Transcription
Assets across the board are seemingly in an everything bubble, which is leaving many investors wondering what to do. Because if I invest now or stay invested, I'm risking collapse. However, the cost of living is also rising extremely rapidly, which means if I stay out of the markets just in cash, I'm losing my purchasing power by the day. Most feel stuck, afraid, wondering how to navigate this without feeling like you're just guaranteed to lose no matter what. I'm going to cover exactly what is actually going on here and what I'm doing about it instead.
For background, if you don't know who I am, my name is Joe Brown. I was a stock broker for years, worked with the top 1% on managing their wealth, and I left that world behind. Now I make videos teaching people about how markets really work so you can make more money investing. And I have a private coaching group where I have over a thousand students who follow my trading strategies in order to beat the markets.
First up, we have things like gold, which not only is gold at an all-time high, it has had an incredible run at over $4,500 per ounce right now. Silver as well is at an all-time high at just under $80 per ounce. The S&P 500 is now at almost $7,000, again, at an all-time high. NASDAQ near an all-time high at almost 26,000. The Dow's at an all-time high. Small caps, the Russell 2000 at an all-time high. US home prices are at an all-time high. But it's not just those traditional asset classes that are at all-time highs or looking like they're in a bubble. It's also things like commodities. Copper is breaking records. Platinum has broken out to all-time highs. Energy stocks and more.
So, because asset prices across the board are so expensive, it's leading many people to say, "I just have to stay all in cash because I can't risk investing right now or even staying invested because there's probably going to be a big crash. Prices just can't stay at these levels." The problem is if you do just go all into cash, you're still losing money. Just take a look at rent prices, which continue to move higher every single year. Or you can take a look at the price of ground beef in the US, which continues to make all-time highs. Or you can take a look at the cost of electricity in US cities on average continues to move higher. And if you take a look at when it really started to take off recently, that was in about 2020. And we all know what caused prices to start moving higher in 2020, and it was not AI. You can also look at things like health insurance and medical costs continue to make all-time highs. So, you're risking large losses by investing, but you're guaranteeing at least small losses by not investing. What are you supposed to do?
Whenever something seems too expensive to you, the most important question you have to ask is compared to what? In other words, if asset prices look stretched, you have to ask compared to what? Because if you're just looking at the S&P 500 at all-time highs, you are comparing it against the dollar. And that is true of everything we've been looking at. We've been looking at prices denominated in dollars.
Now, just a heads up, guys. The things that are happening in real estate are happening across the entire economy, from inflation to the AI bubble to the current state of geopolitics, resources, minerals, and energy. And that's why on Thursday, just a couple of days, January 15th at 7:00 p.m. Eastern time, I'm hosting a small event live on Zoom. I'm calling it the Portfolio Accelerator Master Class because I'm going to detail for you a special trading strategy that I've been using for years now. One that allows you to leverage chaotic events in order to enhance your overall portfolio returns. Using this strategy, I've been able to take home several double and triple-digit returns just in the last year. But the real impact is what that does to my overall portfolio returns over the long term. In fact, for the last 5 years, I have averaged an annualized 36.4% return, which as you can see is significantly better than every single major index. And this is for the last 5 years total, which means the cumulative performance of my portfolio over the last 5 years total is over 350%. In fact, it's 372% to be exact. And you can see how that has compounded to a total cumulative return that is well over triple any of the major indexes. And I'm going to share with you in detail my strategy on how I do this. So, if you're interested in learning how it works. All you have to do is register. My event is completely free. Just click on the description below and show up this Thursday, January 15th at 7:00 p.m. Eastern time. I'll see you there.
Now, the thing about bubbles is they tend to be isolated. Whether you want to look at the tulip bubble, whether you want to look at the tulip bubble, the housing bubble that led to the great financial crisis, the .com bubble, the crypto bubble in 2017, those things were demonstrably more expensive relative to pretty much every other asset class. You notice they were a bubble because everything else was not. And usually if everything looks like it's in a bubble, the problem is not with everything. The problem is what you're comparing it to. In this case, it's the dollar. And no, you're not going to see this by looking at a chart of the dollar index because that's just comparing the dollar to other currencies. And if all currencies are being devalued at a relatively similar pace, then you won't notice that much of a difference in the relative values of those currencies. But the fact that everything is getting more expensive is highlighting the fact that it's the dollar itself that is losing purchasing power relative to all of these things. You can buy less of the stock market with $1 today than you used to be able to. You can buy less gold with $1 today than you used to be able to. You can buy less Bitcoin today with $1 than you used to be able to. You can buy less house. You can buy less beef. You can buy less gas. You can buy less car. The dollar is what is losing purchasing power, which makes the price of those things in dollars go up. But it doesn't necessarily mean they're overvalued. In fact, if you expect the dollar to continue losing purchasing power, it actually justifies you buying those assets even if they're getting more expensive. Because at least it's better than the dollar. And when you look at the stock market charts in places that have experienced the worst of currency devaluation, in other words, hyperinflation, they look like hockey sticks. The faster a money loses its purchasing power, the more it incentivizes people to buy assets at any price. So, when you're looking at valuations of traditional assets based on recent history and saying, "Hey, valuations look extreme. I shouldn't be investing here." Well, guess what? The dollar is being devalued at a more extreme pace than in recent history. So, it's different this time. Not because valuations are good here, but because the thing you're escaping is forcing you out faster.
