GVI Investor August 2022 Video Update

Hi, everyone. I've got a market update for you, and it's quite an interesting one because I think for the first time all year, we've got a significant change in outlook. Previously, we've had overvaluations being a worry, and to some extent they still are. These are the price earnings multiples you can see over here. And you can see again, banks are pretty much the only ones which remain relatively undervalued and energy companies. And you might say, well, banks are undervalued because if there's an anticipated continued rising of interest rates and a recession, then perhaps that would lead more businesses to default, less economic activity. And that would impact banks because they get their profits from people being credit worthy in a growing economy. So you could argue that's where they're undervalued and they rightly should be.

However, this is what's more interesting than the valuation story is the momentum story. These are roughly seven-day price changes in some of the major companies. You can see it over there. And what's interesting is, everything's green across the board. It's not just that, oh certain sectors are doing better. Everything's green across the board. And that can oftentimes indicate some kind of a market bottom. Okay, I'm not saying it is. We'll wait - I've got more data for you on that in a second. This is price earnings-to-growth ratios, PEGs. If they're below 1, it suggests the company is undervalued. In other words, the share price relative to the speed at which profits are growing, price, earnings, growth would suggest that the share price does not reflect and therefore is undervalued, the profit growth of the companies. And you can see in green energy, it's pretty much the only one which is in green. As you can see, there are one or two other odd bits.

Now that doesn't mean you are going to pick this valuation measure over price earnings, or momentum over valuation. What it means is these are all a collection of things to examine. So I remain cautious that we've got a market bottom, or rather the rebound would be V-shaped. I don't think it'll be V-shaped. We might have something of a bottom forming, but there are still concerns over future profitability of companies and therefore their current valuations still being high. That means that once we get a bottom, any move upwards will be in selected sectors and it will be at a far slower rate of growth.

Well, let's have a look at some of that shall we? This is Apple, let me explain this chart to you. These letters here, the Bs, represent where major analysts have said buy and H means when they've said hold. That doesn't really concern me much - analysts are always over optimistic. What I want to look at here is we see the dip down, which has been a drop from that high all the way down here, and then almost a V shaped recovery there. We see the monthly, what's called the MACD, it's a momentum indicator that we look at in the hedge fund. This is the weekly MACD, and that's flat. That is bottomed out and rising, which suggests the price is bottomed out and rising.

The stochastics monthly first, and then weekly always tend to be a bit more premature and proactive. They've also flattened or are rising. Again, both very bullish things as indeed shown by the price. Let's look at that for Microsoft, lots of analyst buy ratings. Again, that doesn't bother me. What bothers me is this, the market seems to have bottomed out with a 30% drop, which seems fair enough and reasonable. Now, if we look at one year ahead, I would project at a slightly slower rate of growth or the rate of growth it had prior to its falls, which is that green line. If I make that parallel there, then it suggests a 35% return in a year.

You might say that's a bit over optimistic. What if that happened in two years? What if you are using leverage products such as exchange rate products and two times average? Well, that'll give you a 70% return in two years. If it was two to one leverage and you got a 35% return in the year, if you got a 35% return in two years in year to leverage product, all other things being equal, you'd get roughly a 70% return in two years, not bad. Either way in a safe company like Microsoft. Which leads me onto Amazon. Again, one of those, what they call bellwether stocks, the ones which sort of set the tone for everybody else. Hard to imagine a market recovery without those stocks going up as well. So let's look at Amazon and that had dropped as we well know over a period of, what six months? It's pretty much the start of the year.

Now, if we go back to its all time highs and we did that in a year, I'm not saying we will get that V-shape, then that'll be a 65% return. Well, if you did that in two years, you'd probably be quite happy with that. Certainly beats inflation. And you can see the monthly MACD flat, which suggests something of a bottom, the weekly one underneath it rising, suggests a bottom. And same with the monthly and weekly stacastics, flat, near the bottom half of the screen and then rising, which again suggests a bottom. Would I get into Amazon now? Yeah, actually I would. Okay. And if I'm willing to say that, which is the first time I'm saying it in the last six months, then that would suggest that we're getting something of a market bottom.

Similarly, with Meta, like I said, it's unlikely. You're going to get these to fall and the rest of the market to rise because these are the bellwethers. And what do we have here? And this is a riskier one, probably an uglier stock in terms of future prospects and so on. And yet again, even this looks like it might have bottomed. It'll probably go along that green line, so nothing spectacular, certainly not a V-shaped recovery, but a slower, amiable growth projection, something a lot less rocket fueled than in the past. Not saying you'd buy into it, what I'm saying is at least it not falling means that the rest of the market isn't spooked.

Costco, one that I prefer, you can see here, you had the fall, which was 27% and the rise, which if I projected it right, it's already exceeding. Which was my projection that in six months it'd get to 35% rise, well it's halfway there already. Okay. Again, bodes well for the broader market. Notice how the trend had been upwards and yes, it bounced off it and sometimes exceeded those growth rates and therefore fell back.

PayPal. Well, that had been horrible for a while. And again, as a bellwether, if that didn't turn up, then I don't think the rest of the market was going to. It dropped 77 to about 80%. It's now going probably along this line I've marked there. And what do I see? Well, I see again, a bottoming out based on these various technical indicators, lots of analysts being bullish. And that, again to me, is an indicator of a market bottom in so many different ways.

And these are the factors we look at in the hedge fund. My analyst will send me this data. Well, I'll tell them to send me, and I get an idea of what's happening. So Qualcomm, similar kind of story. Don't need to do it again. Similar with Johnson and Johnson, more of the safer side. Again, a bellwether. Doesn't matter where I'm looking in the markets, if these ones aren't rising, it's hard to see where the rest of the market would because it tends to form public opinion, market opinion to these stocks. Okay. Coterra, like so many energy stocks that have ripped ahead, then ripped back. Now it seems to be going on a more steady stream, as we expect oil and gas prices to remain at these elevated levels, at least until the new year. So whether or not there's a recession, these companies will continue making ridiculous amounts of profit.

And that's why you can see that whilst they'd ripped ahead of before and they pull back, they'll probably form a basin out and start rising again at a steadier pace. Okay, Occidental, Warren Buffett had bought a ton of this and he was obviously expecting it not to continue falling, but rather to form a base and rise. And I'd suspect he'd projected a 37% return in a year. It's not bad is it, unleveraged, 37% in a year? And it's on that track, you can see it. I've drawn it from about that. It's on track to do that. And you can sort of see what he's thinking.

Well, so hopefully that's given you a market perspective and also a way to look at investing and what's happening in the broader market. I hope you found that useful. Thank you all my GVI Investor subscribers for following this. And I hope as I say, you found these insights into the market useful. Thank you.