Everyone kevin here i wanted to take an opportunity and talk about what i consider to be a mini lesson in stocks and something that i think, unfortunately, a lot of folks make a mistake in especially if you've just started investing in the stock market. In the last few years and a lot of this, you might actually be surprised by, but most folks i should say, don't recognize this about either themselves or how the market actually works. So here's just sort of a little mini lesson with example. So when the pandemic hit in 2020, investors fled to quote safety or stay-at-home stocks right that obviously led the prices of those companies to grow zoom, netflix disney plus whatever, because the expectation was that wow we're pulling forward.

So much demand we're getting so many people to join the service more so than ever before that we're creating five years of profits in the span of one or two years. Now, let's go the companies start rising in price quite substantially, and this is all driven sort of by the original catalyst that wait pandemic. Okay. Well then, let's buy peloton.

Let's get into stay-at-home related things, because people gon na have to work out at home. Gyms are closed whatever right. Well, when prices go up, fomo investors join right because, as prices go up, people who are like oh crap well, the prices of my stocks aren't going up, but those stocks are going up. I'm able to buy those stocks right and then that adds this sort of insanity of valuation pressure to these companies and the valuations start getting out of whack, and they they diverge from fundamentals.

The fundamentals for the company should probably be like this, and instead the value goes like this right, it's crazy, and so at some point you get this sort of reversion and that's the thing that i think oftentimes we forget is that reversion part but worth noting, and I want to make this crystal clear. First, you get a catalyst, so people who want to flee to that basket of safety go into it. That leaves it leaves prices going up. Fomo investors join and a lot of folks underestimate the power of retail, but retail can actually really move stocks.

I mean. Obviously we know that for like gme and amc, but seriously like big companies can move because of retail flows. You just buy up the order book. That's the way it is if you get institutions, hodling and retail, comes in and buys up the order book a certain degree.

You get outsized moves in a stock price, even when they are very large companies like multi-hundred million dollar companies can move from retail, and so what what then happens is you get institutions that have to explain to their customers? Hey uh yeah we're under allocated in those stocks, but uh. Don't worry, we'll we'll increase our allocation to those and then so you actually get this like consumer. That's demanding the institutions allocate their pension fund money or whatever to these hot stocks, because they're going up and it actually adds to the fomo frenzy. So you get even more of a pump to the upside.

So it's crazy, so you get catalyst, fomo, institutions and, and you can get institutions with the catalyst as well, but you get even more institutions after everybody wants to be in those stocks, so really interesting. Now the the biggest danger here, though, is when the original catalyst goes away like oh no, the pandemic goes away now, the original catalyst is gone, and so people like yeah, we don't really have to be that allocated to these anymore. The prices have stopped going to new highs, we're bouncing off high levels or we're starting to trend down a little bit, and this is where you get the safety bleed out and those actually turn from being safety stocks to being high risk speculative socks, because now they're Just plummeting now, unfortunately, this is kind of that wave that we've seen again with things like whether it's peloton or zoom or netflix, or whatever that's sort of the the last couple years. Well, then, savvy managers tend to return to their original portfolios and original allocations, and they go back towards uh what whatever else they may have originally had, which, in 2021 after the pandemic, that seemed to be the large caps larger megas, like the qqq, the spy.

Typically, these like safe, always massive companies like the apple, microsoft, google. You know people are calling them cash parks and like i'll just park cash and the big ones until we get a new catalyst right. So then, in 2022 and of course, there's a lesson to all of this, which i'm gon na explain then in 2022. Of course, we get this.

This uh, you know fed fight inflation and war catalyst, and this is like. Oh, my gosh, like the fed, is going to have to go aggressive to fight inflation and that's going to hurt the stock market so uh, then, on top of that, we get war which war at one point was thought to maybe reduce demand which would have reduced Some of the the broad inflation that we had, but it didn't if anything, people spent more money in the united states, at least not so much in europe, which is entirely the opposite of what you would expect to happen like i. I totally did not expect that to happen myself uh, it is totally shocking. People are spending more money, now, not less, and so what's happening is the fat has to get even more aggressive inflation, and so what do you have? A move into because of war on inflation; well, a huge move into commodities: wheat, corn, nickel, oil, gas, obviously because of ukraine catalysts and and the production shortages that are going to come from here.

Uh, but you've also got to move into a whole variety of commodities. Because they're deemed to be this, this safe investment and then again the cycle repeats itself right prices rise institutions invest as safety. Fomo investors join insane valuations follow for commodities, in this case the new safety play and and then, ultimately, you get more institutions coming in, because people are demanding that they want exposure to these inflation protection, etfs or stocks or mining companies or whatever right, and so what's Important to know about that is now: we've got a break between where we kind of stand now and what the future will likely hold. The future will likely see a massive collapse.

