What to expect when you’re expecting (a crash)

Bryce: [00:01:13] Welcome to another episode of Equity Mates, a podcast that follows our journey of investing, whether you're an absolute beginner or approaching Warren Buffett status. Our aim is to help break down your barriers from beginning to dividend. My name is Bryce, and as always, I'm joined by my equity buddy Ren. How are you?

Alec: [00:01:29] I'm very good. Bryce. Great to be with you for another week as we slowly approach Warren Buffett status. Yeah. 

Bryce: [00:01:36] Week by week, we get there

Alec: [00:01:39] slowly. Another bold prediction that I didn't make in our bold prediction episode, but I should of Warren Buffett is going to. There's going to be a lot of Warren Buffett love this year. OK, your stock? Well, every time high growth is having a moment, everyone's like Buffett's lost at Buffett's lost that. But then when he when growth falls like in 2000, everyone's like Buffett, the king. Well, if it's the 

Bryce: [00:02:04] case, we put up a social post quite recently that showed the divergence that occurred between ARK's ETF

Alec: [00:02:11] and Buffett. Buffett's Berkshire Hathaway and Berkshire is now caught. Yeah, it's 

Bryce: [00:02:17] fascinating. Well, speaking of markets, that's what we're going to be focussing on in this episode today. We have previously spent the last two Mondays doing our bold predictions and stock of the year, so it's time to take stock pun intended and recap what's been happening in markets while we've been on holidays. Have a look at some of the companies that have outperformed over reporting season in the U.S., some that have majorly disappointed, 

Alec: [00:02:43] many that have not. Yes. 

Bryce: [00:02:46] And then have a look at what Jeremy Grantham has been saying the perma bear and close out by having a conversation around whether or not this is a dead cat bounce or not. So plenty to cover. Let's get stuck in Ren unless there's some housekeeping. We want to cover 

Alec: [00:03:01] one piece of housekeeping. We have our annual survey out. We just want to know who's listening, what you want out of Equity Mates, where you're at in your investing journey so we can better make content for you and hopefully grow the Equity Mates community. We do have a $500 prise as an incentive, but hopefully the incentive is to just help us make better content. So if you can jump into any of our channels, socials shownotes here, however you interact with Equity Mates, there will be a link to the survey. If you could please fill it out, that would be greatly appreciated. 

Bryce: [00:03:39] It won't take more than 15 minutes, and to be eligible for the $500 units do is answer all the questions pretty easy. So we would really appreciate that there's a couple of weeks before it closes. So get on it. 

Alec: [00:03:50] But don't wait a couple of wait. No, because then we'll worry about the response rate and we'll keep talking about it. And then if you get it done, who's responsible? If you get it done early, then we won't be worried about it and we'll shut up and not do housekeeping to get into the episode. 

Bryce: [00:04:03] Yes, so Ren. There's been plenty happening while we're away, and we're going to have a chat now about the demise of the unprofitable name or story stocks, particularly since the start of Jan, 

Alec: [00:04:16] which is finally gone in parallel with the demise of your portfolio. 

Bryce: [00:04:20] Not true companies that are reporting well, but missing analyst expectations are getting pumped. And then there are companies that continually beat expectations and are doing well. So let's start with the unprofitable meme stocks in the story stocks. And maybe when we go through them, it'd be good to recap perhaps what the if they were the story stock or the main stock. 

Alec: [00:04:40] Because what's the difference?

Bryce: [00:04:42] Good question. 

Alec: [00:04:43] Well, of feels like an unnecessary thing to do. So look, if 

Bryce: [00:04:48] your portfolio was made up of Tesla, AMC, GameStop, Robinhood, Virgin Galactic, Rivian and a bit of crypto, you're going to be in a world of pain at the moment because they are the stocks that last year saw terrific performance in terms of their share price. But since the start of Jan. have really suffered. Tesla is down 23 percent. AMC is down 38 percent, but are almost down 70 percent since the start of September. GameStop, which we knew was one of the biggest meme stocks of last year, pumped up on the Reddit community, is down 24 percent, 53 percent off its high. Robinhood, another sort of hyped up company when it opened last year, down 27 percent, although 70 percent of its 75 percent off its high in September. Virgin Galactic hoping everyone was getting on that, hoping that it would be the rocket ship. It is down 34 percent and down almost 90 percent since its peak in June last year. And electric vehicle company Rivian really hit the ground running last year, but is now down 41 percent, or 64 percent, since November high. Now we know the market has been dropping more broadly, but these are pretty significant falls for companies that held a pretty strong place in many investors hearts last year. 

