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Well folks if you look at the stock market we’re near all-time highs right dow jones industrial average is at 35 455 points right now if we look at the 52-week range this is also the all-time high 35 631. we have a very confusing stock market right that’s you know we’re only a couple hundred points away what’s that less than one percent away from an all-time high in
The dow the s p 500 is near all-time highs nasdaq is near all-time highs and when you have this sort of situation going on it definitely can lead some folks to start thinking okay are we in a situation where we’re setting up for stock market crash a major correction here something like that right when you see the markets kind of flying high like this you have a lot
Of talk around the fed what’s the fed going to do could the fed raise rates will they raise rates uh faster than expected inflation has been crazy but then also you’re getting some signs that inflation could be potentially coming down in a lot of items that were maybe supply you know supply chain related so you have all these different elements and it’s creating
For a very very confusing situation we got to talk about here i obviously bought stocks heavily the past three weeks i’m recording this on august 29th it’s a sunday afternoon thanks for so much for everybody’s joining me on the sunday by the way uh not every sunday i release a video let’s just put it that way but um these weeks i was buying stocks extremely
Heavily i put some of the most money in the stock market i’ve put in the stock market since probably december when i bought a million dollars worth of walgreens stock right outside of that i haven’t put that much money i mean what did i buy for hundreds of thousands of dollars of different stocks right last week i took a breather week right a lot of stocks were
Moving up moving up i like to take a breather on a week like that especially when you’ve been buying extremely heavy a lot of stocks dropped to very very very low levels right i mean especially a lot of stocks i like and so what did you specifically see me buying you saw me buying a lot of small caps or let’s just call them smaller companies in general almost every
Actually i think every single stock i bought during these weeks was under a uh four billion dollar mark cap or actually under a three billion dollar mark cap right a lot of small companies now if you’re wondering what the heck is a small cap a small cap is generally a company with a market capitalization between 300 million dollars and two billion dollars and now
Like i said almost every single stock and i think actually every single stock i bought was right around two billionish dollars or under okay if you think about all the stocks i was buying over those weeks so i’m pretty much buying small cap small cap small caps now one other important thing we got to know before we start going through some of that sk is what is
A forward p a forward price to earnings ratio is similar to the price to earnings ratio the regular p is current stock price over its earnings per share current earnings per share okay usually trailing 12 months the forward p ratio is a current stock price over its predicted earnings per share over the next four quarters if the forward p ratio is higher than the
Current p it indicates uh decreased expected earnings right usually you want to see a forward p that’s under you know a lower number than the current p that’s usually what you want to see forward p equals current stock price divided by predicted next annual earnings period for instance if a stock price of apple is 600 and the predicted eps earnings per share was
45 dollars or predict it for p would be 13.3 okay so we gotta keep that in mind this is one of the most important uh metrics in my personal opinion in the stock market now the other folks have different opinions some like the trailing 12-month pe they think that’s the best metric in the stock market some like price to sales ratios some like the the schiller pe the
Everybody’s got a what i found is a lot of people have different uh things that they really put emphasis on me personally i’m the forward p guy i put more emphasis on that than anything else by a mile okay now here’s where this confusion reaches even higher levels you gotta be flipping my flapjacks this np500 large caps look so overvalued there’s no other way of
Describing it than they look overvalued i mean you know it’s a holy smoke is to say no joke is valuation on the large caps on 21 in this member this is a four p so we’re talking about you know over the next year essentially what what the company’s earnings are so we’re not talking about a situation where it’s like well we’re backwards looking a lot of roni ronan
Affected quarters no it’s not like that at all right and if you look you know we haven’t been this high since 2002 not something you ever want to see you never want to see anything kind of in the range of like 2001 2000 especially when it comes to ford ps so this is where the market gets even more confusing when you see the markets at near all-time highs and on
