1 00:00:00,000 --> 00:00:01,600 Welcome back, everyone, thanks for joining. 2 00:00:01,600 --> 00:00:04,000 The Joseph Carlson show on this episode. 3 00:00:04,000 --> 00:00:07,900 We're going to be talking about and reacting to an article from 4 00:00:07,900 --> 00:00:11,100 The Wall Street Journal. They call it by the dip. 5 00:00:11,100 --> 00:00:14,800 Believers are tested by the markets downward slide and this 6 00:00:14,800 --> 00:00:19,400 article goes into the hole by the dip idea and what investors 7 00:00:19,400 --> 00:00:22,600 are doing right now because the professional investors, the 8 00:00:22,600 --> 00:00:26,500 institutions are apparently running for the hills they're 9 00:00:26,500 --> 00:00:29,900 scared, they're in aggregate pulling money out of the market. 10 00:00:30,000 --> 00:00:33,000 Market. But us the small guy here, the 11 00:00:33,000 --> 00:00:36,700 dumb money, right? We're just the ignorant naive 12 00:00:36,700 --> 00:00:39,500 retail investor, we're putting our money in the market. 13 00:00:39,500 --> 00:00:42,100 We're buying these dips, as institutions are selling out of 14 00:00:42,100 --> 00:00:43,800 them. And I think that this is an 15 00:00:43,800 --> 00:00:46,000 interesting dichotomy that's happening. 16 00:00:46,300 --> 00:00:49,200 Retail investors are pouring money into the market as its 17 00:00:49,200 --> 00:00:52,500 falling and we have the institutions selling out as its 18 00:00:52,500 --> 00:00:54,700 falling. So do they know something that 19 00:00:54,700 --> 00:00:57,400 we don't, or are we going to have the advantage if the market 20 00:00:57,400 --> 00:00:59,100 recovers? We're going to be discussing all 21 00:00:59,100 --> 00:01:01,500 of that in today's Episode. Now, first, let me just say, 22 00:01:01,500 --> 00:01:04,500 this is a market that will test your resolve, we've had an 23 00:01:04,500 --> 00:01:05,800 interesting past couple of years. 24 00:01:05,800 --> 00:01:08,500 The past seven months, the market has been on a steady 25 00:01:08,500 --> 00:01:12,300 downward decline with little Rays of Hope little, you know, 26 00:01:12,300 --> 00:01:14,400 little bump UPS in price along the way. 27 00:01:14,400 --> 00:01:18,000 But overall, we've lost a lot of money over the past six months, 28 00:01:18,000 --> 00:01:21,100 if you've been investing during this time, I'm down thirty eight 29 00:01:21,100 --> 00:01:23,200 thousand dollars in just the past 30 days. 30 00:01:23,600 --> 00:01:27,900 All right, so, every day I've lost over a thousand dollars in 31 00:01:27,900 --> 00:01:32,300 the stock market over the past, Past 30 days, not a good feeling 32 00:01:32,300 --> 00:01:35,500 to have this happen. Generally speaking in investing, 33 00:01:35,500 --> 00:01:38,800 I want my money to be going up but that's not how it works. 34 00:01:38,800 --> 00:01:40,500 That's not how it works in investing. 35 00:01:40,700 --> 00:01:43,000 You have to go through bear markets and you have to go 36 00:01:43,000 --> 00:01:45,700 through bull markets, you make money when the markets going up 37 00:01:45,700 --> 00:01:48,300 and during a widespread bear market, like the one that we're 38 00:01:48,300 --> 00:01:50,600 in, there's not too many places to hide. 39 00:01:50,700 --> 00:01:54,800 Now, having said that this portfolio just a few months ago, 40 00:01:54,800 --> 00:01:58,200 used to have 80,000 dollars in gains, that was kind of at the 41 00:01:58,200 --> 00:02:01,200 peak of it. And we've Back all the way to 42 00:02:01,200 --> 00:02:03,200 just sixteen thousand dollars in gains. 43 00:02:03,400 --> 00:02:06,900 So I really just a couple days of heading back into the red and 44 00:02:06,900 --> 00:02:10,100 right now, the huge majority of my gains are earn dividends. 