Now, obviously, people are not buying things like ground beef in order to preserve their purchasing power. You're not leaving your lights on and running your AC more, spending more money on electricity in order to save yourself from inflation. But those things are still a direct result of a loss of purchasing power in the dollar. More money chasing the same goods and services. This is demonstrated even more clearly when you start to look at things priced in something other than dollars. In this case, we are looking at a chart of the S&P 500 priced in gold. In other words, instead of looking at how many dollars it takes to buy the S&P 500, you're looking at how many ounces of gold it takes to buy the S&P 500. And you can see that while the long-term trend is up, which is something that you would expect, we are nowhere near bubble level territories. We are nowhere near extreme prices of stocks when priced in gold. In fact, if you look at the more recent end of this chart, you can see that stocks have become cheaper and cheaper compared to gold over the last couple of years, not more expensive. And this is despite the fact that over that exact same time frame, stocks have continued to actually rise. So, while stocks have gotten more expensive compared to dollars, they've gotten cheaper compared to gold. And it's not just stocks here. Big Macs have gotten cheaper compared to gold. Coffee has gotten cheaper compared to gold. Oil has gotten cheaper compared to gold. And even real estate has gotten cheaper compared to gold. As homes have gotten more expensive, when you price them in dollars, they have gotten actually cheaper when you price them in gold.
What I'm not saying here is that you should just invest in gold. That is not the case here. What I am suggesting is that just because something looks like a bubble to you is not sufficient reason to not invest. In fact, it's the opposite. You have to invest. You just have to do it correctly. If you are invested only in the S&P 500 within the last 5 years, there have been three 20% plus bare market crashes in the stock market. While you would have recovered from those at this point, they were still extremely painful and you would have no dry powder in order to take advantage of those losses. However, maintaining a portfolio where you have three to five different asset classes that are uncorrelated allows you to take advantage of crashes of bubbles unwinding because it allows you to rebalance between your asset classes and take advantage of those by buying low and selling high relative to each other.
Here's what I mean by that. During the time period from about 2011 through about 2020, stocks were increasingly getting more and more expensive relative to gold. If you were maintaining a specific portfolio allocation to stocks and to gold, you would have continually over that time frame allocated more to gold and less to stocks relative to each other. You would have been selling stocks when they were overvalued relative to your gold and buying more gold. However, over the last couple of years, that trend has reversed, which means your gold allocation would have grown tremendously relative to your stock allocation, which means over the past couple years, you'd be doing the opposite, getting rid of some of your gold to buy more stocks. Again, both gold and stocks have been going up that entire time frame, but maintaining a specific percentage allocation to each allows you to know when they are overvalued or undervalued relative to each other. Even just a quarterly or a yearly rebalance between them allows you to take advantage buying in low and selling high between them and you never have to worry about trying to time tops or bottoms.
Now, this is a huge step up for most people's portfolios. I take it one step further. I hedge when appropriate and I take a barbell approach to my overall portfolio where I take a small percentage of my portfolio and I allocate it to an extremely aggressive trading strategy in order to boost my overall returns. In fact, I've been doing this for years now. And over the past 5 years, my average annual return has been over 36%. You can see over that exact same time frame, indexes like the S&P 500 have averaged 14.8%. And while it's not an insane difference, that has led my overall portfolio to exceed 372% cumulative return over that time frame. And as you can see, that is over triple what any of the major indexes have been able to do.
Now, if you want me to teach you how I trade with that ultraaggressive trading strategy with the small portion of my portfolio, I have a free master class coming up tomorrow evening about just that. It's called the Portfolio Accelerator Master Class. It's completely free and it's Thursday, January 15th at 7:00 p.m. Eastern time. It's free, but spots are limited. So, don't wait. Sign up with that link in the description right now if you are interested.
And just so you know, what is going on right now is definitely not going to be slowing down anytime soon. Take a look at this chart. This is the Federal Reserve's balance sheet. If you follow my channel for any length of time, you've seen this chart many, many times. What you'll notice is they've been shrinking their balance sheet for the last couple of years. That's called quantitative tightening. During quantitative tightening, they are decreasing liquidity in the financial system. They're sucking cash out and it gets destroyed. It ceases to exist. They were doing this to deal with the fallout of their own actions, all the inflation that they unleash from all the money printing in 2020 and 2021. However, that tightening has come to an end. You might not be able to see it on this chart, but if we zoom in on the very, very end, you can see their balance sheet is increasing again. This is because they just last month started QE again. That is injecting new liquidity. They're buying assets. They are printing money again. This is debt monetization. And even though they just now restarted QE, the money supply has already been increasing again for the last couple of years. This will add fuel to that fire. Add on to that the fact that they're going to be decreasing interest rates more this year and they're going to be deregulating the banks. Scott Bessant is just on the news again talking about their plan to deregulate the banks. And the reason why is so that the banks can do QE for the Fed. The banks are going to be buying an unlimited number of US treasuries. That allows the government to borrow and spend money into existence, increasing the money supply, pushing the prices of assets and goods and services higher. Most likely outcome of this is that it continues to justify higher and higher valuations for stocks and other assets.
If you're not invested, you're stuck on the sidelines losing your purchasing power to inflation. If you are invested, yes, there are going to be drawd downs. I expect even more volatility. The fact that we've had three 20% bare markets in the last 6 years is unprecedented in US history. And that trend of increased volatility will probably continue. So having uncorrelated asset classes in your portfolio allocation paired with a small part of your account that has an ultraaggressive trading strategy in order to take advantage of all the volatility, all the unexpected chaotic events that happen and affect the market. allows you to actually profit from events like this instead of sitting in fear on the sidelines wondering what to do. Again, if you'd like my playbook on how I trade in order to boost my overall portfolio returns, my free Portfolio Accelerator Master Class is happening this Thursday, January 15th at 7:00 p.m. Eastern time. I highly encourage you to attend because the more and more we see trends like this continuing and money printing like this accelerating, the more you're going to need it. Don't miss out. Link is in the description below. As always, appreciate you guys. Thanks so much for watching. Have a good day.