1 00:00:00,100 --> 00:00:03,600 Well, we finally got it. We got our first rate hike, 2 00:00:03,700 --> 00:00:07,000 Jerome Powell, the Fed chair. Just announced a 25 basis point 3 00:00:07,000 --> 00:00:11,600 rate hike, which against a lot of people's assumptions, sent 4 00:00:11,600 --> 00:00:13,700 the market flying much higher, much higher. 5 00:00:13,700 --> 00:00:16,500 In fact, it's up three point, seven, seven percent for the 6 00:00:16,500 --> 00:00:21,900 NASDAQ three point, seven, seven percent, the S&P 500 is up 2.2 4 7 00:00:21,900 --> 00:00:25,100 percent today and even the Dow Jones was up one point five five 8 00:00:25,100 --> 00:00:27,900 percent, but the type of companies that you would assume 9 00:00:28,400 --> 00:00:30,900 would be hurt the most. By interest rates going up. 10 00:00:31,300 --> 00:00:33,900 We're the ones that went up the most today and this is what I 11 00:00:33,908 --> 00:00:37,100 want to make sense of why did the market move this way. 12 00:00:37,300 --> 00:00:41,300 In fact, if we even extrapolate this further and we go down the 13 00:00:41,300 --> 00:00:45,000 or up the risk curve to the more risky companies like the ones 14 00:00:45,000 --> 00:00:48,000 held in the story fund. These companies did even better. 15 00:00:48,000 --> 00:00:51,600 Today, if I go to the one day, we're up five point three, eight 16 00:00:51,600 --> 00:00:57,700 percent that is 5000, $683. Just today in one day so we're 17 00:00:57,700 --> 00:01:00,000 still in the red overall. It's been a rough couple of 18 00:01:00,000 --> 00:01:02,300 Months. But this is a very significant 19 00:01:02,300 --> 00:01:04,800 day and in this video we're going to make sense of all of 20 00:01:04,800 --> 00:01:06,200 this. We're going to go over what 21 00:01:06,200 --> 00:01:09,100 Jerome Powell said what his thoughts are on the chance of us 22 00:01:09,100 --> 00:01:11,800 going into recession, how many rate hikes are planned in the 23 00:01:11,800 --> 00:01:14,300 future, how? This may affect the equity 24 00:01:14,300 --> 00:01:17,000 markets and my thoughts, and how it will affect it, we're going 25 00:01:17,000 --> 00:01:20,000 to go over all of it. Now, let's start off with his 26 00:01:20,000 --> 00:01:22,500 major announcement. The big announcement today was 27 00:01:22,500 --> 00:01:25,100 at drone, pal. Raised, the interest rates by a 28 00:01:25,100 --> 00:01:28,600 quarter of a percentage. The federal fund rate is the 29 00:01:28,600 --> 00:01:30,900 rate at which banks can borrow Borrow from each other. 30 00:01:31,000 --> 00:01:35,300 So when that goes up, the cost of capital goes up, meaning any 31 00:01:35,300 --> 00:01:39,100 business, or any individual that wants a loan for anything, pays 32 00:01:39,100 --> 00:01:41,500 a higher price for that loan. They pay a higher interest rate, 33 00:01:41,700 --> 00:01:45,400 this slows down the economy. It is not accommodating policy. 34 00:01:45,700 --> 00:01:48,100 It is policy that's unaccommodating and it makes the 35 00:01:48,100 --> 00:01:52,300 economy slowed which should have the effect of combating 36 00:01:52,300 --> 00:01:54,800 inflation. So, the reason that drone pal is 37 00:01:54,800 --> 00:01:57,500 Raising interest rates to begin with is because the economy is 38 00:01:57,500 --> 00:02:01,000 incredibly strong right now. But inflation is I so the 39 00:02:01,000 --> 00:02:04,700 inflation needs to come down and he thinks it interest rates will 40 00:02:04,700 --> 00:02:09,100 help accomplish that and the economy also can manage the 41 00:02:09,100 --> 00:02:11,800 interest rates coming down. But having said that let's go 42 00:02:11,800 --> 00:02:15,400 ahead and give this some historical context because this 43 00:02:15,400 --> 00:02:18,900 may seem like a big deal. Our first interest rate hike in 44 00:02:18,900 --> 00:02:21,900 reality, this is a puny