Does Financial History Repeat Itself? Maybe. Ep #3

One of Bob’s favorite sayings is this: “History doesn’t repeat itself, but it sort of rhymes.” When it comes to financial trends and market behavior, it’s many times more true than most people realize. In this episode, we discuss the similarities today’s market has with the market conditions that existed back in 2009 — and what it could mean for the current big tech stock growth.

We also have a big treat for you, our first guest, Adam Johnson. Adam’s newsletter, “Bullseye Brief” is something all three of us subscribe to and read weekly. His insights into what’s happening in the market and how to best leverage it for growth are amazing. His portfolio is up 30% this year already. Stick around, this episode is definitely worth your time.

You will want to hear this episode if you are interested in...

THE NEWS IN PLAIN SIGHT

• Today’s bear market turned bull [2:01]
• Comparing earnings in 1999 to earnings numbers we see today [3:40]

OUR FIRST GUEST - Adam Johnson

• Adam’s view on the markets - we’re roughly where we should have been had COVID never happened [9:40]
• Why Adam doesn’t care for gold because he’s about ingenuity and growth [14:26]
• The base case on the S&P 500 from Adam’s point of view [16:26]

THE TIPPING POINT

• The rules of investing [18:43]
• Markets tend to return to the mean, over time [20:42]

THE HIDDEN FACTS OF FINANCE

• 6 million trading accounts have been opened recently [24:50]
• U.S. companies are very involved in China, even its stock market [26:01]
• Global eCommerce is still only between 22% and 25% of sales [29:01]

History doesn’t repeat itself, but it kind of rhymes

When looking at what’s happening in today’s markets, it’s eerily similar to the 2009-2010 time frame. At the peak of the dot com bubble at that time, tech stocks were 35% of actively traded stocks. Today, big tech is trading even higher at 37%. Today’s S&P 500 is trading at 26X this year’s forward earnings, which is exactly what it was trading at back in September of 2009. And back then, the NASDAQ traded at 35X forward earnings and is trading at that same pace today.

What’s the point? We just might want to consider what happened back then, after tech stock prices kept rising and rising. They didn’t stay high. They came tumbling down when the bubble burst. Are there lessons for today’s investors? Listen to hear how overvaluations and tech investing newbies may be leading investors to a similar downturn.

Those who don’t know history are destined to repeat it

Let’s take TESLA as an example of the craziness going on right now. Its stock is up 525% over the last 12 months and a Bank of America analyst just upgraded it. Chris just had a conversation with a client whose TESLA stock is up 80% but he’s hesitant to take the profits from it for fear it will go even higher and he'll miss out. What he’s failing to realize is that what’s happened to TESLA is not normal market behavior. When the tide goes the other way, it’s not pretty.

We can see that investor behavior really hasn’t changed much over the years or through the generations. Millennials are still trading stocks that are up rather than doing the due diligence needed to make wise, long-term investments. It’s not as alluring to buy low because those stocks are not the darlings everybody is talking about. But it’s typically one of the wisest choices to make long-term.

If not big tech stocks, then what?

Like tech stocks that keep going up (and feel like they will never go down again), the current trends won’t continue to rise. For that reason, we want to be thinking about the next 10 years, not just about today’s trends. Our guest on this episode, Adam Johnson makes it his stock and trade to find the places to put his money that will accomplish growth long term. 

Currently, Adam’s investing in Biotech, Medtech, and Energy — and he has NO money in the big tech companies. What’s his result been? Admittedly, when COVID first hit, his portfolio was down 30% almost immediately, but it’s recovered completely and appears to be growing even more. 

Adam also believes that because the demand for oil hasn’t disappeared, coupled with the fact that it takes a very long time to jump-start oil production, we’re set for a recovery in the oil sector. He believes the equilibrium (where oil companies can both make money and can afford to invest in new wells) is somewhere in the $50 per barrel range, so there’s still plenty of room for growth if he’s right. Listen to hear Adam’s insights and to rethink your investing strategy.

Resources & People Mentioned

See if you qualify for a complimentary financial review from the Paynes

• The Jesse Livermore book mentioned by Ryan
• Adam Johnson, founder of Bullseye Brief (get your 45 day trial)
• Cheniere Energy - one of Adam’s current favorites
• Energy Transfer - another of Adam’s current favorites
• RobinHood Trading Platform

Connect With Ryan, Bob, and Chris

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