tech bubble Archives - Wealthy Retirement https://wealthyretirement.com/tag/tech-bubble/ Retire Rich... Retire Early. Mon, 22 Dec 2025 21:22:47 +0000 en-US hourly 1 https://wordpress.org/?v=6.8.3 Will the AI Bubble Burst in 2026? https://wealthyretirement.com/market-trends/will-the-ai-bubble-burst-in-2026/?source=app https://wealthyretirement.com/market-trends/will-the-ai-bubble-burst-in-2026/#respond Tue, 23 Dec 2025 21:30:03 +0000 https://wealthyretirement.com/?p=34562 Here’s what history says...

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Watch the video on YouTube

It seems like no one knows what to think about AI stocks these days.

For every expert screaming “full speed ahead!”, there’s another one warning investors to pump the brakes.

Last week, our friends at MarketBeat invited Chief Income Strategist Marc Lichtenfeld onto their YouTube channel for an interview on this very topic.

Was the recent shakiness in the sector just a blip on the radar… or something more?

How concerned should investors be about buying stocks at 52-week highs?

And most importantly, is AI in a “bubble”… and if so, when will it pop?

Marc answers all these questions during the interview and even provides two free stock picks:

  • A growth play that operates in an AI hotbed and counts Microsoft (Nasdaq: MSFT) and Meta Platforms (Nasdaq: META) among its customers
  • A defensive agriculture play that gives investors the best of both worlds: a hedge against AI while still maintaining exposure to it.

To watch the interview and get Marc’s two free picks, click here or on the image above.

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Are Stocks in a Bubble Right Now? https://wealthyretirement.com/market-trends/are-stocks-in-a-bubble-right-now/?source=app https://wealthyretirement.com/market-trends/are-stocks-in-a-bubble-right-now/#respond Sat, 18 Oct 2025 15:30:56 +0000 https://wealthyretirement.com/?p=34363 And if so, is it about to pop?

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If you’ve been reading the recent headlines in the financial media, you might think the sky is falling:

“We will have a crash”

“Of course it’s a bubble”

‘Absolutely’ a market bubble: Wall Street sounds the alarm on AI-driven boom as investors go all in

Stocks have literally never been this expensive

But here at The Oxford Club, our strategists, researchers, and Members don’t just blindly follow the crowd. We stay grounded, think for ourselves, and come to our own conclusions.

That’s why we invited Chief Income Strategist Marc Lichtenfeld into The Oxford Clubroom on Thursday to share what he’s been seeing in the markets lately and break down some of the strategies and tools he uses on a daily basis.

Here’s just some of what he covered during the session:

  • Why he’s not too worried about an AI bubble (despite all the fearmongers in the media)
  • Some surprising data about buying at market highs and market lows
  • The average length of bull markets and bear markets
  • Why technical analysis can be so simple that a 5-year-old can understand it
  • Three momentum indicators that reveal whether a stock is “overbought” or “oversold”
  • His thoughts on the technology sector and how long the uptrend could continue
  • A few sectors he’d avoid right now
  • The chart pattern that has led to the strongest historical performance
  • His latest thoughts on gold
  • The one chart that EVERY investor should be paying attention to right now.

It’s not often that I include full Clubroom sessions in Wealthy Retirement, but since Marc covered so much ground, I thought it would be extremely useful to his readers.

To watch the full session, click the image above!

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A Hard Lesson From a Legendary Hedge Fund Manager https://wealthyretirement.com/market-trends/stan-druckenmiller-s-hard-lesson-echoes-today-s-overvalued-market/?source=app https://wealthyretirement.com/market-trends/stan-druckenmiller-s-hard-lesson-echoes-today-s-overvalued-market/#respond Tue, 14 Dec 2021 21:30:59 +0000 https://wealthyretirement.com/?p=27542 Be careful where you're putting your money...

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I’ve certainly learned my fair share of stock market lessons the hard way.

Many of us have.

But investing wisdom doesn’t need to come at a steep cost.

As investors, we can learn through observing the hard lessons learned by others.

Hedge fund manager Stan Druckenmiller is one of the greatest investors of all time.

During one 30-year period, his hedge fund generated an annualized rate of return of 30%.

And the Druckenmiller track record gets even more impressive…

Over that entire 30-year stretch of managing money, he did not have a single down year!

