History In The Making

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What I've Been Reading: The Profit Zone

My friend Alex, better known as The Dividend Dominator on Twitter, writes one of my favorite finance newsletters: The Profit Zone. Each week he gives insights on investing, business, and generating passive income. 

His latest article went over how to cover your expenses with dividends. (They already pay his phone bill!)

If you'd like to learn how to become a master of dividends, join me by signing up here at no cost.

Hey there my friend!

For those who celebrate it, I hope you had a great 4th. I spent the weekend on the coast with family and friends and got to do some much needed fishing.

(Picture for the other fishing enthusiasts)

Since you are a subscriber, you are the first to get notified when I buy or sell a position. Here are my most recent moves from the end of last week.

• Buy- VB - Vanguard Small Cap ETF

• Buy - SCHD - Schwab Dividend ETF

• Buy - QQQM - Nasdaq 100 ETF

• Buy - META - Facebook (covered in last week's email)

We are experiencing a very unique market right now, and I am taking advantage of it.

In fact, it's the S&P 500's worst start to the year since the Great Depression.

Let me tell you more.

Quote

“The intelligent investor is a realist who sells to optimists and buys from pessimists.” - Benjamin Graham

One For The History Books

The headlines tell it all. We haven't seen a market like this in over 50 years.

It's the perfect storm at the moment with rising inflation, the war in Ukraine, Covid-19 lockdowns in China, housing market fears, and crypto brokerages going bankrupt.

With the S&P 500 being down approximately 21% some are wondering if there is any hope of a comeback. According to history, there might be a light at the end of the tunnel.

The last time the S&P dropped like this in 1970, the market came back 26.5% to post a green year. Though to say the market is going to make a run like that based on one statistic would be foolish. Our economy is in a completely different place than it was 52 years ago. 

Two Times?

Here is another piece of data based on the Nasdaq.

As we know the Nasdaq Composite Index is down around 30%. This is very rare.

In the last 10 years, the Nasdaq has fallen over 30% only twice. The first drop was the Covid-19 crash, and the second is the one we are experiencing now.

The 10 years before that from 2002-2012? Twice.

Once in the tech bubble, and once during the Great Financial Crisis in 2008.

Go back another 10 years. From 1991-2001 the Nasdaq dropped over 30% two times.

What does this mean? Going off the numbers you can expect the Nasdaq to drop 30% twice in a 10 year time period, and we are currently experiencing that second pullback.

Fear & Greed

Now we take a look at the Fear & Greed Index. You are probably thinking "Cade don't say it."

But I'm going to say it anyways. We all know the overused Warren Buffett quote "Be fearful when others are greedy, and be greedy when others are fearful."

According to this, now is one of those times to be greedy. But take this with a grain of salt because you shouldn't just go all in at one time.

This indicator has been in the fear to extreme-fear range for a couple of months. For example, let's say you threw everything you had into QQQ during March when the Nasdaq was down around 20%. 

Now you would be sitting with $0 cash to buy and conveniently down another 12% since the market continued to fall after you went "all in."

This scenario is why I choose to dollar cost average. Sure, I might miss out on some gains when the market rebounds, but I'm ensuring I have cash left if we see a further decrease in prices.

I'm A Buyer

What am I doing right now? Buying.

This is a rare opportunity where things are significantly discounted as shown by the performance of the S&P and Nasdaq.

Will things never come back, maybe, but I'm not going to bet on an outcome that has never happened before.

I don't want to look back and think "damn I wish I bought more."

Till next time, Cade

Best Memes Of The Week

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Resources:

Simply Invest With ETFs - Learn the in’s and out’s of ETFs and why they are the simplest and most effective way to invest.

Turbocharge Your Dividends - Generate extra income by selling covered calls on your stocks and ETFs.

Tweet Hunter - Automate your Twitter and build an account that will pay you $100 a week.

Personal Capital - Track all of your investments in one place.

Nothing in this email is intended to serve as financial advice. Do your own research. Thanks for reading, if you have any questions, comments, suggestions, etc. about the email send me a DM on twitter. See you soon!