Alec: [00:06:08] Yeah, sounds like you don't have dominance.

Bryce: [00:06:11] I have nothing to do. These companies, I don't earn any single one of those, thankfully outright. Obviously, a lot of them are in ETFs 

Alec: [00:06:18] that Tesla will be in a lot of people's, yeah, but probably not a lot of the other ones. Yeah. So obviously, meme stocks were punished, I think is not a exaggeration. And a lot of people sort of wondered if that was the start of something bigger in parallel to that we saw. I don't know if you call them meme stocks, I think they're a little bit different. Unprofitable, unprofitable tech companies also fall away Peloton, Zillow, the likes of those bots, I guess, before we get into that more generally. Is this the end of the main stock? 

Bryce: [00:06:53] No. I think what happened last year is here to stay, whether or not we're going to see it this year. I'm not so sure. But no, it's definitely not the end of the meme stock. Everyone loves the story. I think a lot of investors invest on the basis of stories and get attached to companies. And so, you know, Tesla is a great example of that. So I don't I don't think this is the end of the meme stock, but I I do think that it's it's going to sizzle for a little bit now is as things potentially start to revert to the main somewhat, but we'll see what happens. 

Alec: [00:07:25] OK, what's the next meme stock? 

Bryce: [00:07:28] The next meme stock will be Reddit if it IPOs. 

Alec: [00:07:33] Yeah, that's a good shot. Yeah, yeah, that's a good one. 

Bryce: [00:07:36] Reddit pumping up Reddit users, pumping up Reddit. 

Alec: [00:07:39] Yeah, yeah.

Bryce: [00:07:40] And that's potentially going to happen this year. 

Alec: [00:07:42] We'll talk about Reddit because I'm I'm pretty, pretty bullish on it. Yeah, yeah, yeah. Well, just as I use it a lot. 

Bryce: [00:07:48] Yeah, well, that's good. Invest in what you and I are true. 

Alec: [00:07:51] Yeah, well, that's where you invest. That's why you invest in Philip Morris. No, not true. Not true at all. We're back for another year. All right. So I think that's that's the start. And that was for many people. The question was, is this a canary in the coal mine? Does it start with the main stocks? Does it go to the unprofitable small tech stocks and then does it follow to the rest of the economy? Sorry, if the rest of the stock market and like is 2022 going to be a year of a bit of pain and we will get to what some of the expert investors were saying. But before we do, we then entered earnings season and this was while we were on holidays trying to relax. And all of a sudden, you know, stock of Eric's calling us portfolios were in the red and, you know, we were like, Should we be making content about this? Bryce was just like, Give me another mug or radar and shut up. And yes, we were on holidays together. We spend all of our time together. But yeah, earnings season kicked off and the market in a word I think is jumpy.

Bryce: [00:08:56] Yeah, jumpy, jumpy. We often speak on the show that expectations are everything when it comes to reporting season. And if a company doesn't meet expectations despite probably putting up some good numbers, it'll get punished. And if a company exceeds expectation, it's likely to get rewarded on the upside, and we're seeing that in a big way at the moment. Yeah. So a couple of examples here, and I know the first one might not be the best because it did present some pretty poor results. But overall, let's have a chat about Metta or Facebook. So it did thirty three point six, $7 billion in revenue, and that was verse thirty three point four billion in expectation from the market. So they beat expectations. Daily active users was one point ninety three billion. The market expected one point five, so just missed two point ninety one billion monthly active users and the market expected two point ninety five billion. So just missed. And they gave guidance of twenty nine billion dollars in revenue for this coming quarter versus expectation of 30 billion. So the market expected a billion more. So not too far off expectations, some pretty reasonable numbers. The stock did plunge, though 20 percent off the back of that. But Ren there are some other reasons that that was the case. 

Alec: [00:10:18] Yeah, well, if people follow us on Instagram, they'll know that we've got a bet going. You think amid such, Facebook will become a $2 billion company.

