WARNING: Buy And Hold Will Destroy Most Investors (Here's Why)
Summary
Investment Strategy Critique: The podcast challenges the traditional buy and hold strategy, suggesting that historical data does not always support the notion that markets will inevitably rise over time.
Historical Analysis: Examination of the S&P 500 from 1930 to 2020 reveals that in four out of nine decades, the market adjusted for inflation actually declined, questioning the reliability of long-term holding strategies.
Japanese Market Comparison: The podcast draws parallels between the current U.S. stock market and the Japanese market of the 1980s, highlighting the risks of assuming perpetual growth based on past performance.
Valuation Concerns: Emphasis is placed on the importance of PE ratios, noting that historically, decades starting with a PE ratio above 20 have not ended with inflation-adjusted gains.
Market Bubble Warning: The U.S. stock market is described as potentially being in a larger bubble than Japan's in the 1980s, with U.S.-listed companies representing a disproportionate share of global market value compared to their economic contribution.
Mean Reversion Potential: Discussion on the likelihood of mean reversion in PE ratios, suggesting that current high valuations could lead to future market corrections.
Alternative Strategies: The podcast advocates for considering alternative investment strategies, such as focusing on undervalued sectors like energy, rather than blindly following the buy and hold approach.
Probability-Based Investing: Encourages investors to consider market probabilities and historical data in their investment decisions, rather than relying solely on conventional wisdom and narratives.
Transcript
Hello fellow rebel capitalists. Hope you're well. So everybody always hears the narrative. Buy and hold. Just buy and hold. Dollar cost average. Buy the dip. It's not about time or excuse me. It's not about timing the market. It's about time in the market. Yes, that's the saying. But we never stop and think about whether or not this is empirically true. Like if you go back in time and look at history, has that worked? You just hear this from the Dave Ramsey types. You hear this on pe You hear this from people on social media. You hear this in the mainstream media and the financial news that all you have to do is buy and hold. Buy and hold. That's the prudent thing to do. That's the smart thing to do because everybody knows that over the span of a long period of time, the stock market always goes up. And what they'll do is they'll show you charts conveniently from 1980 to today. And they'll they'll show you these charts and they'll say, "Well, look at this right here. It's undisputable. The stock market always goes up." Well, again, today I want to put that to the test. And I think the results of the empirical data will shock you. And in fact, I would go so far that if I was going to put money on it, the buy and hold type of investors that are just dumping money into a 401k and just the ignorance is bliss strategy is what I call it or the ostrich strategy where they just buy and hold because everybody else is doing it and everyone knows that's the smart thing to do is bury their head in the sand and they don't want to know about it. They just assume that this is going to cover their retirement. And unfortunately, I think those investors are going to get crushed. Let me show you what I'm referring to. First and foremost, I want to go to a chart of the S&P 500 and I want to just look and go back past 1980. Imagine that. You mean the stock market existed prior to 1980? Who would have thought? And I want to see what actually happened in real terms when you adjust for inflation because at the end of the day that's what we're trying to do right by investing. The whole point of taking risk is because you want to increase your purchasing power not just maintain it. So let's look at a chart of the S&P 500 and this goes back to 1930. Now you'll notice this is in nominal terms and so what we don't care about nominal terms we care about a deflation which is right here. You need to share your screen. Oh, thank you Josh. Josh stopped swiping through Tinder just to bless us with his presence for the next 15 minutes. All right, getting back to the chart of the S&P 500. So, we can see when we adjust for inflation, 1930 or so, what I like to do is I like to break it down by decade. I've done this a couple times on past videos, but it's definitely worth reiterating because this is something we have heard for the last 40 years. We've had it pounded into our heads that you just buy and hold, buy and hold, buy and hold, and you'll just magically get rich. And that's just look at the chart going back to 1980. Okay, you guys get it. But when we go back to 1930 and look at the past nine decades, nine decades from 1930 to 2020, we see that there were actually four decades where the S&P 500 adjusted for inflation went down, not up. There were four decades where it actually did go up. And there was one decade where it was flat. So you could say, well, this is just a coin toss, but it's really not. Let me show you what I'm referring to. The next chart we're going to look at, and the genesis of this is when I was in St. Barts last week, I was talking to a gentleman, and let's pull up a chart of the NIK here. This is the Japanese stock market. And I was talking to a gentleman that actually started his career in Japan. Big hedge fund manager, one of the best of all times. And he started his career right around here, 1988 or so, in Japan. And he was managing money. And he was telling me about what it was like to not only see the Japanese stock market daily, but to actually live in Japan and be around all the other financial types. and he said it was just assumed the stock market would go up every single day. Now again, we're not talking about the NASDAQ. We're not talking about the S&P 500. We're talking about the Japanese stock market in the 1980s. Now, a lot of you are too young to remember that time. But some of you folks that are as old as I am, I'm sure you remember the narrative. Even back in the United States, remember Japan was taking over the world. They were going to blow away the US economy. They were buying up all the real estate in California. I think they bought Pebble Beach, by the way. They're buying up all the real estate, excuse me, all the real estate in New York City. The Japanese and their incredible economy is going to continue to grow and grow and grow and they are going to take over the world. There's no way anyone in their right mind would invest in the United States when you can invest in the future, which is Japan. I'm not making this up. For you young guys and gals on the on the live stream, I'm sure this sounds like just like like AI or something that it's AI generated narrative. No, ask