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all right guys big week to recap we have a lot of data coming out this week the NASDAQ has been down two or three weeks in a row so obviously a lot of volatility it is Monday morning and even right now Tesla is The Biggest Loser on the market right at the market open for the s p the reason being dropping prices again so if you'd like to engage with me one thing I used to do follow me on Twitter I'm very active on there I talk about a lot of investing and economic ideas please follow me there it's a great place to go and then follow everything Money Channel at e Money YouTube same thing so guys go on there check us out and have a conversation okay so let's first talk about what news is coming out this week today nothing much tomorrow U.S retail sales consumption is 70 of GDP so this is really going to be an important metric to look at for how the economy is going remember the FED is worried about inflation low unemployment increases inflation they want to fight that they want to get the unemployment rate up which causes less consumer spending they don't want to see too much consumer spending because for them it'll say things are still going hot and they need to pair things back by increasing interest rates even further Wednesday housing starts as well as the July minutes from the fomc meeting back in July now housing starts are important because of a big inflationary Factor has been the cost of housing lately and that's a concern for the fed you saw interest rates go from 2.6 two years ago in a 30-year fixed and now over seven percent so like most people would have thought oh my gosh that's gonna do terrible things to the market such a quick increase in interest rates spoiler alert housing prices housing was still really high and the reason being is inventory 10 or 12 years ago there were four million houses for sale in the U.S today there's a little over 1 million that's a 75 decrease so don't forget I talk about this all the time especially with housing supply and demand if demand is big but Supply is huge like in the mid 2000s you're going to have a problem but right now we have a lack of Supply so even with decreased demand you still have a lack of supply and I think that lack of Supply will probably last quite a while why well 90 something like 90 or 95 percent of people have a have an interest rate lower than where it is today maybe it's even higher than that so if you're going to move you're only going to move because you have to move whether your family's growing or you're moving that's the only reason to get rid of that rate how many of my friends have said you know what I'd love to move but I have 2.8 I have three percent why should I move but you better believe then all of a sudden they had five more kids or even two more kids they might say hey we have to move and as their incomes go up they'll be able to absorb that higher interest rate remember the interest rate we're at right now isn't some crazy high interest rate based on history it's just a lot compared to what we were recently experienced So eventually people get used to these higher interest rates and they'll be fine with that finally on Thursday the Philadelphia Philadelphia manufacturing survey is going to come out obviously manufacturing is a component of the US economy we want to see how it's going there so watch us throughout the week we're going to have a lot of videos releasing things talking about things but let's go to our very famous stock market the GDP indicator now guys the stock market the GDP indicator is what Warren Buffett claims to be the single most reliable metric now there's a lot of haters out there gonna say pull it doesn't really matter anymore because guys it's still the same thing and for those of you who doubt this indicator I'm also going to go over the 10-year cyclically adjusted p e ratio what that does is it takes the last 10 years of earnings on the s p brings it to today with inflation and looks at the PE of the market based on that okay it might surprise you where that is now when I hear a lot of people doubting this indicator both of these indicators I think to myself okay they just don't want to face reality we are in an overpriced Market we absolutely are every reliable metric in history reliable metric says we're in an overpriced Market the only things I hear are people saying well the forward PE isn't as bad as you as you portray it portray the stock market the GDP indicator okay you're telling me that people are very Rosy about the future and that should be shocking to you the bottom line is we are in an overpriced Market however price let's take a look this is my sheet going back to 1929.
1929. historically the average for the stock market GDP ratio on this is 0.92 we're at 1.667 that is 78.6 overvalued now the end of last year we are 57.4 because we saw a big drop in stocks last year but now we've seen a big surge but guess what the GDP going up so much helps this indicator stay lower look at this this is my fair value based on what the s p should be based on the historical average of this indicator just back in 2020 we were at 2 000 for fair value now we're at 2500 at the 25 increase in Fair Value in three years why well look at stocks look at GDP I mean we went from 21 trillion to 27 trillion dollars in GDP hey guys there's one of the benefits of inflation it really drives up GDP which is our nation's income okay now I will get to what that means shortly but let's look at the 10-year sickly adjusted p e ratio we are currently at 30.79 the average is 17.
so we're 80.7 percent overvalued it's actually higher when just looking at earnings and guess what these are worth very high profit margins the current profit margin corporate profit margin relative to to GDP is over 10 percent historically it's like seven percent so we're still at very high profit margin levels and those profit margins will go like this and guess what their highest during economic expansions and their lowest during recessions right that makes sense so what I'm trying to say here is not when there's going to be a crash or if there's going to be a crash just saying guys you should expect that invest if you invest your money today in the stock market which I still think you should do if your plan is dollar cost averaging every single month in a low-cost ETF but you should expect expect a lot of volatility you should expect that to make very good money on your money invested today but the point is you never know what's going to happen look at me I've been wrong for the last few years on where the stock market should go right like I I was sitting here back in 2018 saying stocks should be worth and I remember saying 1800 in the s p and look right here and guess what it just kept yes we had covid we had a covert crash it took us down to 21.90 on the s p and I thought great this is the start of it we're gonna get to good levels and then Boop Skyrocket that's what I did I fought the fed and it didn't work and I've learned my lesson from that so learn your lesson from me and my mistakes but do not deny Do not sit there and accept and not accept the fact that we are an overpriced Market but over a long periods of time this is what's going to happen to stocks the value is going to go up like this but the price is going to be like this and you never know when we're going to be here or here so the point is invest all along the way and guess what happens you'll average this and beat 98 of your friends and family and investing just by investing in low cost ETFs month in and month out now obviously if you want to invest in individual stocks we're the channel for you we're here to teach a process and that process can be applied to any sort of investment but especially for our software real estate and stocks and the stocks you can go pick individual stocks but I don't recommend you do that with the majority of your money until you're comfortable with it I didn't even do it until I felt comfortable with it I was all ETFs back in the great financial crisis and as time went on I decreased that to individual stocks and now my goal is to be 100 individual stocks right now I'm about 10 stocks and 90 treasuries okay because I can afford because of all my business upstairs and all my cash flow and my and my Outlook to be wrong for a while which I have been in terms of where stocks are going but I'm okay with that I'm sitting here saying that in the short run stocks are a voting machine and in the long run they're a weighing machine what does that mean it means in the short run what's popular is going to go up what's unpopular is going to go down but in the long run what's fundamentally behind every business is going to dictate its value okay if you pay a reasonable price today for a company and fundamentally the company gets better you will probably do as well as the company fundamentals go right and that's what's important and there are there's there's a separation between company and stock that's what's important to us we want to sit there and see where that missed pricing is happening like I said look at a company like Tesla Tesla today let's see how it is right now pulling up in our software down 2.85 I think Tesla is massively overvalued but I think Tesla did a great job changing the car industry and I think they'll be one of the players the big players and cars for the foreseeable future but it doesn't mean that I'm gonna buy the company just for that reason Apple's a wonderful company I think it's overpriced today but there are 12 companies that I currently own and you should watch our Channel And subscribe because every so often we do videos and the companies that I own but remember you should not own companies just because me or some other person on YouTube has it we're here to teach you a process on how to look at Investments that's what's key here we want you to be able to if all of a sudden YouTube went away tomorrow and you can never talk to me again you say doesn't matter I can apply the same process to investing that's what's important it gives you the power to control your financial future you should not have to rely on other people for that power that is what's key here so guys big week coming up a lot of important things if you don't already subscribe to the channel you need to because we're here to teach you a long-term process and way of thinking thank you very much
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