This Won't End Well For The Stock Market...

Most retail investors are oblivious to what's about to happen. I got a major warning that I wanna share with you so that you can prepare and be set up to make money from what's about to happen instead of getting caught off guard. Now, don't click nothing, don't smash nothing, don't buy nothing, let's get started. So, the S&P 500 over the past three years have been nothing but great for investors. We have seen a return of 61% over the past three years. That is wild, that is great. This year started absolutely different. For the first three months, we were down 14%. Then for the next two months after that, we are up 20%. And so far, year to date, we're pretty much flat, okay? Absolutely bipolar behavior, but that bipolar behavior I think is a first step of something big that's about to happen. Again, most retail investors are absolutely oblivious to. Not gonna happen to you because we're gonna go work through this right now and we're gonna be ready. Now, first and foremost, right now, I have to establish some ground rules, right? We have to talk in the same language. So, we can both agree, you and I, that the average return is 10% on the S&P 500. Maybe it's 10.5, maybe it's 9.5, but we can agree that the average is about 10%, give or take. You can also agree with me that based on the fact that we've done 60% over the past three years, right now, for the past three years, we are running on a 20% average, meaning we are double speed than what this system was designed for, pretty much, right? Now, we're looking at defying gravity, right? You may be a great athlete. You may be able to have a 40-inch vert, but eventually, you're coming down. Averages are magnetizing. They're a very powerful force, just like gravity. Eventually, what comes up must come down. The averages always win. So, whenever you go up, the average pulls you down. You go down, the average pulls you up, et cetera, et cetera, et cetera. Over the course of years, that keeps on happening. So, if you think we're going to continue giving 60% over three-year periods on the S&P 500 like it's cookies, it's not going to happen, okay? Let's establish that first, because most retail investors want to be in this la-la-land hopium in which this can continue forever. Not going to happen. Just like Back to the Future 4, ain't happening, okay? Let's move on. Now, the PE ratio that we have right now on the S&P 500, again, is 27. On its own, it's not anything special, okay? So, 27, so what, right? Hold on. Look at the average. Let's go back to the average rule, right? The average on the S&P 500 is about 16, historically. And even if you look from 1990 to right now, that's 35 years. More modern, that's 20, okay? Dot com, we have 30. Right now, we're 27. We're way, way, way above the average PE ratio, price-to-earning ratio of the S&P 500. If you look at the Buffett indicator, things are even more intense. We're at 200, meaning the entire market cap of the US stock market is double the size of the GDP, of the gross domestic product, which is two deviation points away from the trend line, from the historical trend line of 125. So, we are a long ways away from the Buffett indicator average and from the PE ratio. We are flying very high, very, very close to the sun. It's important to establish that, and it's important to actually not be in the place where you hope for things not to happen, okay? This is a chart that shows you how much money you've made per year for a three-year period after a certain point based on the PE ratio of that entry point. Essentially, if you started investing when the PE ratio was five, how much money you've made for the next three years? Six, and so forth, and so forth, and so forth. Five, 10, 15, 20, 25, 30, okay? Pay attention. Between 10 and 15, you almost couldn't lose money. From 15 to 20, mostly you made a lot of money. From 25 to 30 right here, you either lost money or you made zero to 5%. It's not a great time for the stock market when the PE ratios get inflated like that. It's not to say that we're looking for a crash or correction that's gonna come tomorrow that you have to sell your portfolio. On the contrary, this is not for you to sell your portfolio and run for the hills, not at all. This is a money-making opportunity. I'm establishing the setup so we can talk about how to use this to make money. Most retail investors are not gonna realize this, they're gonna get off guard, and they will do stupid things. If you're ready for this, if you're prepared, this is gonna catapult you. Pay attention, okay? Let's move forward. So if you look at some smart people around the internet or the universe, Michael Burry, one of them, maybe polarizing, so what? Right now, we just got his 13F. He basically sold out out of almost everything. Warren Buffett sitting on a huge pile of cash, record-breaking cash, 350 billion. We've got Jamie Dimon saying that investors are complacent and there's a huge risk that they're not paying attention to and Ray Dalio is warning from the end of the world, so forth and so forth, right? A lot of smart people are telling us right now that the environment isn't great, okay? On top of that, if you take a look at this thing right here, well, you're gonna take a look and you find, okay, so the macro is also not that great, right? We've