your parents. Ask your grandparents. Ask the people that you know that were adults or at least alive at that time and you'll tell you and they'll tell you this was spot on. And if you don't trust them, just go back and look at the archives of the Wall Street Journal. This I would challenge you. In the late 80s, see what the Wall Street Journal was saying about Japan. And it's exactly what I just said. But then we know what happened. We got into the first day of the 1990s and whoa, what just happened? The stock market went down. Well, that's not supposed to happen. Everybody knows that the stock market goes up every day. Well, okay. Well, what are you going to do? Well, obviously you got to buy the dip. Well, why are you going to buy the dip? Because every single time that's worked well. In fact, let's go back a little ways here so we can include the 1970s and look at this. Look at this chart of the Japanese the NIK from 1969 all the way to 1990. Look familiar? Go straight up. This looks almost identical to the S&P 500 today. If you go back to let's say n 2010, right 2005 with the exception of the of the GFC. In fact, I'm curious. What if we go back to 1960? Yeah, look at this. So, think about that. What were the financial planners in Japan saying right here in 1987? They were showing the Japanese investor a chart going all the way back to call it 1965 and they were saying look it it's right here. All you just buy and hold. Buy and hold. Buy the dip. It's not about timing the market. It's about time in the market. And if you don't believe me, just look at this incredible chart of the Nikkay from 1965 to today. Let's just say 1987. And the average Joe and Jane or what or their Japanese cousins, they would look at this and say, "You're right, Mr. Dave Ramsey. You're right, Japanese Dave Ramsey. You're right, Japanese financial planner. You're right, Japanese financial media. I just have to buy and hold. Buy and hold and buy the dip." But then we fast forward to 1990 and the stock market goes down. Well, that's a fantastic opportunity, right? Because now you can buy the dip and you can just dollar cost average. And when you look at those charts going back to 1965, it's obvious all you have to do is buy and hold. And then you buy the dip here, and then you buy the dip there, and you buy the dip there. You buy the dip here. You continue to buy the dip. And you buy the dip. And you buy the dip. And you continue to dollar cost average all the way down for the next 20 years. 20 years. You buy the dip just like you were trained. Just like everyone said in the narrative over and over and over again. So many people said it that it just had to be true. and you got completely wiped out. Completely destroyed. You thought you were going to retire. Good one. Because now every single dollar or a lot of the dollars that you put into that portfolio because you believed the narrative is now trading at 10 cents on the dollar, let's say, just in in aggregate. And oh, by the way, look at where we are today. Woohoo. Awesome. We're at an all-time high in the Nikkay. Well, that's great because it's 2025. That only took 35 years. 35 years. In fact, right here, you're about at a break even. So, it took 35 years just to get your money back. And that doesn't include inflation. Now they've had deflation at inflation, but on net I'm sure prices are slightly higher today than they were in 1990 as far as goods and services. So the point here is you tell me, you tell me and you go ahead and ask Dave Ramsey or ask a financial planner say if this happened in Japan, why can't it happen to the United States? Why? Oh, well, I mean, you can't compare the United States to economy today, to the Japanese economy back in the 1980s. Why not? Why not? The exact same thing that you can say about the US economy today was the exact same thing they were saying about the Japanese economy in the 1980s. And if you don't believe me and if you don't believe your parents or whatever, look it up in the in the archives of the Wall Street Journal. And when I was sitting there talking to this gentleman at in St. arts. It just it reminded me of this chart of the knee and I thought, you know, one of the things that I have to do and share with the audience when I get back home and start doing videos again is I have to dismantle using data and facts this narrative that is so pervasive that all you have to do is buy and hold and you're going to make 15% per year and you're just going to get rich. This is fake news and I actually think it's dangerous. So, let's go back to the first chart of the S&P 500. Now, as I said, there were four decades when you adjust for inflation where the S&P was down. Four decades up, one decade basically flat. But if we dive a little bit deeper, we can get some further insights that are absolutely crucial because although it doesn't seem like it over the last 10 or 15 years, valuations do matter. They do. So, let me show you what I'm referring to. This is a chart going back here. What are we doing? Back to 1930. 1928 to today's date. So this is fantastic because it shows those same nine decades and it shows the PE ratio of the S&P 500. So S&P 500 PE ratio. So this tells us the basic valuation of the S&P 500 and aggregate total. Now today this is totally skewed because as you guys know it's so con concentrated but we'll use this as just kind of to to illustrate a point here. So where we are right now is let's say roughly 28 and then by the way where we were at the beginning of 2020 zoom in here was about 27 Why is this important? I want you to notice going back prior to the.com bubble. This is so going back to let's just say 1990. So from 1930 to 1990 60 years there were very very very few times when the PE ratio for the S&P 500 was above 20. Very very few times. You can see that right here. So the punchline is if you look at the four decades where the S&P 500 was actually up. In fact, we can do that right now. It started uh the first decade where it was up uh was 1950. The 1950s, excuse me. So if we look at the start of the 1950s, where was the PE ratio? Ah, seven. You heard me right. Seven. Now, the S&P 500 went up in the 1960s. Excuse me. It was flat in the 60s. It went up uh the next decade would be the 1980s. So, let's see where the PE ratio started in 1980s. Oh, that would be seven once again. Okay, let's see where it started in the 2010s because that was the next decade where the S&P 500 went up. So, we go to March 2010, November, January 2010. There we go. 17. So, you'll notice it is above seven. That's good. But big butt here. It's lower than 20. It's lower than 20. So the big Oh, by the way, I skipped the 90s, didn't I? Let's go to the 19 1990. January, December. There we go. Right around 15. So what the the bottom line is we have never had a decade in the United States where the PE ratios of the S&P 500 the PE