He even got his investors an 11% return during the market collapse of 2008.

But even an investor as good as Druckenmiller makes mistakes… During the late 1990s, the technology sector was on fire.

In the 18 months from August 1998 to February 2000, the tech-heavy Nasdaq index tripled in value.

Druckenmiller sat at his desk and watched the Nasdaq march higher day after day.

He was exasperated.

Druckenmiller had decided not to participate because he thought that the bull market he was witnessing had gotten way out of hand.

He thought tech stocks had become insanely expensive.

And he was right… Stocks were trading at 100 times earnings and more than 20 times sales.

But by March of 2000, Druckenmiller couldn’t take it anymore. He was tired of watching so many others make so much money so easily.

He wanted to share in the good times.

In Druckenmiller’s words, here’s what happened next:

So like, around March, I could feel it coming. I just – I had to play. I couldn’t help myself. And three times the same week I pick up the phone – don’t do it. Don’t do it.

Anyway, I pick up the phone finally. I think I missed the top by an hour. I bought $6 billion worth of tech stocks, and in six weeks I had left [George] Soros and I had lost $3 billion in that one play.

You asked me what I learned. I didn’t learn anything. I already knew that I wasn’t supposed to do that. I was just an emotional basket case and couldn’t help myself. So maybe I learned not to do it again, but I already knew that.

It was a rare mistake by Druckenmiller – but a big one.

I bring it to your attention today because I think we can all benefit from it.

Druckenmiller knew not to chase outrageously expensive stocks, but he did it anyway.

Greed overtook him.

At the peak of the technology bubble in the spring of 2000, the tech stocks Druckenmiller was buying were incredibly expensive.

With the benefit of hindsight, it’s easy to see that aggressively buying in the spring of 2000 was foolish.

Today, we see a similar situation. We have far too many investors willing to pay foolish prices for many of the most popular stocks in the market.

The chart below shows there are a whopping $4.5 trillion worth of stocks trading at more than 20 times sales today.

That’s even more than the $3.6 trillion worth of stocks that were trading at more than 20 times sales in the spring of 2000, at the peak of the tech bubble.

Total Market Cap of Stocks With a Price-to-Sales Ratio of More Than 20X

The spikes representing the tech bubble and today’s market are less-than-subtle warning signs.

You don’t want to be chasing these overpriced tech stocks today.

When this many stocks are this expensive, you need to start being very choosy about where and what you’re putting your money into.

Rarely over the past 30 years has the market cap of stocks trading over 20 times sales exceeded $500 billion.

But today that number is at $4.5 trillion – more than nine times as much.

You don’t need to learn a lesson the hard way by chasing these expensive stocks.

Instead, let’s draw on Druckenmiller’s experience from March 2000 and stay disciplined.

There are good stocks to own out there, but the really expensive part of the market is not where to find them.

Good investing,

Jody

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The Lesson I Learned in Bermuda https://wealthyretirement.com/market-trends/why-todays-market-setup-positions-value-stocks-win-2/?source=app https://wealthyretirement.com/market-trends/why-todays-market-setup-positions-value-stocks-win-2/#respond Tue, 23 Nov 2021 21:30:08 +0000 https://wealthyretirement.com/?p=27429 We’ve seen this market setup before.

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Investing experience is a powerful weapon.

More and more, I believe that we have seen today’s market setup before.

That pleases me because I know how to profit from it.

Last time we had the market setup we have today, I watched a great investing team generate an incredible profit.

Today, I’m going to tell you about a lesson I learned 20 years ago that is still relevant today.

Then, I’m going to tell you how one of the greatest investors of our generation is positioning his firm to profit in the months and years ahead.

While the Market Crashed, This Fund Rose 71% in a Year

Some things you just never forget.

Twenty years ago, I was living in Bermuda working at a hedge fund administrator.

I provided accounting services to hedge funds and got to see what they were buying and selling on a weekly basis.

I had the pleasure of working with some of the greatest investors in the world.

It was a sweet gig, to be sure. Pink sand beaches, a crystal clear ocean and wonderful weather year-round.

I loved watching how these world-class hedge funds operate.

Then, in 2000, the technology bubble popped and the stock market crashed.

But one fund had been positioned for this for months.

Week after week, Orbis Funds posted excellent results as the rest of the market was melting down.

