원문 보기
good FM investors last week we discussed what happened it happened again this week but today we're going to discuss what will happen how low can stocks go if you are a longer term investor it's pretty easy to make decisions related to investments related to your financial portfolio and today I'm going to show you what to watch and then your decision making process will be relatively easy should you sell stocks should you keep stocks how much should you share how much should you keep and what to do so keep watching after that we're going to discuss what is Ray Dalio doing what are JP Morgan and UBS saying about the markets what is going on in emerging markets those will always be hit the hardest because those are considered more small risky and then we're going to show and discuss a little bit about gold many of you expect that gold does well when the market Falls no gold will do well when there is financial turmoil which is a pretty pretty different thing so let's immediately start with how low will the ESPY go last week the situation wasn't that good five point sixteen percent down the worst situation was on Friday but after lunch after that sugar kicked in people were buying like crazy to have a better weekend at least a little bit better but still down five percent now in the last two weeks the sp500 stocks are down 10% which is formally called the correction but that is just short-term thinking I want to show you the long-term perspective on stocks and if you look from the long-term it's much easier to make decisions however it's very very difficult because we humans are wired for instant gratification and if you take the long-term view it's counterintuitive but it really helps in investing let's take a look at the global market capitalization in the last 17 years this is the Bloomberg's world stock market capitalization and you can see how what happened in the last two weeks practically led to global stocks being there were they were in December so practically if you erase the last three months nothing happened this reminds me of the capuchin monkeys behavioral finance test where one monkey was given one Apple while the other monkey was given two apples and one Apple was immediately taken away from him of course the first monkey was very happy the second monkey was extremely mad even if their total gain was equal so don't be a capuchin monkey and understand what's going on in the stock markets from a global long term perspective so if you focus on paper gains what happened in the last three months were just paper gains there were no fundamentals that pushed stocks high only speculation so this correction how they call it is good because it hits the speculator there where it hurts the most when you are too greedy as always in the stock market there are ones that are greedy don't do well if nevertheless we can see that the total stock market global capitalization was below 40 billion in 2003 and in 2009 and now it is around 80 billion and it almost hit 90 billion two weeks ago but now we have to see stocks have tripled in the last 17 or we can also say nine years up and down nevertheless we have to see if in the last 15 years the GDP the global GDP also tripled because stocks should replicate what's going on in the economy the answer is yes and no if we take global GDP in 2010 constant US dollars the global GDP from 2002 increased 52 percent so stocks went up much more than that so however we have to understand that stocks give some protection from inflation and if we look at not inflation adjusted GDP levels the global GDP did indeed increase almost three times so we can say that stocks increased alongside the global economy so all looks fine well not that fine I will now show you the most important charts for long-term investors which are valuations and earnings if we take a look at the sp500 earnings since 2000 they are just cumulative Li not even inflation adjusted nothing up 52% over the last 18 years so that's a very very slow growth rate as stocks went up earnings remained flat the earnings yield which is the key component for long-term investing returns has been only declining and is now around 4% and that's the key the earnings yield for stock that determines long-term returns up and down you can have speculation tax bills whatever the earnings yield is what matters and that yield is then compared to the Treasuries yield the yield of bonds bonds are the safest investment stocks commend the premium on bonds if the 10-year Treasury bond gives 2.8 3 percent now and the Fed has said that it will hike interest rates three times in 2017 and then perhaps even further free time so in two years we can have the federal interest rates at three percent let's say ten year bonds at four point five five percent then stocks would demand an earnings yield of seven percent you can see here how the spread between the ten-year Treasury and the sp500 earnings yield has been just declining which means that stocks were considered much less risky than they actually are as that reverts to the mean as there is more volatility stocks are considered more risky and interest rates and Treasury yields increase we could really see higher required earnings from stocks which means stocks fall the other option is that the Fed doesn't hike rates which means that the economy slows down if the economy slows down stock market also goes down because earnings go down so it's a lose-lose situation for stocks from a fundamental let's say irrational perspective what can happen was what has been going on for the last three five years is all already irrational so I cannot tell you what will irrationally happen I can tell you what logic says what will happen as always be prepared for everything nevertheless the question is how low can stocks go if we take a look at the price to earnings ratio in this case cyclically adjusted using ten-year every earnings we can see that it has been only hired from 1998 till 2000 and the returns next ten years weren't that good from that point similarly we can expect the same in the future especially as the economy is heating up interest rates are raising inflation is knocking on the door so the Fed might be forced to increase interest rates ECB stopped buying bonds etc etc that wouldn't do good for stocks how low can stocks go well now the price to earnings ratio is 25 the Cape is a little bit higher such a price to earnings ratio of 25 gives a yield earnings yield of 4% if that earnings yield goes to 8% we need a price to earnings ratio of 12.5 so that's a 50% decline for stocks stocks have lost 10 percent in two weeks 50% is not that far away it is very very possible that there will be volatility so you might take advantage of that if you're a trader but long-term investors should really no look at when do I need the money can I weather a 50% decline and would that decline be actually good or bad for me I made a video where I say stock crash would be good for