¶ Overview of video
We are living through the worst economy that almost anybody alive has ever seen. You have to be over 80 years old to go back to the 30s, to, to have seen worse and maybe we're even worse than that. That's right. We are living through the worst economy possibly ever in US history and yet during this time. I have 90,000 dollars invested and I'm continuing to invest that's basically the situation here.
What I want to do in this video is explain why I'm choosing to do this, why I would put 91 thousand dollars at risk. In an economy. That's the worst economy we've ever seen. And I'm going to go through what I think are the three basic realistic scenarios that the u.s. Can go through the three basic scenarios. And why I think an each one of these scenarios, one, two, and three, I think that it doesn't make sense to sell. Basically.
I don't think there's any scenario that convinces me to sell, so we'll be looking at this. I'll be explaining why I don't ever plan on selling. And then, of course, we have some emails and other fun stuff to get to. Now, like I said, I have a lot of money at least to me invested in this portfolio. How its invested in the stock market? It's mostly a breakdown of large-cap, dividend-paying companies Diversified in different Industries.
If you want to look at it, there's a link in the description that you can click into each one of these different sections here, and you can see exactly what my Holdings are. So, either way. I have a lot of money invested and the question is, is whether that's a good decision right
¶ The case for selling
now. Some people don't think. So. I've watched different videos and different content creators saying. Hey, you know, I think I'm going to move to cash because the risk reward right now. Not really good. The market isn't priced correctly. If you go to different graphs like this, they have a pretty sound argument. I don't necessarily disagree with them in the context that they're making their argument.
In fact, if I go to the year to date view of the Dow Jones here and I look at it from the all-time high to where we are currently, it's down around 17% now consider this in the context of the current economy. It's a pretty bad economy in the Dow Jones is down 17 percent from its all-time highs. That's not A whole lot if we go to the S&P 500, this is even even better. It's down only 13 percent because the Dow Jones has a lot of big industrial companies.
The S&P 500 has a lot of these big large, Mega cap tech companies like Microsoft and Apple that really weren't affected too much by the downturn. So these companies didn't have to close their doors and stuff. So it's down 13 percent. Now. Keep this in mind the S&P 500 is down 13 percent basically from its all-time highs. Al Jones is down 17 percent from its all-time highs. Let's go ahead and go back to
Howard marks. This is the founder of Oaktree Capital. He's a billionaire and he gives his assessment on the current condition of the economy. Let's go ahead and listen to a little bit more of this. We are living through the worst economy that almost anybody alive has ever seen. You have to be over 80 years old to go back to the 30s to to have seen worse and maybe we're even
worse than that. It's believed that the unemployment rate will hit a higher level than was achieved in the Great Depression. I people are talking about second-quarter GDP being down 30 to 40 percent. As far as we know. I mean, there aren't good quarterly records. But as far as we know, there's never been a quarterly decline in DP to that extent. So we're in the worst. Economic environment. Let's say ever now. I don't disagree at all with
Howard Marks here. I think that he's accurately describing the situation you goes on to explain a few differences that we have the FED really supporting the economy right now. He says that relying on the fed, you know, has its own implications and concerns and risks, but there are differences between now and 1930. And a lot of them is the way that the FED supporting the economy, but regardless, the point that he's making that the economy is not good right now. It's really bad.
Historically speaking. It's probably the That you've ever seen in your entire life, even if you're elderly, it still might be the worst economy you've ever seen in your life. Having this many unemployed people having GDP expected to follow this amount. That's the, the worst numbers that we've ever seen. And then knowing that it's the worst economy. We've had possibly ever knowing all these bad economic numbers again. The S&P 500 is down, like 13%, So some people are correctly.