45 00:02:10,400 --> 00:02:14,700 So even though this portfolio trades up and down from eighty 46 00:02:14,700 --> 00:02:17,500 thousand dollars in gains to 16 thousand dollars in gains and it 47 00:02:17,500 --> 00:02:20,300 might go down a - ten thousand dollars or minus thirty thousand 48 00:02:20,300 --> 00:02:22,500 dollars. It can trade around in any 49 00:02:22,500 --> 00:02:27,200 direction based on the appetite of investors and as investors we 50 00:02:27,200 --> 00:02:31,800 have no control over what Oceans are doing over, what big funds 51 00:02:31,800 --> 00:02:34,700 are doing or what other people across the globe are doing. 52 00:02:34,700 --> 00:02:37,200 We have no control over their budgets or whether they're 53 00:02:37,200 --> 00:02:39,900 buying stocks are selling them. So, in essence, we have no 54 00:02:39,900 --> 00:02:42,200 control over these price fluctuations. 55 00:02:42,500 --> 00:02:45,900 What we do have control over is the companies that were buying 56 00:02:46,000 --> 00:02:48,800 and the way that we value them. When I look at what I'm doing 57 00:02:48,800 --> 00:02:53,100 with my portfolio I'm not buying companies based on what I think 58 00:02:53,200 --> 00:02:55,500 other investors will want to buy next month. 59 00:02:55,600 --> 00:02:58,600 I'm not trying to swing trade or get ahead of the curve on 60 00:02:58,800 --> 00:03:01,100 certain Timely. With my portfolio. 61 00:03:01,500 --> 00:03:05,600 I'm buying companies that I consider to be economic machines 62 00:03:05,600 --> 00:03:09,200 that will produce cash flows for years and decades into the 63 00:03:09,208 --> 00:03:12,500 future, they'll produce growing cash flows with sound balance 64 00:03:12,500 --> 00:03:15,600 sheets and they're at valuation with very low down side and 65 00:03:15,600 --> 00:03:18,100 these type of companies, I think will continue to produce these 66 00:03:18,100 --> 00:03:20,100 cash flows. They'll continue to grow their 67 00:03:20,100 --> 00:03:23,300 dividends and their share BuyBacks for a very long time 68 00:03:23,300 --> 00:03:26,300 into the future. That's why I buy so much apple 69 00:03:26,300 --> 00:03:30,200 and Microsoft and Costco not because I think these are Timely 70 00:03:30,200 --> 00:03:32,500 trades, that will do well over the next six months. 71 00:03:32,600 --> 00:03:35,900 But because these companies produce real profits, and what I 72 00:03:35,900 --> 00:03:39,300 look at my portfolio, if you really ignore the price 73 00:03:39,300 --> 00:03:42,300 fluctuations and the month-by-month trading, whether 74 00:03:42,300 --> 00:03:45,100 I'm down, fifty thousand dollars or up fifty thousand dollars, 75 00:03:45,300 --> 00:03:48,700 give or take one or two months. You look at what's going on 76 00:03:48,800 --> 00:03:52,500 underneath the hood, the engine that I'm building this passive 77 00:03:52,500 --> 00:03:56,600 income portfolio is the project of building an economic engine 78 00:03:56,800 --> 00:03:59,300 that will provide real passive income. 79 00:03:59,400 --> 00:04:02,900 This is Out of monthly dividends at this portfolio has provided 80 00:04:03,000 --> 00:04:07,200 since its beginning in 2018. Now, on average, this portfolio 81 00:04:07,200 --> 00:04:11,400 produces around $600 a month in dividends and my goal is to get 82 00:04:11,400 --> 00:04:15,300 that to 700 and 800 and then above a thousand dollars. 83 00:04:15,400 --> 00:04:18,100 My long-term goal is to get this to four to six thousand dollars 84 00:04:18,100 --> 00:04:21,100 a month and make it so I can live entirely off of my dividend 85 00:04:21,100 --> 00:04:23,900 income. So this entire project is not 86 00:04:23,900 --> 00:04:27,000 based around timely Market trades, it's around building 87 00:04:27,000 --> 00:04:29,000 this economic machine for the future. 