What It Feels Like When Your P/E Ratio Betrays You
What It Feels Like When Your P/E Ratio Betrays You
You know that moment right before you realize you've made a terrible mistake? That half-second of clarity where the thing you told yourself was fine suddenly reveals itself as catastrophically not fine? That's November.
The Buffett Indicator hit 217%. Two hundred and seventeen percent. For those keeping score at home, that's not a signal anymore. That's a siren. That's a red light. That's your dashboard catching fire while you're still pretending the engine sounds normal.
And here's the thing that nobody wants to say out loud: everyone knew. Everyone has known for three months. The valuations were psychotic. The S&P 500 trading at a forward P/E of nearly 24x, the Shiller CAPE at 38—these aren't subtle tells. These are billboard advertisements screaming "something is rotten." But as long as the stock kept going up, as long as your tech holdings kept printing gains, it was fine to ignore it. It was fine until Friday, November 6th, when it wasn't.
That's when AMD exploded down 7.27%. When Palantir—everyone's favorite "this time is different" trade—cracked 6.84% in a single session. When even Nvidia, the unmovable object, flexed weakness. The VIX jumped 9% in a day. Nine percent. That doesn't happen on good news.
But here's where it gets interesting: that was three weeks ago. And we're all still here.
The government shut down for 42 days. Forty-two days. Economic data—the actual lifeblood of price discovery—just stopped flowing. Nobody knew what was happening in the labor market. Nobody knew anything. And somewhere in a trading desk at a bulge bracket bank, a risk manager looked at the calendar and thought: "We are flying completely blind, and the market is at all-time highs on a forward P/E that assumes nothing goes wrong."
Then the data came back.
ADP reported job growth fell 13,500 on average over four weeks. The Challenger report saw layoffs surge 183% from September. The Fed's Beige Book said economic activity was "little changed." Everywhere you looked, the story was the same: the machine was losing momentum.
But the machine was supposed to be accelerating. The whole bull case was predicated on earnings staying robust and growth staying adequate. That narrative had a very specific half-life. And it expired sometime last month.
Bitcoin dropped below $90K for the first time in months. Over a trillion dollars got wiped from the crypto market in six weeks. ETF outflows from spot Bitcoin hit a record. And here's the part that matters: this wasn't a systemic crisis like 2022. There was no contagion. No trust breakdown. Nobody's exchange collapsed. The on-chain settlement worked perfectly. The infrastructure held. And yet, the selling was absolutely relentless.
Why? Because when macro momentum dies, everything that was riding it dies too.
Solana got crushed 40% from October highs. Altcoins that had tripled got halved. And through it all, the narrative that was supposed to carry crypto—"pro-regulation, pro-Bitcoin administration"—meant absolutely nothing when the risk-off switch flipped. Policy doesn't matter when the trend reverses. Style doesn't matter. Story doesn't matter. Only flow matters.
Here's what November actually was: capitulation disguised as volatility.
The market didn't go down 5% and stabilize. It went down, recovered half of it, went down again, bounced, stumbled, and by Thanksgiving, everyone was exhausted. The VIX hit 28 at one point—one-month highs. CNN's Fear and Greed Index was oscillating between "extreme fear" and just regular "fear." JPMorgan's CEO—Jamie Dimon, the guy whose job it is to sound composed—said on the record: "There's a lot of turbulence out there."
Translation: nobody knows what's happening.
The Nasdaq posted its worst month since 2019. Small caps actually won—the Russell 2000 was up 0.8% while everything else bled. This is what it looks like when capital stops believing the mega-cap AI narrative and starts hunting for anything that isn't priced like the world is ending in 2035.
So what do you do when you're standing in a room where the lights just flickered?
The smart answer is: you hedge. You rotate. You sell what's too expensive and buy what's been beaten down. You get small and patient.
But that's not what most people do. Most people panic. Or worse—most people tell themselves they have conviction when what they actually have is inertia. They hold the Nvidia because they bought it at $140. They hold the Palantir because the story is "still compelling." They hold the Bitcoin because "this time is different."
And here's the cruel part: sometimes that works out. Markets reverse. Volatility subsides. The buyer shows up. But sometimes—not always, sometimes—the person with the most conviction is just the last one to panic.
The real issue is that we spent all of 2024 and early 2025 convincing ourselves that valuations didn't matter because growth was real. AI was real. Tech spending was real. And all of that is true. AI spending is real. But so is this: you can have real growth and still be overpaying.
A company spending real money on AI infrastructure can be a good business and still not be worth 45x earnings. These things coexist. And the market is learning—violently—how to price that tension.
The forward P/E is now around 22.8 instead of 24. That's movement, but not much. We're still in the zone where the margin for error is razor-thin. One bad earnings report. One Fed signal. One geopolitical incident. And it's back down to the volatility machine.
By Friday, the post-Thanksgiving relief rally tried to happen. The CME outage, the half-day session, the absence of anyone who could actually do anything. The market clawed back up. Bitcoin recovered to $91K. The S&P 500 posted a 0.5% gain. Everyone exhaled.
But exhaling isn't healing. It's just catching your breath before the next wave.
VIX futures are pricing volatility at 21 by February and 22 by April. The market isn't expecting peace. It's expecting more turbulence. More data. More tests of whether the current prices make sense.
So here's where we actually are:
The machine is still running. The infrastructure is still intact. The earnings are still coming. But the narrative that stocks only go up, that valuations don't matter, that AI changes the fundamental physics of risk—that's dead. Completely dead.
What replaces it? Reality. The boring, uncomfortable, sideways reality where you have to think about price relative to value again. Where you can't just buy everything and hope.
It's not fun. It's not exciting. And compared to the ripping FOMO of 2024, it feels like deprivation.
But it's also where real money gets made—not on the way up, when everyone's making money. On the way back down, when the people who thought about value are still sleeping, and the people who didn't are having nightmares.
November was the nightmare. Now we wait to see if December is the awakening or just the next bad dream.
The Buffett Indicator at 217% isn't a prediction. It's an indictment. And indictments eventually have trials.