Today on the Joseph Carlson showed the stock market continues its decline. It's now down three point six, seven percent for the S&P 500 over the past five days. The QQQ is down, 6.25 percent over the same time period. The fairing greed index which is a rough estimate of investor sentiment. Now is that a 13?
Which is in the extreme. Fear category, investors are becoming increasingly concerned and for good reason, Bill Ackman. Recently did a tweet storm of how we're already in World War 3. Al's not 128 the highest it's been since 2008 and President Biden says that he's going to ban Russian oil imports so we have a lot of craziness going on in the market right now.
We also have this popular graphic being shared around, all of social media, the surgeon Energy prices, suggests high, probability of a recession and the graphic shows that every time oil prices have gone up 50 percent which they just now have that is quickly, proceeded a recession. So I'll give you my thoughts on this and if I think, This is a
true indicator of a recession. Now, we also have some other news that Disney plus is going to launch a cheaper ad-supported tear later this year to their service and I want to go through the benefits and the potential downside of Disney plus having an adverse in of their service. So as always, we have a lot to jump into in this episode a lot of ground to cover. If you like this type of content, you can subscribe to the channel and follow along with my progress for free.
You can also check out the patreon, you get access to a Discord Community exclusive content and of course It's the qual trim software suite, which gives you the dip finder as well as qual term insides and dividend tracking software. That's all included under the patreon. All right now let's go ahead and start off looking at the market overall year-to-date, the S&P 500 is down 13 percent so it's well into correction territory headed towards a bear Market.
The queue is down 20 percent year-to-date and it's well into a bear Market overall. So both of those major indices are in a correction or a bear market and the Dow Jones, the Last of the three has entered into correction territory as well. So all of these are headed down across the board. Stocks are going down and it's clear to me that investors are becoming increasingly fearful
the fear and greed index on CNN. Now shows that investors are in the extreme Fair category and I think this is mostly accurate, from what I see investors are incredibly fearful no longer investors talking about this story of companies. Their total addressable markets, they're not talking about the Future Vision and growth of the company's there. Now just He's looking for places to not lose money.
That's basically what every investors doing right now, they're not looking at the growth plans. They're looking at the defensiveness of every company they own. Is it going to be sold off more tomorrow? That's the biggest concern. Now, if we look at this gauge in historical context, I actually
think it's pretty accurate. The fear and greed index showed that investors were extremely greedy leading up to March of 2020. So, going into that time period, I remember that being the case I made videos. Sarcastically saying that the stock market is this magical money-making machine where you can buy any company and it will go up in price the next day. And that's exactly what was happening in late, 2019 and early 2020.
Then of course, the 2020 pandemic happened sentiment quickly shifted from extreme greed, all the way to extreme fare during March of 2020. That's the point where this gauge got all the way to the worst reading in extreme Fair. Now, after this point the gauge has shifted back and forth somewhere between the two. Ooh, and it's normal radius. But now, it's starting to shift way back down into that extreme fear category my guess is this is going to continue with all
the events unfolding right now. I can see this gauge going all the way back down to the very bottom of extreme fair. So that's the situation we're working with here. We know that the QQQ, the S&P 500 and even the Dow Jones are all selling off. All of them are now in correction territory. In the queue, is in a full-on bear market and it looks like it may continue on this way, unless we get some Really good news. We can see this with our
portfolios as well. My portfolio over the past one week. Period is down 3.25 percent. So it's holding up a little bit better than the market better than the S&P 500 but I'm still down 11 thousand, one hundred dollars that's eleven thousand dollars in one week gone. Then if we look at the past month I'm down 7% That's twenty five thousand six hundred dollars gone.
Then if we look at the past 1/4 the past, 90 days, I'm Down forty two thousand dollars forty two thousand dollars gone in a three-month period. So this is affected my portfolio like crazy looking overall, I used to be at gains of eighty thousand dollars three months ago. Now I'm at gains of 37 thousand dollars and if this selling continues, if the broad Market selling across-the-board, indiscriminate Lee continues on my portfolio is eventually going to go all the way back into the red.
I have a little bit of buffer room right now, I'm still up to 37 thousand. First. But if we go down another 12 or 13 percent, we could see my portfolio. Go back into the red overall. Now, this can be a little depressing to say the least, to see your gains vanish away. And just the order of a couple of months, to see this much loss over Justice time period. I think is very difficult to deal with for a lot of investors. I'm getting a lot of questions
from different investors. Different people that are part of the community hair that are asking me questions. Like look, I invested in companies that I thought were good value, their great companies. They're all being sold off. I'm in the red on almost every single one of them. What do I do in this situation? And I think that's the most important question.