88 00:04:29,000 --> 00:04:32,200 And when I look at the Best time to buy these companies at 89 00:04:32,200 --> 00:04:35,600 discounted prices based off their future expectations. 90 00:04:35,900 --> 00:04:39,200 It's always better to do that during a dip over the past six 91 00:04:39,200 --> 00:04:43,700 months. The QQQ is down, 25% from, it's 92 00:04:43,700 --> 00:04:45,800 just recent Heights down that much. 93 00:04:45,800 --> 00:04:49,500 Then you look at the S&P 500 and it's down, 17 percent, the major 94 00:04:49,500 --> 00:04:52,500 indices with all the companies in them are selling off like 95 00:04:52,500 --> 00:04:54,400 crazy. And we don't know when that's 96 00:04:54,400 --> 00:04:57,200 going to end, but while this is happening, I'm certainly 97 00:04:57,200 --> 00:04:59,800 reinvesting my dividends and I'm certainly deploying new. 98 00:04:59,900 --> 00:05:02,000 Cash into buying these companies on a dip. 99 00:05:02,000 --> 00:05:04,200 Now, having said that, there's this new Wall Street Journal 100 00:05:04,200 --> 00:05:07,600 article where they kind of question the strategy of buy the 101 00:05:07,600 --> 00:05:11,400 dip and they know how popular this strategy has become amongst 102 00:05:11,400 --> 00:05:14,200 retail investors. And the interesting thing is 103 00:05:14,200 --> 00:05:17,400 that retail investors and institutional investors are 104 00:05:17,400 --> 00:05:19,900 doing two different strategies while retail investors. 105 00:05:19,900 --> 00:05:21,800 Here are buying the dip with all these great companies. 106 00:05:21,800 --> 00:05:24,000 Falling institutions are pulling their money. 107 00:05:24,200 --> 00:05:26,000 So let's go ahead and dive into this article. 108 00:05:26,000 --> 00:05:29,300 They say this year stock market volatility has turbocharged a 109 00:05:29,300 --> 00:05:32,300 favorites Strategy, among individual investors buying the 110 00:05:32,300 --> 00:05:34,400 dip. Their dramatic Plunge in major, 111 00:05:34,400 --> 00:05:37,900 indexes will test the resolve on Thursday when the stock market 112 00:05:37,900 --> 00:05:41,300 had one of its worst days of the year individuals, rushed in 113 00:05:41,400 --> 00:05:44,700 setting. A one-day record for buying in 114 00:05:44,700 --> 00:05:47,500 March, they invested the largest-ever monthly some 115 00:05:47,800 --> 00:05:51,500 according to Van Der research data beginning in 2014 and 116 00:05:51,500 --> 00:05:54,200 continue to pour money into the markets in April. 117 00:05:54,600 --> 00:05:58,500 So, as retail investors, we are buying the dip we aren't running 118 00:05:58,500 --> 00:06:01,300 for the Hills. And I think that that's an 119 00:06:01,300 --> 00:06:04,000 interesting thing. It's a change in human behavior 120 00:06:04,300 --> 00:06:07,500 individual's willingness to backstop markets throughout this 121 00:06:07,500 --> 00:06:09,100 year. Sell-off demonstrates that the 122 00:06:09,100 --> 00:06:13,000 group for now has been more resilient than analysts and 123 00:06:13,000 --> 00:06:15,100 traditional professionals anticipated. 124 00:06:15,100 --> 00:06:19,100 But this year the S&P 500 has fallen, 16 percent, its worst 125 00:06:19,100 --> 00:06:22,800 start to a year in nearly a century and the NASDAQ Composite 126 00:06:22,800 --> 00:06:26,600 has dropped 26 percent. Inflation is at a 40-year high 127 00:06:26,700 --> 00:06:29,700 and the Federal Reserve has embarked on an aggressive. 128 00:06:29,800 --> 00:06:31,500 Terry tightening cycle, right there. 129 00:06:31,500 --> 00:06:34,600 They highlight all these super bad things that are happening. 