interest rate hike. 45 00:02:22,200 --> 00:02:26,600 We are right now effectively at 0% interest rate. 46 00:02:26,800 --> 00:02:30,000 So money is essentially as free as it will ever get in the the 47 00:02:30,000 --> 00:02:32,500 u.s. borrowing is as cheap as it will get. 48 00:02:32,600 --> 00:02:37,100 And what Jerome Powell is doing, is bumping this up to 25 basis 49 00:02:37,100 --> 00:02:40,300 points which is a quarter of a percentage that puts us right 50 00:02:40,300 --> 00:02:44,100 there in December of 2015. That's how high the interest 51 00:02:44,100 --> 00:02:46,600 rates are historically. Look at that little dot on the 52 00:02:46,600 --> 00:02:48,100 chart. Does that look like it's 53 00:02:48,100 --> 00:02:51,100 historically high? No this is barely anything. 54 00:02:51,300 --> 00:02:55,600 This is barely above zero and if we even zoom out further you can 55 00:02:55,600 --> 00:02:57,700 see how how puny this looks over. 56 00:02:57,700 --> 00:02:59,800 All that little dot right there by 2. 57 00:03:00,000 --> 00:03:03,200 I'm 15 is where the interest rates are being moved after 58 00:03:03,200 --> 00:03:04,700 today. Now, having said that the 59 00:03:04,700 --> 00:03:07,800 markets have been used to this low interest rate environment. 60 00:03:08,000 --> 00:03:12,500 So a lot of the expansion from 2009 all the way to 2016 was in 61 00:03:12,500 --> 00:03:16,000 a very low interest rate environment and that causes an 62 00:03:16,000 --> 00:03:19,200 economic, boom, but we didn't have inflation during that time 63 00:03:19,200 --> 00:03:21,200 period. So the FED didn't need a raise 64 00:03:21,200 --> 00:03:24,200 interest rates. Now, since we have inflation, we 65 00:03:24,200 --> 00:03:26,600 gotta raise interest rates. So the FED is officially raising 66 00:03:26,600 --> 00:03:29,800 interest rates by a quarter of a percentage, and they have six. 67 00:03:29,900 --> 00:03:33,900 More planned in 2022. So there is going to be a series 68 00:03:33,900 --> 00:03:35,800 of interest rate hikes throughout this year. 69 00:03:35,900 --> 00:03:39,100 Now I know whenever you have a series of interest rate hikes 70 00:03:39,400 --> 00:03:42,500 the concern becomes for investors is are we going to be 71 00:03:42,500 --> 00:03:45,600 sent into a recession? Because we look at history and 72 00:03:45,600 --> 00:03:48,200 many times the FED has to aggressively raised interest 73 00:03:48,200 --> 00:03:51,200 rates and not only does that stop inflation by slowing the 74 00:03:51,200 --> 00:03:53,500 economy. Sometimes it slows the economy. 75 00:03:53,500 --> 00:03:56,000 A little too much sends us into a recession. 76 00:03:56,200 --> 00:03:59,800 Not something good for the economy or or investors. 77 00:04:00,300 --> 00:04:02,800 Returns. So this was something that was, 78 00:04:03,100 --> 00:04:06,600 it was like, the first question asked to drone, pal was, how are 79 00:04:06,600 --> 00:04:09,900 you confident that this isn't going to send us into recession? 80 00:04:10,400 --> 00:04:12,300 And this is his response to that question. 81 00:04:13,500 --> 00:04:18,300 So, I guess I would start by saying that in my view the 82 00:04:18,300 --> 00:04:20,800 probability of a recession. Within the next year is not 83 00:04:20,800 --> 00:04:24,200 particularly elevated. And why do I say that aggregate 84 00:04:24,200 --> 00:04:27,200 demand is currently strong and most forecast. 