Each Thursday, I raced to work to see how the fund had performed over the past seven days.

It was exciting – I felt like I was a part of what was going on.

In 2001, the first year of the bear market, this fund notched a 71% return while the market crashed.

The lesson I took away from watching this outperformance is that what this hedge fund did was incredibly simple.

It is also the exact same thing that another investing legend is doing right now…

I Don’t Plan to Just Watch the Trade This Time…

Grantham, Mayo, Van Otterloo & Co., or GMO, is an investment firm led by the investing legend Jeremy Grantham.

What GMO sees in the stock market today is the same thing my hedge fund client saw 20 years ago.

There is an absurdly wide spread in valuation between “growth” and “value” stocks.

That means the expensive stocks are far too expensive and the cheap stocks are way too cheap.

The same market conditions are back – and the trade that will help GMO profit is fairly basic.

GMO launched a fund that shorts the most expensive growth stocks and goes long the cheapest value stocks.

That means GMO is positioned to profit from both the expensive stocks falling and the cheapest stocks going higher.

The underlying data shows that the fund’s timing looks spot-on.

Growth Trounces Value

Value stocks have underperformed badly for the last 10 years.

Over that time, the Russell 1000 Value Index has gone up only 165% while the Russell 1000 Growth Index has gone up 415%.

That is one of growth’s largest outperformances over value over any 10-year period in history.

But unlike GMO, I have no interest in shorting stocks. I don’t think you should either.

What I am very interested in, however, is owning value stocks. I believe they will outperform over the next several years, potentially by a wide margin.

Exactly 20 years ago, growth stocks were very expensive and value stocks were very cheap.

That meant it was time to buy value.

That time has come again. The tide is starting to change.

Good investing,

Jody

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Margin Debt: The Canary in the Coal Mine https://wealthyretirement.com/financial-literacy/why-rising-margin-debt-bad-sign/?source=app https://wealthyretirement.com/financial-literacy/why-rising-margin-debt-bad-sign/#respond Thu, 13 May 2021 20:30:32 +0000 https://wealthyretirement.com/?p=26382 Look out...

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Buckle up, folks… because we might be in for another bumpy ride.

The chart below has me concerned. It shows the yearly change in the amount of margin debt carried by U.S. investors.

U.S. Margin Debt is Soaring Out of Control

Margin debt is money that an investor borrows from their broker to buy stocks.

My opinion on margin debt is pretty simple – I don’t believe it should ever be used.

Today, I want you to see the year-over-year increase in margin debt. It’s unlike anything we have seen in decades – or ever.

You will also notice that over the past three decades, there were two prior instances when margin debt suddenly spiked, albeit not nearly as severely as it has this time.

Those were in 2000 and 2007.

If you have been investing for a while, the fact that I’m connecting the market conditions of today with those two years should have you thinking… “uh-oh.”

The margin debt spikes of 2000 and 2007 immediately preceded two of the worst stock market crashes in history.

In 2000, margin debt soared as investors chased technology and internet stocks ever higher.

Here is how the S&P 500 performed after margin debt peaked in March 2000…

The Long, Painful Tech Bubble Burst

From the market peak in March 2000, the S&P 500 entered a steady decline that did not end until October 2002.

The decline was almost exactly 50%.

The popular internet and technology stocks of the day fared much worse.

By 2007, most investors seemed to have recovered from the 2000 market crash and margin debt had soared once again.

The investing herd always gets greedy at the worst possible times…

This time, the popping of the housing bubble was the catalyst that caused the market meltdown.

This triggered the freeze of the entire global financial system, which exacerbated the stock market crash.

The 2008 Market Crash Was Even Worse

The top-to-bottom crash in the S&P 500, from the peak in October 2007 to the bottom in March 2009, was almost 57%.

Soaring margin debt was a warning sign of impending market turmoil.

Don’t Stick Your Head in the Sand

The last two spikes in margin debt in 2000 and 2007 both happened right before the entire S&P 500 was cut in half.

Yet, against the increase in margin debt that has happened over the past 12 months, those increases in 2000 and 2007 look pretty tame.

That has to be considered a flashing warning sign. We could soon be in store for another unpleasant stock market experience.

Now, to be clear, I’m not saying that a major stock market decline is certain to happen. I’ll never claim to be certain of such things.