ratio of the S&P 500 and aggate total was above 20 where the decade ended higher than where it began. Let me repeat. We have never had a decade going back to 1930 when the stock market started at a PE ratio S&P 500 at a PE ratio above 20 where at the end of the decade the S&P 500 adjusted for inflation was higher than where it started. And every single decade where the S&P 500 was higher adjusted for inflation started with a PE ratio below 20. And two of the four times it was at seven seven for heaven's sakes. And where did we start 2020 or the 2020s this decade? We started with a PE ratio of 27. So I'm not saying that history has to repeat. Not what I'm saying here. But what I am saying is it's a matter of probabilities that we started this decade with the PE ratios at nosebleleed levels. So what is the probability that we finish the decade with the S&P 500 higher when you adjust for inflation than it was at the beginning? It's low. Now it's not zero. Sure, it could happen, but it's it's not as the the probabilities are far far lower than if the PE ratios start off at seven for heaven's sakes. So, this is something that you've got to factor into the analysis when you're sitting there asking yourself what strategy you want to employ. Do I want to go into this buy and hold, just blindly buy the dip, this dollar cost average? Do I want to do these things when the PE ratios are at these nosebleleed levels? Now, does that mean that the stock market can't go up? Absolutely not. It could double. It could triple from here. Who knows? But it's simply a game of probabilities. It's just like sitting at a blackjack table when you have a 19. Now, could you hit and get 21? Absolutely you could. Sure. You could have that hand four, five, 10 times in a row and you could, it's mathematically possible that you could get a two every single time. Sure. But is it probable? There's a difference between possible and probable and what everyone thinks because they've been so programmed and brainwashed by people in social media, by the mainstream media, and by the typical financial planner out there. They've been so brainwashed that all you have to do is buy the dip because all those financial planners show them is a chart of by the way nominal and then they just show them a chart from 1980 and they say there you go there you go buy the dip and even in this chart buying the dip would not have worked for 10 years and that's the 10 years of 2000 to 2010. you would have gotten crushed even in nominal terms, but obviously inflation adjusted terms, you would have done even worse. So you you've got to get this out of your mind. If if you're someone that believed this was true just because you've heard it so many times, you've heard it repeated over and over and over again. All your friends are doing it. all your employee uh your fellow employees or maybe the people you know your friends and family and all the professionals all the experts that you hear say this just do me a favor and look at these charts that I'm going over look at the chart of Japan and come to your own conclusions but I'm not done I'm not done there's more to the analysis now let me make sure I've got the screen share on. Okay, good. We do. So, let's go over to a slide from an interview I did the other day with my good friend Chris Mintosh, and he pulled up some data that I I had never heard of this. And this is shocking. So, let's go through it here because I know a lot of you are probably saying, "Well, George, you cannot compare the United States to Japan. You can't compare it. Apples and oranges, blah blah blah blah blah. And there's no way the US stock bubble is as big as the Japanese bubble was. Let's just put that one to the test. In 1989, Japan's stock market weight was about 40 to 45% of the MSCI World Index, but the Japanese domestic economy was only 15% the world economy. So again, stock market 40 to 45% of the world index. So if you take all the global stock markets and you put them including the United States and put them in uh put them together, the Japanese stock market represented 40 to 45%. But the domestic Japanese economy was only 15% of global GDP. Let's fast forward to today, 2025. US-listed companies accounted for roughly 64% of global stock market value with the S&P 500 alone constituting about 51%. Now the next question is what is the United States domestic economy relative or what percentage of the overall global economy is the United States? So we can get an apples to apples comparison to Japan. That would be 15%. So right here, the proofs in the pudding. The United States stock bubble is bigger bigger than the Japanese stock bubble was in the 1980s when you compare it to the domestic GDP. Don't take George Gammon's word for it. It's right here. Now, let's go over to some other data here. Um, for those of you who are um familiar, I have a investing community called Rebel Capitals Pro. And this is with my good friend Lyn Alden, Chris Mintosh, uh, Jason Hartman, Patrick Sresna, and Brent Johnson. And part of Rebel Capitals Pro is the premium research from Chris and Lynn. So, I just wanted to go over this quickly. This is from Chris's last report that you can find in Rebel Capitals Pro community. Let's see if I can zoom in because this is another chart that's going to completely blow you away. Here we go. comparing current PE ratios to historic averages. Now, we're not comparing this to averages in Japan. We're comparing this to just the United States. So, we look at technology, which by the way is the S&P 500 because it's all about the MAG 7. That's 27%. When historically it's 8%. industrials 24% when historically it's 12. Look at the other end of the spectrum and you see energy is less than is 24% less than it typically is. So what is this chart telling us? It's telling us that things usually mean revert. So if you are in the S&P 500 or if you are in the US stock market and you are a value investor and this isn't investment advice. This is just what I would do for my own portfolio. I I would have more energy, more commodities on the watch list that I'm buying now than I would technology. So if we also take that idea of mean reversion back to let's say right here, you could say that the mean the average is roughly 15 the PE ratios. Now, a lot of people are going to say, "Oh, it's different this time. It's different this time. Now we've got the Fed. Now we've got the government. Blah blah blah blah blah blah blah blah blah." Okay, fine. Maybe it is different this time. But this is a game of probabilities. So, we have to look at the past, see what happened, and then incorporate that into the analysis. But most people don't do that. They just look at a chart from 1980 to today and omit the 2000s, by the way. And then they just bury their head in the sand and buy and hold. dollar cost average buy the dip. So if we let's not