The Stock Market Is Disconnected From Reality. Here’s How I Am Positioning My Investment Portfolio

[@sf7234]

The video we've all been waiting nearly 2 months for

[@MichaelJayValueInvesting]

Thanks for your patience! Sorry for the wait, I am getting back into a more regular upload schedule this week.

[@MetalBum]

Michael Jay - Value Investing hey what happens buddy 👋

[@glowlog]

Money printer go brrrrr

[@MichaelJayValueInvesting]

Pretty much! If only the Fed could print jobs and consumer confidence.

[@tamershahin2172]

I hope you post more videos Michael. Quality content is needed on YT. Thank you and I’m glad you’re back.

[@MichaelJayValueInvesting]

Thanks Tamer, more coming soon!

[@hur1836]

You've been missing for way too long but I'm always glad, and I'm sure everyone else is too, that your back with great content! Where have you been?

[@MichaelJayValueInvesting]

Thanks for your patience! Aiming to get back to a regular upload schedule going forward :)

[@amandasmith1198]

Do you think the fact that this unemployment is largely in the 30% of the workforce that works in high contact positions but only generates 15% of GDP is factored into the prices?

[@idontlikeyouyo]

What happened to your episodic series about financial news general? Discontinued?

[@utubefun8]

Michael, I am a fan and truly appreciate you sharing your perspective and investment plan with us during these uncertain times. You are so good at what you do! Thank you for spending the time for the qualify videos and guiding us through.

[@carlmaissan4340]

One of the best commentaries I've seen about how to think about the current market rally, and in particular the tension between the impending recession and an unprecedented QE program. Great work.

[@JacobHaines91]

Always love hearing your insight. Thanks!

[@MichaelJayValueInvesting]

Thanks Jake! I appreciate you and your patience :)

[@paulmolyneux9503]

Is QE really the same as 'printing money', in terms of its effects, especially on inflation. Aren't they just generally swapping something that is very similar to money (i.e. a government bond) with actual money? The net increase in money or money like assets is zero.

[@MichaelJayValueInvesting]

No, it is a confusing system. When the Fed purchases a bond and adds it to its balance sheet it is creating new money. If that bond is redeemed by the Fed then that money comes back (money removed from circulation).

[@paulmolyneux9503]

@@MichaelJayValueInvesting but the thing they're buying with the newly created money (a treasury for example) is incredibly money-like so the net increase in money is zero.

[@jabulani777]

Why not just buy stocks from companies that always get government bailouts. They are viewed as 'too big to fail' so just invest in them. They won't be allowed to fail.

[@AlexRechevskiy]

Absolutely fantastic video! Isn't the stock market a barometer of *future* expectations? In other words, the stock market is correlated not with whether the news is good or bad but only with whether the news is BETTER or WORSE than what was expected. In this case, the markets are simply responding to the fact that economic news isn't WORSE than what was expected.

[@MichaelJayValueInvesting]

Good point. Though it is worth asking, does it make sense that the S&P500 is trading at the same level as Oct. 2019, given that the future is significantly worse than the expectations priced in 6 months ago? The answer is more difficult to evaluate with Fed interventions, but by most metrics the answer is probably no.

[@AlexRechevskiy]

@@MichaelJayValueInvesting Excellent analysis, Michael, thank you very much!

[@Discoworx]

You also have to consider the reality of news esp fudged employment figures.

[@briandarzev8535]

The said that stocks weren’t overpriced in 2001 and 08 when warren was sitting on cash

[@MichaelJayValueInvesting]

I have a video specifically on Buffett in the works. Interestingly despite his motto "be fearful when others are greedy", he generally has tended to be fearful when others are fearful. Likely driven by his risk averse nature and investment style. (Looking back in reference specifically to his purchases in 2008/2009.)

[@moresugartradercc2744]

@@MichaelJayValueInvesting looking forward to seeing that video

[@davem3789]

I think Buffet is a little more cautious than he used to be. He’s 89 and he may be worried about a big loss thinking he may not life long enough to bring Berkshire back.

[@MetalBum]

Great video Michael

[@Maddenman7034]

10:45 .... have you been maintaining around a 40% cash position for the past three months?

[@bradchen4369]

Good sharing. But I am not quite convinced why you keep bonds out of your portfolio? Long term US gov bonds are a good hedge to the volatility of equities. Bond's return is not just dividends but also NAV appreciation. For example, TLT has grown 22% YTD.