85 00:04:27,600 --> 00:04:31,200 He says the possibility of a recession is not particularly 86 00:04:31,200 --> 00:04:33,400 elevated. That's the opposite of what I've 87 00:04:33,400 --> 00:04:36,200 been reading by a lot of analysts and forecasters but we 88 00:04:36,200 --> 00:04:37,800 have the Fed chair that has all the data. 89 00:04:37,800 --> 00:04:41,700 He has so many economists and people working for them and the 90 00:04:41,700 --> 00:04:45,500 indicators they show again he's reiterating, it is not elevated 91 00:04:45,500 --> 00:04:47,000 we do. Have an elevated chance of 92 00:04:47,000 --> 00:04:50,400 recession, the opposite thing. You probably have heard from all 93 00:04:50,400 --> 00:04:52,800 the YouTube videos and articles that you've been reading over 94 00:04:52,800 --> 00:04:56,100 the past couple of weeks. But he goes on to explain why he 95 00:04:56,100 --> 00:04:56,900 be? Is it this way? 96 00:04:57,200 --> 00:04:59,700 Master is expected to remain. So, if you look at the labor 97 00:04:59,700 --> 00:05:02,600 market, also very strong, conditions are tight, and 98 00:05:02,600 --> 00:05:06,700 payroll job growth is continuing very high levels, household, and 99 00:05:06,700 --> 00:05:08,300 business balance sheets are strong. 100 00:05:08,900 --> 00:05:13,300 And so, all signs are that this is a strong balance sheet, labor 101 00:05:13,300 --> 00:05:18,300 participation, rate payrolls. And companies every indicator. 102 00:05:18,300 --> 00:05:20,700 They look at for a strong economy shows that the economy 103 00:05:20,700 --> 00:05:26,500 right now is strong on economy, indeed one that will be able to 104 00:05:26,500 --> 00:05:31,400 flourish not to say withstand, but certainly flourish as well 105 00:05:31,400 --> 00:05:34,900 in the face of less accommodative monetary policy. 106 00:05:34,900 --> 00:05:38,400 So I guess that's how I would say I'm looking at that. 107 00:05:38,400 --> 00:05:42,500 Of course, the objective is to achieve price stability, while 108 00:05:42,500 --> 00:05:45,200 also sustaining a strong labor market and that, that is our 109 00:05:45,200 --> 00:05:46,100 overall objective. Active. 110 00:05:46,100 --> 00:05:49,300 But we do feel the economy is very strong and well, positioned 111 00:05:49,300 --> 00:05:51,600 to withstand tighter monetary policy. 112 00:05:52,100 --> 00:05:55,100 So he says, again there, that the economy is very strong, it's 113 00:05:55,100 --> 00:05:59,300 able to not only handle and take in these new interest rate 114 00:05:59,300 --> 00:06:02,500 hikes, but it's able to flourish through it to grow out a quick 115 00:06:02,500 --> 00:06:04,800 speed. In fact, he goes on to say that 116 00:06:04,800 --> 00:06:08,300 the rate of growth expected the GDP growth of the US economy 117 00:06:08,300 --> 00:06:11,700 throughout this year is expected to be two point eight percent 118 00:06:11,900 --> 00:06:14,400 which is very high growth in historical context, that's one 119 00:06:14,400 --> 00:06:17,200 of the better years of the past. Last 10 years of expansion. 120 00:06:17,400 --> 00:06:21,200 So drone Palace says, not only should the economy be able to 121 00:06:21,200 --> 00:06:23,900 handle these interest rate hikes, but it should be able to 122 00:06:23,900 --> 00:06:26,700 flourish through them, not just handle them, but flourish 123 00:06:26,700 --> 00:06:29,300 through them. And in my opinion, I think 124 00:06:29,300 --> 00:06:32,400 that's one of the that's got to be one of the biggest things. 125 00:06:32,600 --> 00:06:36,000 The best things to investors ears is hearing drone, Pals say, 126 00:06:36,300 --> 00:06:39,000 look we're not at a heightened chance of recession. 127 00:06:39,700 --> 00:06:42,800 A lot of that is like investors panicking and that type of thing 128 00:06:43,100 --> 00:06:45,700 and we look at all these indicators and we do not believe 129 00:06:45,900 --> 00:06:47,600 Eve that this is going to cause a recession. 130 00:06:47,700 --> 00:06:50,600 I have to believe that that's a big part of why the stock market 131 00:06:50,600 --> 00:06:54,200 went up today. Simply the confidence in the Fed 132 00:06:54,200 --> 00:06:56,300 chair that he's not going to send us into recession. 