even say this mean reverts. Let's just say that we go from 28 or wherever we are now down to 18. What does that mean for the S&P 500? I don't know. But it ain't good. I can assure you. Especially if we go through a recession. So looking at this historic chart of the S&P 500, remember that we've never ever ever finished a decade higher adjusted for inflation when at the beginning of the decade we were over a 20p and every single decade where we end higher we were below that threshold. So, if we if this happens again in the 2020s, then let's just look at the level of the S&P 500 where we started. Let's go to 2020 and then we'll get a good idea. Oh, actually, let's look at the inflation adjusted because that's the one that I was using as an example. So, let's go back to January of 2020. Here we are. right there. So, the S&P 500 started right around 4,000. So, the punch line is here we'd have to be below 4,000 at the end of 2030 or the beginning of 2030, the end of this decade in order for this pattern to stay true. So, right now we're at 6,200. So, that would be a decrease ah of call it what uh 30% 33% roughly. Now that would be and by the way that's adjusted for inflation. So in real terms and that's all we care about here because it's all about your purchasing power. So this is your your well the downside is far more extreme. But based on historic averages and if we revert to the mean this is what we're looking at. Now, I don't I would have to do the math to see if we go from a 28 PE down to 18 if that takes us down to below 4,000. My guess is it would. But you've got to do this on your own. All I can do is present the data to you. I can smash the narrative just using facts and data, but at the end of the day, you cannot delegate your thinking to me. You've got to think through this yourself. You've got to include it in your own analysis and set up your own portfolio. Let's go back to Japan because I just want people to remember this chart and remember the fact that the Japanese stock market in terms of a bubble was less than the United States stock market when you compare it to the domestic economy's percentage of global GDP. And the narrative back then would have been exactly exactly what you hear today in the United States. And if you would have bought the dip from 1965 all the way to 1990, you would have done great. But then for the next 35 years, you would have gotten hammered, absolutely crushed. So this is not to say that the stock market is going to crash. This is not to say that the stock market's ever ever going to go down. Maybe it continues to go up forever. This is just to get you thinking that maybe it'll go up, but maybe it won't. That this is a game of probabilities. And the probability that the stock market goes up forever is not 100%. and the probability that you're going to increase your purchasing power by employing the buy and hold strategy, dollar cost averaging, buying the dip, the probability of you coming out ahead using that strategy is not in far far far from 100%. In fact, I would argue it's closer to zero than it is 100%. So, one thing you can do if you want to because this is what we do in Rebel Capitals Pro is you can check it out. It's the investment community that I have with Lyn Alden, Chris Macintosh, Brent Johnson, Patrick S, and Jason Hartman like I said earlier and this is one of our goals. I mean, this is what we try to do through the research that we have in there, the model portfolios and just sharing with you guys exactly what we're doing in our own portfolio. Uh, let me give you an example of that. A lot of you guys have heard me talk about this spread trade and so that's an example just not buying and holding right and actually using some timing mechanisms there but uh it's the spread between the 2-year and the 10-year. So what I did is I went long the uh oh thanks Josh put the link there. What I did is I went long the 2-year and I went short the 10-year because I'm playing the spread blowing out now. I don't know if I have a chart of the spread. I I could pull that up really quick. Or here we go. So that you can see very quickly why I put this bet on because every single time we come up from an inversion and the Fed starts dropping at the front end, we get a bull steepener. But then what happens is you go in the stuff hits the fan and then once we get through the other side, then the long end of the curve goes up. you get a bare steepener once you've already had a bull steepener and then you have the spread between the two and the 10 year completely blow out. So this is what I was betting on. I was betting that you know we at the time I put it on we maybe 40 45 basis points that I was betting that this spread between the 2ear and the 10 year would increase and it absolutely has. It absolutely has. But the weird thing was let's go back to um the community here. This is a Rebel Capitalist Pro community. It's on the school platform, by the way. But the weird thing here is I didn't make as much money as I thought I would. I made a mistake. There was something wrong in my calculation. So, what I told everyone in the community was, "Oh, time out. I sold the position. Just FYI. I'm not going to put the position back on until I know what I did wrong or my calculation was went a drift, let's say. So, fortunately, I was in St. Barts, as most of you know, last week and I the first thing I did when I got there is uh I I spoke with Mike Green and I told him what I did and because I knew he would know my mistake. Of course, he he laughs at me and he said and he said, "George, you got to understand that when you put that trade on, you're not locking in the spread as it is today because the futures, you know, the contracts that I had were for September." He says, "Because the futures are pricing in the spread as the market is predicting in September." Hello. That's why they're called futures. I'm like, you know, Mike, that makes a lot of sense. Of course, I I felt like a complete dumbass, but I but I understood that when I was buying it at 45, I wasn't locking in that spread. I was locking in the future projected spread, which was, let's just say, 50. So when it went up to 55, I only made the difference between 50 and 55, the five basis points, as opposed to the 10 basis points that I thought that I I would have made. The bottom line here, what I'm trying to communicate to you is this is what this is what we do in Rebel Capitalist Pro. It's these insights and a lot of times you're using me as the guinea pig, by the way. You're just learning from my mistakes. So, if you want to check it out, you can go to the link that Josh just provided. He'll put it in the description below. All right, guys. Enjoy the rest of your afternoon, your evening. As always, make sure you're standing up for freedom, liberty, free market, capitalism. We'll see you on the next video.