But to look at this chart against what has happened historically when margin debt spikes and then pretend there isn’t a good chance trouble is brewing would be silly.

Plus, soaring margin debt isn’t the only canary in the coal mine…

I recently wrote to you about how one of the smartest investing shops that I know currently has the lowest exposure to U.S. stocks in the three-decade history of the firm.

I also detailed three other major warning signs that suggest a market correction could be coming.

I find it a bit unusual that we are barely a year removed from a severe market sell-off and another one could be approaching.

But then again, the astounding recovery of the stock market over the past 12 months was also very unusual.

If I’m right and the market does suddenly roll over, it isn’t anything to fear.

For long-term investors who are still actively buying stocks, a big sell-off is good news because it allows them to purchase companies at better valuations.

And always remember that even the worst market crashes are minor bumps in the long-term upward journey of the stock market.

The S&P Just Roars Higher

For people who have money invested that they are going to need in the near future, though, I think now is a great time to consider taking some profits.

There is clearly more than enough smoke to suggest a major market event could be coming, and you don’t want to risk being forced to cash out during a panic.

If you have cash in the market that you are going to need in the next 18 months, I wouldn’t expose it to what could be coming.

Good investing,

Jody

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The Lesson I Learned in Bermuda https://wealthyretirement.com/market-trends/why-todays-market-setup-positions-value-stocks-win/?source=app https://wealthyretirement.com/market-trends/why-todays-market-setup-positions-value-stocks-win/#respond Tue, 29 Dec 2020 21:30:23 +0000 https://wealthyretirement.com/?p=25429 We’ve seen this market setup before.

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Investing experience is a powerful weapon.

More and more, I believe that we have seen today’s market setup before.

That pleases me because I know how to profit from it.

Last time we had the market setup we have today, I watched a great investing team generate an incredible profit.

Today, I’m going to tell you about a lesson I learned 20 years ago that is still relevant today.

Then, I’m going to tell you how one of the greatest investors of our generation is now positioning his firm to profit in the months and years ahead.

While the Market Crashed, This Fund Rose 71% in a Year

Some things you just never forget.

Twenty years ago, I was living in Bermuda working at a hedge fund administrator.

I provided accounting services to hedge funds and got to see what they were buying and selling on a weekly basis.

I had the pleasure of working with some of the greatest investors in the world.

It was a sweet gig, to be sure. Pink sand beaches, a crystal clear ocean and wonderful weather year-round.

I loved watching how these world-class hedge funds operate.

Then, in 2000, the technology bubble popped and the stock market crashed.

But one fund had been positioned for this for months.

Week after week, Orbis Funds posted excellent results as the rest of the market was melting down.

Each Thursday, I raced to work to see how the fund had performed over the past seven days.

It was exciting – I felt like I was a part of what was going on.

In 2001, the first year of the bear market, this fund notched a 71% return while the market crashed.

The lesson I took away from watching this outperformance is that what this hedge fund did was incredibly simple.

It is also the exact same thing that another investing legend is doing right now…

I Don’t Plan to Just Watch the Trade This Time…

Grantham, Mayo, Van Otterloo & Co., or GMO, is an investment firm led by the investing legend Jeremy Grantham.

What GMO sees in the stock market today is the same thing my hedge fund client saw 20 years ago.

There is an absurdly wide spread in valuation between “growth” and “value” stocks.

That means the expensive stocks are far too expensive and the cheap stocks are way too cheap.

The same market conditions are back – and the trade that will help GMO profit is fairly basic.

GMO has launched a fund that shorts the most expensive growth stocks and goes long the cheapest value stocks.

That means GMO is positioned to profit from both the expensive stocks falling and the cheapest stocks going higher.

The underlying data shows that the fund’s timing looks spot-on.

Growth Trounces Value

Value stocks have underperformed badly for the last four years.

Over that time, the Russell 1000 Value Index has gone up only 17% while the Russell 1000 Growth Index has gone up 104%.

Over the last 12 months specifically, growth has outperformed value by 40%.

That is growth’s largest outperformance over value over any 12-month period in history.

But unlike GMO, I have no interest in shorting stocks. I don’t think you should either.

What I am very interested in, however, is owning value stocks. I believe they will outperform over the next several years, potentially by a wide margin.

Exactly 20 years ago, growth stocks were very expensive and value stocks were very cheap.

That meant it was time to buy value.

