Timing the Bottom of the Market & Trade Bet.

has the market bottomed and is it time

to buy back in that's what we address in

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I'll never forget when I was uh oh gosh

in high school uh and it was around 2007

and I was just getting ready to graduate

high school started working on my real

estate license in high school I ended up

getting my real estate license at 18.

I'll never forget uh in in 2009 around

this time my uh family members were

dumping their 401ks because they had

realized that the valuation had fallen

so much it was almost kind of like

they'd never been into stocks they're

sort of just blind to the idea of of the

stock market and it's almost as if all

of a sudden you had folks decide oh well

I'm gonna go look and see what my

retirement is and oh no it's down like

40 well dang if it's sound 40 percent

I'm may as well go and sell because if I

sell now at least I'll still have the

other sixty percent and sure enough many

of these folks and not just uh people

that were close to me but but also just

you saw the story repeat itself over and

over again we're selling essentially at

the bottom of the market uh and as

difficult as it is to time the market

perfectly I think it's very clear when

markets tell you okay we're near a top

of a cycle it's time to buy okay we're

near a bottom of a cycle or sorry we're

near a top of a cycle it's time to sell

we're near a bottom of a cycle it's time

to buy right that's pretty logical I

think we could say that pretty clearly

for example with the real estate cycle

and the real estate cycle is something

that I've been teaching probably for

about 12 years originally in coffee

shops and at open houses to folks I

would draw the or I actually had a

picture of the real estate cycle up uh

and it was it was sort of customized for

Real Estate but folks were so worried

about this idea of oh my gosh you know

well what if home prices continue to

fall and the the most simple and I think

comforting concept that you should think

of as an investor is not to try to be

perfect to sell right here at the end of

2005 and try to buy right here in

November of 2011 when the housing market

bottom uh and this applies to stocks as

well right but instead the goal is to

try to draw a line through the middle

here and try to do your best to buy over

here right to buy here and to ultimately

sell here that is actually a lot easier

to do we can time that the market in

this sense by looking at the macro cycle

this is one of the reasons why in

November of 2021 over here I started

shorting Arc K wish I held on to those

shorts longer it's also why in January

of 2022 I'd say probably on this side I

sold my entire portfolio and and removed

what I thought were some of the most

most riskiest positions all together as

we were in this sort of macro cycle and

it wasn't to say that oh we could

perfectly time the bottom it's to say

that we know we're at sort of a macro

Peak right and now I would argue that

we're probably somewhere near a macro

Bottom now that might be here or we

might be here I personally believe we're

probably on the left side unless we have

some form of Black Swan event that we

haven't actually seen occur yet which

means if we are on the left side we're

certainly well either way whether we're

on the left or the right Black Swan

event or not I believe we're certainly

almost certainly I would say on the

bottom half of this cycle I think that's

pretty evident with with some of the uh

declines and and the shifts in the

economic data that we've seen we'd

really have to see a U-turn in inflation

to the dark side or some kind of Black

Swamp to suggest that we're not in the

bottom half of the economic cycle uh the

macro cycle here

or you'd have to really believe that

look you know maybe inflation's going to

pop up again and things are going to get

even worse but then you wonder hey does

that mean we're just right here and okay

fine so things are going to get a little

bit worse right the point is we're not

at Euphoria anymore and my belief is

forget about trying to perfectly time

the top or the bottom time the macro

cycle and look at it as an individual

and say look we're obviously in a

difficult and recessionary style of time

why not try to take advantage of this

environment work harder now make more

money now build more wealth Now by

investing more now so basically what

you're doing by investing more now is

You're Building more potential wealth

right you work harder now you take your

money you buy more quantity of exposure

to either prep for Real Estate or buying

equities or maybe you're buying bonds

whatever and then that way you're

rewarded as we enter the upswing of that

cycle whenever that cycle comes I

personally think that is actually quite

easy for anyone to do it's it's not

difficult to know okay when when are we

when are we turning on a macro cycle to

the dark side and and when are we when

are things getting better right yeah

that that I think are those are the

things that I think we will end up

having shown as true between November

and January as sort of our top uh for

the the peak of the cycle and uh

hopefully somewhere between October uh

certain stocks even as as early as July

somewhere between July and October who

knows that could have been a bottom

maybe you get a double bottom who knows

uh but let's take a brief look over here

so uh this is where uh the reason I

started with this is because there are

so many research pieces discussing the

differences between

what investors are doing and how

investors are positioning themselves and

and almost daily I read content uh about

how uh investors are just in in such

different positions uh for example here

you've got uh you've got this argument

that the current Equity rally we're

seeing is due to systemic buying and

hedge fund short covering which may have

legs and there are always so many

reasons for why the market could be

going up right uh in the short term I

actually agree I think I think in 2022

it was easy to make money just shorting

the market you could sell covered calls

and milk money you could short the

market and milk money it was easy uh and

and unfortunately I think that actually

for a lot of hedge funds leaves them

under allocated to equities in in uh

what you know what could eventually be a

sustained rally and then what happens

whether it's hedge funds or individuals

they'll end up saying oh don't worry the

latest bounce is just a bear Market

rally and it'll plummet to new lows

again maybe or it doesn't and then all

of a sudden they look back and they're

like wow the nasdaq's up 40 you know

whatever from from where it was uh and

they're like dang well now everything's

just overpriced I'll wait for the double

dip and then that double dip never ends

up coming uh that's that's a danger or

risk that individuals run into I believe

and so do institutions uh but uh here's

here's an interesting uh piece on the

difference on how individuals and

institutions are positioned they do say

that short interest has actually halved

for uh the fourth quarter for European

equities however in the United States we

still sit at elevated levels of short

interest now I find that very

interesting that we're still sitting at

elevated levels of short interest in the

United States because at some point

those shorts are going to have to cover

when when when movements and the equity

Market

continue to prove that they're going to

Trend uh in in a positive direction in

contrast mutual funds rather than

remaining short or long cash and have

actually been dumping equities in recent

months as a result our Equity beta is

close to lows beta is is a measure of of

the difference of your portfolio to uh

to to an index usually like the s p 500.