WARNING: Buy And Hold Will Destroy Most Investors (Here's Why)
Summary
Transcript
Hello fellow rebel capitalists. Hope you're well. So everybody always hears the narrative. Buy and hold. Just buy and hold. Dollar cost average. Buy the dip. It's not about time or excuse me. It's not about timing the market. It's about time in the market. Yes, that's the saying. But we never stop and think about whether or not this is empirically true. Like if you go back in time and look at history, has that worked? You just hear this from the Dave Ramsey types. You hear this on pe You hear this from people on social media. You hear this in the mainstream media and the financial news that all you have to do is buy and hold. Buy and hold. That's the prudent thing to do. That's the smart thing to do because everybody knows that over the span of a long period of time, the stock market always goes up. And what they'll do is they'll show you charts conveniently from 1980 to today. And they'll they'll show you these charts and they'll say, "Well, look at this right here. It's undisputable. The stock market always goes up." Well, again, today I want to put that to the test. And I think the results of the empirical data will shock you. And in fact, I would go so far that if I was going to put money on it, the buy and hold type of investors that are just dumping money into a 401k and just the ignorance is bliss strategy is what I call it or the ostrich strategy where they just buy and hold because everybody else is doing it and everyone knows that's the smart thing to do is bury their head in the sand and they don't want to know about it. They just assume that this is going to cover their retirement. And unfortunately, I think those investors are going to get crushed. Let me show you what I'm referring to. First and foremost, I want to go to a chart of the S&P 500 and I want to just look and go back past 1980. Imagine that. You mean the stock market existed prior to 1980? Who would have thought? And I want to see what actually happened in real terms when you adjust for inflation because at the end of the day that's what we're trying to do right by investing. The whole point of taking risk is because you want to increase your purchasing power not just maintain it. So let's look at a chart of the S&P 500 and this goes back to 1930. Now you'll notice this is in nominal terms and so what we don't care about nominal terms we care about a deflation which is right here. You need to share your screen. Oh, thank you Josh. Josh stopped swiping through Tinder just to bless us with his presence for the next 15 minutes. All right, getting back to the chart of the S&P 500. So, we can see when we adjust for inflation, 1930 or so, what I like to do is I like to break it down by decade. I've done this a couple times on past videos, but it's definitely worth reiterating because this is something we have heard for the last 40 years. We've had it pounded into our heads that you just buy and hold, buy and hold, buy and hold, and you'll just magically get rich. And that's just look at the chart going back to 1980. Okay, you guys get it. But when we go back to 1930 and look at the past nine decades, nine decades from 1930 to 2020, we see that there were actually four decades where the S&P 500 adjusted for inflation went down, not up. There were four decades where it actually did go up. And there was one decade where it was flat. So you could say, well, this is just a coin toss, but it's really not. Let me show you what I'm referring to. The next chart we're going to look at, and the genesis of this is when I was in St. Barts last week, I was talking to a gentleman, and let's pull up a chart of the NIK here. This is the Japanese stock market. And I was talking to a gentleman that actually started his career in Japan. Big hedge fund manager, one of the best of all times. And he started his career right around here, 1988 or so, in Japan. And he was managing money. And he was telling me about what it was like to not only see the Japanese stock market daily, but to actually live in Japan and be around all the other financial types. and he said it was just assumed the stock market would go up every single day. Now again, we're not talking about the NASDAQ. We're not talking about the S&P 500. We're talking about the Japanese stock market in the 1980s. Now, a lot of you are too young to remember that time. But some of you folks that are as old as I am, I'm sure you remember the narrative. Even back in the United States, remember Japan was taking over the world. They were going to blow away the US economy. They were buying up all the real estate in California. I think they bought Pebble Beach, by the way. They're buying up all the real estate, excuse me, all the real estate in New York City. The Japanese and their incredible economy is going to continue to grow and grow and grow and they are going to take over the world. There's no way anyone in their right mind would invest in the United States when you can invest in the future, which is Japan. I'm not making this up. For you young guys and gals on the on the live stream, I'm sure this sounds like just like like AI or something that it's AI generated narrative. No, ask your parents. Ask your grandparents. Ask the people that you know that were adults or at least alive at that time and you'll tell you and they'll tell you this was spot on. And if you don't trust them, just go back and look at the archives of the Wall Street Journal. This I would challenge you. In the late 80s, see what the Wall Street Journal was saying about Japan. And it's exactly what I just said. But then we know what happened. We got into the first day of the 1990s and whoa, what just happened? The stock market went down. Well, that's not supposed to happen. Everybody knows that the stock market goes up every day. Well, okay. Well, what are you going to do? Well, obviously you got to buy the dip. Well, why are you going to buy the dip? Because every single time that's worked well. In fact, let's go back a little ways here so we can include the 1970s and look at this. Look at this chart of the Japanese the NIK from 1969 all the way to 1990. Look familiar? Go straight up. This looks almost identical to the S&P 500 today. If you go back to let's say n 2010, right 2005 with the exception of the of the GFC. In fact, I'm curious. What if we go back to 1960? Yeah, look at this. So, think about that. What were the financial