Hey guys, it's Sasha The stock market is jittery and on the surface things are looking nasty. Amazon Posted their results last week. Revenues up nine percent year on year, 4.1 billion dollars in profit compared to a 5.3 billion lost 12 months ago. But investors are upset because the growth in AWS is forecast to slow down.

Result: Stock is down six percent since those results came out. Pinterest Also posted the results last week. Earnings beat expectations. Numbers grew year on year.

They announced a new partnership with Amazon, but guidance for Q2 was a little weak. only around five percent growth year on year. So stock is down a whopping 21 in the last few days. Tesla is having to drop prices to shift their cars because consumer confidence is low and of course the stock takes a 23 beating in April and many investors are completely losing their.

everyone is sitting there panicking because stocks are going down and very few investors are sitting there and asking the actually important question. which is why why are the stocks going down? Because according to the Panic Mantra, the economy is about to shrink and we're about to have a monster recession. It's going to get ridiculously bad. that's the word on the street.

So the expectation is that the economic output of the United States is going to collapse. Demand for products and services from companies in the United States is going to fall and so you should absolutely Run for the hills, waving your hands in the air, panicking because the world is about to end. Go and sell everything right now. But here is an interesting thought that I think many people are missing.

If the US economy is about to shrink, why is it that the consensus expectation is that every major company in the United States is going to grow in the next year. This is a primary example where following the money and following the numbers presents a completely different story to the narrative that the media of the US government, the U.S fed, and everybody else is trying to feed you. This is not exactly a New Concept the legendary investor Peter Lynn mentioned his book one up on Wall Street said when you find a company you like disregard what the Market's doing and just buy stocks. Now this is because one, the market will always be in flux and will eventually reverse itself and two, any pundit or acquaintance who thinks they know how the market will perform is likely wrong.

It's virtually impossible to predict the Market's future movements accurately. and yeah, yeah, I know a bunch of The Clairvoyant fortune tellers in the comments will tell me that I am an idiot because they know 100 for sure exactly what's going to happen. But don't trust me. A random guy on YouTube trust Peter Lynch who made a ton of money in the stock market over a long period of time.

And if you want a summary of his book, one up on Wall Street which I highly recommend, you should check it out on short Form who are the sponsors of today's video. Short Form is an amazing platform where you can get guides with the key points from over a thousand books by amazing authors. You can read a one-page summary or you can choose to listen to understand the key points in just a few minutes. If you want to learn about not timing the market and buying stocks when everyone else is panicking, you can read Charlie Munger or Benjamin Graham both highly recommended.

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Higher interest rates are not helping, but Amazon is growing. Investors are upset because it's not growing as fast as they would like them to grow. but you know what? five to ten percent year-on-year in the current market is a deal that I would personally take any day. Tesla's Revenue grew 24 year on year in Q1 now nowhere near as much as it was growing before these recent price Cuts but it's still grew Google suffered from lower ad spending q1 after the Doom and Gloom has hit ad revenues on YouTube and on network ads.

but they still grew despite all this three percent compared to Q1 last year. Facebook The Social Network that your mom uses to share cat videos grew revenues by three percent. And yeah, they pissed away another four billion dollars and just three months on their less good version of the Nintendo. Wii and Facebook is guiding for two to ten percent growth in Q2 as well as pissing even more money down the metaverse drain.

But here's the point. These are the biggest companies in the United States They are all growing and expecting to continue to grow in Q2 and for the rest of 2023, the market is looking at their earnings and the market seems to think that there really should be growing more. They get annoyed when they're not growing as fast as what the market is expecting is pricing them to grow at, and they get very pissy and sell their stock When earnings are a little bit lower than what they would like, banks are raking it in with higher interest rates, so their earnings are looking spectacular. And sure, we have the energy companies who have fleeced everyone when gas and oil prices shut up and now their revenues are falling because commodity prices have collapsed.

But it's staggering that while everyone is talking about the imminent definite arrival of the worst recession in living memory, at the same time, the money is expecting growth in 2023.. preliminary numbers just came in for Q1 and the US economy grew by 1.1 percent on an annualized basis. Now, this is a lot lower than the growth that we saw last year Q4 was up at 2.6 Higher interest rates are slowing down the economy as they are meant to, but consumer spending remained resilient and 1.1 is still more than zero. And at the same time, the market is expecting companies to grow in Q2.