They're scratching their heads and saying, how was the economy this bad? With the stock market, down 13% is the stock market, accurately priced. Those are the questions people have. And then some people say, well, I look at the potential upside and the potential downside, and I see a lot more downside in the stock market than I see upside. They look at this and they say
it might go up 10%, but it could go down. 50% could go down 60% from where it is. So, they think the risk reward is not good right now because they believe the stock market isn't factoring in the economy correctly. Now, I think these are all solid arguments. I don't really Problem with people making these arguments and if they want to sell and move the cash based off of that. I think that that's fine. I don't have any issues with it. I'm not really arguing against what people are saying.
What I want to do is introduce my frame of thought and how it might differ from it. I see three basic scenarios that
¶ Why I won't sell
can happen and in each one of them. I don't really see a great reason to sell. So let me go through each one of them real quick. Okay, let's go through the first scenario. So this one's scenario on, I think this one is possible, but I think this scenario is unlikely. This would be be where the economy recovers very quickly that we have that v-shaped recovery. The US economy has a quick recovery, people quickly, regain
employment. So we have like three million people losing jobs every week or at least filing for unemployment. This would be the reverse of that instead of three million people losing jobs. Now, we have three million job gains every single week week after week, you're getting that good news of another three to four million people that get their jobs back, that would be great news. Then we have treatments to the virus. Not only do we have news that a
vaccine is on the way. It's Tested and is having positive results. But we also have different therapies and better ways to treat the virus. So the virus becomes less of a concern and we don't have that huge Resurgence that a lot of people are expecting. So this is where instead of all the news being - it starts to turn around really quickly where everything starts to seem positive again. We have good health news. We have good economic news. People are regaining jobs, the
damage to companies. As limited really things reverse very quickly and the economy is back on track. Now, in this scenario. Rio the very optimistic one. I think that it's somewhat unlikely files to give it like a percent chance. I think could be somewhere around like 20% ten twenty percent, so unlikely but not impossible. It is possible that the economy could recover quickly. That's a possibility. We have a lot of unknowns. But again, I think this one is
unlikely. Now in this scenario doesn't make sense to not be invested. Does it make sense to sell out of the market? Of course, not. This is the good scenario. This is the optimistic one. You want to have your money in the So that if it recovers quickly, you ride along with those gains, if businesses flourish and business is good. You want to have your money in the market for that? So, in this scenario, the one that I think is unlikely, I think it does make sense to be
invested. I don't think there's a good argument for selling out of the market. But let's go ahead and go to the second. One scenario, two is not The Optimist. It's the realest. This is the one where the economic effects are a little bit longer lasting. We have things like the US economy has a very slow recovery. It's not the v-shaped recovery. You it is the swish recovery. We have employment taking years
to regain. We're seeing these numbers of - 3 million a week and instead of having employment regain at 3 million a week, instead. It's a couple hundred thousand a week, maybe and it takes years and years to finally regain back to anywhere close to where it was to begin with. Lots of companies, go out of business, even though the FED aggressively tries to fight the downturn, a lot of companies go out of business for good, and that affects the economy for a
long time. Many people default on loans, so People unemployed have trouble paying for their mortgage paying for their car loans, paying for the credit cards, they default on them. And that causes stress to our financial systems, banks are stressed because of the amount of default treatments to the virus. Take a long time a lot longer than expected. The good news and the rumors of their being good treatments and vaccines. They really just don't pan out
quite as well. And the virus has Resurgence that keep affecting the economy into the future. So, these are things that could happen in scenario 2 where it's not quite as rosy as the first. One thing's do eventually recover. Let's say, within five years, but it does take a number of years. That's a long time to wait for Recovery.
When I'm sitting here making videos every week, talking about my portfolio, going through this five years is a long time for the economy to recover and the stock market in scenario two could drop in the meantime, within those. Five years. We could test new lows. We could have another drop, but in this scenario, even the realest one, the economy does recover.
We don't go into some type of Spiral out of control where it never recovers in scenario 2. Even though the Outlook is a little bit more Grim. It's not completely optimistic. Eventually the economy does recover, and with that recovery. The stock market goes along with it. And eventually we do hit new highs in the stock market. Now, does it make sense to sell and scenario two? I don't think so. Why would I sell right now?