I believe that time has come again.

Good investing,

Jody

P.S. There’s still time to register for tonight’s event! To learn how you can earn 4X more on the trades you make, click here and sign up for the free broadcast.

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Are You a Growth or Value Investor? https://wealthyretirement.com/market-trends/value-investing-vs-growth-investing/?source=app https://wealthyretirement.com/market-trends/value-investing-vs-growth-investing/#respond Thu, 17 Sep 2020 20:30:34 +0000 https://wealthyretirement.com/?p=24846 It pays in today’s market to be a certain kind of investor...

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The distinction between value and growth stocks dates a long way back…

Benjamin Graham, known as the father of value investing, lost a bundle in the stock market crash of 1929. To prevent a repeat episode, he made it a personal rule to buy only stocks that were dirt cheap relative to their fundamentals.

He focused on companies trading at low valuations relative to their net asset value, earnings and cash flow. Graham didn’t try to buy great companies – he tried to buy stocks valued so cheaply that they couldn’t go any lower.

His approach worked well…

He bought at cheap valuations and then sold when his stocks reached fair ones. Rinse and repeat, over and over and over again.

Graham didn’t buy and hold forever. He bought cheap and sold at fair value.

Philip Fisher, meanwhile, had a very different approach. In his 1950s classic, Common Stocks and Uncommon Profits, he laid the foundation for growth stock investing.

Fisher believed that the key to stock market success was finding great companies that could drive earnings growth for decades to come. He wanted one-decision stocks where you could buy and then hold forever.

There aren’t that many truly great companies, so Fisher’s opportunity set was smaller. But since he seldom had to sell, managing his portfolio was easier.

Like Graham, Fisher made out very well with his approach.

Which Is Better: Value or Growth?

It took a while even for Warren Buffett to decide whether he was a value or growth man.

In his early days as an investor, Buffett’s hero was Benjamin Graham. Buffett thought so much of Graham that he once offered to go work for Graham’s investment firm for free!

Buffett rang up astounding returns using a Graham-style approach while managing his investment fund in the 1950s.

As he progressed through his career, though, Buffett moved more toward a Philip Fisher style of investing.

You can see that with some of his most well-known investments, like Coca-Cola (NYSE: KO), American Express (NYSE: AXP) and, more recently, Apple (Nasdaq: AAPL).

Buffett bought those stocks and held on for the long term.

Famously, Buffett described his investment approach as being 15% Phil Fisher and 85% Ben Graham.

But the reality is that he is neither a value nor a growth investor…

He is both. As we all should be.

Whether you should focus on value or growth depends on the opportunities that the market presents at any given time.

The Best Opportunity Today

Over the past decade, stocks have had an incredible run. We can see that in the share prices of big tech companies like Apple, Netflix (Nasdaq: NFLX), Facebook (Nasdaq: FB) and Amazon (Nasdaq: AMZN).

As the stock prices of these companies have soared, so have their valuations.

I’ve been using the chart below a lot. It shows Apple’s valuation relative to its earnings.

Apple's Price to Earnings Ratio

Today, Apple trades at twice the price-to-earnings (P/E) multiple that it has averaged for the past decade.

As I said earlier this week, I don’t believe we will see that multiple go much higher, but it sure can easily be cut in half.

The charts of the P/E ratios of most of the popular growth stocks today would look similar to Apple’s chart. These great companies have simply gotten too expensive.

Meanwhile, value stocks have had one of their worst runs relative to growth stocks in history.

Value Stocks' Worst Returns

The last time value underperformed like this was in the late 1990s when tech mania was in full swing.

Not surprisingly, that immediately preceded a period when value stocks went on an incredible run of outperformance.

I believe we are in a very similar position today to the one we were in in 1999.

These growth stocks’ terrific run is nearing its end. Meanwhile, the opportunity in value stocks has seldom been better.

It is time for us to put down our Phil Fisher growth pencils and sharpen our Ben Graham value ones.

So when you next hear from me, I’ll give you what I think is the best Ben Graham value investment in the market today.

Good investing,

Jody

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Why March 2020 Was One for the Books https://wealthyretirement.com/market-trends/march-2020-bear-market-historic-speed-market-volatility/?source=app https://wealthyretirement.com/market-trends/march-2020-bear-market-historic-speed-market-volatility/#respond Tue, 07 Apr 2020 20:30:03 +0000 https://wealthyretirement.com/?p=23594 It was the fastest drop in stock market history... Here’s why it’s unlikely to happen again.