Top of that you see large caps looking super high right and also price to sales ratio a lot of these large caps are dang high now keep in mind a lot of these large caps have been reporting ridiculous earnings the last few quarters like some of the the best earnings growth a lot of these companies have had in honestly decades for some of them it’s been absolutely
Incredible right or at least in five ten years and so that’s another factor that’s like okay but the earnings growth is also stronger than we’ve ever seen right for a lot of those companies or at least in a long time right now all of a sudden you bust it down to the s p 400 mid caps and you’re at 16.8 so now if you’re buying mid caps i i would feel you’re not nearly
As uh you can’t even call overvalued if you’re buying mid caps you can call it fairly priced if you look at that line obviously there’s time periods when you could have bought it lower right but at the end of the day for the mid caps it feels it feels to me very fairly priced when you just look at this on a historical standard for the last 20 plus years right and
So mid caps definitely are nothing crazy right but get ready to have your mind blown okay the small caps are down to 15.9 now 15.9 the small cap stocks in this market have been getting you know just decimate it just decimate it i mean there’s all the you know you have to go back to when the market was getting killed in kind of the end of december of 2018 november
2018 to find a time period when you get small caps for a cheaper price than right now right i mean look at this you know look where we were at in 2012 or right around there 2013 we were much higher 2014 we were much higher 2015 we’re much higher 2016 we maybe dropped to this level once for a very short amount of time and we were up 2017 2018 obviously we dropped
Lower when that big crash and then 2019 2020. 2020 obviously got super messed up because of ronnie rona right so you look at these time periods going back you can look at 2003 2004 2005 and we’re definitely on the lower ranges and so this allows me not to play with much fear in the market and this is why i plowed hundreds of thousands of dollars into small caps
A couple weeks ago i saw some specific stocks that i i thought were really good deals and there’s not a lot of fear for me as far as downside goes you know look at a perfect example of a stock that you know i was buying heavily you know over the past month let’s say in august right was corsair gaming of course they’re gaming just above small cap range it’s like
Two billion like maybe two and a half billion or so right that’s like that’s a stock in corsair gaming that you know is it realistic at all for that stock the the the the fear is always could it fall fifty percent could coarse air fall fifty percent everything’s possible but it’s so ridiculously unrealistic the stocks already had a 4p of 15 and the small caps are
Already at a level that is undervalued undervalued and so that allows me to play with no fear when it comes to some of these stocks because i’m looking at this and i’m like uh these stocks aren’t highly priced at all when it comes to small caps if i was buying you know let’s say instead of buying a lot of these small caps i was putting my money all in big tech or
All in just large caps in general i would be more fearful when you when you saw what that chart you know just showed there uh let’s compare these okay let’s compare these for a moment and tell me which one’s a little scary and which one’s not the large caps there are obviously extreme scary if i was buying all large caps yeah i would be a little worried because i
Was like you know i would easily feel like we could fall 20 30 percent quickly on lows and get back into this range because you know that’s what could happen right a 20 fall and then also we’re back into these ranges and then all of a sudden it’s like okay we’re about where we should be right large caps does a 20 to 30 percent fall make sense no it could happen
But it would make no sense for small caps to all fall another 30 plus right i mean then we’re down what maybe in here in here you know what i mean like like how ridiculously undervalued could you get so this is what allows me to play with a situation where i’m i’m not fearful i mean we would be all the way back back to 2008-2009 ranges when there was no credit at
All in the markets when the the the financial system had almost nearly completely collapsed right we would be at those type of levels they’d be ridiculous it wouldn’t make any dang sense right and so this is why in a market like now being a stock picker is more important than ever before in my personal opinion being a good stock pick i was just put that way and
Knowing kind of you know where to put your chips and where not to put your chips not to say every single small cap or excuse me not to say every single large cap in the stock market is overvalued or every single small cap is a great deal but if you just look at like things generally speaking generally speaking if you’re buying large caps you are getting ripped off
And you’ve got to be ready for a big potential fall if you’re buying small caps you’re generally speaking going to get a really good deal and generally speaking you if anything you’re gonna get ready for a skyrocket ride to the sky more than a 30 crash right and so these are some this is what’s definitely allowing me to play with less fear in the market if it fall
