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Hello everyone! With you, Graham. I don't usually make videos like this, but someone has to say it. Although this is an unpopular topic, I am sincerely worried about many investors right now. Because I've noticed that a lot of people have convinced themselves that the stock market is easy money, and every drop is just another buying opportunity. But the problem is that eventually there will be a recession that will last so long that an entire generation of investors will begin to doubt whether the market will recover at all. And this is not some crazy hypothesis. In fact, most people have completely forgotten that the stock market had negative returns from 1929 to the 1950s, again from 1966 to 1982, and most
recently from 1997 to 2009. That's why I think it's critically important to understand how these cycles work, how to recognize warning signs before they become apparent, and most importantly, how to prepare for the future. Because if the market is showing negative or zero returns over the next 5, 10, or 15 years, you don't want to be forced to completely change your strategy at the worst possible moment. Although, before we get started, there 's never a "worst time" to hit the like button and subscribe if you haven't already. I'm not a fan of constant requests either, but this helps a lot, and as a token of gratitude, I'll pin the funniest comment at the top of the video.
Thank you very much, and a big thank you to Surfshark for sponsoring this video, but more on that later. So, when talking about where we are in the market cycle right now and why so many people are dangerously convinced that stocks are only going to go up, we need to discuss the " bull" market. For those who don't know, this current bull market began in late 2022, and since then the S&P 500 has returned over 129%. This means that if you had bought on the very "bottom", which coincidentally coincides with the release of this video, you would have doubled your money in 4 years. Furthermore, any dips along the way were redeemed almost instantly. For example, remember April 2025, when the market panicked over tariffs? So, from that April low to today,
you could earn another 60%. Not to mention that buying on the dip is becoming a real reflex these days. According to Citadel Securities, on days when the S&P 500 index falls, private investors buy about three and a half times more shares than usual, compared to just 1.4 times on days when it rises. Even more incredible is that in July of this year, there was not a single day when private investors were net sellers on the Citadel platform. None. And, honestly, why would they do that? Since 2009, the S&P 500 has returned about 14.8% compared to a long-term average of just over 11%. However, as good as it looks, here's what almost everyone misses.
The "buy on dips" strategy only works when the stock market recovers. And historically, this does n't always happen. Sometimes you buy on the dip and prices continue to fall. And then you wait for years while the market just falls. And this brings us to the concept of the " lost decade." So, what's the point? The Lost Decade is not a fictional worst-case scenario. This is a real period of time when the stock market has been stagnant for over 10 years. And as uncomfortable as it may be to talk about it , it has happened many times in the United States. Let's start with the first case-the Great Depression of the 1920s. The market peaked in September 1929, and it took over 25 years, until the end of 1954, to simply return to the same level. This means that
if someone bought stocks at their peak under the age of 40, they would have to wait until almost retirement for the investment to simply break even. And, strangely enough, today we see many articles about how we are witnessing a repeat of the " Roaring Twenties" almost exactly 100 years later. By the way, I think this should be a separate video, because when you delve into the similarities between the 1920s and today 100 years later, it gets pretty creepy. But I'll save that for another video, because we have number two-the 1970s. Then the Dow reached almost a thousand points in 1966, and then "stuck" for 16 years. But what makes this case much worse is that inflation has almost tripled the prices of everything. So, if you adjust the
stock market for inflation, the real decline in the Dow over more than a decade was about 74%. And finally, we have number three-the early 2000s. This is what people call the real "lost decade," because if you invested $10,000 in the S&P 500 on January 1, 2000, 10 years later you would have about $9,000, including dividends. And the Nasdaq index performed even worse. It took 15 years, 1 month, and 13 days just to get back to the previous high. While this may sound like baseless fearmongering, I get it. Nobody likes to talk about things like that when everything is going well and everyone is making money. But the last time we saw a " lost decade " was about 20 years ago, which means that if you've been investing money for the past 15 years, you're used to returns
that are historically truly impressive. Believe it or not, stocks have never been as popular as they are now. At the end of last year, a record 33% of all American capital was invested in the stock market. Simply put, everyone is completely focused on stocks right now. Margin debt has reached an all-time high as people increasingly borrow money from the markets. And while this works great when prices continue to rise, there is no guarantee that it will continue forever without any obstacles. So, here's what the experts think will happen next, and my own thoughts on the future. This is what you came for. But before that: when it comes to the markets, most people spend most of their time thinking about how to make more money, invest more, and build
wealth. However, there is another side, no less important-protecting what you already have. For example, few people would leave their credit card or wallet in plain sight in a public place, but online we are constantly accessing bank accounts, investment accounts, and working with other confidential data without proper precautions. That's why an extra layer of online privacy can be extremely important, and one of the best ways to do so is to use the services of our sponsor, Surfshark VPN. For those who don't know, Surfshark protects your information by encrypting your online data, hiding your IP address, and preventing hackers from knowing your city, country, or download history.