planners in Japan saying right here in 1987? They were showing the Japanese investor a chart going all the way back to call it 1965 and they were saying look it it's right here. All you just buy and hold. Buy and hold. Buy the dip. It's not about timing the market. It's about time in the market. And if you don't believe me, just look at this incredible chart of the Nikkay from 1965 to today. Let's just say 1987. And the average Joe and Jane or what or their Japanese cousins, they would look at this and say, "You're right, Mr. Dave Ramsey. You're right, Japanese Dave Ramsey. You're right, Japanese financial planner. You're right, Japanese financial media. I just have to buy and hold. Buy and hold and buy the dip." But then we fast forward to 1990 and the stock market goes down. Well, that's a fantastic opportunity, right? Because now you can buy the dip and you can just dollar cost average. And when you look at those charts going back to 1965, it's obvious all you have to do is buy and hold. And then you buy the dip here, and then you buy the dip there, and you buy the dip there. You buy the dip here. You continue to buy the dip. And you buy the dip. And you buy the dip. And you continue to dollar cost average all the way down for the next 20 years. 20 years. You buy the dip just like you were trained. Just like everyone said in the narrative over and over and over again. So many people said it that it just had to be true. and you got completely wiped out. Completely destroyed. You thought you were going to retire. Good one. Because now every single dollar or a lot of the dollars that you put into that portfolio because you believed the narrative is now trading at 10 cents on the dollar, let's say, just in in aggregate. And oh, by the way, look at where we are today. Woohoo. Awesome. We're at an all-time high in the Nikkay. Well, that's great because it's 2025. That only took 35 years. 35 years. In fact, right here, you're about at a break even. So, it took 35 years just to get your money back. And that doesn't include inflation. Now they've had deflation at inflation, but on net I'm sure prices are slightly higher today than they were in 1990 as far as goods and services. So the point here is you tell me, you tell me and you go ahead and ask Dave Ramsey or ask a financial planner say if this happened in Japan, why can't it happen to the United States? Why? Oh, well, I mean, you can't compare the United States to economy today, to the Japanese economy back in the 1980s. Why not? Why not? The exact same thing that you can say about the US economy today was the exact same thing they were saying about the Japanese economy in the 1980s. And if you don't believe me and if you don't believe your parents or whatever, look it up in the in the archives of the Wall Street Journal. And when I was sitting there talking to this gentleman at in St. arts. It just it reminded me of this chart of the knee and I thought, you know, one of the things that I have to do and share with the audience when I get back home and start doing videos again is I have to dismantle using data and facts this narrative that is so pervasive that all you have to do is buy and hold and you're going to make 15% per year and you're just going to get rich. This is fake news and I actually think it's dangerous. So, let's go back to the first chart of the S&P 500. Now, as I said, there were four decades when you adjust for inflation where the S&P was down. Four decades up, one decade basically flat. But if we dive a little bit deeper, we can get some further insights that are absolutely crucial because although it doesn't seem like it over the last 10 or 15 years, valuations do matter. They do. So, let me show you what I'm referring to. This is a chart going back here. What are we doing? Back to 1930. 1928 to today's date. So this is fantastic because it shows those same nine decades and it shows the PE ratio of the S&P 500. So S&P 500 PE ratio. So this tells us the basic valuation of the S&P 500 and aggregate total. Now today this is totally skewed because as you guys know it's so con concentrated but we'll use this as just kind of to to illustrate a point here. So where we are right now is let's say roughly 28 and then by the way where we were at the beginning of 2020 zoom in here was about 27 Why is this important? I want you to notice going back prior to the.com bubble. This is so going back to let's just say 1990. So from 1930 to 1990 60 years there were very very very few times when the PE ratio for the S&P 500 was above 20. Very very few times. You can see that right here. So the punchline is if you look at the four decades where the S&P 500 was actually up. In fact, we can do that right now. It started uh the first decade where it was up uh was 1950. The 1950s, excuse me. So if we look at the start of the 1950s, where was the PE ratio? Ah, seven. You heard me right. Seven. Now, the S&P 500 went up in the 1960s. Excuse me. It was flat in the 60s. It went up uh the next decade would be the 1980s. So, let's see where the PE ratio started in 1980s. Oh, that would be seven once again. Okay, let's see where it started in the 2010s because that was the next decade where the S&P 500 went up. So, we go to March 2010, November, January 2010. There we go. 17. So, you'll notice it is above seven. That's good. But big butt here. It's lower than 20. It's lower than 20. So the big Oh, by the way, I skipped the 90s, didn't I? Let's go to the 19 1990. January, December. There we go. Right around 15. So what the the bottom line is we have never had a decade in the United States where the PE ratios of the S&P 500 the PE ratio of the S&P 500 and aggate total was above 20 where the decade ended higher than where it began. Let me repeat. We have never had a decade going back to 1930 when the stock market started at a PE ratio S&P 500 at a PE ratio above 20 where at the end of the decade the S&P 500 adjusted for inflation was higher than where it started. And every single decade where the S&P 500 was higher adjusted for inflation started with a PE ratio below 20. And two of the four times it was at seven seven for heaven's sakes. And where did we start 2020 or the 2020s this decade? We started with a PE ratio of 27. So I'm not saying that history has to repeat. Not what I'm saying here. But what I am saying is it's a matter of probabilities that we started this decade with the PE ratios at nosebleleed levels. So what is the probability