InsideArbitrage May 2026 Mid-Month Update – Portfolio Rebalancing

In our May 2026 Special Situations newsletter I wrote that the current market feels very much like 1999 and we were trading at extremely stretched valuations whether we compared the U.S. to global markets or used various metrics like Buffett’s favorite ratio Market Cap/GDP.

Since then, the S&P 500 is up another 3% and is up more than 25% over the last year.

Transformational Technologies and Subsequent Busts

There is certainly cause for optimism because this latest phase of AI through the advent of LLMs is transformational, just like personal computers were transformational in the 1980s, the internet was in the 1990s and smart phones were this century. Most of these transformational technologies have resulted in bubbles and subsequent crashes going all the way back to the panic of 1873 related to the railroad boom of that era.

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