If I think the economy is going to recover within five years, or just around five years, if it takes five or six years, if I think it's going to take that long to me, it still makes sense. To just buy companies. Keep invested in, wait for the recovery because I'm expecting it to happen. The economy will eventually recover, the economy will eventually grow, the stock market, should hit all-time highs sometime in five or six years with the economy recovering.
So in this second scenario, just like the first one, I don't see a real good argument that says I should sell and move to cash. I don't really see that argument as being a strong argument. Some people argue that. Well, in this one, if reality sets in The economy's going to take a lot longer to recover. People are going to sell out that will lower the stock market, and you could have sold, and then bought in at a lower
price. That's what people are saying that the stock market will probably go down 30 or 40%, You could have sold and then bought back in when it's down 30 or 40%. I think that that's really, really difficult to do. I'm not good at timing. The market. I think that it's easier to stay invested to wait for recovery. And in the meantime try to buy good companies at good prices. They pay a good yield. You can just enjoy a constant stream of income.
That's so much easier to do if you try to sell out right now and then wait for the economy to go down far enough to drag the stock market down and then try to buy back in at the right time. You might be successful, but I could see myself really screwing that up. So I think it's really difficult to time the market and if you think the economy is going to recover somewhere, within the next five years. It's just so much easier to wait it out so much for less stressful.
Even if it goes down in the meantime for the next one or two years. I'd rather just keep Vesting, keep buying and wait out the recovery. And then we have scenario, 3, the pessimistic scenario, the Doomsday. This is no recovery for decades. We have not only a there's, there's no long drawn-out recovery. They're simply just not a recovery. We have a long drawn-out
oppression and the US economy. Enters one of these spiral inflation, spiral, deflation stagflation, one of those scary economic terms, that really means that money becomes worth a lot less. It becomes worth too much and we can't manage our debt. Either. One of those scenarios aren't good. If we have too much inflation, that's not good. We have too much deflation, that's even worse.
So if either of those happen, that's not a good thing to have happen, and it can spiral out of control, especially in the deflationary phase. I think the feds more worried about that. So we have issues like that, that we could face and we have the treatment being worse than the Cure. I'm not talking about coronavirus. When I say that, I'm saying the FED that the treatment that The FED is giving us, what if it's worse than the Cure, what if it's worse than nothing.
They're treating. What if it has unintended consequences that causes the US economy to spiral out of control in some direction. We have too much debt. We have too much unexpected consequences. What? This could be a similar to the often referenced Japanese stock market. If you're not familiar, the Japanese stock market went through a phase where it really just never recovered. Since like, the 80s, it hit a peak and since then it's never
been back to where it was. It was a huge asset bubble, both in real estate. And in the companies in Japan, people bid them up to prices that were astronomical. So let's say we have that. We have something happened that similar to what happened to the Japanese stock market. That the US economy was really just this big bubble.
Everything was inflated. It had all these problems and the virus was just the pin that poke the bubble, everything explodes, and it's really never going to recover for decades and decades. Now, overall. I think this scenario is Unlikely, I don't think it's that realistic. I think most of people that really try to sell this happening. They're also selling gold. That's typically what happens.
So, keep that in mind when people are really advocating for this type of thing saying that it's realistic, you know, they're typically selling gold. But regardless, I think this is a possibility. It's something that theoretically could happen. We could have a type of collapse in the u.s. That takes decades to recover really. Just never happens in our whole investing career. Years. So, even if we had this play out, if we had this doomsday worst case scenario in my much better off.
Having sold right now, then staying invested. I don't really think so. I don't think there's a great argument that convinces me, that I'd be much better off in 20 years. If I sold right now. If we have this type of thing happen, I think we're all in this same big boat. We're all in this boat called the world economy. If the world economy comes to a grinding halt, all of us are going to suffer whether you're invested or not. None of us are going to have Retirements. Think about this.