What do we do in this situation? Now, to answer this question, I've gone through an outlined what I think are the most objective and reasonable options. We have available to us, these are the different things we can do with our money and our investments. The first thing is we could look at growth stocks. These are the companies that have been beaten down already quite a bit. Girl, stocks are a category of companies that are growing their revenue faster than other
companies. So if their top line revenue growth is above 10 or 15 percent. That's probably in the growth stock category. If it's slower than 10%, it's probably no longer a growth stock. So, these companies are valued based on their future growth, not really their earnings or their profitability. And the problem with growth stocks right now is that interest rates Rising, make
these companies, less valuable. So they get further and further discounted, and knowing that the feds going to increase interest rates in the future, Makes it so that the multiples these companies trade at is continually Contracting as a multiples, come down the price comes down. So even though growth stocks have been hit a lot already. They've came down and prices the multiple contraction may continue and they might continue to come down in price now.
Of course, we could look at the other group of companies, the value stocks. These are companies that aren't growing their top line revenue as fast as growth stocks. So they might grow out less than 10% per year, but they do have higher amounts of earnings. And they have Our free cash flow that's typically what defines a value stock.
NOW, value stocks have done better than growth stocks for the past six months, but the valuations of these defensive value stocks has actually gotten quite High, feel like the valuation of most of these companies, it's the highest they've been in the past five years. So a lot of the future prospects and defensiveness of these companies has already been largely priced in and if you pile money into am now, you might risk. Those multiples Contracting like growth stocks in the future.
Now, outside of these girl, group of companies, we have the specific group of Commodities. This is the hottest trade right now. This is what every Traders doing. They're piling money into Commodities and you can see this reflected in the share prices ExxonMobil. For example, is the highest price that has been for the past five years, in just the past 30 days, it's up 13 percent while the rest of the market stinking, and you can see the same thing with Chevron.
It's the highest price has been in the past five years, the price is going parabolic, and there's a ton of momentum in this company. So the commodity trade, right? No, is working out well for a lot of investors. They're making money, buying Exxon, Mobil and Chevron.
The issue I have with this trade is that there's a lot of day traders in it. There's a lot of momentum investors in it, not just long-term investors so the prices are being pushed up like crazy right now and eventually those momentum investors will move on to something else. And if you make the mistake of buying towards the top of the peak and momentum investors decide, it's time to move on.
You could be hurt in this trade now after Commodities, we We could look at bonds, maybe that's an option but we know that we're going to be earning real negative returns with bonds so we might earn 2% on a bond and actually have five percent inflation. So we're losing three percent and of course with cash we just have it being eaten Away by
inflation. We also have the option of trying to become a market timer selling, now exiting the market and hoping that we can get back in at a better time. And of course, timing the market in this way, I think is an ill-advised strategy that you're more likely to lose money by tying it incorrectly. Then actually timing it correctly. So overall, when I look at all the options here, none of them look great. In my opinion, this is kind of a situation where you can pick
your poison. You can choose different options here. You can go different routes but I have left out one important option available to us and that is to do nothing. Do nothing, May in fact be the best option. If we go back to Terry Smith's investment letter, he summarizes his strategy in three different steps by good companies. Don't overpay and the third one, which he intentionally leaves in. As part of the three steps is to do nothing.
And I think this is the one that investors really struggle, the most with their good at buying companies and I think a lot of investors are even good at not overpaying. They look at valuations, they look at PE ratios and price to sales and try to determine a good value for the company, but they struggle the most with the step of doing. Nothing sitting on your hands and doing nothing while watching gains vanish away is incredibly difficult and that can't be
understated. This is The most difficult part of investing. And I think this is why investors like Carrie Smith have done really well, is because they're really disciplined and doing nothing.