130 00:06:34,600 --> 00:06:38,000 Now, that is change the situation and this is where the 131 00:06:38,000 --> 00:06:40,900 strategy comes into question. And they highlight where some of 132 00:06:40,900 --> 00:06:44,300 the recent strategies have not worked out for retail investors. 133 00:06:44,600 --> 00:06:47,100 They say the wildly popular trades of the past, two years 134 00:06:47,100 --> 00:06:50,000 have already crumbled. Many investors have soured on 135 00:06:50,000 --> 00:06:53,500 richly valued technology stocks newly minted public companies 136 00:06:53,500 --> 00:06:56,400 which soared last year have come back down to earth and the 137 00:06:56,400 --> 00:06:59,800 highly speculative Ark Innovation fund has plummeted. 138 00:06:59,900 --> 00:07:02,700 It is of course a lot of things have changed over the past year, 139 00:07:03,100 --> 00:07:06,900 they say, despite the Turning Tides, many investors said that 140 00:07:06,900 --> 00:07:10,300 they have relished the chance to buy stocks at a discount they 141 00:07:10,300 --> 00:07:12,200 say for many of the calculation is simple. 142 00:07:12,400 --> 00:07:16,500 History has shown that stocks eventually go up and that is 143 00:07:16,500 --> 00:07:18,800 exactly correct throughout all of history. 144 00:07:18,800 --> 00:07:21,900 We can look at any bear Market in any correction and the 145 00:07:21,900 --> 00:07:25,400 investors that were fearful that sold out during the market lows 146 00:07:25,800 --> 00:07:28,000 are very regretful in those situations. 147 00:07:28,000 --> 00:07:30,200 The best thing historically speaking has always Always been 148 00:07:30,200 --> 00:07:32,900 to take advantage of dips and buy them when the market trades 149 00:07:32,900 --> 00:07:36,200 down to lower and lower levels. But the journal goes on here to 150 00:07:36,200 --> 00:07:39,700 know how many investors are pouring money into this current 151 00:07:39,700 --> 00:07:43,700 dip, they say small investors plowed 114 billion dollars into 152 00:07:43,700 --> 00:07:46,300 US. Stocks through March and the S&P 153 00:07:46,300 --> 00:07:50,400 500, tumbled into a correction falling, at least ten percent 154 00:07:50,400 --> 00:07:52,900 from its high. According to Goldman Sachs that 155 00:07:52,900 --> 00:07:56,200 marks a sharp shift in the group strategy for much of the past, 156 00:07:56,200 --> 00:07:59,500 two decades, typically individual investors have sold 157 00:07:59,500 --> 00:08:03,800 about Out ten billion dollars in 12 weeks after market Peak when 158 00:08:03,800 --> 00:08:06,000 the S&P 500 has tumbled that much. 159 00:08:06,300 --> 00:08:11,100 So this paragraph here, outlines a dynamic shift in the behavior 160 00:08:11,100 --> 00:08:13,700 of investors. Historically, retail investors 161 00:08:13,700 --> 00:08:16,300 have not bought the dip after major sell-offs. 162 00:08:16,600 --> 00:08:20,000 In fact, human behavior. Historically has been to sell 163 00:08:20,000 --> 00:08:23,300 during the market going down. That's why they've earned such a 164 00:08:23,300 --> 00:08:26,600 poor return as opposed to just a general index. 165 00:08:27,100 --> 00:08:30,300 So historically speaking investors have done the Exact 166 00:08:30,300 --> 00:08:33,500 opposite of what they're doing now is seems like a lot of I 167 00:08:33,500 --> 00:08:37,100 think the financial education across social media across 168 00:08:37,100 --> 00:08:41,500 YouTube has taught investors now to buy the dip, do not be 169 00:08:41,500 --> 00:08:44,100 fearful of on the market trades down and I think the abundance 170 00:08:44,100 --> 00:08:46,300 of financial knowledge has changes for the better. 