But here here is an even more interesting way to look at it. Because a year-on-year numbers suffer from the lapping effect when you compare numbers to last year. It's important to understand what happened last year compared to the year before last year. because let's say that you're a company that has zero growth.

You're always doing exactly the same every single year. Then you have one year when your growth explodes, you balloon, and you grow by 100. Then let's say the next year you again have zero growth. The fact is, the zero percent growth in that most recent year is lapping the year when you grew by a hundred percent.

So the reality is that although it looks kind of the same as the previous years, you actually are performing extremely well. After having one still a year, you are having another equally Stellar year because you kept up with the level of performance. Even if performance dips, you might see a minus 10, maybe a minus 20. It is still a pretty good year and you're still growing.

Compared to the years before this early year, we see this sort of lapping effect in the performance of the biggest companies in the United States a lot at the moment. Here is the data in my valuation model for Google for example: you can see that when Covet arrived Google had a really pretty bad time because everyone panicked. Everyone shut up their businesses, threw their toys out of the pram and Google's revenue growth got hit. Google search ads their biggest business was down 4.6 then 22 percent, then 8.1 percent year on year.

but then fast forward to 2021. We have vaccines, we have stemi checks being thrown at people, and when you look at 2021 numbers, you are comparing them to 2020 which are artificially suppressed. So when you compare 2021 to 2020, you see a huge rebound plus 30.1 percent on search as in Q1, plus 68 in Q2 and plus 44 in Q3 monster results on paper. In reality, though, it's not old as spectacular.

The Plus 68 percent is just following on from the minus 22 in the previous year. and if you multiply those two together, it actually only averages out at 14 growth per year, which is less than the rate at which they were growing in Q2 2019, for example. But on paper, it looks incredible. Plus 68.

Wow. Then we had 2022. The economy began tanking, inflation was running away, while the Fed was too busy picking their nose and you can see that businesses were pulling back on ads, Q1 was still up, grew by 24 year on year, but it just got progressively worse and worse as the year moved on and Q4 was minus 1.6 So in Q1 and Q2 this year, we are lapping a sort of decent start right at the beginning of 2022 and a really good 2021 beforehand. So it's not surprising that numbers are down.

That's how it works because growth is never linear, and when you have this wave effect where some years you are trending way above and some years you trending way below. it is not surprising when those happen in that order. But the interesting bit comes when you begin looking at Q3 and Q4 because Q3 Last year we began seeing the pain and the stock market was beginning to throw a hissy fit and many companies were being judged on their 2021 performance in 2022. And in many cases, the 2021 level performance was insane.

But when we come to Q3 and Q4 this year, we are going to be comparing it to Q3 and Q4 last year, and suddenly year-on-year numbers might not look quite so ugly. not because the companies will start pulling out rabbits out of their hats and doing other kinds of magic, but just because of the lapping effect. And when we get to Q1 next year, we will be comparing that Q1 to Q1. This year, when relative growth for many companies are subdued and every quarter of the passers will be seeing new guidance for the following quarter from these companies.

And just like every single time that the slapping effect happens, sentiment can shift, and even though the numbers are showing much the same story as they did before, it begins looking better. Relatively speaking, the oscillations of the lapping effect tend to die down with time. so you have this big wave up or big wave down, followed by the reverse and so on, and so on, and it just sizzles itself out. It's sort of a bit like the inverse of the bullwhip effect when the initial wave that we saw from Covert becomes smaller and smaller the further away you move from that first point.

But remember in 2021 when every stock was going up, even if the company was literally just about to go bankrupt and burning cash and people began gambling their life savings on made up internet money named after Fluffy Dogs. Well now we are seeing the opposite wave play through and just like with every one of these cases, it looks Mighty gloomy when you're sitting right in the middle of it. But many companies that I follow and analyze look like they're hitting a bottom plateau in their growth I am seeing consistent low single digits for the second quarter in a row and they're forecasting the same for the third quarter next quarter across the board. And the reason that I am so excited by seeing this very low Plateau is to me it looks kind of like a good sign because when you look at a typical sine curve which this is a plateau only really tends to happen at the market Peak or the market bottom and we're definitely not at the market.

Peak So I am looking at all this: Panic stocks losing 5 15, 25 because they slightly missed earnings or gave slightly weaker guidance for Q2 and I see a massive opportunity where everyone else is sitting there holding their head in their hands. I'm telling you that you need to sell everything if you found this video useful. Please go and smash the like button for the YouTube algorithm. And don't forget to get your five day free trial and special discount for short form link is in the description.

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