Okay folks, so we need to give a violent update on today's market and what happened. and then I want to talk about the good news. Yes, there is some good news. There's some pretty significant evidence in the data that I'm going to be showing you in this video that points to reasons that you should be very, very excited about today's market.

Sure, things are rough right now, but if you're so focused on the downside, you'll never see the upside when it starts getting factored in. I think that it's crucial that we're not just honest about the negative catalysts, of which there are many that we're dealing with right now, but also the positive ones. Okay, let's get right into it. Let's start with the marquetta.

Another pretty red day. You've got the dow basically flat, the S P almost down a percent, and the Nasdaq and Russell's just getting hammered. On the bright side though, oil prices and energy have been on a downtrend since the original blip upward. about a week ago.

you had oil down 7.2 percent. Today, that's U.s listed. You have Brent, European listed oil down 6.45 natural gas down 1.16 and so forth. You pull up U.s crude, and we're hanging at around 100, which is a decent cry from those panicked prices at 123 from last week that happened around when Biden announced Russian sanctions sanctions on Russian oil and Gas, which caused a lot of speculators to try to factor that into the risk premium.

Sure, the U.s may not buy much from Russia, but oil and gas markets had factored in a probability that other western nations would follow suit with these types of sanctions. But so far, about a week later, we haven't seen any meaningful moves towards that. The most that we've seen in terms of hiking of rhetoric is basically Eu nation saying that they're going to phase out Russian oil and Gas, but not giving much in terms of specifics. And that's caused a lot of the fear from those energy markets to well leaf.

At the end of the day, the U.s sanctioning Russian Oil and Gas doesn't do much to the global prices. it's really the symbolism behind it and whether that causes other nations to follow suit. But at the end of the day it's sort of like if I decided to give up Brussels sprouts. I don't like Brussels sprouts.

I barely eat them. It's not hard for me to give it up, nor does it have much of an impact on vegetable companies. But yeah, I'll give up Brussels sprouts, no problemo. But if I ask my friend who is a vegetarian to give up Brussels sprouts, that might be a whole other story.

I gave it up. Why can't you do it too? Because Charlie, my food options are a lot more limited than yours. That's basically what's happening with the Eu and the Us. If you didn't follow, Europe is the vegetarian in the situation, and the Brussels Sprouts are Russian oil and Gas.

Sure, Eu leaders have agreed to phase out Russian fuels, but that's not exactly a short-term process and may not be phased out for a long time, and oil prices are recognizing that. And there's enough wiggle room where speculators really doubt that they're actually ever going to be really cut off. That said, sadly, I don't think that this downtrend in oil is going to continue unless these Russia Ukraine talks actually work. The more that Russia decides to escalate, the more pressure that Eu leaders are going to have to phase out Russian oil and gas, and the more risk premium that speculators are going to try to factor in to oil prices.

It would be very, very nice for escalation to go down and for this whole crisis to be solved, but we know that's not that easy Now moving on in terms of government and the government side of spending, House Speaker Nancy Pelosi tried making the case for Biden's build Back Better Social Spending plan. She says that increased government spending is actually going to help bring down the national debt and it's not going to be inflationary. It's important to dispel some of those who say, well, it's the government spending. No, it isn't.

The government spending is doing the exact reverse reducing the national debt. It is not inflationary. I don't know about you, but I would not want to be the person trying to convince the American people that somehow spending more money is going to bring down inflation and also reduce the national debt at the same time. I mean that's just a little bit goofy.

That's like putting someone on an all-cake diet when they're trying to lose weight and then seeing them gain all this weight and you're like, oh, looking good, losing all that weight and they're just like, really? because all my clothes aren't fitting anymore. Except in this case, you can't afford any clothes because t-shirts now cost 500. And just to be clear, I'm not saying anything good or bad about the actual programs in this bill. That's up to you and your politics to decide.

But anyways, what she's getting at here is that certain provisions of this bill are put in place with the idea that it could bring down long-term inflation, putting money into more affordable housing and affordable housing policies, creating better and perhaps cheaper, public transportation. Investing in education and training of labor forces could help increase productivity and bring down costs, and also allocate some money for green energy, which, in theory, as green energy becomes more modernized and actually developed, should be a lot cheaper than traditional ship forms of energy that pollute the world. but right now and for the foreseeable future, is still a pipe dream. The bill also claims to reduce prescription and health care costs amongst some other things, and while some economists have argued that these are deflationary investments that should bring down inflation over the long run, the fact of the matter is that a lot of these won't pay off for a very, very long time, but the immediate consequence of spending is very, very short term.

and that is going to be a short-term boost to inflation, which is already a massive, massive problem. I can see what they're getting at when they're calling it deflationary, but at the same time it can definitely be a little bit misleading when you look at when that deflationary pressure is going to be applied and certainly not set in stone that these programs will be successful in bringing inflation down. The Congressional Budget Office estimated that the legislation will still add about 367 billion to the deficit, and they assess that the Build Back Better plan will at least modestly boost near-term inflation relative to what it would be otherwise. arguably, that's putting it modestly regardless of your intentions.