171 00:08:46,600 --> 00:08:49,500 So no longer are investors selling out after massive 172 00:08:49,500 --> 00:08:51,800 losses. Now they're doubling down and 173 00:08:51,800 --> 00:08:53,800 buying these dips. They say in the month of March 174 00:08:53,800 --> 00:08:56,000 alone individual investors bought around Twenty Eight 175 00:08:56,000 --> 00:08:59,700 billion dollars of us listed stocks and ETFs on a net basis. 176 00:09:00,200 --> 00:09:03,900 That's the largest monthly some on record that is pretty 177 00:09:03,900 --> 00:09:05,800 substantial. Even after these big 178 00:09:05,800 --> 00:09:09,300 discouraging declines retail investors are piling money into 179 00:09:09,300 --> 00:09:10,600 stocks. Now, this is where the Wall 180 00:09:10,600 --> 00:09:13,700 Street Journal, gets a little bit skeptical on whether or not 181 00:09:13,700 --> 00:09:16,000 this buy the dip attitude of retail. 182 00:09:16,000 --> 00:09:17,500 Investors will work out for them. 183 00:09:17,900 --> 00:09:22,200 They say unlike the crash in early 2020 which lasted just 23 184 00:09:22,200 --> 00:09:24,400 trading days investors are weathering. 185 00:09:24,400 --> 00:09:27,700 A more prolonged sell-off. That could worsen as recession 186 00:09:27,700 --> 00:09:31,200 risks grow the feds move to raise, Rates and shrink the nine 187 00:09:31,200 --> 00:09:34,800 trillion dollar asset portfolio has already triggered a sell-off 188 00:09:34,800 --> 00:09:37,500 in the Government Bond Market. So with the treasury going past 189 00:09:37,500 --> 00:09:40,400 three percent interest. Now Stocks have more 190 00:09:40,400 --> 00:09:46,000 competition, you can actually get a semi okay, return 3%, with 191 00:09:46,000 --> 00:09:48,600 a risk-free asset. They say that this is the 192 00:09:48,600 --> 00:09:52,600 highest level since 2018 higher yields typically chip away at 193 00:09:52,600 --> 00:09:56,000 stock markets Allure by giving investors another attractive, 194 00:09:56,000 --> 00:09:59,600 place to park cash. So as the tenure goes, higher 195 00:09:59,600 --> 00:10:02,000 and higher, Fire. Investors will look to buy that 196 00:10:02,000 --> 00:10:05,000 instead of risk on assets like stocks and this is where we get 197 00:10:05,000 --> 00:10:07,000 to the most interesting part of this article. 198 00:10:07,300 --> 00:10:11,100 While us retail investors are putting money into the market. 199 00:10:11,300 --> 00:10:14,300 Us individual investors are buying these dips left and 200 00:10:14,300 --> 00:10:17,000 right. The institutional investors are 201 00:10:17,000 --> 00:10:18,700 doing something entirely different. 202 00:10:18,900 --> 00:10:22,500 They say individual investors appetites for stocks diverges 203 00:10:22,500 --> 00:10:25,200 from the behavior of professional investors who have 204 00:10:25,200 --> 00:10:28,800 collectively sold stocks. During the turbulence JPMorgan, 205 00:10:28,800 --> 00:10:31,700 Chase estimates that Institutional investors have 206 00:10:31,700 --> 00:10:35,500 pulled almost 200 billion dollars out of the stock market 207 00:10:35,500 --> 00:10:39,400 this year. So just in 2022, the net flows 208 00:10:39,400 --> 00:10:42,500 of institutional, big money, smart money. 209 00:10:42,500 --> 00:10:46,500 Investors has pulled almost 200 billion dollars out of the stock 210 00:10:46,500 --> 00:10:48,000 market. That's the data that they're 211 00:10:48,000 --> 00:10:50,000 Gathering through these public order flows. 