So my portfolio, that's the strategy that I'm following, I'm not doing the latest Trend. I'm not jumping from growth to value and value to growth going into Commodities, going into Cash, trying to time the market or doing, all of these things that have been proven time and time again to lead to inferior Returns. What I'm doing is buying good companies. In fact, I'd consider them to be great company. Knees. I'm not overpaying for them and then I'm sitting on my hands and
patiently doing nothing. And that third step is very difficult. The pendulum swings from that greed to fear all the time. And I plan on waiting until investors become bullish again on this Market because this isn't going to be the end of it. The market isn't always going to be an extreme fear mode eventually at some point. It'll move all the way back up to extreme greed. That will happen again eventually.
And that's the time when you should be taking gains and selling Out of positions, not when investors are incredibly fearful. So while this may not be the most exciting strategy that comes with the most drama. I think it's the best one for making money and that's what I plan on doing in the future. Now, moving on, we gotta jump into this news of Bill, Ackman the famous investor, now saying that were already in World War 3. We just haven't realized it yet. His reasoning for this is pretty
simple. He says that even though we're not fighting Russia directly, the ukrainians are were supplying them with money were supplying them with weapons and we're doing harsh. Economic sanctions all across the world against Russia. So we're basically at war with them even though we're not directly boots on the ground fighting them and I think in that respect he's probably correct but I wouldn't really categorize this as world war
three. What I have been astonished by is how unified all of the West has been in coming together and going against Russia. It's actually been pretty incredible to see every single major company that I track is pulling out of Russia. The latest to do it is McDonald's. Donald's will temporarily closed 850 restaurants in Russia. Nearly two weeks after Putin invaded Ukraine. So even McDonald's is pulling out of Russia. You have companies like Netflix
and Disney opposing Russia. You have Visa Mastercard implementing restrictions, we have sanctions across the board that are going to further cripple the Russian economy and the US and Europe are now saying that we're going to reduce the amount of oil that we import from Russia. So a lot of this is semantics is This World War 3?
Well I don't really know. It depends on what you define as World War 3. Not fighting directly against Russia. But we're certainly sanctioning them offering resources to people that are fighting them and the unified West are doing a lot to damage their economy through the amount of companies being pulled out of Russia. And it seems like a lot of this may have been underestimated by Putin. Putin May argue that this is all going according to plan, and he had all of this baked in this is
all expected. But I think that that assumption is probably ridiculous. I think Putin did underestimate Ukraine's resistance and I think he probably underestimated, the length that the West is Link to go to punish their economy. I really don't believe that this is all going to plan for Putin. I think a lot of this has backfired.
He's now resulted that just bombarding cities, trying to reduce them to Rubble. They say that President Vladimir Putin could still reduce cities in Ukraine to Rubble. But European countries, say they are not as intimidated by Russian Ground Forces as they were in the past. So, in the vision of all of Europe, This is actually weaken their view of the Russian Ground Forces, they no longer view Russia. As ground forces as this Unstoppable army, they now view it as something that can be
defeated. So Putin, in the eyes of his enemy has actually lowered the view and the respect that his army has by doing this for now. Of course this war has caused oil prices to go up. And now there's a lot of people predicting that the high price of oil will lead to a recession within the us. And this came about with this chart here, this chart shows all the way back to 1970, the price of oil and then highlighted in vertical.
Lines a recession. So you get to see where the price of oil is, and where recession starts and as they Circle hair, every time oil has gone up over fifty percent inflation. Adjusted it is preceded, a recession. Not every single recession has started this way, but every time oil prices have gone this High, it has preceded a recession. So we see that pattern six, different times since 1970 and now we're in the same situation, oil prices inflation, adjusted have again gone up above. 50%.
So the concern is, this might proceed another recession. Now these charts are interesting to look at, but ultimately, I don't think that they prove much. This doesn't mean that we have to enter into a recession. It's happened six times before. But there's a lot of times where we were just shy of that 50% Mark and we didn't enter into a recession, like just a couple years ago, we are about 49
percent. So is this the perfect line that if we got two percent higher oil prices we would have entered into a recession a couple of years ago?
I don't link. I think that this is just a rough gauge and something that we see crop up after the fact even the firm that put this graphic together, says quote, I don't expect an economic disaster but what we're seeing in oil prices will have significant impact on growth and I think that that's fair to say we also have few economists say that the u.s. is in danger of recession. Since the economy is underpinned by strong labor market.