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March was the wildest month in stock market history, and it wasn’t even a close competition.

Even compared with the most hair-raising months in stock market history, March 2020 sticks out like a sore thumb.

Today, I want to take one last look at what we investors just went through in March 2020.

Then, let’s tie a ribbon around this sucker and never speak of it again!

A Market Collapse Like No Other

March 2020 was not my first dance with a market meltdown.

I was an active investor through the tech bubble’s pop in 1999 and also through the housing and financial crises of 2008 and 2009. They weren’t fun, but they weren’t anything like March 2020.

What makes March 2020 different is the speed and whipsawed action of the move. This stock market drop was absurdly fast and volatile.

Here is the best perspective I can give you for the speed of the drop…

The chart below depicts all stock market declines of more than 20% that happened after all-time market highs. The data dates back to 1915.

Chart - First 50 Days of Historical 20% Drawdowns

Historically, on average, it has taken 255 days for the market to go down 20% from a peak (a 20% drop is the definition of a bear market). In March, it took just 20 days – which is less than 8% the time of the historic norm.

You wouldn’t believe it unless you lived through it.

Even the 20% stock market crash of 1929, known as “The Great Crash,” took 36 days. This time around, we almost cut that in half.

A Surprising Amount of “Up”

Even though the market in March 2020 went down at record pace, the swings upward during the month were equally extreme.

One day, the market had a big drop. The next day, the market had a big gain… It went up big, and then it went down bigger.

It is really quite amazing that we went down as far as we did with how many massively positive days there were.

Pictures tell a thousand words, so I’ll show you how wild March 2020 was with another graph. This graph shows the Dow’s cumulative absolute percentage daily change over the month of March compared with history.

(“Cumulative absolute percentage daily change” refers to how much the market moved each trading day regardless of direction. So if the market went down 2% on day one and then went up 3% on day two, the cumulative percentage change would be 5%.)

Chart - Dow Cumulative Absolute Percentage Change by Month

Wowzers! There is nothing in stock market history that even comes close.

Adding the 22 trading days of March 2020 results in a cumulative percentage change of 117%. That is an average daily change of 5.3%!

The next wildest month in history was October 2008, which had an average daily change of 3.8%.

I lived through October 2008 inside of a financial institution, and let me tell you, I did not expect the market would ever exceed that wild ride.

But we did, so congratulations are in order… I guess?

Where Do We Go From Here?

As an investor, I believe it is important to not convince yourself that you know something that is impossible to know.

Don’t convince yourself that you can predict the unpredictable. Leave that for the talking heads on the financial networks who are willing to do it by the hour.

I’m not going to tell you that the stock market has now bottomed and that we’ll go straight up from here. It may very well have, but nobody can know that for sure.

What I will tell you is that historical data shows us that a repeat of the wildness of March 2020 is incredibly unlikely for years to come. There may be another month like it at some point, but it might not be for 50 years.

What we experienced in March was the sudden realization of how severe this pandemic is and the brutal impact it will have on the economy in the short term. It is the suddenness that created the wild ride.

What I will also tell you is that the long-term direction of the stock market is the same as it always has been, and that direction is up.

The reality is that making money in the stock market is incredibly easy. All you need to do is build a diversified portfolio over time and then hold that portfolio for the long term.

The key is not to get shaken out of your long-term objectives during the months that the market gets scary. The best way to do that is to stop watching what the market is doing so closely.

Prepare yourself for the fact that the next few weeks and months are going to be tough with respect to both the pandemic and the economy. I don’t think it is realistic to think that the stock market is going to rebound until we work through more of that.

The market could very well go lower, but don’t worry. Eventually, that long upward stock market trend will resume. We have more than a century of data to show that it always does, no matter what difficulties get thrown at it.

Good investing,

Jody

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The Market Twist Even Buffett Didn’t See Coming https://wealthyretirement.com/market-trends/even-warren-buffetts-portfolio-suffering/?source=app https://wealthyretirement.com/market-trends/even-warren-buffetts-portfolio-suffering/#respond Tue, 24 Mar 2020 20:55:48 +0000 https://wealthyretirement.com/?p=23479 Warren Buffett’s portfolio includes major players from a beaten-up sector whose very survival may be in question.

