CAPITAL PHYSICS
Capital Regime Cycles
Internet & Housing
Old Mechanism Failing
Normal credit expansion and multiple growth begins to stall.
Transition (~2 years)
Early internet adoption and speculative equity appetite accelerate.
Phase 1
Tech Duration Bubble
Drivers
Negative EYP • Low Real Earnings Yield
Result
Growth equities dominate • Extreme multiple expansion • Internet speculation
Dot-com crash (2000) — long-duration equities collapse.
Phase 2
Housing & Credit Expansion
Tech crash destroys speculative tech appetite. Capital rotates toward real assets.
Drivers
Low interest rates • Credit expansion • Mortgage securitization
Result
Real estate boom • Financial sector expansion • Household leverage
Regime Break2008
Housing and credit collapse.
Transmission Breakdown
Lower interest rates no longer stimulate the system. Debt saturation prevents further transmission.
Earnings Yield Premium
Fed Funds Rate