All of us have a retirement. This kind of dependent on investing. We have our pensions, our 401ks are Roth IRAs. We have all these tools to build a retirement. And most of them are invested in the stock market. If the stock market goes down and never recovers throughout the duration of our lifetime. The none of us are going to have a good retirement.
You could save up for your own retirement, but most people make somewhere between 500,000 and like two million dollars on the high end over the the course of their working life. So in order to save for retirement without investing, you'd literally have to save almost every penny you make without spending any of it. Not really a plausible thing to have happen. Either that or you have to make like double what the normal person does.
So this is a scenario where I just think we're all in this big ship. If it doesn't work out at all. I think all of us are going to suffer. I have my doubts, that moving your money to Precious Metals is really the thing that would save you here. Now that might be the case, but if you do that and keep all your money and gold and you're waiting for the collapse of the Double economy. Not only are you waiting for a scenario that I think is highly unlikely.
But even if we do have it, I have my doubts of how that will work out. We don't really know how people will value gold. If the global economy is completely stagnant for decades. They might value it well, but it might not be valued as much as it was historically.
So, there you go. That's the reason why I say I'm not selling is because I look at the different options that I think are likely outcomes or probable outcomes of the US economy in the stock market and in each one of these Mario's, I just think it doesn't serve me better to sell. Doesn't serve me better to sell out on better served, keeping my money in the market in each case. Now, maybe I'm missing something. Maybe you have an argument that I haven't considered.
If that's the case if I'm wrong. Leave a comment. Write me an e-mail. I'd be happy to go over it because I've thought about this a lot and again in each case. I think I'm better served staying invested. So what I plan on doing is basically more of the same focusing on passive income, focusing on generating a lot of cash flow. I have $88 My cash balance right now. That's all from dividends.
None of this is from deposits. Typically, what I do is I take this money from dividends in my cash balance. I combined it with money that I deposit and then I use that to buy shares of whatever companies I think are either a good value or are a good company to buy given the current threats that we face. So I bought companies and health care companies and tech companies and consumer different ones that I think are good by. So that's what I've been doing.
I plan on continuing to do that and I'll keep you updated week by week with it. Now, moving on there's a couple
¶ The new normal
items. I want to address before going to emails and questions. One of them is this video that I came across, this is the social distancing table that this restaurant and Maryland came up with. It's basically a big inflatable tube on a table, that's on Wheels. So, let me go ahead and play this clip here. This is real, by the way, this isn't fake. Now hopefully this is just an attempt at the store owner to have some type of viral
marketing. Some type of funny marketing gimmick that it was doing and if you did do that good job. I mean, he did a good job of making these tables. But if this is really a non-ironic attempt to have social distancing at its restaurant. If this is the new normal, I don't want any part of it. I'll be good. Staying in my house forever and eating takeout. If this is what the dining experience is going to be like at restaurants, what? This reminds me of is a while back.
I showed this video clip of this guy, he made this thing called the pandemic prevention belt. Let me play just a clip of this. This is the pandemic. Prevention valve, stop spreading germs today, the included spandex wristbands will ensure your hands will never be able to reach your face. Keep those disgusting hands as far away as possible. No, Okay. Now I didn't think that I had to point this out. But I feel like I must this was a joke here. This guy made this as a funny
joke. Haha laugh at the absurdity of this pandemic. Prevention, belt. I think we've gotten to the point though, where some people might actually use this type of thing on. Ironically. I think it feels to mass-produced that belt and sell it. The owner of this restaurant would be the first customer. So, after seeing this video, hopefully, this isn't our new
¶ Viewer reaches 10k investments
normal here. Okay. Now, let's move on to some emails. Joseph at Joseph Carlson show.com as the email address. I first want to highlight one comment. That was left on the previous episode. I did. This is from Luke. He says can't wait to see you hit 100K. My portfolio is now over 10K and I can't believe it never thought I'd be able to save that much money so fast, thanks for the inspiration and the awesome content, keep it up. I really appreciate that. Comment, Luke.