If all these small caps fall 20 percent okay fine i’ll buy more small caps okay but it’s going to be what is a 20 fall then we’re down in here like it just is so preposterously ridiculous right and you can say well what about the boogeyman uh the boogeyman is ronyrona okay well the numbers have gone insane for ronyrona and i don’t see anybody really caring people
Don’t care uh the government doesn’t care you know that was the one kind of wild card that did kind of give me some fears like ronnie ronan but seeing the numbers skyrocket and no one really cares it’s like okay well i guess running around is going to be what ronnie ronan is going to be and so that almost kind of takes that whole boogie man out of the situation
Right the fact that just like whatever you know numbers skyrocketed went to like what 200 000 and uh the highest numbers we had since december and it was what it was right and so anyways you know that’s why i’m playing with not much fear right now now look at this this is a peg ratio this is price to earnings growth ratio right and if you look at this this is
S p 500 valuation so we’re not even just talking about small caps now just s p in general uh yeah peg ratio is actually really really darn low right now the price to earnings growth you have to pay for stocks actually really really cheap and so this is another factor that looks uh that confuses uh folks right now because you look at a price to sales ratio we look
Really high you look at the schiller p which i don’t think is a good metric um at all to look at most of the time uh it’s just you know it’s a metric that gets i think over hyped you can look at the shoulder pe and times it looks pretty low and then we went through some crazy crashes you could look at the schiller p in the past um in time periods where it looked
High and actually we went through a massive bull market right peg ratio i i think pig ratio is pretty good to look at and we’re just we’re just trading low i just flat out the pay ratio is definitely very very low and so this leads us into a situation the stock market right now where it’s max confusion it’s uh where to turn what to do things like that and i look
At it and i say small caps that’s where my opportunities are and there are specific small caps out there that i love that i think are going to do amazing over the next three to five years there’s some small caps i think are going to do horrible the next few years right but there’s no doubt if i was to worry about something it’s the larger caps and if the small caps
Got pushed down because let’s say the large caps fell for any reason which i think would be more of a rotation of money because keep in mind if these stocks are to drop if large caps are to drop that means investors funds folks in general are selling large caps well if you’re selling large caps then you have cash in your account if all of a sudden you have cash in
Your account you need to put that money somewhere right especially if you’re an etf a fund or anything like that right you can’t just keep also in like oh we sold 100 million dollars worth of large caps now we don’t do anything with the money no now you got to put that money somewhere right and so i actually think that money could easily flow in to small caps and
With small caps the thing is with those stocks is also if you just get 50 million dollars or 100 million dollars flowing into a small cap i mean that stock just goes crazy because it’s so much buying pressure on the side and so i almost feel like it could be a rotation of money and it almost feels like it’s just a matter of time and like i said if if for whatever
Reason if for whatever reason you know the small caps were to fall i’m ready to buy more it’s just it you know for a big huge 20 30 sell-off of small caps i mean you start pushing down to such ridiculous valuations that just starts to get laughable right and it just doesn’t make a lot of dang sense so that’s why i’m doing what i’m doing in the market and um yeah
If any of those stocks fall anymore i’ll gladly buy a lot of those stocks came back uh roaring this week a lot of those stocks made um those small caps made 10 20 some even more than 20 percent moves to the upside this week and you know when when they’re beating down dogs like that they can easily all of a sudden move to that other side like a lot of people don’t
Realize how fast it can happen in small caps in small caps it can go so bad so fast right and that’s why we saw a ton of small caps all of a sudden fall you know from ranges that looked way overvalued to all of a sudden you know now it looks undervalued right we saw a ton of those small caps fall i mean what 50 60 70 percent from their 52 week high some of them
80 percent have seen and now a lot of these stocks are also in the range is that it’s like okay now a lot of them are looking like a snack so anyways guys hope you enjoyed this video as always all i ask in returns that you smash that thumbs up button that helps us out huge in youtube algorithm if you haven’t got a chance to check out the hungry ball yet definitely
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Transcribed from video
THE MARKET JUST REACHED MAX LEVEL CONFUSION By Financial Education