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need to discuss the market trap. And to be clear, I'm not going to pretend to know what's going to happen or hint at a "lost decade" in the near future, but I think it's important to hear both sides so you can come to your own conclusion. So let's start with the pessimistic scenario. Believe it or not, some of the world's largest companies are not very optimistic right now. For example, Vanguard expects US stock returns to be only 4-5% per year over the next 5-10 years. And Goldman Sachs spoke even more sharply. For example, in October 2024, they predicted only 3% annualized returns for the S&P 500 over the next decade, with a probability of about 72% that stocks would underperform Treasury bonds. Of course, to be fair, a year later Goldman
raised their forecast to 6.5% per year with a range of 3 to 10%. However, GMO strongly disagrees with this, predicting that the economy will show -6% real returns for large US companies over the next 7 years. However, on the other hand, the optimistic scenario is no less convincing. For example, in May, Deutsche Bank and Morgan Stanley raised their year-end target for the S&P 500 to 8,000, and Yardeni Research even raised it to 8,300, largely because they expect S &P 500 earnings to grow by 24%. In addition, a record $8 trillion is sitting money market fund accounts, which, in theory, could eventually return to stocks. Furthermore, historically, this " bull" market we're in now is actually not that old. If
you look at the period after World War II, the average bull market lasted about 5.6 years with a growth of 167%. Well, this one, in turn, lasts about 4 years with a profit of about 129%. So who is right in this matter? Honestly, I don't know, but I'll never forget how I got into real estate in 2008, watching the markets crash, home prices drop 26%, and remembering that no one wanted to invest. In fact, for a while, cash was the most profitable asset. But, strangely enough , it turned out to be an opportunity, because when everyone was interested in real estate, there wasn't much growth potential. But when no one wanted to touch it, I was able to buy an asset for $60,000 that is now valued at $350,000-eight
times more. And that's what made me realize that the moment when no one wants to invest is usually the best time to invest. I also remember 2020 when the markets crashed so quickly and everyone was saying it was the end of the world. But instead, the S&P 500 ended the year at a record high just as I released a video about how wealth is created during recessions. This also happened again in 2022, when the markets supposedly came to an end. Jeremy Grantham called it a " super bubble" and warned that the S&P 500 could fall as much as 2,500 points. And in October of the same year, Bloomberg Economics estimated
the probability of a recession within the next 12 months at 100%. And it just so happens that this forecast was released on October 17-just five days after the start of the bull market. All of this proves: if the smartest people in the world can't predict the future, then neither can we. Therefore, we can only assume that at some point in the future the music will die down. And whether you will be able to survive depends only on the " crash test". That's what's really interesting about the " lost decade." It was only lost if you owned one thing. For example, from 2000 to 2009, a dollar invested in the S&P 500 turned into 90 cents. But US government bonds have almost doubled.
A dollar in gold turned into almost $4, and even a simple 60/40 mix of stocks and bonds ended the decade with a small profit. That's why it's so important to me not to keep all your eggs in one basket. Starting with the first: don't just own American stocks. Remember that the 10 largest companies now make up about 39% of the entire index. So, simply buying the S&P 500 index is no longer as diversified as it used to be. And as a perfect example of this, over the past year, international stocks have returned about 32% compared to about 18% for the S&P 500. This was the first time the U.S. market has given way since 2022, which brings us to the second point: invest in safety.
Treasury bonds are currently yielding some of the highest yields we've seen in the last 20 years-about 5.3%, which is simply incredible. So it makes sense to keep a small portion of your portfolio in something safe so that in case the market falls you have a " safe haven" that also generates a good income, which leads to the third point: keep buying and don't sell. I know, this is very boring advice, but it is the most important one, because JP Morgan found that if you invested $10,000 in the S &P 500 from 2005 to 2024, you would have about $71,000. But if you missed just the 10 best trading days, that profit would drop to $32,000. And seven of those 10 best days came during periods of the worst market declines. Also, if it's any
consolation, the stock market triples on average in the decade following the previous one, which is why it's so important to keep buying and not selling. And finally, point number four: be optimistically cautious. For me, it comes down to three rules. Determine the size of your investment so that you are not scared of a drop, take your emotions as a signal to act contrary to the market, and continue to buy, ignoring the noise, with the money you are willing to calmly watch the depreciation. I think that usually when everyone is euphoric and excited about something, it's not the best time to buy. But when everyone says everything is terrible, the market is going to fall further, and everyone is panicking, it's usually a great
buying opportunity. So, as far as my thoughts and what I'm doing next, here's what you need to know. In general, I will be frank with you. I'm not going to pretend to know what happens next, because I don't, and neither does anyone else. But I tend to believe that only one of two things will actually happen. Either company valuations will rise and we will eventually " grow up" to these prices, which would mean a continuation of the " bull" market, or valuations will fall and we may see a relatively stable market, as was the case in the mid-2000s. Personally, I wouldn't bet against the first option, because the market could remain expensive and continue to grow for a very long time. In fact, the market was expensive in terms of CAPE ratio in the 1990s, but
it still managed to double. But I worry when I see people investing everything in stocks without any financial cushion, assuming we will continue to earn 10-15% per year. And these people, I'm afraid, unfortunately, are in for a very cruel disappointment. Overall, all of this means that now is the time to think about diversification. I'm talking about investing not just in U.S. stocks or the S&P 500, but also adding international assets, perhaps bonds, a high-rate savings account, gold, real estate, or collectibles. That way, if something goes down, you have another asset to fall back on. And you know what? If the market continues to grow-great. But if not, you won't be forced to sell at the worst possible moment, because the only way to survive the "lost
decade" is to ensure that you can survive. Oh, by the way, I thought this was interesting, given the topic of investment and diversification. If you want to see my own portfolio, what exactly I've invested in and how it changes daily, add me on Blossom Social. This is a site that was created, oddly enough, by one of the subscribers who wrote to me and told me about it. I like him very much. And I published my portfolio there. You can see how I work compared to someone like Caleb Hammer. And it's completely free. It won't cost you anything The link is below in the description. Go ahead and add me there. You will be able to see everything I do.
Thank you very much. And until the next meeting.