[@MichaelJayValueInvesting]

Thanks Brad. Any NAV appreciation on TLT will come from lower treasury rates. The bond holders with TLT benefited from the hedge in Feb-March, but now that we are at much lower rates there is less possibility for NAV appreciation going forward (unless rates go negative), and you have the possibility of a decreasing NAV in TLT if rates rise. You can certainly own them, I just don't personally think the risk/reward (even as a hedge) is very favorable here.

[@bradchen4369]

@@MichaelJayValueInvesting Hi Michael, You are definitely right about the relationship between bond NAV and interest rate. However, I think the future is unpredictable. I would not be surprised if one day FED cuts the interest rate to negative. I am mainly using a Permanent Portfolio for my investment.

[@bradchen4369]

​@@MichaelJayValueInvesting The return in bond funds does not come purely from interest rates dropping. It also comes from sources such as a yield curve steepness, and from reinvesting maturing bonds. In fact, if interest rates were to gradually rise over the years, bond funds will perform well. So it's incorrect, and overly simplistic, to say that bond funds need yields to drop, to produce a return. That's not how bond funds work. Japan had treasury bond rates near 0% for many years, even lower than we have now. Bond funds in Japan have actually done quite well over the decades.

[@ricardovieira482]

Good afternoon Michael, first of all congratulations on the work you are doing. Based on the current uncertainty and your suggestions, I had some doubts. At this moment, what kind of actions do you recommend? Did you talk about gold funds, like for example? Thanks and sorry for some mistakes, but I'm Portuguese ...

[@abhijitkhialani]

Saw ur channel 1st time..it has relevant content with lucid explanation..keep up the good work..

[@PetraruRazvan]

i wish you could sell your spreadsheet without having to commit to a 200$ yearly membership, other than that everything else is spot on! Keep up the good work

[@bd8421]

Michael, great video! Thanks. Do you reccomend any short term money market funds for 2020?

[@CrankingAllDay]

Market is way too high... Did people forget that this whole economic recession is going on?

[@MichaelJayValueInvesting]

As economic data starts rolling in during Q2, I think markets will begin to "remember". Fed printing is the key unknown variable though.

[@valterrebelo6524]

Such a great video. Learned some useful tools 🧰

[@edwardzachary1426]

You've said you use the vangaurd money market funds. Will that and bond etfs have yeilds that trail the current bond yeilds since they primarily have bonds but have older bonds? So will their yeilds be higher than current bond yeilds now but lower as time goes on and their older bonds get converted to newer bonds? Is that how it works?

[@lifeforgod07]

That's weird you mentioned Facebook. During the crash, the only stock I ended up buying was Facebook at 150 a share. Thought process was the CoronaVirus isn't going to slow them down in the long run no matter how bad it got, and the FB balance sheet is incredibly strong with a great business model. It was the only no brainer purchase I could think of during that short time.

[@reeceleyh1989]

Great insight, Michael. I've been watching your videos since 8 am today. Thank you!

[@drpguzman]

Good seeing you back in action with new content!

[@jonathancreative5779]

whats your philosophy in diversifying equally into emerging markets and developed markets? emerging markets have historically low p/e ratios and cape ratios and seem extremely attractive in comparison to us markets

[@MichaelJayValueInvesting]

I generally have been skeptical about large allocations to emerging markets, as I have less understanding confidence in regulation and capital allocation habits for emerging market companies. Returns from VWO ETF over the last decade have been poor despite having a lower P/E, P/B than the US during that entire time period.

[@sandpiperbf9767]

I am investing in broad etfs for global markets with the lowest valuations.

[@sandpiperbf9767]

Also emerging market bonds

[@InvestingwithKurt]

Couldn't agree more. Nice approach to your portfolio!

[@albertbryant1403]

Great explanations and yes using good valuation tools like your spreadsheet is very helpful for me

[@MichaelJayValueInvesting]

Glad it was helpful!

[@HamiltonRb]

With interest rates at all time lows is a classic 50/50 stock / bond balanced portfolios a thing of the past

[@MichaelJayValueInvesting]

I would agree, returns likely much lower and risk much higher than in the past. A gold/stock portfolio makes more sense to me for a long term allocation. Buying bonds here is more a speculation on negative rates (which would be positive for gold as well).