133 00:06:56,400 --> 00:06:59,100 Now, you may think that he's wrong that they don't have. 134 00:06:59,100 --> 00:07:02,100 It figured out, it's going to cause a recession but still they 135 00:07:02,100 --> 00:07:03,500 are looking at all those indicators. 136 00:07:03,500 --> 00:07:06,100 And in my opinion I've been saying this for a while. 137 00:07:06,100 --> 00:07:08,600 I think markets are always predicting recessions. 138 00:07:08,900 --> 00:07:12,600 I think there's always a lot of Hysteria and concerns but going 139 00:07:12,600 --> 00:07:16,400 into like a 2008 recession. I think is just unlikely. 140 00:07:16,400 --> 00:07:20,500 We had a lot of events happen than that were particularly and 141 00:07:20,500 --> 00:07:23,700 uniquely horrible. And I don't see those type of 142 00:07:23,700 --> 00:07:26,000 things unfolding unless there's something totally unknown. 143 00:07:26,000 --> 00:07:28,500 So I kind of agree with your own pal here. 144 00:07:28,500 --> 00:07:32,000 If I had to take a side between all the, all the people that are 145 00:07:32,000 --> 00:07:35,300 screaming Doom and Gloom and him, predicting that we might 146 00:07:35,300 --> 00:07:37,500 get through this without going into recession. 147 00:07:37,800 --> 00:07:39,600 I think there's a really decent chance of that. 148 00:07:39,900 --> 00:07:43,000 The other big thing that I want to highlight, why would stocks 149 00:07:43,000 --> 00:07:46,300 go up so much today? We have been hearing for After 150 00:07:46,300 --> 00:07:51,000 month, that interest rates going up, is bad for stocks, because 151 00:07:51,000 --> 00:07:54,400 it raises the 10-year treasury, it makes bonds more appealing 152 00:07:54,600 --> 00:07:56,700 and it makes it. So there's other options to 153 00:07:56,700 --> 00:08:00,200 invest in outside a stocks. So, why are stocks going up 154 00:08:00,200 --> 00:08:02,000 today? Well, this is the reason you 155 00:08:02,000 --> 00:08:05,700 don't try to time the market. It is very difficult to figure 156 00:08:05,700 --> 00:08:08,800 out what is priced in currently and what is not priced in. 157 00:08:09,200 --> 00:08:12,300 We've been told that interest rates are coming for months and 158 00:08:12,300 --> 00:08:16,200 months and months and the devil that you don't know, Is worse 159 00:08:16,200 --> 00:08:18,900 than the devil you do know. Now that we actually have a 160 00:08:18,900 --> 00:08:21,400 clear consistent plan from the Fed chair. 161 00:08:21,700 --> 00:08:24,800 We have Clarity to interest rates being risen right now. 162 00:08:25,000 --> 00:08:27,200 We have Clarity to how the economy stands right now. 163 00:08:27,400 --> 00:08:30,700 We have a path going forward of interest rates with transparency 164 00:08:30,700 --> 00:08:35,100 and Clarity investors like that before today it was a lot of 165 00:08:35,100 --> 00:08:39,299 just predictions and unknowns and not too much transparency to 166 00:08:39,299 --> 00:08:42,299 what's actually going to happen and as you might notice 167 00:08:42,299 --> 00:08:45,500 investors hate unknowns, they hate unpredictability. 168 00:08:45,800 --> 00:08:48,200 Any added level of clarity and consistency. 169 00:08:48,300 --> 00:08:49,900 Helps markets. Move up. 170 00:08:49,900 --> 00:08:52,400 So I think a lot of the move up today was also related to 171 00:08:52,400 --> 00:08:55,500 investors finally getting over all the predictions in the 172 00:08:55,508 --> 00:08:57,900 unknowns and finally having it happen. 173 00:08:58,000 --> 00:08:59,500 Finally having interest rates. Go up. 174 00:08:59,600 --> 00:09:02,300 We're getting to this phase and knowing that it might not 175 00:09:02,300 --> 00:09:05,100 actually be the end of the world, that's at least my 176 00:09:05,100 --> 00:09:07,200 prediction. So determining, why markets move 177 00:09:07,200 --> 00:09:08,700 up as a little bit of a guessing game. 178 00:09:08,700 --> 00:09:11,400 But if I had to guess those would be the reasons why we have 179 00:09:11,400 --> 00:09:13,800 confidence that were not going to be sent into recession. 