got GDP coming down, negative GDP. We've got tariffs are a thing. I mean, they have been reduced and we have trade agreements, but tariffs are a thing, right? That's gonna lead to more inflation and that's gonna lead to earnings shrinkage because when your cost of goods by import is actually going up, your earnings coming down. Also, consumer sentiment has dropped from 74 to 50 in just six months, the lowest we've had since 2022. Also, we've got the highest delinquency rate on credit cards over the past 10 years, an 18 trillion household debt, which is a record number, and everything is hella expensive. People forget that despite the 3% inflation we have now, we had like two years when everything is basically doubled in price. Those prices have never came down. So cost of living today is a lot more expensive than it used to be just five years ago, but the salaries haven't kept up. So people are having a tough time, a harder time than they had five years ago. All of this is not a good soup. On top of that, if you look at what's going on right now with the US credit rating, well, Moody's just downgraded the US from AAA, from triple A, to one tier below. That's really bad news because the ability of this economy to function is basically predicated on having the ability to raise capital cheaply. If I'm a low risk, I can borrow at cheap rates. However, when you downgrade, basically you become a bigger liability, which means you have to pay more interest to borrow, which means that you have less money to spend on growing your economy, which means that that economy is generating less taxes, which means you have to borrow more money to keep up, which is a debt spiral. Not a good thing. Not saying that the US is going into a debt spiral. I'm just saying that that downgrade is impactful. Is it the end of the world? Is the US actually in the risk of default? No, no, no, no, no. Not happening. Not happening, okay? But for every increase of 1% in interest rates, the US is paying to service its debt. That's a $350 billion cost per year that's not going for schools, roads, education, and healthcare. It's going to service that debt. And the Fed can't help here because if the Fed actually lowers rates to help, well, inflation is gonna creep back up. Inflation's still really not that good. So essentially, the government is left with cutting spending but this administration, obviously, no, I'm making you laugh. Donald Trump isn't gonna cut spending, right? However, at this point, you may ask, well, Tom, you just told us a lot of bad news. So is the conclusion to sell? No, the conclusion is not to sell. Look, this chart basically shows you all the crazy stuff that happened in the world since 1970 all the way to 2024, right? It's actually about 10% of things that happened during that time. A lot worse things that happened, a lot more. We don't have enough room. All the wars and crises and crashes, insanity happened. The average return was 11%. If you've invested $10,000 in the S&P 500 and you held it from 1970 to now, you have $2.6 million. Despite all this craziness, despite all the reasons to sell, look at what the market is doing long-term. It almost is meaningless. Now, the other thing here to pay attention to is look at the length of bad times in the stock market. Right now, we can take a look at all these red points but look at how minuscule they are compared to the bull markets. Red is the bear markets. Look at the length. The average bear market in the US is about 10 months. The average bull market is about five years. If you just sit and you let these blow over, these blue, huge, humongous giants are gonna catapult your portfolio. There's no need to try and exit because most of it is actually bull markets. You're gonna miss out on this. And speaking about missing out, check this out. This is what happens when you miss out. It's actually very deadly, like a fart in a closed room with no windows, right? If you've missed the top 10 days over a course of 20 years, 20 years, you just missed just the best 10 days, your portfolio slashed by 50%. If you've missed the top 60 days over a 20-year period, your portfolio is gone, 93% down. And 70% of the best 10 days happen when you least expect it in bear markets, not when everybody's expecting the market to be great. This happens when people are afraid, not when they're excited. Now, here's the crazy part. What most investors don't realize, and that is why 90% of investors lose money in a market that only goes up long-term, is that you can't see something that's obviously true. Imagine a tree, right? We can all agree that planting a tree is gonna yield us a massive tree, right? But it's gonna take 10 years, 15 years, right? That tree eventually is gonna be massive, there's no doubt, right? But if I'm gonna be standing there every single day waiting for the tree to grow, and every day I'll be frustrated that the tree isn't growing fast enough, I'm gonna go crazy, I'm gonna go mad. What kind of insanity is this? Why would this logic apply to the stock market? You're trying to grow a tree. This is a 10, 15-year period. You wanna look at this every day and see how it's doing? What's the point of this? Now, the crazier part here is that 54% of days in the stock market every single day has a chance to be green. 