212 00:10:50,000 --> 00:10:53,700 So the professionals keep ramping up a bearish bet against 213 00:10:53,700 --> 00:10:57,100 the US Equity Market. While the individual investors 214 00:10:57,200 --> 00:10:59,800 are betting long, that's the dynamic going on right now. 215 00:10:59,900 --> 00:11:02,500 Now, so when you see your aportfolio going down week, 216 00:11:02,500 --> 00:11:05,400 after week, and month, after month this year, especially in 217 00:11:05,400 --> 00:11:09,700 2020 to realize that that's not other individual investors, like 218 00:11:09,700 --> 00:11:13,500 you, that is because of big money, big institutions, pulling 219 00:11:13,500 --> 00:11:15,500 out hundreds of billions of dollars. 220 00:11:15,500 --> 00:11:17,700 That's what's causing a lot of the liquidity to come out of the 221 00:11:17,700 --> 00:11:20,100 market along with the price is collapsing. 222 00:11:20,100 --> 00:11:22,700 That is a pretty substantial and interesting change that's 223 00:11:22,700 --> 00:11:24,900 happening. Now individual investors buying 224 00:11:24,900 --> 00:11:28,100 the dip and institutions selling out and here we have the Wall 225 00:11:28,100 --> 00:11:29,800 Street Journal in the same article. 226 00:11:30,100 --> 00:11:32,900 Giving us a warning about buying the dip. 227 00:11:33,100 --> 00:11:36,500 Now, they're all of a sudden against buying the dip when 228 00:11:36,500 --> 00:11:39,300 they've been telling investors to do this for the past 20 229 00:11:39,300 --> 00:11:41,600 years. Some strategist say buying the 230 00:11:41,600 --> 00:11:44,700 dip is a risky way to invest because it's so difficult to 231 00:11:44,700 --> 00:11:46,300 gauge. Whether the market is going to 232 00:11:46,308 --> 00:11:49,600 keep following Vanda estimates that the average individual 233 00:11:49,600 --> 00:11:54,000 investor portfolio Peak late last year and has since tumbled 234 00:11:54,200 --> 00:11:58,000 giving the average individual, a paper loss of about twenty eight 235 00:11:58,000 --> 00:11:59,800 percent. So here we are. 236 00:11:59,900 --> 00:12:02,500 In the Wall Street Journal and they're highlighting strategist 237 00:12:02,500 --> 00:12:04,800 saying that buying the dip is now risky. 238 00:12:04,900 --> 00:12:06,600 So let me share a few thoughts on this article. 239 00:12:06,900 --> 00:12:10,200 First of all buying the dip in and of itself isn't really an 240 00:12:10,200 --> 00:12:13,500 investing strategy because all buying the dip means is that 241 00:12:13,500 --> 00:12:16,300 something fell in price and you're buying more of it as it 242 00:12:16,300 --> 00:12:18,800 falls in price. But the thing that you're buying 243 00:12:18,800 --> 00:12:21,200 is really important in this equation. 244 00:12:21,300 --> 00:12:24,100 For example if you have an extremely overvalued company 245 00:12:24,100 --> 00:12:29,200 like cloudflare was in 2021 and that company Falls 50% and 246 00:12:29,200 --> 00:12:31,700 price. A massive fall, it's chopped, 247 00:12:31,700 --> 00:12:34,600 its valuation in half that still doesn't mean that that 248 00:12:34,600 --> 00:12:38,200 companies, good value. And in the case of cloudflare, 249 00:12:38,400 --> 00:12:41,800 even after this company, fell 50% in price, it would still 250 00:12:41,800 --> 00:12:44,800 dramatically overvalued. So investors that were buying, 251 00:12:44,800 --> 00:12:47,500 the dip were really buying a company that was going to 252 00:12:47,500 --> 00:12:52,100 continue to fall unknown other 50% and even after this last 50 253 00:12:52,100 --> 00:12:55,700 percent drop the company still not cheap by any measure. 254 00:12:55,700 --> 00:12:58,400 It trades at a price to sales of 28. 255 00:12:58,400 --> 00:13:01,200 That is incredibly expensive. Ensive with incredibly high 256 00:13:01,200 --> 00:13:03,500 expectations. And in my opinion, this company 257 00:13:03,500 --> 00:13:05,800 has no business trading at these levels. 