Gerelyn Terzo
6 min read
Quick Read
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Ahamed warns $1 trillion in foreign inflows pushed US stocks to 250% of GDP, a ratio he says historically precedes collapse.
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Real rates climbed 150 basis points in 12 months, leaving NVIDIA’s 2.32% earnings yield far below the 5.09% risk-free Treasury.
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Ahamed compares today’s $1.3 trillion AI buildout to the 1870s railroad boom, where only 1 in 5 railroads paid dividends before it collapsed.
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The AI boom has pushed American stocks to valuations few living investors have seen. Meanwhile, one of Wall Street’s most respected financial historians argues that the money pouring in is itself the warning sign. Liaquat Ahamed, Pulitzer Prize-winning author of Lords of Finance, reportedly says “a trillion dollars has come into the US equity market from foreigners” over the past 12 months and that “the US equity market is 250% of GDP,” a figure that includes private equity. But the size of that number concerns him less than what tends to follow it. In his account, booms die when the rush of capital drives interest rates higher, and “the major ones all end badly.”
A Rate Signal Already Flashing in Treasury Data
Ahamed traces the pattern throughout historic market cycles: the 1870s, 1880s, 1920s, 1999-2000, and 2008. In each case, a boom drew in capital until demand for money raised its price, and higher borrowing costs then sank projects that only worked with cheap financing. He says “real interest rates have gone up by 150 basis points in the last 12 months” and calls the move “a global phenomenon” as governments borrow heavily.
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Treasury data supports his reading. The 10-year Treasury yield reached 5.19% on October 14, 2026, up 1.16 points year over year. That same day, the 10-year TIPS real yield stood at 2.84%, compared with 1.73% a year ago. Yields have eased a little since then, with the 10-year at 5.09% and the real yield at 2.74% on October 16. Long-term money is still expensive, with the 30-year real yield at 3.16%.