If you're investing tons of money into tax credits, or you're investing into education, training, or building something out, well, you're creating bulk demand increases Now in present day, and the benefits of those things like education aren't going to pay off for a long time down the road. Not debating whether or not the government should be investing in these programs or not. Again, that's up to you to decide, but in terms of how this relates to the market, remember everything that you do to increase demand is going to go and put more pressure on the weighting of demand and supply, which all of a sudden creates more and more out of control pricing pressures. There's a cost to everything if the government goes and gives you a 10 tax credit and you get 10 percent more take-home pay at the end of the year.

but then inflation is 10, 15, 20 and your prices are that much more. Did that government tax credit really help you or did it just hurt you and accelerate a problem that's already out of control? It's something really to think about. Okay, next now for the main entree: the optimism. So during periods of time where it feels like the future is super murky and there's not much to be excited about and stocks just keep going down, it's kind of easy to fall into this helpless mindset.

But the problem is that in order for a downtrend to be stubborn, people have to become stubborn. They have to buy the Dev and buy the dip until they realize that things aren't coming back very quickly. and then they change their perspective and they sell out of everything at a huge loss. They swear off the market and decide never to trust it again.

And that's all fine and Danny when stocks are going down and down and down in that downtrend and everybody's thinking the same way. But the problem is that that reinforcement from the market breeds a very, very unhealthy mindset. It breeds this mindset of persistent addiction to pessimism. and it stops you from seeing any of the silver linings in the situation or being able to take advantage of it in any meaningful way.

So today, let me show you some silver linings and some positives in today's market condition. So Yardini research has this nice chart that shows the presence of bulls and bears. The theory goes that bulls and bears are always fighting to showcase their outlooks on the markets, and during certain periods of time you're going to have either the bulls winning more or the bears winning more. But if you can chart it over the last 30 40 years, you could see periods of time where they have gotten overcrowded and the bulls have overstayed their welcome or the bearish have overstayed their welcome.

It tends to be the case that when too many people have too strong of an outlook over too short of a period of time, it creates this opportunity for a massive reversion. And as of March 8th, we have now hit a historically significant level of bear presence in the market. The bull bear ratio is at its lowest level since the original Kova Drop. That doesn't mean the bears are wrong, but it does mean that there's uniform pessimism right now that isn't willing to hear any sort of optimism.

Again, lots of reasons to be pessimistic, but when you have so much crowding of bears, that means that they're trying to factor in as much as possible. The longer this goes on, the more they factor it in and the more room you have to bounce. If better case scenarios actually happen and the worst case scenario doesn't play out. and then you look at the composition of capital in the market.

margin debt has gone down dramatically. Since last year, all of this margin has been closed, and where has that capital come from? Well, probably mostly tax stocks in the growth sector and now in mega caps. All that capital helped to celebrate the up trends and now a lot of that margin has just been pulled out and vanished. But also notice that the only other periods of time where margin debt dropped this quickly were during periods of time where we had a bear Market in the S P 500 like in the dot com bus and in the 08 crisis.

But this time margin debt dropped dramatically before we even got into a bear Market in the S P. Remember the higher the presence of margin, the higher the presence of risk. So in other words, what's happening when you have this massive massive deleveraging? Well, it means that the market is significantly de-risked as compared to where it was just a year ago, which over to comparing growth versus value. Obviously, Grove stocks have gotten hammered significantly more than value, but thanks to input costs rising, anticipated forward profit margin Based on analysts, earnings and sales forecasts have started flatlining and are actually dropping a bit this year.

which isn't good news for value stocks, but for growth stocks which office is our focus, it's accelerated an uptrend, which is fascinating because in some sense, the market is broken right now. First of all, the idea of the whole value trade and the whole tech exodus is that value stocks would be able to pass on the pricing increases to consumers. Now we cast out on their ability to consistently do that for quite a while, but they were able to do that in 2021, but this year they're not having as much walk. Profit margins are flatlining and increasingly getting crunched, and I don't think this is going to look any better in future reports.

Whereas with growth stocks, profit margins are actually looking increasingly better. Which stocks were it again that we're supposed to be able to pass on cost to consumers? The value stocks, I don't know. Oh, what's also fascinating is the market right now is not really driven by real fundamentals in any meaningful way. Look at the sectors that show the highest level of forward earnings growth per share.