Alec: [00:10:27] Two billion, I'll take it. Yeah, it's really important to 

Bryce: [00:10:31] remember if it was one or two, to be honest. But whatever, whatever, let's call it one, 

Alec: [00:10:37] and I don't think it will ever hit that. And so, you know, Bryce has come on the pod today and is saying, Oh, they only just missed their numbers, whereas I'm going to tell you why they fell twenty six percent in a day, which was the largest value fall in history. Those percentage wise, it's been bigger. Yeah, but in terms of the amount of market cap value investor money that was wiped out in a day, there's never been two hundred and thirty billion. So thanks Zuckerberg. First of all, the very first time ever. The daily active users has fallen on Facebook 

Bryce: [00:11:16] with some million or something like something 

Alec: [00:11:18] like that. And so it's not about the fact that it was only they just missed expectations. It was about the fact that you have to significantly readjust your growth rates and your projections for this company if daily active users are falling. Secondly, Apple's privacy changes on the iOS 14 have really started to impact revenue. But interestingly and importantly for the market. It affected Facebook a lot more than it affected Google. Google has been able to manage the Google suck up or did suck up just as much data, perhaps even more data than Facebook. But it has in effect affected their business as much as it's affected Facebook's. And you can sort of understand why that is because Google can still target search terms without needing data on you, whereas Facebook made that data on you to effectively target ads so that that was a big one. Let's see if I can remember two other reasons off the top of my head. You might need to help me out here. 

Bryce: [00:12:13] I think those are the two biggest. The other one was that huge expenditure in the middle of 

Alec: [00:12:18] a huge expenditure on the metaverse costs big there, and then there was one more that I'm not going to remember. That's right. You can google it if you really care. But the long and the short of it is metta is a long way off one trillion dollars now. Yes. Yeah, well, it's like in the 600 billion. Yeah. Still not small.

Bryce: [00:12:37] Look, I'm going to stick with the bet, but I'm very I'm very I'm not. I'm nowhere near as confident as I. Yes. But look, if who knows, it's we're just we're talking about one quarter here. So the Zach has turned it around before. Can he do it again? Time will only tell. But let's have a look at some other companies that reported pretty reasonable results, but got slammed Spotify. They increased their monthly active users by 25 million paid subscribers, grew 16 per cent year on year. They have been pushing to increase their share of revenue by ads, and that increased to a record 15 per cent of total revenue. They beat expectations. Yet the stock plunged 13 per cent because their estimates for Q1 were below analyst expectations. Analysts were expecting more to occur in the next quarter than what Spotify have have advised, so despite some pretty decent growth. They've been absolutely hammered on over the last couple of days, so third, down 13 per cent. Another one is Netflix. They beat profit in line with revenue expectations. Net subscribers grew and they got pumped 20 percent. Shares fell 20 per cent in a day, but that is because growth is a subscriber. Growth is really slowing and what it feels like is matter. And Netflix are in a battle with attention from Tik-tok, so it's a really interesting dynamic playing out at the moment. But Ren, what about companies that beat expectations and continue to outperform? 

Alec: [00:14:13] Yeah. Well, we said that the market was jumpy, and so those three companies are they all fell double digits because they slightly beat or slightly missed what the market expected of them. There were companies that surprise the market on the upside and the market jumped up. So it's not just jumping down, it's jumping both ways. It's just it's just big movements for big companies as well. Facebook saw the biggest value destruction in a day. Amazon saw the biggest value creation in one day. They jumped 18 percent after, so they reported after hours. The stock jumped eight percent after their reported. Here's what the market expected from earnings per share three point seventy eight. Here's what they delivered. Twenty seven point seventy five 

Alec: [00:15:06] Market Get it so wrong. 

Alec: [00:15:08] So I think a big part of it. Surprisingly, given you've just spoken about this company as a meme stock, that's fallen. But the company's net income was boosted by an eleven point $8 billion pre-tax valuation gain from its investment in Rivian Automotive, 

Bryce: [00:15:26] an account that's so on paper. 

Alec: [00:15:29] Well, yeah, yeah. Yeah. Rivian. Hopefully they sold before they didn't even have a car yet. Yeah, they don't. But they've got a big investment from Amazon. They are down 41 percent, so you'd expect that to impact next quarter. Yeah. But yeah, Amazon surprised on the upside in the market jumped. This is my favourite story, though. Social media company that you keep counting out that no one really understands how they keep doing it, but they keep doing it. Yeah, well, actually, we all understand how they keep doing it. Young people flock to it. They've got like 200 million daily active or monthly active users still snap. And I think the company, though, that at one time tried to tell us they were a wearables company and they came out with glasses, with cameras on them, a more fashionable Google Glass. Forget the glasses because they are a social media platform that continues to go from strength to strength. And they just announced their first quarterly profit as a public company only profitable. No better surprise for investors than a surprise profit. 