258 00:13:05,800 --> 00:13:08,600 If anything, it should be trading around a 15 price to 259 00:13:08,600 --> 00:13:11,700 sales or lower. So buying the dip doesn't mean 260 00:13:11,700 --> 00:13:16,000 by any company at any valuation after its fallen in price, 261 00:13:16,200 --> 00:13:18,300 that's not what that strategy should mean. 262 00:13:18,600 --> 00:13:22,100 What you're buying is incredibly important in this calculation, 263 00:13:22,300 --> 00:13:25,600 when I look at companies that I'm buying the dip of, I'm 264 00:13:25,600 --> 00:13:28,900 buying companies with reasonable valuations and in many cases I 265 00:13:28,900 --> 00:13:32,200 think heavily Valued, I've been buying more restaurants, stocks, 266 00:13:32,200 --> 00:13:35,500 high, quality ones, like Starbucks, Texas, Roadhouse, and 267 00:13:35,500 --> 00:13:37,400 Domino's. And the reason I've been buying 268 00:13:37,400 --> 00:13:40,600 these companies is because right now, they're in a substantial 269 00:13:40,600 --> 00:13:43,000 dip. And I also consider them to be 270 00:13:43,100 --> 00:13:45,700 high quality companies. But I want to contrast and 271 00:13:45,700 --> 00:13:49,500 compare buying the dip in a Starbucks or Texas Roadhouse 272 00:13:49,800 --> 00:13:51,800 compared to the example of cloudflare. 273 00:13:51,900 --> 00:13:54,500 And that is where valuation comes into play. 274 00:13:54,900 --> 00:13:58,600 While Cloud fleurs creating at a 28 price to sales, Starbucks 275 00:13:58,600 --> 00:14:02,300 trades at a Seven, this is around half of what McDonald's 276 00:14:02,300 --> 00:14:05,300 trades at and Starbucks has a better balance sheet than 277 00:14:05,300 --> 00:14:07,800 McDonald's and better growth than McDonald's. 278 00:14:08,200 --> 00:14:10,000 So it trades at a low price to sales. 279 00:14:10,200 --> 00:14:14,900 The PE Ratio is now below 25, which is historically extremely 280 00:14:14,900 --> 00:14:17,400 low for this company. It usually trades anywhere from 281 00:14:17,400 --> 00:14:21,100 like 29 to 35. Simply put investors aren't 282 00:14:21,100 --> 00:14:24,700 pricing in a lot at this price. The company's already traded 283 00:14:24,700 --> 00:14:28,100 down significantly in the chance of this company under performing 284 00:14:28,100 --> 00:14:29,700 its earnings to the extent that it trades down. 285 00:14:29,900 --> 00:14:32,600 Other 50% I think it's highly unlikely. 286 00:14:33,000 --> 00:14:35,900 So when I assess the different companies to buy the dip, I'd 287 00:14:35,900 --> 00:14:39,100 rather be a buyer of Starbucks right now than cloudflare. 288 00:14:39,100 --> 00:14:41,700 So buying the dip is a strategy that I Implement. 289 00:14:41,700 --> 00:14:44,200 I firmly believe that you should try to buy high-quality 290 00:14:44,200 --> 00:14:47,300 companies as investors and institutions sell out of them 291 00:14:47,300 --> 00:14:50,600 based off of temporary fairs. Most people in the stock market 292 00:14:50,600 --> 00:14:53,500 have a short term time Horizon and if you have a long-term time 293 00:14:53,500 --> 00:14:56,300 Horizon, you can take advantage of dips and in terms of the Wall 294 00:14:56,300 --> 00:14:59,700 Street Journal and these new experts trying to discourage, 295 00:14:59,800 --> 00:15:02,800 Judge retail investors and individual investors from buying 296 00:15:02,800 --> 00:15:05,600 the dip because the stock market might go lower. 297 00:15:05,900 --> 00:15:09,800 That is the exact attitude, that Warren Buffett and every great 298 00:15:09,800 --> 00:15:13,900 investor warns you against trying to time the market. 299 00:15:13,900 --> 00:15:15,500 That's basically what they're saying. 