180 00:09:14,200 --> 00:09:17,800 And we have some Nancy and consistency and to what the FED 181 00:09:17,800 --> 00:09:20,200 is actually doing. So investors can accurately 182 00:09:20,200 --> 00:09:22,000 priced at in. Now, big question for us 183 00:09:22,000 --> 00:09:25,700 investors is what happens next as we go throughout this year 184 00:09:25,700 --> 00:09:29,500 2022 and a series of rate hikes what happens to the valuations 185 00:09:29,500 --> 00:09:31,900 of our companies. Well we can look at this through 186 00:09:31,900 --> 00:09:35,900 historical context. The first thing is is that the 187 00:09:35,900 --> 00:09:39,100 valuations of software companies in particular. 188 00:09:39,200 --> 00:09:42,600 Cloud companies has came down dramatically so a lot of the 189 00:09:42,600 --> 00:09:45,700 selling is behind us. Take a look at these valuations. 190 00:09:45,800 --> 00:09:48,700 Historically, this is the Enterprise Value to next, 12 191 00:09:48,700 --> 00:09:52,500 months Revenue, multiples of SAS companies, and the blue line 192 00:09:52,500 --> 00:09:55,400 here is the median valuation. So what we can see is that up 193 00:09:55,400 --> 00:09:58,700 until 2020. It was around like a 10 times 194 00:09:58,700 --> 00:10:01,400 multiple. Then it went all the way up to 195 00:10:01,400 --> 00:10:04,300 almost a 20 times. Multiple software companies, 196 00:10:04,300 --> 00:10:07,100 literally went up almost double in their valuation. 197 00:10:07,500 --> 00:10:11,200 Then the selling started to happen late last year and their 198 00:10:11,200 --> 00:10:13,900 valuations. Got chopped back down all the 199 00:10:13,900 --> 00:10:17,800 way to ten times and now they're actually below 10 times to eight 200 00:10:17,800 --> 00:10:21,500 point nine times. So the valuations on the median, 201 00:10:21,600 --> 00:10:24,500 not the average, but the median are all the way back to around. 202 00:10:24,600 --> 00:10:27,000 8 times. Next 12 months Revenue, 203 00:10:27,000 --> 00:10:30,900 multiple, which historically, speaking is pretty decent, these 204 00:10:30,900 --> 00:10:33,100 software companies are at a pretty decent valuation. 205 00:10:33,200 --> 00:10:35,800 There are no longer in the stratosphere all the way up next 206 00:10:35,800 --> 00:10:38,300 to 20 times. So this is good news for SAS 207 00:10:38,300 --> 00:10:41,100 investors. A lot of the crazy high excess 208 00:10:41,100 --> 00:10:43,500 and super high multiples is behind us. 209 00:10:43,600 --> 00:10:45,100 We're now back to more normalized. 210 00:10:46,000 --> 00:10:48,700 Now, this next chart is even more applicable to investors 211 00:10:48,700 --> 00:10:51,700 today. It shows the 10-year treasury in 212 00:10:51,700 --> 00:10:54,900 Orange, compared against the SAS index in blue. 213 00:10:55,200 --> 00:10:58,500 And so you get an idea of how interest rates affect software 214 00:10:58,500 --> 00:11:01,600 companies because if the interest rates go up, so does 215 00:11:01,600 --> 00:11:03,400 the 10-year treasury? The yield on the 10-year 216 00:11:03,400 --> 00:11:06,900 Treasury and if the yield on the 10-year treasury goes up, it's 217 00:11:06,900 --> 00:11:09,800 more attractive to investors. So money is pulled out of the 218 00:11:09,800 --> 00:11:12,800 equity markets and into the bond market to buy the 10-year 219 00:11:12,800 --> 00:11:15,500 treasury, it just makes sense. Right? 220 00:11:15,500 --> 00:11:18,800 Because Because if the 10-year treasury was yielding like 20% I 221 00:11:18,800 --> 00:11:21,000 would probably liquidate my portfolio and by that it's a 222 00:11:21,000 --> 00:11:25,200 risk-free 20% but of course right now, the 10-year treasury 223 00:11:25,200 --> 00:11:29,600 is only right above 2% so I'm going to stay invested in 224 00:11:29,600 --> 00:11:34,200 equities but again the 10-year treasury will go up as interest 225 00:11:34,200 --> 00:11:37,500 rates, go up making it more attractive and affecting the 226 00:11:37,600 --> 00:11:39,500 pricing of all other Investments. 