I don't know when it could be in six months. It could be in two or three years, but the future will likely see a massive collapse in wheat corn, nickel oil, gas commodities that that is going to look very eerily similar to the stay-at-home stocks like you're gon na be able to, in my opinion, lay wheat And corn and nickel and gas and oil prices over peloton and zoom and netflix, and go well hot. Damn that's what safety started to look like! So there's a huge lesson about this and the big lesson is preceded by i mentioned that you should check out ftx folks. If you are trading crypto, i don't know why you ain't using ftx, yet they have the absolute best technical analysis.

Software built right into where you can trade, so when your ta, when your bollinger bands go beautiful, buy up or sell up, you can do it right there within the app and one of the things that drives me crazy about trading view, for example, is i can't Trade in it, but ftx is freaking brilliant. They add trading view to ftx, because what drives me nuts about trading is going into trading view and then going to a different platform to actually execute the trade it's like like. I don't want to look at both ftx solves that problem for you now, if you use that code meet kev link down below you, get a special offer from ftx check them out linked down below okay. So what's the lesson here? Well, the lesson really is that you have two huge choices as an investor, you have to recognize uh, first, that if you are in a safety trade, you want to set probably downside limits or b we're ready to trade out when that catalyst momentum ends now.

This is frequently misconstrued as paper handing okay. When somebody sells peloton at 113 dollars like i did, i got lamb basted for saying, dude, kevin or people are like kevin. You were really bullish on peloton. It's true.

I was bullish on peloton in 2020 and made lots of money peloton in 2020, but then, when the cat, when the momentum went away, when the google search trends died, the website activity died. The earnings reports looked terrible when the price started falling when the delivery time frame started falling. What are all those things telling you they're telling you that you're gon na have a bad stock price action going forward that the momentum is over, that the trade is dying. It is not stupid to sell those things to sell things that have run up because they are part of a short-term catalyst like a pandemic or a war or temporary contemporary inflation uh that that that is just be smart portfolio management.

This is what the institutions do. This is why the institutions ream retail investors, because the institutions don't call it paper handing they call it smart. They move out of things when catalysts die. Now that is a form of trading.

It's very important to know that when you are a momentum or catalyst investor you are trading, you have to have the sell button unlocked you have to have the buy button unlocked both of those have to be ready to be used. It is a lot harder to be that style of investor or number two, which is what i more largely associate with. This is your long-term winner's focus now i've traded in the past, but i don't consider myself a traitor. Maybe you have a different impression, but that's okay.

We could have different opinions, we could still have a beer together and still hang out, but here's my belief - and this is the second thing that you can do. You could either be the momentum and catalyst trader which again i did that i did that with lemonade and peloton and other companies. Okay, you can, you could do those things or you could use these temporary catalysts which create substantial fear in other stocks, because people are selling other stocks and then running to those safety trades right. You could use that flight to safety as an opportunity to buy cheap on companies that you have a long-term belief in now.

You can't have a long-term belief in safety trades, and this is probably the hardest separation to make. It's like. Oh well, i'm long-term bullish on peloton. No, you can't be because it went 3x higher than it should have because of the pandemic because of a short-term catalyst right.

You've got to focus on those long-term stocks or companies that don't even trade off a catalyst they're. Just good companies that are growing at massive growth rates and look an easy example, and i know people like yeah kevin stitch has a but whatever it's an easy example: okay, the pandemic lowered tesla stock price to 350 dollars that didn't make tesla a bad company. It just temporarily meant everybody was fleeing to safety, so there was no buying pressure. The sell order book got fulfilled way faster because there were no buys and boom.

The price falls same thing as how i bought tesla for 713. You know seven figures worth of tesla at 713, just recently on february 24th right there are short-term fear catalysts that really have virtually no impact on some of your long-term plays that you can use as fear by the dip opportunities, but the biggest thing for you to Evaluate is how do you separate? How do you basket your companies that you're investing in right now, the big momentum trades, the catalyst trades, the safety trades are commodities and these commodity etfs and mining companies. I don't expect that will last, if you're in these, i'm proud of you, because you're making money, but by being in them, you're also making a choice not to buy the dip on long-term, plays that aren't trading off of these shorter term catalysts, and these could be Companies that you might really love long term, like nvidia phenomenal company long term tesla, phenomenal company long term, google, phenomenal company long term, i'm not going to add disney to this list because 50 of you were going to say, stay woke and go broke. But the point is there: are these short term catalysts that can create really good opportunities if that by the dip strategy? Is your strategy, but this is where things also get dangerous if you take by the dip and you apply it to commodities and momentum, you're, pretty much always going to lose really important lesson there.

Hopefully, that helps you out and we'll see in the next one goodbye.