This is something I think is awesome. Anytime that I make episodes. One of my favorite things is a see if it motivates other people to save money to invest to pay off debts to do anything like that. Because I genuinely think you're Matter what companies, you buy the specific investment decisions you make, whether you go for growth companies or dividend, all that type of stuff can model out. The fact that if you're putting your money and productive assets for making financially, good
decisions. It's going to improve your life and like you mentioned, you can't believe that that you have ten thousand dollars invested. Now once it gets past ten thousand dollars in value, Luke, that is when you get a lot of momentum, I think when you got to this point realize that you're so far past what most people are doing, Most people couldn't go two weeks without having a paycheck. They can't survive a month without having a paycheck.
You have ten thousand dollars in Investments sitting there. That's pretty liquid. You could take it out at any time you want. So you essentially have saved up ten thousand dollars. You have it invested right now working for you. But this is a huge landmark and you have to give yourself a pat on the back for doing something that most people don't. Do you have momentum going in
the right direction? You're saving this money, using it wisely and you're going to be rewarded for it down the road. If You keep going. I think momentum will push this further and further along. It'll get easier to build up larger sums of money. So it'll be at 20,000 before you think and then we'll be at 40,000 before you think you know, you'll be surprised how quickly it grows. If you stay consistent. Diego says, hey Jules, if people
¶ Frustration about Heroes Act
are being narcissistic and selfish regarding the heroes act. Nobody's happy that immigrants will be able to receive a stimulus check. Don't forget that. There are mixed families who have kids born in the US. Is it right? That American children with one immigrant parent won't get help. During this critical time, are they not considered Americans for having an immigrant parent? Personally.
I don't think there should be any talks regarding a stimulus check, because it won't help the economy, and we'll just cause future problems. If we're honest, Americans would be okay with the heroes act. If the immigrants were taken out of the equation. Most people don't care if it affects the economy. They just want all the benefits for themselves. They're giving an attitude that if they can't have it, nobody. Can. We are being greedy and forgetting the virus.
Does not care about your status. Love your videos. Thank you. Well, Diego, I appreciate the email. I'm glad you liked the show. I think you're highlighting a point or at least arriving at a conclusion that I think most people get to at some point, which is the government is not good at properly, rewarding people for effort or their situation in an equitable way.
That's not a skill, the government really has that they're good at but they're known for in fact, a lot of the ways that they do things are almost counterintuitive. They're against the incentive. So I can give the example of You know, a big business that has done stock BuyBacks for a decade that hasn't saved any money for itself and then it runs into trouble and the government steps in and bills it out.
That is rewarding bad behavior. That is, you know, a moral hazard is the term for it. So the government's really good at rewarding bad behavior and its really good at discouraging good behavior. For instance. My older brother. He's been working during this entire downturn. He's an eye surgeon and he's been doing a lot of procedures that aren't elective procedures.
These are emergency procedures. So people, come in, they have Damage Done to their eye, they have I issues and they need an immediate surgery to help restore Vision. He'll do these surgeries there, really highly complex, highly stressful surgeries, and he's not going to receive any money from the stimulus. He's on the side where he pays nearly 50 percent of his income in taxes, but he's not going to receive any money and stimulus because he makes over the
threshold. So there's people that, you know, they're in that situation where they're working doing things that are pretty important, you know, fixing your vision is kind of an important thing that aren't rewarded by the There's companies that Miss manage businesses. That get huge paychecks and they get a Lifeline. There's a whole thing with the government. They're really, really good. At making it so that they have the wrong incentives. There's lots of moral hazards.