227 00:11:39,800 --> 00:11:42,100 And this is what it looks like. When you compare that against 228 00:11:42,100 --> 00:11:45,900 software companies, what we can see is that there is someone Of 229 00:11:45,900 --> 00:11:48,200 an effect. When the 10-year treasury goes 230 00:11:48,200 --> 00:11:51,100 up dramatically in a short amount of time, typically, 231 00:11:51,100 --> 00:11:53,400 that's led to a little bit of a sell-off in software. 232 00:11:53,400 --> 00:11:56,600 Companies, the multiples have contracted when that happens. 233 00:11:57,000 --> 00:11:59,200 You can see it right there in 2016. 234 00:11:59,600 --> 00:12:02,900 The 10-year treasury went up quite a bit, quite rapidly, and 235 00:12:02,900 --> 00:12:05,700 software multiples, contracted over that time period. 236 00:12:05,800 --> 00:12:10,800 You can also see, you know, in 2018, the treasury went up and 237 00:12:10,800 --> 00:12:13,600 softer multiples actually expanded but then it continued 238 00:12:13,600 --> 00:12:15,600 to go up and they started to contract back. 239 00:12:15,700 --> 00:12:17,400 Down. So it's not a perfect 240 00:12:17,400 --> 00:12:20,100 correlation. You can see right here, where 241 00:12:20,200 --> 00:12:23,200 where the 10-year treasury went down like crazy software 242 00:12:23,200 --> 00:12:25,700 multiples, went up like crazy. So you see the inverse 243 00:12:25,700 --> 00:12:28,700 correlation there and just recently you can clearly see 244 00:12:28,700 --> 00:12:31,200 that software multiples are Contracting going down like 245 00:12:31,200 --> 00:12:35,500 crazy as the 10-year treasury is anticipated to go up, so 246 00:12:35,500 --> 00:12:38,700 investors are pricing that out. So when I look over this chart I 247 00:12:38,700 --> 00:12:41,900 do see somewhat of an inverse correlation when the 10-year 248 00:12:41,900 --> 00:12:45,000 treasury goes up like crazy multiples for software 249 00:12:45,000 --> 00:12:46,100 companies. Down. 250 00:12:46,400 --> 00:12:50,200 And we could expect to see that in the future if the inflation 251 00:12:50,200 --> 00:12:53,000 just gets out of control and even Rising the interest rate, 252 00:12:53,000 --> 00:12:55,800 step-by-step doesn't get inflation under control. 253 00:12:56,100 --> 00:12:58,100 And the FED is like, well well dang. 254 00:12:58,100 --> 00:13:04,000 We got a rise in interest rates even higher. 3% 4% 5% 6%, they 255 00:13:04,000 --> 00:13:08,200 get up to 6% interest rates and the 10-year treasury is you know 256 00:13:08,200 --> 00:13:09,800 way higher than its been historically. 257 00:13:09,800 --> 00:13:13,100 For the past 10 years I think software company multiples will 258 00:13:13,100 --> 00:13:15,400 contract a lot and that scenario. 259 00:13:15,700 --> 00:13:17,000 I could see them going from the eight times. 260 00:13:17,000 --> 00:13:20,300 They're at right now all the way down to four but that is a very 261 00:13:20,300 --> 00:13:23,300 particular scenario that's under the assumption that inflation 262 00:13:23,300 --> 00:13:26,700 never gets under control and the FED has to continually rise 263 00:13:26,800 --> 00:13:29,600 interest rates. There's always a chance that 264 00:13:29,600 --> 00:13:32,400 inflation does somewhat diffuse over the next couple of years. 265 00:13:32,700 --> 00:13:35,000 The FED does raise interest rates to, like two or three 266 00:13:35,000 --> 00:13:38,000 percent, and they keep it there because the economy slows down a 267 00:13:38,008 --> 00:13:41,000 bit, inflation comes down and software companies, I think 268 00:13:41,000 --> 00:13:42,800 would do fine and that environment. 