Bryce: [00:16:32] Yeah, or a profitable tech company in general.

Alec: [00:16:35] That's up

Alec: [00:16:37] 60 percent. That's one one does crazy, you know? That's more than my portfolio will be up all year sucks. 

Alec: [00:16:45] This sucks every year. 

Alec: [00:16:48] So yeah, that was a big one. Don't talk about any of the other companies that are that did well. 

Bryce: [00:16:52] I mean, it's just staggering that companies like Amazon that have a $1.4 billion valuation can jump 18 percent. It's pretty impressive, but look, others that have done well. Alphabet just keeps on delivering it. Had it had great results. Atlassian Home-Grown Home-Grown Hero. They had great results and an. Another little fun one is Chipotle. They also beat analysts expectations and had a double digit jump as well. So there are still companies out there despite what's going on in the market at the moment that are outperforming and beating expectations. And yeah, it feels like if you're invested in some of these companies, then you can be doing pretty well. 

Alec: [00:17:36] So Atlassian up 10 percent the normalised earnings per share because actually from a gap accounting, they didn't actually make a profit but normalised earnings per share, 50 cents beat by 11 cents like that's a big expectations beat up 10 percent. Mike Cannon-Brookes can probably buy more of the Southern Highlands as a result. 

Bryce: [00:17:58] He doesn't if he doesn't own enough of it already. And for those overseas, that's a really nice place down in the south coast of Australia. 

Alec: [00:18:05] Well, no, no, no. South coast like inland. Yeah, yeah. A couple of hours south of Sydney. Yeah. Mike Brooks, his boss like eight properties down there or something huge. Yeah. Yeah, huge amount of land. Obviously, that's American companies will talk about Australian companies earnings season a little bit light up with sort of a couple of weeks into it. But I think the takeaway is we started the year with a lot of panic and then earnings season was a really mixed bag. There was some great results and some quite poor results. And the market is incredibly jumpy. Obviously, we've been reading like a lot of people, everything that's been happening around expert investors calling crashes and you know, what does that mean and what does how should we be investing as a result? So let's take a quick break and then get into that discussion, talk about what we've been reading and then talk about how we are approaching the year as investors. So Bryce, before the ad break, I mentioned that there's a lot of noise, shall we say, a lot of noise from very rich and accomplished investors noise that makes you question whether you should be invested at all right now. Yes. So let's unpack that.

Bryce: [00:19:20] Well, firstly, to those making noise, I say chill

Alec: [00:19:23] out, just relax. 

Bryce: [00:19:25] Because yes, we started this episode by talking about some of the story stocks in the meme stocks that have been hammered into the tune of, you know, almost 90 per cent in some cases. But I'm looking at the S&P 500, and since its peak in early January, it's down a whopping four percent. Yeah. So firstly, chill out where 

Alec: [00:19:45] if it was down, what? Like 10 percent and then it's bounced back?

Bryce: [00:19:48] Yeah, yeah. We hit a correction on the ASX with a correction on the Nasdaq. We hit correction this. And no, 

Alec: [00:19:54] we didn't hit correction in the S&P. It fell nine point eight percent between the 3rd of January

Alec: [00:19:59] and the Tony on a technicality. 

Alec: [00:20:01] And we don't roll up when we decided to round up. True, true. 

Bryce: [00:20:05] So we've just missed a correction and now we're seeing a little bit of a bounce and we'll discuss that what that could mean. 

Alec: [00:20:12] So just in terms of these terms, technically, they say a market correction is if it falls 10 percent or more and then a market bad. But that's not a bear market is 20 percent or more. 

Bryce: [00:20:26] Yeah, but I think a bear is over a period of time as well. It needs to be sustained, right? Look, crashes 20 seconds. It's all down. 