similarly the bid from retail investors

has waned with U.S households turning to

outright sellers of stocks think about

how weird this is you're potentially

sitting at I would potentially say the

bottom 20 of the macro cycle again no

guarantees whether we are on the left or

right but the bottom twenty percent

would probably look something like this

of the macro cycle right again it means

we could potentially go a little lower

or potentially means we've already

lifted off of the bottom nobody knows

that uh but we we do have high

confidence that we're on the bottom half

potentially even within that bottom 20

percent yet at that same time look at

how investors are positioned in my

opinion it's ludicrous you have

households seller being sellers you have

mutual funds long cash and you have

hedge funds in the United States I guess

I should write three there we go one two

three there we go and you have hedge

funds in the United States still

relatively short so

think about I mean there's a reason why

Morgan Stanley has said

there is so much cash on the sidelines

waiting to be put to work and when you

see a report like this from Barclays

you kind of reiterate that argument I

thought well yeah if households are

sellers mutual funds are dumping and

they're long cash and hedge funds are

short well either they think we really

are going into some form of double dip

or the bottom still isn't here they're

trying to be perfect

or they're making a big mistake uh so

that's something quite interesting I

believe for watching your own individual

portfolio they do believe that currently

uh this is the short interest that we're

seeing in the United States uh it is a

chart here on the right side short

squeeze in the United States is less

clear to us in other words we've seen

Short covering here in the United in in

the Eurozone but look at this you could

see almost no drop in short interest

through December uh in the United States

and into the early part of January TBD

how uh that has moved in the last uh in

the last week here but a lot of

information about how uh ultimately

exposure to equity uh is is by no means

uh high or excessive if anything it's

low so I think that's that's quite

fascinating so uh we'll see how things

move here cash and treasuries uh

catching up with Equity flows we've got

cash and corporate credit in demand year

today okay so plenty of other charts and

information from Barclays but uh

something here to consider are we

potentially near the bottom of that uh

of of that macro cycle and again for me

I think the big question is where

where's the Black Swan and I suppose the

idea is that nobody knows where that

Black Swan is right but what we do know

is there's a lot of repositioning

happening in Investments

whether it's again hedge funds going uh

for for short positions or mutual funds

being Loan cash one of the things that

I'm paying attention to actually is

advertising and we know that advertising

is expected to slow by five percent in

2023 the consensus in 2022 was actually

a uh it slowed down or sorry a growth of

about uh 10 and that is now slowing to

about five percent in 2023 and

potentially falling as

um or Rising then again to 8.5 growth in

2024. now the reason I bring this up is

because personally there's a position

that I hold that I think is actually

going to really benefit from this

movement in advertising so so if you

look closely at this here you see

advertising in consensus boomed about

21.6 in 2021 9.9 of 2022 only 5 in 2023

and then 8.5 in 2024 so not actually

going negative on Advertising but what's

remarkable is even though advertising is

slowing down you have this sort of

rejiggering expected in where

advertising spend is going and one of

the biggest markets that it really seems

to be benefiting from this recruit or

sort of remarking or redesigning of

advertising spend budgets is the U.S

connected TV advertising sector you can

see here it is expected to have tripled

from 2020 to 2024 from about 10.9

billion dollars in 2020 to 17 and 21 21

and 22 20 nearly 7 2023 and then 31 in

2024 according to emarketer now what's

fascinating about that is I think

there's one play that is worth paying

attention to and that is the trade desk

so if you are thinking about that macro

cycle and you're looking where are

