The Truth Behind Your Terrible Performance>>

2022 has been a year tough year for any investor that hasn’t had any exposure to oil & gas or commodities. Outside of a few industries, anything other than the above mentioned stocks have experienced significant losses.

In fact, if you own any company trading more that 5x sales, you’re most likely ready to file for bankruptcy.

So what went wrong with your investment in Sea Limited (NYSE: SE)? Maybe you should’ve done a better valuation than allowed a YouTuber to become your financial advisor…

Luckily you aren’t alone. Many a young and starry-eyed investors looked at companies like Roku (NASDAQ: ROKU) and Palantir (NYSE: PLTR) and without hesitation, threw their capital into them. Why?


Similarly, many impressionable youths have thrown their hats to the wind and purchased a sizeable amount of either Bitcoin or Ether, and called themselves “visionaries.”

Don’t get me started on the NFT crowd.

But YOU’RE different… right? You’re a value investor. You buy stocks when they fall over 30% from their highs. Stocks like Meta Platforms (NASDAQ: FB) and PayPal (NASDAQ: PYPL) were opportunities you surely couldn’t miss out on.

So now you currently sit on 50%+ losses on all of those stocks while Lockheed Martin (NYSE: LMT) is up 25% and Occidental Petroleum (NYSE: OXY) has doubled since January.

Why is this happening, you may ask?

As It Should Be

The current stock market is playing out as if it is a self-fulfilling prophecy. Most investors, even the super-bullish, knew that higher interest rates would lower current valuations.

“But THIS time it’s different, RIGHT?”

It turned out, it’s not different, after all. The recent price action over the last few months played out exactly as it should; high-multiple names have been crushed while stocks that benefit from rate hikes and higher inflation have risen.

Rather than buy the trend, which would’ve been the smarter option, most retail tried to catch the falling knife in stocks such as Affirm (NASDAQ: AFRM), Alibaba (NYSE: BABA), PayPal (NASDAQ: PYPL), Shopify (NYSE: SHOP), Roku (NASDAQ: ROKU) and many other twitter favorites. Why? Because they saw an opportunity to catch a massive bounce.

The bounce came, but long-term uncertainty over these names has crept in. Sentiment has changed, and liquidity has shifted into value names. Surely, if this is an exact replica of dotcom bubble, the winners will eventually come out stronger than ever. The question inlays; how long will drawdown in tech last?

The Times They Are a-Changin’

The answer depends on the Fed. What makes the situation more difficult, is the uncertainty behind the number of rate hikes that are due to be issued. Three, five, SEVEN???!!

Volatility is the direct result of uncertainty.

Add to that the fears of persistent inflation, and you have a recipe for disaster. The stock market has discovered that Jerome Powell is a liar and inflation may not be “transitory,” after all. Markets are beginning to price in the fact that Powell may not have the “tools,” to stop inflation without raising interest rates to extreme levels.

The only good sign out of all of this is the fact that the market has been trying to price in multiple rate hikes since the start of the year.

“So how does this affect my investment in Palantir?”

Since most Wall Street analysts use the 10-year treasury in their calculations of discounting future cash flows, it matters quite a bit. The higher the interest rate, the lower the price of the security.

Interest Rates have been on a tear since the start of the new year, which the 10-year treasury yielding near 2.8%. At this rate, 3%+ is right over the horizon. The risk/reward of holding on to uncertain future cash flows becomes less appealing with treasuries at this level.

The flight to safety comes into play.

War Crimes

Likewise, the ongoing conflict between Russia and Ukraine has added more supply constraints to crude, as well as several commodities.

Ukraine exports, including Wheat, Corn, Iron, or Soybeans, have all seen price spikes. The uncertainty behind Russia’s planned invasion is adding another brick to the wall of worry. A prolonged invasion can continue to impact commodity prices, indefinitely.

Look to emerging market players, such as LATAM (particularly Brazil), to make up for the loss in European commodities.

Aerospace & Defense contractors are also beneficiaries to the ongoing conflict. With the exception of Boeing (NYSE: BA), and a few others, the companies that align with this industry have outperformed the S&P as well YTD.

Add to the fact that the majority of these companies are trading at attractive valuations, and you can see some interesting investing opportunities.

Old News

Many retail investors are continuing to buy more and more shares of the “disruptive” tech companies that promised so much success in the past cycle.

While some of these may become the next Microsoft or Amazon, the majority will most likely fade away. Choose wisely, young chums.

And remember, always #buythedip.

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