9. The Current State of the Market

in this episode, Josh reflects on thecurrent state of the stock market, how companies have grown in market cap andhow that impacts inequality and unemployment. He concludes with advice forcontinuing on your financial journey. The stock market right now is reacting tothe technology trend that we discussed earlier, where the largest companies inAmerica are completely impervious or even helped by the way the economy iscurrently structured.

[00:00:36] And so those companies have avery large waiting in the indexes and there are many of them. It's not justfive. There are hundreds of companies that have found this as an amazing momentfor what they do. Right Shopify, which is company based in Canada, which allowssmall businesses to become their own mini Amazons.

[00:00:55] There are companies like Gilliadthat are working on vaccine cures. There's a company called , which is thelargest warehouse company in North America, basically Amazon and Walmart'slandlord for all of the e-commerce shipping and fulfillment. So there arecompanies that. Have done a credibly. Well, as a result of the pandemic, asshocking as that might sound to someone who's unfamiliar with the market, thosecompanies have grown in market cap to the point where the entire stock markethas risen about 50%.

[00:01:26] In just a couple of months, aspeople feel more and more comfortable that humanity is going to get throughCorona virus. And then on the other side of that, there were a group of stocksthat will be the new leaders. So that's, what's gone on recently. I'm fine withit. I'm an investor. I own all this stuff.

[00:01:43] Very happy, no complaints. Ithink the bigger concern I have is that. Most of the stock market is owned by avery select group of people. And there are a lot of people who are stillunemployed, who are not having fun trading stocks on Robin hood, who aregenuinely in a position where they don't know how they're going to pay theirbills next week.

[00:02:04] And they are being increasinglyleft behind by all of the wealth being created. For the shareholders oftechnology companies. So that's my big concern. And if you felt that wealthinequality before the pandemic was bad, wait till you see what the postpandemic inequality looks like, because it is orders of magnitude worse.

[00:02:26] So we've lost 20 million jobs,the U S economy, and we've only gained back about 10 million of them. Andyou've got many people who are watching the stock market, do what it's doing.And saying, I don't know how I'm ever going to keep up and catch up becausenone of this is helping me.

[00:02:47] this is the part I'm happy thatI think it's led to increased discovery of the stock market by a new generationof investors that were stuck at home with not a lot to do and no sports. And inthe absence of televised sports and things to watch the stock market became theonly game in town. The only thing to watch to bet on, to learn about, to becomeexcited about.

[00:03:09] So other than Fortnite andNetflix, I think the stock market became a really important activity formillions of younger people. And many of them had just completely ignored thestock market for a long time. So I think the silver lining is discovery. And anew class of investors that are genuinely excited about the ability to investin companies.

[00:03:31] Many of them have begun astraders and many of them will lose a lot of money. But I think in the aftermathof that, they'll examine, why did I lose money? Or why did they make so muchmoney and then give it all back even faster. And they'll want to learn. They'llwant to read. They'll want to listen to excellent podcasts and they'll want tobecome a better version.

[00:03:50] Of the investor. They startedout as, and I think that's great. And I'm rooting for them to turn that corner.

[00:04:02] I think this is the firstrecession in us history where every single person agreed that it was startingat the moment that started the night, Tom Hanks and Rita Wilson disclosed thefact that they had COVID an hour later, Adam silver shut down the NBA season.Those two events happened within 45 minutes of each other.

[00:04:21] And I remember being on Twitterand I just remember saying to myself, we literally have just had the firstrecession ever that you could timestamp at the beginning of it's never beenthis way. We have recessions typically that we don't find out it's officiallyrecession for three months, based on the way the national Bureau of economicresearch calculates it.

[00:04:44] We knew in a second that night,maybe March 14th, we knew in a second, this economy is 100% finished. And ifnot in a recession, in a depression, which arguably March and April probablylooked more like depression than recession. So that's never happened before. Andso I think that was the biggest surprise.

[00:05:05] Now we won't all agree on therecovery and to what extent we're recovering and how much there is still to goand how long it's going to take to get 2000 nineteens economy back. If we everdo, we won't all agree on that, but we all at one moment knew this economy justwent to zero and it really did. It really did.

[00:05:26] And that I think is one for thehistory books.

[00:05:33] I try to build diversifiedportfolios for clients. There were some stocks that everyone is betting onright now to be the next big thing that will go to zero. So making big bets onthat sort of thing for me is not a good use of my time. I don't think I'd bevery good at it. The only thing to keep in mind is I do business mostly withrich people.

[00:05:51] And if you're already rich, youdon't need get rich quick schemes. What you need to do is preserve yourpurchasing power and make it through. Hitting all your financial goals,retiring and leaving a lot of money to your heirs. You don't need to all of asudden become, and this gets back to the first answer I gave you about thedifference between long-term building of wealth versus sudden wealth.

[00:06:15] So I'm not in search of Southernwealth. I know personally, if I keep doing what I'm doing, building my businessand investing my own capital and energy and time I will have wealth. I know it.It's inevitable. So I prefer to invest on that basis rather than try toidentify the next Tesla let's say and strike out a thousand times on my way todoing that.

[00:06:43] never forget that risk andreward are related and allocate your assets. Accordingly. Try to read more blogposts than tweets. Try to read more articles than blog posts. Try to read morebooks than watch television and understand that the more thought that's goneinto something, the harder it is for you to unlock those truths and thatinformation.

[00:07:08] So reading a 300 page book aboutinvesting is hard. Reading a tweet about investing is easy. It's not that thetweet has no value. It's that if you pick the right books, it's very likelythat you are going to get an exponential amount of value out of that effortthat you've put forth to read that book.

[00:07:25] It's like anything else in life.If you want to get good at this and you want to do something seriously. Youhave to commit time and energy and fight through. There is no free lunch, butI'm telling you that you must read. So if books, aren't your thing. We blogs.My firm puts out seven or eight of the highest quality financial blogs inexistence.

[00:07:46] We work really hard on a day andnight. There are amazing podcasts you can listen to. You want to just make surethat the people whose opinions you're taking are people who manage money inreal life. And not people who are professional attention getters, because ifsomebody doesn't report to clients or manage any real money, their opinionscould be extreme and volatile because it costs them nothing to have thoseopinions.

[00:08:12] Somebody who manages money. Theymay be biased in what they're saying, of course, but at the very least, youknow, that they're responsible to people for their real money. So they're notgoing to have these outrageous, extraordinarily volatile opinions. They'regoing to be a little bit more practical in what they say.

[00:08:30] And I think that's really whereyou want to begin your journey of learning the stock market. One Oh one withJosh Brown is a Himalaya learning of original production produced by DarrenSchwartz and edited by Tyler Morissette and Eric Carlin. Yeah.