There's lots of issues with it. You're probably looking at this and I can send some frustration with this email. You're saying, you know, there's probably some people you're talking about undocumented immigrants that are contributing they're working. They're probably paying taxes and they're not going to receive any money fair enough. There's arguments on either side, but the main point is if you're giving away five trillion, Dollars.
If you're expecting a few bureaucrats in Washington, to do that in a very Equitable way where everybody is receiving it fairly. It's just not going to happen. There's going to be winners. There's going to be losers. Everybody wants to be on the winter side, but it doesn't work out that way. I could give more examples of moral hazards. So one part of it is student loan, forgiveness. There's winners and losers in
that situation. Obviously the winners in that situation would be the people carrying student loans. That would have a forgiving that would be huge. Win for them. The losers in that situation are the people that worked two jobs to pay off their student loans that were financially responsible. So again, there's there's incentives and disincentives a lot of times the government has it backwards, but that's the way
the government works. So my advice, I guess even thinking about this for a minute is just, you know, be grateful if you're on this side where you're benefiting from it, if you're not, don't concern yourself too much with it because it's out of your control and like most things with politics in the government. It's probably better to not. Self with the too much, do what you can but then focus on things you're in more control of. So that's what I try to do.
Not concern myself too much with stuff that is out of my control and how they divvy up and give out trillions of dollars is definitely out of my control. So that's the best advice I have
¶ Who would buy negative yield bonds?
on that subject. All right, Ryan says, hi Joseph. Firstly, thank you for the informative and thought-provoking videos. I watch every week and appreciate the effort. My question is regarding - bonds here in the UK. The bank of England is now offering a three-year bond with a negative. 0.003 percent yield as an investor. I cannot see the appeal knowing that your investments will return less than initially invested. Seems like a poor move. Or is there some upside? I'm overlooking.
Thank you for taking the time to read this Ryan. Well, this is an interesting question. Ryan. This is something that's perplexing to a lot of new investors. I have I think limited knowledge of the bond market it gets very complex, but I've listened to a lot of different opinions on this people like Jeffrey gundlach that strongly opposed the u.s. Following Example of Europe and entering into negative interest rates. He thinks that. That would be an incredibly bad
decision for the u.s. So you can look at some videos of him. Jeffrey gone, like has talked about this a lot. But overall, I think it's policies where the intention was to Spur economic growth. Europe wanted to have it. So money was really cheap and that would make it. So the economy would grow faster. It doesn't seem like there's a whole lot of evidence to support that but that's the basis of it. The question is, why would people buy a - yielding Bond?
Why would anybody do that? Is there some hidden reason why I think the reason why is because they have no other place to put the money if you're controlling billions of dollars that money has to exist somewhere. It can't just be in the air know where it has to actually exist somewhere. So, typically that's an equity of companies. So you have stocks or you have bonds. And if you don't want to put your money in stocks, you put it in bonds. Well, what if the bonds aren't yielding?
Well, what if they're negative Feeling Again, that money has to be somewhere. So some people will buy the bonds just because they're really forced you. They No other good place to put the money if they don't want to actively buy shares of companies. They have to put that money in bonds. So I think that's the answer. I think there's a lot of money that exists. There's not a lot of places to put it so it ends up in these bonds, even if they're guaranteed to give you a negative return.
So I'm sure people there aren't really pleased with a guaranteed - return but that's the options are given right now. Okay. I'm going to go ahead and end this episode there. I appreciate everybody for listening. Also, if you don't know, this show is on pretty much every Podcast service. So it's on Spotify. It's on Apple podcast. If you search, the Joseph, Carlson show, you'll find it. So if you want to listen, that way you can, you're welcome to
as well. We probably have about 5,000 listeners per episode on the different podcast services. So there's a good amount of audience there as well. But you can check that out. Also, if you're interested in doing more of a daily discussion, if you want more Joseph, Carlson show, I have the Discord. I'm on that pretty much every day so you can check that out as well. Otherwise, I'll see you guys next time.