that we finish the decade with the S&P 500 higher when you adjust for inflation than it was at the beginning? It's low. Now it's not zero. Sure, it could happen, but it's it's not as the the probabilities are far far lower than if the PE ratios start off at seven for heaven's sakes. So, this is something that you've got to factor into the analysis when you're sitting there asking yourself what strategy you want to employ. Do I want to go into this buy and hold, just blindly buy the dip, this dollar cost average? Do I want to do these things when the PE ratios are at these nosebleleed levels? Now, does that mean that the stock market can't go up? Absolutely not. It could double. It could triple from here. Who knows? But it's simply a game of probabilities. It's just like sitting at a blackjack table when you have a 19. Now, could you hit and get 21? Absolutely you could. Sure. You could have that hand four, five, 10 times in a row and you could, it's mathematically possible that you could get a two every single time. Sure. But is it probable? There's a difference between possible and probable and what everyone thinks because they've been so programmed and brainwashed by people in social media, by the mainstream media, and by the typical financial planner out there. They've been so brainwashed that all you have to do is buy the dip because all those financial planners show them is a chart of by the way nominal and then they just show them a chart from 1980 and they say there you go there you go buy the dip and even in this chart buying the dip would not have worked for 10 years and that's the 10 years of 2000 to 2010. you would have gotten crushed even in nominal terms, but obviously inflation adjusted terms, you would have done even worse. So you you've got to get this out of your mind. If if you're someone that believed this was true just because you've heard it so many times, you've heard it repeated over and over and over again. All your friends are doing it. all your employee uh your fellow employees or maybe the people you know your friends and family and all the professionals all the experts that you hear say this just do me a favor and look at these charts that I'm going over look at the chart of Japan and come to your own conclusions but I'm not done I'm not done there's more to the analysis now let me make sure I've got the screen share on. Okay, good. We do. So, let's go over to a slide from an interview I did the other day with my good friend Chris Mintosh, and he pulled up some data that I I had never heard of this. And this is shocking. So, let's go through it here because I know a lot of you are probably saying, "Well, George, you cannot compare the United States to Japan. You can't compare it. Apples and oranges, blah blah blah blah blah. And there's no way the US stock bubble is as big as the Japanese bubble was. Let's just put that one to the test. In 1989, Japan's stock market weight was about 40 to 45% of the MSCI World Index, but the Japanese domestic economy was only 15% the world economy. So again, stock market 40 to 45% of the world index. So if you take all the global stock markets and you put them including the United States and put them in uh put them together, the Japanese stock market represented 40 to 45%. But the domestic Japanese economy was only 15% of global GDP. Let's fast forward to today, 2025. US-listed companies accounted for roughly 64% of global stock market value with the S&P 500 alone constituting about 51%. Now the next question is what is the United States domestic economy relative or what percentage of the overall global economy is the United States? So we can get an apples to apples comparison to Japan. That would be 15%. So right here, the proofs in the pudding. The United States stock bubble is bigger bigger than the Japanese stock bubble was in the 1980s when you compare it to the domestic GDP. Don't take George Gammon's word for it. It's right here. Now, let's go over to some other data here. Um, for those of you who are um familiar, I have a investing community called Rebel Capitals Pro. And this is with my good friend Lyn Alden, Chris Mintosh, uh, Jason Hartman, Patrick Sresna, and Brent Johnson. And part of Rebel Capitals Pro is the premium research from Chris and Lynn. So, I just wanted to go over this quickly. This is from Chris's last report that you can find in Rebel Capitals Pro community. Let's see if I can zoom in because this is another chart that's going to completely blow you away. Here we go. comparing current PE ratios to historic averages. Now, we're not comparing this to averages in Japan. We're comparing this to just the United States. So, we look at technology, which by the way is the S&P 500 because it's all about the MAG 7. That's 27%. When historically it's 8%. industrials 24% when historically it's 12. Look at the other end of the spectrum and you see energy is less than is 24% less than it typically is. So what is this chart telling us? It's telling us that things usually mean revert. So if you are in the S&P 500 or if you are in the US stock market and you are a value investor and this isn't investment advice. This is just what I would do for my own portfolio. I I would have more energy, more commodities on the watch list that I'm buying now than I would technology. So if we also take that idea of mean reversion back to let's say right here, you could say that the mean the average is roughly 15 the PE ratios. Now, a lot of people are going to say, "Oh, it's different this time. It's different this time. Now we've got the Fed. Now we've got the government. Blah blah blah blah blah blah blah blah blah." Okay, fine. Maybe it is different this time. But this is a game of probabilities. So, we have to look at the past, see what happened, and then incorporate that into the analysis. But most people don't do that. They just look at a chart from 1980 to today and omit the 2000s, by the way. And then they just bury their head in the sand and buy and hold. dollar cost average buy the dip. So if we let's not even say this mean reverts. Let's just say that we go from 28 or wherever we are now down to 18. What does that mean for the S&P 500? I don't know. But it ain't good. I can assure you. Especially if we go through a recession. So looking at this historic chart of the S&P 500, remember that we've never ever ever finished a decade higher adjusted for inflation when at the beginning of the decade we were over a 20p