most but if you're just about to retire or want to do something special different different from that money you might think about keeping that money in something else rather than stocks and you can still take advantage of the extremely crazy irrationally high stock prices and sell now take your money and run don't be greedy like in the movie the wolf of Wall Street says that the clients keep coming back because they are greedy so dot don't be greedy that's my only message what our experts much smarter than me saying jeromy's Erie UBS head of investment strategy for Americas is saying this is just a correction normal market correction of 10% and everything is fine of course he has to say that when his salary his bonus his everything depends on how much money have his clients invested if he says no the stock will crash 50 he will lose his head not only his job similarly Gabriela Santos from JPMorgan funds also it's just a crash earnings are okay the economy is doing okay okay of course the economy is doing okay in the late part of the cycle and I'm a little bit scared by this lady aren't you who nevertheless they keep drinking their own kool-aid and saying the same always old message to all the clients to keep the clients calm I'm sure that no banker called you get out of the market this is crazy run hide where ever you can go no because he will lose money however if you have somebody like that I would trust that banker if they called you in the last few weeks or in the last two years even to sell everything and if he told you I will call you back when things are better that's the guy you want to look for now what's red ale you are saying we've just had a taste 10 percent decline just a taste of what the tightening will be like so just the taste of course we always have to be very careful with what these gurus say and what the gurus do because they might say things just to make their trades win nevertheless daily err is putting his money where his mouth is he has increased his European shorts from four billion to thirteen billion that's almost 10% of his portfolio if we divide his portfolio to the Puli or alpha that's almost 20 percent probably of his pure alpha portfolio this means a lot of things he's now shorting 44 stocks in Europe we can see here that in Texas Impala is the leader NL total also so he's shorting oil stocks and European banks insurance a SML also with a lot of money what does this mean Ray Dalio shorting he's not greedy he's smart this means that when he opened those shorts those shorts were extremely cheap and risk reward the risk was low and the reward was extreme so if the downturn continues if interest rates go if there is turmoil in Europe his bets will pay out enormous Lee very very interesting what he has been doing lately and he even increased those shorts now so I'm looking forward to the 15th of February when Bridgewater B will report us Holdings to see how things are going on there and what is Daly doing I will report on that so keep watching the channel just show you what day leo is betting on and how the situation quickly changes this is the assets under management of leveraged exchange trade products that many have been very attracted in the last few years however you can see how the assets under management went from 4 billion quickly to 1 billion that's how quickly things evaporate especially in those very very delicate situations love like Italian banks like French banks like oil companies and whatever you might find in this crazy market another very important thing emerging markets are always considered the most risky assets of all and therefore those stocks will be the hardest hit even if there is fundamentals even if there is quality I have made a video about how emerging markets have been up 50 percent in the last year and how one should be careful because emerging markets will be hit hard when people start selling in panic because emerging markets people consider them risky see them is very risky also there are currency issues interest rates whatever and they start selling everything however there are great cheap companies there to buy that have no debt that are doing well and will do well in any environment and those will also be sold very very much and those will again create amazing investing opportunities so be patient and I will let you know when to buy what just be patient now I have been saying a lot and sharing a lot of things about gold because that's what I have been researching in looking the best hedges for my portfolio however gold is not a hedge to the stock market crashing because the stock market is paper Gold is a hedge to economic turmoil financial turmoil where there is really a dry up in liquidity when the Fed lowers interest rates when the Fed raises interest rates when the economy is doing good gold goes down like a rock or like gold so be careful not to misunderstand me there gold is a hedge against financial turmoil loose monetary policies not increased interest rates and stocks going down those the best hedge for that is really to be short or to have puts protection so that's very different something very important to understand I am exposed to gold yes because I don't know what will happen I don't know when this tightening will affect the economy which is also very very delicate and then we will see gold search but until that happens gold may actually go down and go down heavy you can see here that gold went down in the last two weeks also the Vanek gold miner CTF went significantly down in the last two weeks if interest rates raise gold miners a lot of them you have seen in the videos that I'm making about gold miners are extremely leveraged which means higher interest rates more difficulties to refinance especially if gold prices go down and then you are in trouble that's why I don't like gold ETFs I really want to know how am i hate hedged and why am i hatched and I also got a lot of comments about correlations yes you can look at correlations first looking correlations in the past doesn't tell you anything about the future and if anything can change with econometrics with all the Greeks you can prove everything so be careful about correlations in the past and in the future especially as it is random so I wouldn't go into that further so don't expect I own gold unprotected your own gold you're protected for hyperinflation or such kind of things that's why I'm also always saying keep a small percentage of your portfolio in gold and the key really to gold investing and having gold miners is constant rebalancing that is where you get your alpha also on that part of the portfolio thank you for watching there is a lot of comment there is a lot of discuss there is a lot to see to learn together so please come and share your knowledge your perception ask questions I learned a lot also from your questions because it helps me systematize my knowledge thank you for watching I'll see you in the next video
Comments 0