269 00:13:43,000 --> 00:13:46,600 So, a lot of this is kind of like, you know, What path is the 270 00:13:46,600 --> 00:13:47,500 economy? Go down. 271 00:13:47,800 --> 00:13:49,800 What Pat does interest rates really take? 272 00:13:49,800 --> 00:13:53,300 Ultimately, ultimately, all of, that's impossible to predict. 273 00:13:53,300 --> 00:13:57,200 But, right now what we know for certain is that software company 274 00:13:57,200 --> 00:14:01,600 valuations are no longer in the crazy category, there are no 275 00:14:01,600 --> 00:14:04,200 longer flying up into the Stratosphere. 276 00:14:04,500 --> 00:14:07,300 In every single category of software companies, the 277 00:14:07,300 --> 00:14:10,500 high-growth ones, the mid growth ones and the low growth ones 278 00:14:10,700 --> 00:14:13,600 their way back to normalize valuations, they're back to 279 00:14:13,600 --> 00:14:16,400 where they normally trade at. So, When I look over at my 280 00:14:16,400 --> 00:14:20,100 portfolio, to me, this is very bullish news, I look at it and I 281 00:14:20,108 --> 00:14:21,800 think that valuations are much better. 282 00:14:21,900 --> 00:14:24,900 I think the FED has a clear path to raising interest rates and I 283 00:14:24,900 --> 00:14:27,700 think that the chance of going into recession right now, Still 284 00:14:27,700 --> 00:14:30,000 Remains low. So in my opinion, even though 285 00:14:30,000 --> 00:14:33,700 I'm down right now, I'm in the red, I'm in the gutter right 286 00:14:33,700 --> 00:14:36,700 now, I still think I have a decent chance at this. 287 00:14:37,000 --> 00:14:40,700 I look at the S&P 500 and it's winning the race right now, but 288 00:14:40,700 --> 00:14:44,200 this has been under a condition of anticipating interest rate, 289 00:14:44,200 --> 00:14:47,500 hikes and continue. Contraction and multiples after 290 00:14:47,500 --> 00:14:50,200 contraction and multiples, multiples, just keep coming 291 00:14:50,200 --> 00:14:52,500 down, and down, and down, and down. 292 00:14:52,900 --> 00:14:54,900 It's not the software companies doing poorly. 293 00:14:55,100 --> 00:14:57,700 The companies that I'm investing in across the board are 294 00:14:57,700 --> 00:14:59,900 performing their performing, very well. 295 00:14:59,900 --> 00:15:02,000 They're growing their earnings are growing, their revenue, 296 00:15:02,200 --> 00:15:03,600 they're growing, their free cash flow. 297 00:15:03,600 --> 00:15:04,800 They're growing their market share. 298 00:15:05,200 --> 00:15:09,800 This is multiple compression and ultimately, at some point, 299 00:15:09,800 --> 00:15:14,000 multiple compression will stop. It will it will hit a bottom, 300 00:15:14,200 --> 00:15:17,000 will hit the point where the Ian, multiple software companies 301 00:15:17,000 --> 00:15:20,200 eventually stops and then it will be reliant on their growth. 302 00:15:20,200 --> 00:15:23,300 And I think that these companies growth will far outpaced the 303 00:15:23,300 --> 00:15:26,200 broader market. So, even though we're trailing 304 00:15:26,200 --> 00:15:29,200 the S&P 500 right now. I think over the next three or 305 00:15:29,208 --> 00:15:31,300 four years, there's a decent chance. 306 00:15:31,300 --> 00:15:34,100 We'll climb back up to not only meet it but surpass it. 307 00:15:34,100 --> 00:15:37,000 So there's my update for today. I hope you enjoyed this little 308 00:15:37,000 --> 00:15:38,000 update. If you like this type of 309 00:15:38,000 --> 00:15:39,900 content, you can check out the patron. 310 00:15:39,900 --> 00:15:41,900 There's a link in the description below comes with a 311 00:15:41,908 --> 00:15:44,200 free trial. If not, I understand I'll have 312 00:15:44,200 --> 00:15:46,500 more content out soon, so, Make sure you subscribe to the 313 00:15:46,500 --> 00:15:47,900 channel and I'll see you in the next one.