and every single decade where we end higher we were below that threshold. So, if we if this happens again in the 2020s, then let's just look at the level of the S&P 500 where we started. Let's go to 2020 and then we'll get a good idea. Oh, actually, let's look at the inflation adjusted because that's the one that I was using as an example. So, let's go back to January of 2020. Here we are. right there. So, the S&P 500 started right around 4,000. So, the punch line is here we'd have to be below 4,000 at the end of 2030 or the beginning of 2030, the end of this decade in order for this pattern to stay true. So, right now we're at 6,200. So, that would be a decrease ah of call it what uh 30% 33% roughly. Now that would be and by the way that's adjusted for inflation. So in real terms and that's all we care about here because it's all about your purchasing power. So this is your your well the downside is far more extreme. But based on historic averages and if we revert to the mean this is what we're looking at. Now, I don't I would have to do the math to see if we go from a 28 PE down to 18 if that takes us down to below 4,000. My guess is it would. But you've got to do this on your own. All I can do is present the data to you. I can smash the narrative just using facts and data, but at the end of the day, you cannot delegate your thinking to me. You've got to think through this yourself. You've got to include it in your own analysis and set up your own portfolio. Let's go back to Japan because I just want people to remember this chart and remember the fact that the Japanese stock market in terms of a bubble was less than the United States stock market when you compare it to the domestic economy's percentage of global GDP. And the narrative back then would have been exactly exactly what you hear today in the United States. And if you would have bought the dip from 1965 all the way to 1990, you would have done great. But then for the next 35 years, you would have gotten hammered, absolutely crushed. So this is not to say that the stock market is going to crash. This is not to say that the stock market's ever ever going to go down. Maybe it continues to go up forever. This is just to get you thinking that maybe it'll go up, but maybe it won't. That this is a game of probabilities. And the probability that the stock market goes up forever is not 100%. and the probability that you're going to increase your purchasing power by employing the buy and hold strategy, dollar cost averaging, buying the dip, the probability of you coming out ahead using that strategy is not in far far far from 100%. In fact, I would argue it's closer to zero than it is 100%. So, one thing you can do if you want to because this is what we do in Rebel Capitals Pro is you can check it out. It's the investment community that I have with Lyn Alden, Chris Macintosh, Brent Johnson, Patrick S, and Jason Hartman like I said earlier and this is one of our goals. I mean, this is what we try to do through the research that we have in there, the model portfolios and just sharing with you guys exactly what we're doing in our own portfolio. Uh, let me give you an example of that. A lot of you guys have heard me talk about this spread trade and so that's an example just not buying and holding right and actually using some timing mechanisms there but uh it's the spread between the 2-year and the 10-year. So what I did is I went long the uh oh thanks Josh put the link there. What I did is I went long the 2-year and I went short the 10-year because I'm playing the spread blowing out now. I don't know if I have a chart of the spread. I I could pull that up really quick. Or here we go. So that you can see very quickly why I put this bet on because every single time we come up from an inversion and the Fed starts dropping at the front end, we get a bull steepener. But then what happens is you go in the stuff hits the fan and then once we get through the other side, then the long end of the curve goes up. you get a bare steepener once you've already had a bull steepener and then you have the spread between the two and the 10 year completely blow out. So this is what I was betting on. I was betting that you know we at the time I put it on we maybe 40 45 basis points that I was betting that this spread between the 2ear and the 10 year would increase and it absolutely has. It absolutely has. But the weird thing was let's go back to um the community here. This is a Rebel Capitalist Pro community. It's on the school platform, by the way. But the weird thing here is I didn't make as much money as I thought I would. I made a mistake. There was something wrong in my calculation. So, what I told everyone in the community was, "Oh, time out. I sold the position. Just FYI. I'm not going to put the position back on until I know what I did wrong or my calculation was went a drift, let's say. So, fortunately, I was in St. Barts, as most of you know, last week and I the first thing I did when I got there is uh I I spoke with Mike Green and I told him what I did and because I knew he would know my mistake. Of course, he he laughs at me and he said and he said, "George, you got to understand that when you put that trade on, you're not locking in the spread as it is today because the futures, you know, the contracts that I had were for September." He says, "Because the futures are pricing in the spread as the market is predicting in September." Hello. That's why they're called futures. I'm like, you know, Mike, that makes a lot of sense. Of course, I I felt like a complete dumbass, but I but I understood that when I was buying it at 45, I wasn't locking in that spread. I was locking in the future projected spread, which was, let's just say, 50. So when it went up to 55, I only made the difference between 50 and 55, the five basis points, as opposed to the 10 basis points that I thought that I I would have made. The bottom line here, what I'm trying to communicate to you is this is what this is what we do in Rebel Capitalist Pro. It's these insights and a lot of times you're using me as the guinea pig, by the way. You're just learning from my mistakes. So, if you want to check it out, you can go to the link that Josh just provided. He'll put it in the description below. All right, guys. Enjoy the rest of your afternoon, your evening. As always, make sure you're standing up for freedom, liberty, free market, capitalism. We'll see you on the next video.