[@HamiltonRb]

Walter Schloss I can recall interest rates north of 16% and stocks were flat, but this was well before the Fed started treating the monetary supply like monopoly money

[@alfonsogrillo2001]

Hi Michael, very good content! :-) I was wondering if you are a global stock market investor or if you only focus inside US. I think in this particular period you can find value in other countries (China, Europe, Russia, Latin America and so on). What do you think?

[@MarkEm]

Top quality analysis Once I saw all the tabs I realised “here's a guy I can relate to”

[@carlbowden4712]

For Michael if no money in bonds I'd say hold some VTIP for inflation coverage

[@MichaelJayValueInvesting]

Good suggestion, though I am not really a fan of TIPs as 1) I don't really trust that CPI will match my personal inflation rate and 2) that TIPs rates can go negative if inflation expectations turn negative. In the case of 2) I would rate just hold cash. In the case of 1) I would prefer gold for long term monetary hedge

[@CinemaTeacher]

Great video, Michael, and just signed up for your newsletter! Looking forward to it! P.S. Yesterday I invested in VIAC (ViacomCBS) and today I read that they're announcing "Cash Tender Offers" for up to $1.0 billion and I see their price climbing. What does this mean? 🤔

[@MichaelJayValueInvesting]

Hi Roberto! Just FYI I am not currently very active with the free group (but that is something I am hoping to revamp later this year). As for VIAC, tender offer means they are offering to buy back a security they issued for a certain cash price. In this case it looks like $2B of their bonds. Doesn't directly affect you as a shareholder.

[@CinemaTeacher]

@@MichaelJayValueInvesting, thanks so much for the education! I really appreciate it.

[@KimchiFlavoredRamen]

What ETF would you recommend for investing in gold? Are there better alternatives than ETFs?

[@slicedGabe]

Buy physical gold

[@MichaelJayValueInvesting]

Buying some small physical isn't a bad idea if you can get it for reasonable premiums, though it is difficult finding inventory these days. I have my positions in gold ETFs that are fully allocated. Sprotts funds I have used in the past, but most of new purchases are in SGOL.

[@homesbyjgr]

I missed you glad you are back

[@IrelandVonVicious]

Stocks are not disconnected. They are moving from short to long positions. All based around money printer going Brrrrrrrrrr. Every time they get bad news they buy because they got more excuse for Brrrrrrrrrr. They are betting on future mass inflation.

[@bonniehanh-nhinguyen1292]

Is there any limit for FED's money printing?

[@charanbirrekhi9077]

How do u invest in gold, is there a etf or fund name

[@bretray7506]

GLD or IAU

[@craigcothren6629]

SGOL has the lowest management expense.....GOLD the mine company will continue to out perform SGOL as gold prices continue to increase ....and the stock pays dividends

[@carlbowden4712]

I'd also recommend looking at PHYS, Sprotts physical gold fund, I own that and IAU

[@MichaelJayValueInvesting]

I use SGOL, low mgmt fees and fully allocated bars. Sprotts funds work too but may have extra IRS filing for US investors in taxable accounts to qualify for the lower LTCG tax rates. PHYS is the Sprotts gold fund.

[@sengvang3718]

@@bretray7506 I be careful with buying GLD because HSBC is the custodian for GLD. Alot of issues with HSBC.

[@mreman007]

Why is shorting the market not more widespread by institutions, specifically as a way to make positive returns, as opposed to buying "bonds"?

[@MichaelJayValueInvesting]

Shorting can be tricky especially if you get caught on the wrong side of a trade (short squeeze). Most managers do not want to take (or are not allowed to take) that kind of risk.

[@mreman007]

Love your videos 👏👏👏

[@seanlynch8869]

Great video Michael but please post more often 🤣 I totally agree the market seems to be extremely rigged now due to the fed printing so much money. Just one question on the metals allocation in your portfolio, is that just Gold or Gold and other commodities?

[@MichaelJayValueInvesting]

More to come! And primarily fully allocated gold ETF (SGOL) and some smaller amount in silver ETFs. (no commodities)

[@seanlynch8869]

@@MichaelJayValueInvesting Interesting would you mind explaining that decision process?

