#144 -The Durability of Canadas Economy is Incredible, Mbappe gets PAID and How Stocks Bottom
In this week's episode of Reformed Millennials, Joel and Cam talk highest paid athletes, the durability of the Canadian economy, and the process of how the stock market bottoms.
Remember, the stock market has doubled your money every ten years for the last 100 years (on average). It has done this with:
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👉 For specific investment questions or advice contact Joel @ Gold Investment Management.
The fed and central banks are choosing to put the patient in a coma right now.
Market always bottoms before the recessions appear.
New home sales -16.6% vs -1.7% est
Used car sales are significantly lower.
Shipping costs down bigly
Congrats to the fed? Well done
The biggest mistake we can make as investors is to anchor ourselves to prices we saw over the last 18 months.
We have a new world order.
We have to invest for a new rate environment. CPI is a backward looking indicator. Used cars, airline tickets, and shipping costs
The counter factual above wont show itself for another 3-5 months.
That bear market bounce didn’t last long. SPY and QQQ rallied to their previous low where they found resistance. Then, they continued down and finished at new 52-week lows. The silver lining is that many stocks and ETFs did not make new 52-week lows alongside the indexes which is a bullish breadth divergence. This is not a reason to buy blindly; just a signal that selling is starting to weaken.
In a bear market, eventually, all stocks get hit. We saw a glimpse of that last week when even consumer staples like Costco went down more than 15% on weak earnings reports from competitors Walmart and Target. Everyone’s favorite Big-Tech stocks have also been under heavy pressure as they have become a source of liquidity for many – AAPL, GOOGL, MSFT, AMZN, NVDA, and TSLA are down 25-50% from their 52-week highs.
The issue with prolonged downtrends is that they can become self-fulfilling prophecies to a certain degree. Companies without a positive cash flow have to raise more money to survive which means diluting current shareholders. Younger tech companies that compete for talent with Big Tech, have to give their employees more stocks and options to keep them from leaving – which means again diluting current shareholders. In a way, lower prices bring more supply from both the companies and shareholders who want out. This is why most rips don’t last long during downtrends. There’s too much overhead supply.
The good news is that the market is cyclical and no trend lasts forever. Out of every bear market and economic situation, there is always a new set of winners that will set up and go on to make 5-100x returns. This one won’t be any different.
In the meantime, it pays to remain nimble (focused on really short-term trades) and with a high cash position.
Here’s how I think the three stages of a market bottom are formed:
Stage 1 – Bullish breadth divergences – the main indexes will make new 52-week lows but many stocks and ETFs won’t. This is not a reason to buy. Just a sign and selling might be getting weaker.
Stage 2 – Heavy-volume wide-spread buying – the majority of stocks and main indexes go up 5-10%+ on 3-5x their average daily volume.
Stage 3 – More and more long setups start to show up and breakouts are following through. If this does not happen, Stage 2 is likely to be just a bear market bounce and new lows are likely to follow.
💸Reformed Millennials - Post of The Week
How bad is it out there right now in the markets?
The summer of road travel that Americans love is at hand at gasoline prices are the highest EVER:
If next week is down for $QQQ it would be the 8th in a row and would tie 2001 and 2008 as a couple of notorious tech bear markets:
I liked this data set from Ryan Detrick that shows what has happened one year out after SIX down weeks in the S&P which we are having right now:
You will notice that the two worst events from this data set were 2000 and 2008 so if we are to have an outlier year like those we should be prepared for at least another 30 percent drop in the indexes.
When you’re in hell, keep going.
How Big Is Berkshire Hathaway?
To give a sense of how big Berkshire Hathaway and Warren Buffett are, they own:
5% of Apple
12% of Bank of America
20% of American Express
8% of Chevron
9% of Coca Cola
24% of Occidental
26% of KraftHeinz
13% of Moody's
11% of Hewlett Packard
11% of Paramount
8% of Activision
Warren Buffett's portfolio at Berkshire Hathaway generates almost $5.30 billion dollars in annual dividends...
🐦 Twitter Thread of The Week 🐦
The Kelly Criterion:
🔮Best Links of The Week🔮
Energy at the End of the World - Peter Zeihan
SiriusXM buy’s Conan O’Brien’s Team Coco Podcast company for $150 million
ESG is a scam? or does it just need to be changed? - Matt Levine
Interest expenses eat into business profits - Thomas Chua
The 50 Highest-Paid Athletes Made Nearly $3 Billion; Here’s A Breakdown Of The Numbers - from Forbes
All In Summit Interviews - here