Solid consumer spending and better-than-expected corporate profits but many expect growth to slow further. ER, if inflation continues to rise, the war in Ukraine has injected further volatility into the markets, just as a Federal Reserve enters the rate hike cycle. They're saying there's a lot of volatility going on right now because of all the chaos going on. So Graphics, like this may be interesting to look at and you might be able to get a better gauge of when a recession is
going to start. But even if you were able to accurately predict exactly when a recession starts, you're still not able to predict the stock market. In many cases, the stock market doesn't trade down, Chloe with the recession and back up with the recovery. A lot of times it dips down before the recession starts and starts to recover during the recession. They're not always perfectly correlated. So trying to time this type of stuff I still think is a losing
game now. Lastly we have a strategy change in Disney with Disney plus so far their service has been where you sign up and just like Netflix you have no ads, you pay a certain amount every month and you get access to their library of content. That's constantly updated. But now Disney has Decided to add in a cheaper ad-supported care to their subscription options. So you'll be able to choose between paying more and having no ads or paying less and having ads in the mix.
Now, I have some thoughts on this and the strategy change, and I want to see if you notice the type of companies that are adding in the ad-supported tears, let's go ahead and read through some of them that are doing this HBO. Max last year, introduced a ten dollar a month plan that shaved five dollars off of the ad free Price. Although in addition to adding Commercials the cheaper plan. Also is limited to HD content, not the 4K. Peacock is another one. It takes a more varied approach.
A smaller selection of content with ads is available for free with a $4.99 per month. Tear that offers the full library with ads, and then there's the 10 dollar plan for peacock. That allows customers to download titles to watch offline and get rid of most, but not all of the commercials. So peacock has the most varied
approach. They have three different Tears with ads, and no ads and everything in between and even Hulu, which Disney now owns and operates offers an ad-free and advertisement supported version Hulu with commercials is seven dollars a month, the ad-free version is $13 per month. So there's a lot of streaming companies that are taking this approach of having a mixture of ads and no ads in their services, they have varied approaches and doing this in
varied strategies. And the reason that they do this, of course, is because it raises that ARP. You that Average revenue per user, introducing ads increases, the average revenue per user by a lot. For example, peacock with their free tear, the completely free tear has an average revenue per user of around $10 per month. They load you with so many ads. When you're watching this, that they're still making $10 per month off of you. So, that's the reason they charge ten dollars per month for
their premium version. Just so that they can have the same amount of average revenue per user that they do with the free tier. And I know that Disney's looking at peacock and saying, wow, they're getting $10 per month per user just with the ad Revenue. That's so much money on a per user basis. Maybe we should allow that option as well.
So Disneys, following peacock, and HBO, and all these other companies with this strategy, do you notice the group of companies that have so far been unwilling to follow this ad Revenue model? Netflix is one of the few companies that only offers options for streaming that don't include ads. They have no add Model. Another one is Apple TV. + Apple TV + only has the option to have ad free. They will not include ads on their service or at least they haven't done.
So, so far and the other one is Amazon Prime video so far. They don't have ads included in their service. The big differentiator, I noticed between these two groups of companies is all the ones that are embracing an ad version of their platform. Are all the traditional cable companies. These are all the Legacy companies. Embracing their legacy model peacock is From Comcast, they're happily embracing ads. We have now even Disney a legacy company embracing ads with both
Hulu and now Disney plus. And we have HBO Max of course with AT&T and bracing ads on their services. Well, all of them in varied forms are embracing ads while the tech companies. The newer companies like Netflix Amazon, Prime, and Apple tv plus so far. None of them are really embracing this ad model and I think that's an important distinction to make the reason that the average Netflix user watches for over.
Hours per day, probably has to do with the fact that they have not embraced an ad version of their subscription. They refused to do so. So their engagement stays incredibly High because you have no reason to disengage you go from one episode to the next with no ad breaks in between. So overall, I think this will be a good thing for Disney in the short term. I think that in the short term, they'll have a higher average, revenue per user. So Disneys going to make more money.
And I also think that they're going to gain subscribers quicker, having the dual options, but in the long term, I see a potential downside to this. Having an adverse in of a streaming service is kind of like trying to just remake cable TV on the internet. And I don't think that's exactly what people want. And I see this actually as a potential for Netflix and Apple tv plus and Amazon Prime to differentiate themselves from all these cable Legacy companies.
While they're all going into the ad-supported revenue streams, the services with Netflix and Apple tv plus, and Amazon Prime probably stand to benefit from it. So, that's all for this show. I'll have more content out this weekend, so if you haven't already, hit the Subscribe button and you can follow along for free.