Alec: [00:20:35] But so Jeremy Grantham, who is a really notable investor, co-founder of JM, are over in Boston. He released an article at the start of this year that really, I guess, got people quite worried. And he turned to the US stock market, a super bubble. He he referenced this. A bubble of this size has only been saying a few more times us in 1929. Hate to say that comparison. Japan in 1989. Not great. The a super bubble in housing in the United States in 2006 and then also in housing in Japan in 1989. And then he said all five of these super bubbles. Oh, sorry. Also, the US in 2000, the tech bubble. So he said all five of these super bubbles corrected all the way back to trend with much greater and longer pain than average. Now, that doesn't sound great, and he was basically calling a 50 per cent drop in. Yeah, the US share market, which obviously got people worried. So I think it's important to say that Grantham captured headlines, but he wasn't the only person that started the year making big calls. He just he just branded it really well. Calling it a super bubble gets the media headlines. Yeah. Seth Klarman, one of our favourite investors here. He he wrote in on the 19th of January. So around the same time, against a backdrop of relentless money printing, a very active Federal Reserve and financial largesse, many investors have been lulled to sleep, unaware of an unfocused on risk. He he went on, but he was talking about the risk in the market and obviously concerned. And then a couple of other investors, Sam Zell and Thomas Petterfy. I won't read their quotes, but basically they were also saying that we're in a bubble. 11TH of January, 19th of January, respectively. So like early January was the time when billionaires were calling bubbles, basically. But it's

Bryce: [00:22:49] not new. New news like we've had people been calling this last year in 2020. And of course, it seems to sort of ramp up every year that goes by and it doesn't pan out the way that all these bears think it does. I think it will, but like no better example than Grantham himself. 

Alec: [00:23:08] Yeah. Grantham is a poem about 

Bryce: [00:23:11] he is for a while now. 

Alec: [00:23:14] What do we mean by that? 

Bryce: [00:23:15] Just constantly a negative Nancy.

Alec: [00:23:20] This is the this is the part of the episode that people will clip if the market does fall 50 percent and feel like listen to these two idiots. 

Alec: [00:23:27] No. Well, I 

Bryce: [00:23:28] mean, it's so he has been calling a bubble for a while, and I guess he has the credentials to do so correctly. Called the crash of 2000 the over in the States, the tech crash and correctly called the 2008 financial crisis the housing crash. But as as if you are a perma bear, it can be argued that it's easy to call crashes as they eventually might pan out well 

Alec: [00:23:55] if they say a broken clock is right twice a day. Maybe we should say a bearish billionaire. Is right, twice a decade plus a decade, because he was right in 2000 and 2008. But he he loves to call. He does, he loves to call it crush the last few years. So I remember the first time I came across Jeremy Grantham was 2018, preparing, for starters, our Monday email sign up for it. If you haven't already. But he wrote this article calling a near term melt up and then a crush. Yeah, and that was January 2018, and I read it. I looked into him. I was like, This guy, could this guy pick 2020? Like God? I should be worried. How do you reckon the market's gone since January 28? 

Alec: [00:24:45] Well, we know how it's gone incredibly well, 

Alec: [00:24:47] even with the Covid crash of 2020 and the recent sell off to start this year. It's up about 70 percent. Yeah. 

Bryce: [00:24:56] Sorry, Jeremy. 

Alec: [00:24:56] Glad I didn't miss that one. But that's not the only time he called a crush of light 

Bryce: [00:25:00] coloured in 2018. June 2020 Quote My confidence is rising quite rapidly rapidly that this is in fact becoming the fourth real McCoy bubble of my investment career that didn't pan out. So 12 months later, May 2021, we will have to live potentially with the biggest loss of perceived value from assets that we have ever seen that didn't pan out. So January 2021 22 start of this year. I wasn't quite as certain about this bubble a year ago as I had been about the tech bubble of 2000 or as I had been in Japan or as I had been in the housing bubble of 2007. I feel highly likely, but perhaps not nearly certain. But today I feel it is just about nearly certain. So look constantly upping the ante on his calls. He feels like this is the year that, look, you've got to take it all with a grain of salt because, well, yeah. Calling this stuff for a while. 