46% has a chance to be red. It sounds almost like a crapshoot, but it's not. This is how casinos make money. You got a chance to beat the casino. The house always wins. You are the house in this game. If 54% of days are green and 46 are red, that means that 73% of years are green. And that means that 94% of decades are green. What kind of odds do you wanna have better than this? 94% of decades are green since we have a slight edge here. Why would you wanna time this when you can just sit in it and have the American dream? The American dream is sit on your ass, do nothing, and create passive income by doing diddly squat. There you go. Just sit in the index. Now, the rule is quite simple. It's not really rocket science. I hold the S&P 500. Increase your holding period. Easy money. The American dream, the holy grail. You've got it right here. And if you don't wanna pick stocks, you don't wanna learn anything about the stock market, you've got the formula right here. You need to know nothing about stocks, nothing about the stock market. Just put in the S&P 500, hold it for longer, get easy money. That's it. Now, of course, there's people who want extra risk. They wanna invest in individual stocks. I get it. The steps for extra education here are not that complicated. All you gotta do basically is the same thing. Again, just like before, save more money or create more money through generating more income. But the key here is pick great companies. Buy great companies. Not buy hype companies. Not buy trendy companies. Buy great businesses, okay? And dollar-cost average, which means invest a little bit every single time, every single month, every single week, and non-stop unless the company's no longer great. When the company's no longer great, then you stop. Until then, you continue buying like clockwork, okay? Very, very simple. Same principles apply, both for index fund investors and individual stock pickers and for hybrid portfolios as well. Because at the end of the day, if you selected a great company or you just bought the S&P 500, this is what you're gonna get. You're gonna get this insanity in the short term. But because you bought at every green point right here, what your cost base is gonna look like is this. All-time low, all-time high, right? All-time low, all-time high. You never try to time this. Zero stress, zero timing, zero, zero luck. Your cost base is here, right? That's smack in the middle. So you basically brought your cost bases to the middle by doing nothing except buying at all times. And actually, if you've doubled down when you had these points right here and you've done my system, which is double down when the stock is below 20% of the 52 week high, then your cost base is probably gonna be here, very close to the all-time low without timing the market even once. All you have is skill and discipline. Two things you can learn, two things you can acquire, skill and discipline. Don't need luck, don't need timing the market. Now, basically, what most investors have is this innate ability to flip-flop. In the bull market, they're all about opportunity. They're all about the infinite time horizon. Two weeks go by, the market goes red. You've seen it right now. All of a sudden, they all flip. Oh my God, we only see risk. Our short-term horizon, we gotta sell before. Come on. Great investors, DCA, no matter what, nonstop. They don't pay attention to this nonsense, okay? Now, here's the crazy part. If you wanna get better at this game, you have to start somewhere, okay? If you wanna be a stockbroker, you have to start somewhere. This is a list I have for my academy members on Rock Academy. You can get it right now. All the stocks are your entry point, your ideas for you to do the work, do the research, okay? We have some stocks where we had great success with 800, 700%, some stocks where we lost. This isn't me being the oracle, okay? Join the academy, download this list. This is gonna be your first step. Second step, do the work, do the research, don't gamble. This is an article I just posted three hours ago about Google. What's going on with Google? Google just showed something incredible to the world. Does this change my bearish thesis about Google? This sort of article is what you need to be reading, not these 30-second clips from CNBC, okay? Again, you can find that in the academy, but there's plenty of other free resources. Number three, get yourself StockMVP. StockMVP is gonna allow you to run your DCF, compare companies, run scorecards, and see what institutional investors are doing. This chart showed us that Palantir was being bought like crazy by institutional investors while everybody telling you to sell, okay? StockMVP is a game changer. I built it for you guys. If you wanna get better at this, two things you can do right now. Number one, join the academy, patreon.com forward slash TomNash. We have 19,000 members. The reason I have 19,000 members is because this ---- is probably good. Number two, stock-mvp.com. Get it right now. It's gonna be your own tool to separate the garbage, what's ---- and what's legit within seconds. It costs like a cup of coffee every single day. Not that big of a deal. We made it affordable on purpose. There's a seven-day free trial. Check it out. Join the academy. Get StockMVP. I'll see you on Sunday in the next lecture. Peace.