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Investor portfolios are being brutalized by the coronavirus.

But I have an important message for you…

Do not beat yourself up over what has happened to your portfolio over the past several weeks.

You could not have seen this coming.

Nobody did.

That includes people who are much, much smarter than you or me.

Today, I want to accomplish two very specific things as we work through this crisis together. I believe that we can not only get through it, but also profit from it.

I’ve been on the front lines of two similar market collapses, and those experiences are proving invaluable to me right now. I believe that those experiences can be equally valuable to you as we move through this.

Here are my two objectives today:

  1. I want to show you how impossible it was for you as an investor to predict what is happening today by looking at the portfolio of the greatest investor in history.
  2. I want to show you why what is happening in the markets today is not worth worrying about.

We are all in this together.

Let’s stay calm and rational and keep moving forward.

Buffett’s Big Bet on the Airlines Is Suffering

Few would argue with me when I say that Warren Buffett is the greatest stock market investor in history. Buffett didn’t get rich by making one or two big bets… he did it by repeatedly picking great stocks for decades.

Buffett attributes much of that success to his first two rules of investing:

    • Buffett Rule No. 1: Don’t lose money.
    • Buffett Rule No. 2: Don’t forget rule No. 1.

Pretty simple, isn’t it?

Buffett has always grown his wealth with a very concentrated portfolio. That means he can’t afford to make mistakes.

Yet, in this market, even the notoriously careful Buffett is suffering – and not just from the market volatility.

He has significant exposure to a group of companies whose very survival is in question.

Chart - Airline Price Movements Since Highs

Yes, Warren Buffett owns airline stocks, and he owns them in a major way.

In total, Buffett has invested more than $10 billion in four different airlines (the recent share price performance of each is reflected in the chart above).

Buffett doesn’t put $10 billion to work unless he has absolute conviction that his No. 1 rule isn’t being violated. That means that when he bought these airline stocks, he did so believing there was virtually no chance of a permanent loss of capital.

Clearly, even Buffett didn’t foresee what the world is now facing.

All of these airlines are now bleeding cash at a nauseating rate. That means that even Buffett’s portfolio is currently showing serious declines.

My point is this…

Buffett is like the rest of us – his portfolio is currently hurting. So don’t beat yourself up for being in the same position as everyone else… including Warren Buffett.

Because what Warren Buffett knows, and what you know as well deep down, is that this is just a temporary situation. This too shall pass. The key is to not panic-sell.

Over the Long Term, The Coronavirus Won’t Impact Your Portfolio

Things look bleak today on every front.

That includes our health, our economy and our portfolios.

But take a deep breath and relax – that is only the near-term view.

The first and by far most important priority right now is to protect your health.

I can assure you that over time, your diversified portfolio is going to be just fine.

I present Exhibit A – the all-time historical performance of the United States stock market.

Chart – The Dow Jones Industrial Average Up 36,264%

Over time, the stock market in our country goes in one direction. That direction is up.

The ride can get a little bumpy, but for the most part, the stock market goes up 7% to 10% per year on average.

Yes, the coronavirus is going to give us one incredible economic punch to the stomach. In fact, I expect that the economic slowdown we are now into will be one for the record books.

But it will end.

Remember what the world has been through over the long time period covered in the chart above.

That includes World War I, the Great Depression, World War II, the rampant inflation in the 1970s, September 11, the tech bubble, the housing bubble, the global financial crisis… and multiple 50% market crashes.

Despite all of that, over time, the stock market marches in one direction. Again, that direction is up.

Things look bleak today, but this crisis too shall pass.

If you are a diversified investor, you don’t have to do anything. Just wait it out.

If you are someone who has cash and is still investing, this is a great time to put new money to work. You can bet that Warren Buffett is doing exactly that today. That wise old fellow has been sitting on more than $100 billion in cash just waiting for something like this.

Over the coming weeks and months, I’ll help find you the best places to put money to work. There are going to be incredible bargains.

We’ll keep an eye on what Mr. Buffett is buying too!

Good investing,

Jody

P.S. In his recent State of the Market address, Chief Income Strategist Marc Lichtenfeld proved how the market has only gone up over the long term – and offered viewers his expert guidance on what to do next.

Click here to watch the video.

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