Alec: [00:25:59] And we should be quite clear, like I am also nearly certain that in the next decade, stocks will fall 50 percent. Like, I think that you could probably say that that's a near certainty. But historically speaking, yeah, yeah. But the timing of when market crashes is what makes calling them silly fraud. Yeah, because if if I listen to Grantham in 2018, I would have missed out on 70 percent return. If I'd just bought the index, you know, Grantham might be right. This might be the year that we say 2000. Like slow sell off and stocks eventually do fall 50 percent. He could be a hundred percent right, but that could be four years from now, and we could miss another 50 percent leg up in the meantime. And if you're investing for the long term, you go in with your eyes wide open at some point in the next seven to 12 years. I will lose 50 percent of whatever I've got invested, but over time it will come back, at least historically. That's what it's always done. And if you just sat in cash on the sideline because a bearish billionaire told you year after year that it was all about to come down, at some point you would be very right, but you wouldn't be wealthy. 

Bryce: [00:27:12] I also think as well, like what? What's what like if you're going to sit in cash and wait for wait for a moment where the stock market crashes, right? If you're anxious enough not to be putting money into the market when people are making these huge calls? What's the psychology that's going to make you all of a sudden dump all your cash in when the market's falling, you know, 20 percent, 30 percent, you're essentially then saying, Well, I'm going to try and call the bottom here. You know what I mean? Like, it's kind of a bit contradictory to me. 

Alec: [00:27:39] Yeah, I guess. But you know, I mean, 

Bryce: [00:27:41] he's a pro. I'm talking about a retail investor. I think the the emotional intelligence to sit, sit, sit and wait and then for to think that you're going to be clear thinking when the market's really going crazy, it's tough. Yeah, it's a tough one. 

Alec: [00:27:55] I know what you're saying. I also think that like if in 2018, I decided I'm not going to invest, I'm going to wait. There's no way I'd be doing an investing podcast in 2022, like I would have just lost all interest.

Alec: [00:28:06] They're doing a lot of fraud. If you're not investing, you're doing an investing podcast 

Alec: [00:28:12] or just be really boring, like, what did you do last week?

Alec: [00:28:16] Nothing. Yeah, yeah. Yeah. 

Alec: [00:28:20] So I think Grantham could be right. Like, we're laughing about him, but he could be right. You know, there there is an argument to be made that the way that the 2000 tech bubble played out was the unprofitable small companies fell first and then it sort of bled into other areas of the market. And then eventually everything was falling. And we sort of saw that at the start of this year, the meme stocks were first to go, then the unprofitable high growth stocks with sky high expectations. And now we're starting to see it bleed into the very profitable companies that are just missing expectations like Facebook and Netflix. And maybe that. That continues so that that is definitely one way this year will play out the other way is that, you know, similar to December 2018 and, you know, a few other blips along the way, January 22 was a a blip. But the market still has another leg up before it falls. So, yeah, who knows. But I think what we've learnt is over time, markets grind upwards as these companies get more innovative and create new products and expand to new markets and hire more smart people to do incredible things. And that's a journey that we all want to be a part of. And as long as we're aware that at some point it might fall 20 or 30 or 50 percent, but then it will keep grinding upwards. I think that's that's how we have to approach it as investors. Yeah. 

Bryce: [00:29:56] So Ren, let's let's take a look at what happened to some of the key markets, and we'll also have a look at bitcoin as well. During that period, while we were on holiday sipping margaritas? 

Alec: [00:30:05] Is that not? Is that not a key market in your mind? 

Bryce: [00:30:07] No, not. It's not. No, it's not.

Alec: [00:30:10] OK. 

Alec: [00:30:12] Well, yeah, let's let's go through it. Let's start in America, because that's where all those billionaires were talking about January hurt. 

Bryce: [00:30:19] January did hurt. Jan hurt to the tune of the S&P 500 between the start of Jan after New Year's were all back and 20 and the 27th of Jan, which was the bottom, fell 9.8 percent. But look, if you if you stuck it out, didn't panic. Since that point to the time of recording, it's back up six percent. Similarly, the Nasdaq 100 fell 15 percent during the same period, but then from the 27th of Jan, the bottom again to to where we are today, it's up seven point fifty three percent, so definitely some recovery starting to happen. The Bitcoin Ren has actually been significantly hammered, and it's also returning down almost 50 percent from early November through to 22nd of Jan.. So for those bitcoin enthusiasts, it's been it's been a rough few months, but it has bounced a little and is up 25 percent. But a recovery happening there. The ASX 200 surprisingly down a similar percentage to the S&P 500, but over an extended period of time from the 4th of November through to the end of Janet fell almost 10 percent, just missing that correction and is subsequently up seven percent. And then a market we don't often talk about as much as the others, but we certainly should. And that's the 50 100 over and over in London. It is a bit of a slower start between 17th of Jan and the 24th of Jan. It's down four percent, but has recovered almost the same amount four percent. 