Information Technology is far ahead of literally every other sector, right? What is Infotech made of? Well, Apple, Microsoft, Nvidia, Visa, Mastercard, Broadcom, Cisco, Adobe, Salesforce, Amd, and so forth concentration of tech heavy exposure plates. So those are the ones that have the biggest growth in the overall market and the economy right now. But at the same time, they're the ones getting hit the most. People are leaving them like crazy for other sectors that aren't grown as much, right? So then you have to back up and say, okay, well, what is it that actually drives market performance over the long term? Some people say it's the Fed, some people say it's Mickey Mouse, and some people say it's Nancy Pelosi's traits.

And while all of those have an impact, especially that last one, the core idea of investing in the market is to buy companies that grow in actual intrinsic value. intrinsic value grows by providing more value to customers, and providing more value to customers means you're getting more revenue and then more earnings. But again, when you think about how the market is so backwards right now, the companies that actually have and are driving the most revenue and earnings growth and providing the most value to customers at the fastest accelerated rate, those are the ones that are getting beat down the most. And obviously there is some logic to why they're getting beat down.

As interest rates go up to combat high inflation and uncertainty increases, people don't want to look out super far in terms of growth rates, People simply discount years of future growth. If you thought your company's going to grow really fast for five years and you valued it that way and you bought the stock based on that and now you have this environment that we're in right now. All of a sudden, you're like, well, I don't have the risk appetite to look out. Five years now.

I'm looking out two years, two years of growth. It's worth a lot less. But still, if you look at the bigger picture, this is one of the most insane times to get deals. Even if it does get cheaper, it's still an insane time.

We're in a massive bear market for growth tech stocks during a massive bull market for the companies themselves, and you consider the strong probability that peak fear will be reached far before the worst happens to our economy, and it creates this picture of an eventual bottom that may not be too far away and will certainly have a very, very strong reversal. In other words, if markets factor in 200 oil prices and 15 to 20 percent inflation on the Cpi, and then we have, I don't know. 150 in oil prices and 12 inflation on the Cpi. Sure, the data is still awful.

it's a disaster. terrible, but it's not as bad as they thought. So all of a sudden you're set to bottom and rally. And if you break down sectors by size, your large caps, your mid caps, and your small caps, The P E ratios and small caps are some of the lowest they've been in 20 years.

And these are P E ratios for companies that actually have earnings. I don't even want to talk about companies that don't have earnings yet because they're still scaling up to that part. and you look at the market as a whole, the peg ratio, which you can think of as a five-year analyst prediction and consensus on earnings growth relative to current price. It's also trading pretty damn low.

The only reason it went up a little bit is because a lot of analysts have been lowering their expectations. But I mean you look at the bigger picture. a lot of risk has been removed from the market, and a lot of stocks are trading below their intrinsic value. If you adjust it for the next five ten years, there's this idea that's very, very strong and in everybody's minds, that when stocks go down, especially when they go down fast, that means they're getting increasingly riskier.

But really, what is risk, it's the risk of losing capital When stocks go down, That means you have less risk When we say that the Nasdaq is down 20 year-to-date does that mean that the Nasdaq is a lot riskier now than it was back in December of 2021? No, it means that it's 20 cheaper. Which means that's 20 less capital that you can lose. Now, of course, there's always that risk of, well, the economy could go into a massive, massive downturn thanks to all these negative factors. and we don't know exactly how bad this is going to get.

But those factors at a certain point get increasingly factored in if you ask somebody if it was riskier to buy a stock in January of 2021 or today. A lot of people would say right now is the riskiest time ever because so many things are uncertain, but a lot of stocks have already factored in a lot of that uncertainty, and right now we're in a market condition where margin debt has gone down dramatically. Fundamentals and technicals are looking historically oversold, and many of the highest hitting, fastest growing stocks are down like 60, 70, or 80 percent from heists. So just something to think about when I say that something is de-risked That doesn't mean that there's no risk, but it does mean that relative risk is down.

Right now. it's down a lot. Perhaps it takes six months a year, two years, three years to really get any sort of consistent optimism back. Who knows.

But what isn't hard to say is that companies who perform and do well fundamentally over the long run will be the ones that have the best returns to back them up over the long run. So again, folks, this isn't a buy the Dip video. This is an opportunity to analyze why buying dips isn't as easy as you think it is, because the actual times the buy dips are usually the ones that nobody feels like It's a good time to buy the dip. Super easy to buy a dip during a bowl trend that just keeps going up and up and up and just drop down five percent from all-time highs.

It's another thing when you have all of these negative factors hitting you in the face and we know that it's not about wasting all your chips on each and every dip. We know that this process that we're going through right now can take a while and it can be painful, but that if you're strategic and slow and patient that this and what comes after, this is going to be an insane opportunity. So anyways, those are my thoughts on why you should be excited and positive about this market condition. If you have any questions, feel free to reach out to us below or join us on Ziptrader Circle.

if you're looking to learn how to trade. With our private chat, our daily morning briefings, our prize targets, and our step-by-step lessons, I'll put a link to Zip trader you below along with a coupon code that gaps off today's video. Have a good one folks and I'll see you tomorrow.