Cinnamond warns that stocks, especially small caps, lack valuation support, with Shiller PE at 37 and market cap-to-GDP over 200%, signaling bubble territory.

• Cash-Heavy Strategy: Palm Valley Capital holds ~75% cash/T-bills, prioritizing absolute returns (10-15% over a cycle) and awaiting a correction to deploy into quality small caps.

• Unsustainable Trends: Corporate profits rely on unsustainable fiscal deficits ($6T+), debt growth ($36T), and asset inflation, driving buybacks (~$1T/year) and wealth inequality.