Alec: [00:31:55] So it didn't really feel like it fell a bit. But, you know, like it fell four percent in a week. That's that's pretty quick. But then it recovered most of that. Yeah. So I think the question that we have to ask to end this episode is, is this a dead cat bounce? What in finances is term a dead cat bounce? This is just where the term comes from, that there's an idea that even a dead count, even a dead cat will bounce if it falls from a great hot. 

Alec: [00:32:27] OK, that's does that actually play out to what we're told? 

Alec: [00:32:29] So the idea is if a stock falls enough, there will be some. It will have some legs up and then 

Bryce: [00:32:37] before it actually falls to the 

Alec: [00:32:38] ground. So rather so we can ask all these companies, all these indexes, these markets fell and then they've come back up a little bit. The question is, are they actually recovering or is this a dead cat bounce? It's a small, brief recovery in the price of a declining stock. If you look back in history of the stock market crashes over time, there have been dead cat bounces. Yeah. So if we go all the way back to the Great Depression of 1929, the stocks fell 4.5 percent. But then, from late 1929 to early 1930, stocks rose 47 percent. So it's not bad. Yeah. Now remember, if something falls 50 percent or jobs in value, it has to go up 100 percent to get back to even. Yeah. So fell 45 percent, up 47 percent and then fell 80 percent from there. Ouch. That's a that's a classic example of a dead cat bounce. But in other stock markets falls, there have been similar dead cat bounces. The global financial crisis in 2008 saw the initial fall and then actually a gain of more than 25 percent and then a further fall. We've got this chart from the 2000 to 2002 bear market. We'll get this up on Instagram on Wednesday's episode going up Monday, well posted on Monday so people can check it out. There were three separate rallies of around 20 percent, but over over the two years if the stock market fell 50 percent. So I won't read you through it, but it's like, you know, it's like down 27 percent, up 19 percent, down 26 percent. So I guess the long and the short of what we're trying to say here is that the stock market crashes are never linear. It's never just down, down, down. It's never the Coles read a read hand down that it makes sense if people listening overseas. But yeah, it goes up and down, but over a stretch of time, it's a lot more down the road and 

Bryce: [00:34:47] trying to play that game is often 

Alec: [00:34:51] or don't try and time the market. 

Alec: [00:34:53] You know, just 

Bryce: [00:34:54] going to get into a world of hurt. So I guess that leads to the question Ren what do what do we expect to play out in 2020 to how we're going to play it? 

Alec: [00:35:04] I think it could be a dead cat bounce. I think I think the market could fall more. I think the challenge is especially if you look in America, Amazon, Microsoft and Apple. As long as they keep doing their thing, the S&P 500 index in the Nasdaq 100, like every other companies, are really going to have to drag it down because they're just those three is so big. 

Bryce: [00:35:29] Yeah, that's if you're an index investor. Yeah.

Alec: [00:35:31] You know, interest rates might rise. I think this year will be one of the hotter years for us in our investing lives, our very short investing lives so far. Yeah, but I'm excited by that because it will give us an opportunity to put cash into the market at lower prices. There might be some individual stocks that become really attractive. You know, it's never good that the market falls, but I'm going into it. Being like the value of my portfolio might fall a bit. But this is the opportunity for us to set ourselves up for the next. However many years we live, hopefully century. 

Alec: [00:36:09] What about you? 

Bryce: [00:36:10] Yeah. Look, I've learnt the lesson that trying to be trying to predict what's going to happen over the next 12 months and subsequently putting in to place a strategy that would work in favour of that prediction is the wrong thing to do. It's impossible to to do that.

Alec: [00:36:28] So remember when you would call a 

Alec: [00:36:30] market crash every year 

Bryce: [00:36:32] and it just didn't play out? I learnt my lesson from that. I got seriously burned. Seriously. So like similar to the vibe that's going on at the moment, it feels like there is a chance that we're going to see a lot more red this year. It might not. It might not pan out that way. But I'm not changing my portfolio makeup at the moment. I'm not changing how I'm investing to to play into that thesis. I think one of the things that I really have in the back of my mind was when I spoke to Marcus Padley, and he's just kind of like, you got to assess it. The information at the time, like when it's happening, you can make some decisions, but there's no point trying to predict. 