stocks and positions that uh you know

maybe they've been beaten up over the

last year trade deaths down about 20

over the last year uh and and how are

companies positioned to potentially take

advantage of that shift in advertising

well trade desk might be one of those to

consider for that sort of bottom of the

macro cycle play again not calling an

exact bottom but something to pay

attention to now one of the reasons

we're seeing an explosion in connect to

TV is because Disney is introducing

advertisements via connected TV to their

platform and this follows obviously

Netflix's move into connected TV

advertising now connected TV via

Microsoft via Netflix excuse me is

provided by

um by Microsoft however connected TV for

uh companies that that Disney owns like

Hulu are provided by a trade desk and we

expect trade desks to be heavily

involved in providing ads for Disney

Plus us so I think there's a a pretty

substantially exciting opportunity in

trade desk and when I look at the actual

fundamentals of that particular company

I I kind of like them take a look at

just some of these notes Here some of

these notes by the way are notes that

I've put together with course members

oftentimes in the mornings we'll do

course member analysis on certain stocks

either that you're looking at or that

I'm looking at we'll either do this on

real estate we'll do this on stocks ta

you name it and you could join those and

get lifetime access for those using that

final coupon code link down below which

expires January 30th which is just in a

few days go to metcaven.com join to

learn more but take a look at the

statement of cash flows for trade desk

this is from their earnings report

ending September 30th 2022 we've got 1.3

billion dollars available in free cash

we'll see that on their balance sheet

we're adding about 125 million dollars

in free cash from operations which is

incredible is an incredible cash flow

here if we look at free cash flow we're

well above 90 mil this is a smaller

company of course but Revenue in the

last three months of 2022 growing at 30

percent now they did have a one-time

boost of GNA for their well I mean there

could be future booths here but they had

GNA explode here in uh in in 2022 uh in

the three months ending in September

relative to 2021. I actually think

that's a positive Catalyst now you might

think that's crazy but most folks aren't

paying attention to the fact that this g

a boost was actually in my opinion a one

well I look at it it is heavily based on

a one-time CEO stock comp payment in

other words we're not expecting to see

that kind of GNA expense boost again for

future quarters which could actually

boost EPS substantially from where it

sits now it's positive uh it's been

positive it was positive in 2021 uh it

was slightly negative for the first

first nine months of 2022 this the stock

comp payment didn't help uh but uh

positive here again in 2021 positive

2022 Q3 and so in my opinion well while

we're kind of on the edge there of of uh

profitability it's a company that's

growing revenues phenomenally uh and uh

once some of these one-time expenses

Fall by the wayside EPS growth could

look pretty dang phenomenal uh and it's

a player in that connected TV space

that's really really killing it uh so so

here are just some notes that I wrote

about that uh a CEO expense platform

operation costs 17.7 of Revenue uh and

uh they've got pretty decent margins

bringing income uh from operations uh to

about 26 percent uh of of their Top Line

not bad

so uh then we have

uh let's see here this is uh this is

just an example of of potentially a

company to look at uh near well I mean

most most of the the text style and

advertising style plays have really

Fallen by the wayside in this macro

cycle so I'm I'm really paying attention

to what do I think is potentially

positioned for that bottom of macro

cycle uh trade desk could be one of

those so it's definitely one that I'm

paying attention to uh and I think it

deserves a high allocation and uh in

ETFs uh whoever maybe managing ETFs out

there pretty fascinating so um that

gives us a little bit of insight into

ads a little bit of insight into sellers

where we might be in the macro cycle

curious to know what you think in terms

of where we are in the macro cycle so

leave a comment Down Below on that