300 00:15:15,800 --> 00:15:18,400 Oh, don't buy these companies right now because they might go 301 00:15:18,400 --> 00:15:21,500 lower in the future. If you look back on history 302 00:15:21,700 --> 00:15:25,800 there is no way that anyone including any expert from JP 303 00:15:25,800 --> 00:15:28,700 Morgan or from Goldman Sachs would be all the time. 304 00:15:28,700 --> 00:15:30,400 The market. None of Have been able to 305 00:15:30,400 --> 00:15:33,900 consistently do it and at best they're guessing we can look 306 00:15:33,900 --> 00:15:37,000 back at all. The bear markets in the S&P 500 307 00:15:37,100 --> 00:15:41,900 since 1950. There's been 15 and in each case 308 00:15:42,000 --> 00:15:45,400 people cannot time. The bottom of the market it is 309 00:15:45,400 --> 00:15:47,500 frivolous. It's not worth trying. 310 00:15:47,800 --> 00:15:51,400 And the thing that you should be trying to do is take advantage 311 00:15:51,400 --> 00:15:54,300 of good quality companies falling in price that you know 312 00:15:54,300 --> 00:15:57,500 have a very bright future and eventually when the market turns 313 00:15:57,500 --> 00:15:59,700 back bullish investors will want to buy. 314 00:16:00,200 --> 00:16:04,200 Over the past 70 years, we've had 15 bear markets in the S&P 315 00:16:04,200 --> 00:16:06,600 500. They've averaged a decline of 316 00:16:06,600 --> 00:16:10,500 30.2%, they've gone on on average three hundred and thirty 317 00:16:10,500 --> 00:16:12,300 eight days, so just under a year. 318 00:16:12,700 --> 00:16:14,900 So we're around 7 months in ours. 319 00:16:15,100 --> 00:16:18,000 That means that it could go throughout the remainder of 2022 320 00:16:18,300 --> 00:16:20,500 or even longer some bear markets. 321 00:16:20,500 --> 00:16:23,400 Like the worst ones last almost three years. 322 00:16:23,500 --> 00:16:25,200 That would be a tough bear Market. 323 00:16:25,300 --> 00:16:28,800 But even in those cases, the investors that stuck with it and 324 00:16:28,800 --> 00:16:32,700 continually dollar Stafford in, we're heavily rewarded over the 325 00:16:32,700 --> 00:16:36,600 next 10 to 20 years. So, having the perseverance and 326 00:16:36,600 --> 00:16:39,900 the determination, and the resolved estate in the stock 327 00:16:39,900 --> 00:16:42,400 market. During these times, is critical 328 00:16:42,700 --> 00:16:46,800 becoming discouraged and bearish and having pessimism take over 329 00:16:46,800 --> 00:16:49,700 and discourage you from sticking with your plan, is probably the 330 00:16:49,700 --> 00:16:51,400 worst thing that you can do historically. 331 00:16:51,400 --> 00:16:54,600 Speaking every single bear Market throughout history, 332 00:16:54,800 --> 00:16:57,400 eventually returned to all-time highs on average. 333 00:16:57,400 --> 00:17:02,300 That happened on day 6, 2003, Yeah, so 603 days go by the 334 00:17:02,300 --> 00:17:03,900 market returns to all-time highs. 335 00:17:04,099 --> 00:17:07,300 That's just under two years. So this bear Market could last a 336 00:17:07,308 --> 00:17:09,599 while. We could be in it for years and 337 00:17:09,599 --> 00:17:12,099 that's something you have to be, okay, with if you're investing 338 00:17:12,099 --> 00:17:15,099 in stocks, that's why I put such a huge emphasis on Investing For 339 00:17:15,099 --> 00:17:18,200 passive income and the fundamentals of my company even 340 00:17:18,200 --> 00:17:21,700 if the bear Market lasts one year or two years or three, I 341 00:17:21,700 --> 00:17:24,300 know that I'm going to generate more and more passive income, 342 00:17:24,300 --> 00:17:26,900 more dividends every single month and every single year. 343 00:17:27,300 --> 00:17:30,700 So that's my thoughts overall. You to buy the dip. 344 00:17:30,700 --> 00:17:34,000 But focus on quality and focus on valuation. 345 00:17:34,200 --> 00:17:36,400 That's all for this time. I'll catch you in the next one.