Alec: [00:37:06] Yeah, I

Bryce: [00:37:07] like to make the decision before it happens, because you're an idiot if you do that. Yeah. And so for me, the only thing that I will change is I'm probably not going to be I'm not putting money into the market as frequently and in as large chunks as I had been over the last few years. And that's one way of sort of keeping a bit more cash on the side for the opportunities that might arise. But I'm not putting in, you know, bear positions or, you know, I'm not trying to go hard on value all of a sudden and all these sorts of things, like the companies in the way that I've invested, I still generate genuinely think over 30, 40 years that's going to be the winning portfolio. So I like that until it does start really turning and the environment changes. I'm just going to enjoy the content that we're going to create from it.

Alec: [00:37:58] Well, one thing that I probably know that I will be steering away from, and I haven't really jumped headfirst into a Web3 Metaverse cryptocurrency, and that's not because I don't believe that some of this technology has merit, and some of those projects could become really meaningful. But in the same way that in 2000, a lot of the internet companies weren't wrong, they were just early. I think that's probably going to play out with a lot of these web three metaverse projects. There will be some gems, there'll be some diamonds in the rough, there will be the Googles and the Amazons that, you know, become, you know, the next web three giants. But a lot of these companies will probably not come to fruition in the same way that a lot of the internet companies of 2000 were great ideas like cloud computing and online retail and all this stuff. And a lot of them fell away because the world wasn't ready and technology wasn't ready. So for me, that's probably one area where I'm not really going to play. I dollar cost average a small amount into bitcoin and Ethereum, and I just don't I just don't think about it. But that's probably the extent of it for me. 

Bryce: [00:39:12] Yeah. Yeah. I'm keen to see what happens in the NFT space this year, but similar to you just decaying into a few of the larger coins. But as a total proportion of my portion of my portfolio, it's still what I'm putting into the market, not the value of it, but it's still a bit. It's still very small. Yeah. So Ren look plenty happening in the markets at the moment, and I hope we've been able to sort of paint the Equity Mates picture here and how we're thinking about it and approaching. You know, we've got one side, Jeremy Grantham, saying that we're about to hit an all time crash that is going to be the worst that we've ever seen in history. And then on the other side, you've still got Apple and Amazon absolutely smashing it and pulling the market up. So plenty to consider for us anyway. It's an exciting time to be involved in markets, and I hope that we're going to be able to create some content over the next few weeks or months or whatever it is that helps people understand where they're in the journey and provide some value. 

Alec: [00:40:07] Yeah. And let's find some really exciting individual companies that people may not have heard of. And you know, the last few years, it's been tough to pick stocks because why would you do anything other than pick the Big Tech names? Yeah, they just blew the lights out. Honestly, how could the Big Tech names are has caused a lot of headaches for historically fund managers out here. Yeah, but this year might be the year that us trying to pick individual stocks and the professional stock pickers will show how good they are. 

Bryce: [00:40:42] That's it. So stay with us over the next few months or years and will hopefully help you in your investing journey. Reminder, though, that we have plenty of other podcasts in the network. Talk money to me. You know, they're always doing an order pad where they'll talk about two stocks on their watch list. So few are also interested in specific stock chat beyond just our podcast. Head over there, crypto curious covering all things in the crypto space. And then we've got your own good company and Canadian economist, as well as Get Started Investing feed. So plenty of content that we've got and so plenty of content and we've got you covered. Also, please do fill out that survey. If you have a moment, it'll take 15 minutes and you'll go in the draw to win five hundred bucks. It'll help us to create even better content for you guys. And if if that's not enough of us asking for things, if you could write in reviews, that would be great as well. So we have you have a great week and Ren will be picking it up on Thursday. Sounds good. Hey, thanks for listening to this episode of Equity Mates. We love hearing from you, so drop us a line at contact@equitymates.com or even better, go to your podcast player and leave a five star review. Also, a reminder that the Equity Mates content train doesn't stop when you've run out of episodes to binge. We've got a brand new website, a Facebook discussion group where on Instagram, YouTube and slowly making our way as an influencer on Tik-tok. Well, that's Ren. So come and say hello and join the community. We'd love to welcome you. Until next time.