[@LearnWithMike]

Looking at Shiller's P/E or Buffet indicator everything looks expensive due to crazy valuations of tech companies (FAANG) they represent like 15-20% of SP500 index but if you remove them from the equation market is fairly valued

[@syncbrother]

Excellent video. Thanks for your bonds comment. I've been feeling the same so glad to hear the same from someone so talented

[@MichaelJayValueInvesting]

No problem! It is just hard for me to justify such low rates in the face of such significant currency expansion. While we may hit a deflationary shock with this recession in the short term, currency expansion of that scale is an inflationary force.

[@rjw6487]

Thanks for the video! I for myself think it is wise to currently honor the metals with a 30% stake. But that's just me. P.S.: Will you make the google sheet available to play with? (Would earn you fame! 😉)

[@MichaelJayValueInvesting]

Metals will be volatile in the ST, but long term they likely will do much better than bonds at these low rates. Full access to those advanced sheets in my group in the description. I also have several tutorials on my channel to build them yourself :)

[@buckleupbuckeroo]

Excellent content. Well done

[@MichaelJayValueInvesting]

Much appreciated!

[@benji2526]

The market need to crash during the Q2 which will offer us great deals.

[@MichaelJayValueInvesting]

That is what I am preparing for. Economic realities in Q2 will likely be pretty harsh for many of the non-tech companies, which should start to get priced in as that data comes out.

[@rightlane4960]

Wait until the market prices in the possibility of a Biden presidency.

[@ichoudhury007]

Michael, I’m looking forward to see more videos with quality analysis as always. Please keep up the great work. You know, I would love to see you deep dive on Gold Investments. Which is the best option- Gold ETF, Mining companies or real gold (bars, coins etc). I have mixed feelings but love to hear your thoughts.

[@_darkbrian]

I thought you're gonna talk about $BRKb a little more

[@MichaelJayValueInvesting]

Plan to address that more in upcoming Buffett video. Cash drag has weighed on BRK.B for a while, and may continue to do so. Very conservative which is what most BRK.B investors have come to expect so expectations are likely less than the market anyway.

[@utuber4841]

The stock market is like we took your investment and now your poorer!

[@TheCustomer]

Have you thought about uploading all ur content on spotify podcast?

[@MichaelJayValueInvesting]

Not currently, but might consider it in the future. Need to get back to more consistent uploading here on KZbin first!

[@sgtsnakeeyes11]

11:10 "don't time the market by going all cash because that generally doesn't work"... so if it doesn't work for 100% of your portfolio why would it work for 50%? or 20% or 1%?

[@mreman007]

I'm shorting Twilio

[@DirtyMinusBit]

shorting the strongest stock is often not the best idea. Stock market can stay irrational longer than we can stay solvent. No hate, just saying.

[@MichaelJayValueInvesting]

I presume on the basis of valuation? I agree that it is overvalued, but anything can happen short term (see TSLA as example). Just be careful when shorting!

[@zgreg427]

Nwl update. Need Accountability if giving investing advice. U bought in the 20s. Down 50%

[@MichaelJayValueInvesting]

Not giving investment advice, but yes as an update I did sell NWL for ~$18 last Sept. Done as an effort to reduce the portfolio weight in special situation/turnaround stocks.

[@zgreg427]

@@MichaelJayValueInvesting People take your advice tho. Why do you think people watch your videos on stock picks? Are you not better off buying index funds? your picks lag the index. So you have to be careful with your recommendations. Gaining financially from KZbin by giving stock picks is very dangerous.

[@travisjacobs3]

@@zgreg427 It's called doing your own research as this is really meant for. It's what HE is doing. Stop putting blame on someone. If you don't do your own research yes it may be a smart thing to do a index fund. I don't like index funds because they aren't that great. Even gold has beat index funds.

[@zgreg427]

​@@travisjacobs3 He is leading people to believe they can pick stocks. Even he can not pick stocks will all the research and time spent he lags the index. His stock recs have been horrible. He needs to create content to sell you ads to get paid by youtube. He knows index are the best for most, even for him, but he cant make much money off recommending index funds.

[@SuperSlayinJJ]

Buy Bitcoin

[@MichaelJayValueInvesting]

Will be interesting to see how it performs over the long term. With central banks printing it has potential to do well, but still very volatile. I generally prefer gold (using SGOL currently) as my monetary hedge given the longer history. Best of luck!

[@Coda1850]

It's not

[@MichaelJayValueInvesting]

Do you think today's prices are fully justified?

[@pastexpiry2013B]

hardcover book