Flagship Pod 6/20: How To Play The Bear MarketJun 20, 2022
Every single Thursday we host a live discussion in our Discord channel at 5:00pm EST.
This gives you the opportunity to ask us questions and hear our thoughts on the things you want answers to!
Here's what we went over:
What it means now that the S&P 500 is in a bear market
How the 0.75% interest rate hike is already being priced in by the market
How Apple is still innovating with its big push into financial services
Our top stock to do well over the next 6 months
How to budget during hard times
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Check out the rest of the transcript below!
From Moby.co, this is The Flagship Pod, a weekly podcast discussing the economy, the stock market, and the various economic forces shaping the world around you. As always, I'm your host, Peter Starr, bringing you this time the first official moment we are in a bear market, folks. The S&P is hovering at around 3,600, which is about 200 points below our bear market indicator. Inflation is spooking the absolute bejesus out of the market right now. We had a tiny little rally yesterday, only to get it just completely quashed today, as the market is just full of volatility, full of fear right now, lots of little moments within this that are going to be really interesting to watch as we finally officially hit bear territory.
We've basically been in a bear market since November. We've been talking like it's a bear market since November, so it's nice that the rest of the market is catching up with our view on that. Not very nice because I'm sure there's a lot of fear in the investment world right now. But that's the game, right? You go through the up times and you go through the down times. To help guide us through that, of course, audience, as always, I am joined by Justin Kramer, CEO co-founder here at Moby.co and our chief analyst who has been absolutely crushing on the analytical side, finding little moments of momentum within various stock picks that over the long term should be pretty awesome. So that's the cool thing about investing in a bear market, so let's just go ahead and get right into that. Justin, man, what's good? How's life on the East Coast, dude?
I mean, to your point, not good in the markets right now, but things will change. They always do. So the question we are asking ourselves is not when they will change, but what opportunities can we find, because timing the bottom is impossible. But for a lot of these younger, newer investors, things will reverse. As long as you haven't been investing your life savings in highly speculative NFTs and penny stocks, this will ultimately turn around, and you'll feel much better about it.
Absolutely. I mean, for me, the most fascinating part about this is watching Wall Street vets and seeing how that community reacts to the first true bear market that the community has ever faced. It's also interesting for me because this is the first real down market/potential recession that the crypto community is going to experience as well. And so for me, somebody who was constantly watching just how these complex systems play out and interact with each other, I'm going to be very interested to see just how my generation of retail investors who have been kind of only in it for the memes for the past decade are going to react when things get deeply, deeply, real, right?
So not necessarily excited for that, but obviously excited for everything I'm going to learn from that. So Justin, just kind of getting through it, you and I have been talking about the market going down since the downturn really began and accelerated round about December. It was a selloff. It was correction. And now we're officially 20% down from those highs, which means we are officially in bear market territory. I'm going to ask the Cardi B question, Justin. When are we going to announce we're in a recession, too? Is that also on the table, or is that something that's not quite there yet?
I mean, we're going to have to wait for the next quarter of GDP to actually be ending up getting announced. But I mean, it's not inevitable, but there's a high likelihood that we end up moving towards that. Again, what does that mean? It means people are scared to spend money because things are so expensive, so they're not spending money, so the economy contracts. Outside of supply chains and a few other existential, kind of external crises, there's nothing in particular that is so bad about a recession. It's part of natural economic cycles. Things get more expensive, rates go up, economic cycles slow down, things get a little bit better, and then... It just goes in waves.
I know a lot of people probably listening to this haven't seen the waves before, haven't invested through the waves, but this is all completely, completely, completely normal. I cannot stress that point enough. Things will change. And even if we're in a recession now or moving towards a recession, being fearful of your portfolio is not something that should even cross your mind. What you can be fearful for, and I totally understand, is if your company is doing layoffs.
It's hard to find new jobs because companies are being very responsible in terms of hiring and not hiring what they don't need and managing their costs very closely. So it's a long-winded way of saying there are certain things you need to be worried about in a recession. Your portfolio is not one of them, because we are long-term investors here. However, the things that are outside of Moby's control, like daily income, cash flow, those are things, I mean, we completely understand why it can be fearful.
Exactly. But those are things that you as an investor can mitigate and something you should be thinking about while you still have a job, as long as you have not been hit by these tech layoffs that are currently... It's the first wave of what happens during, in air quotes, recession, the high-growth folks who just threw a whole bunch of money at hires to help grow their company when the market was absolutely awash with cash from mid-2020 all the way to November 2021, right? So the main thing is making sure your emergency fund is well padded out. Usually you want something starting with about three to six months, but I would say extend that out to eight months, just so in case this is one of the longer recessionary periods, you've got enough in the pot, so to speak, to make sure that you can kind of make it through the worst of this as some companies begin to pull out.
Anyone saying this is going to be like any shape recovery doesn't know what they're talking about because there are simply too many unprecedented factors kind of lining up together. For me, it's all about just, this is natural, but it is also kind of not normal because this recession technically should have actually hit round about mid 2020, early 2021, just the way the market had been going from 2009 to 2020. It's just then we got hit with a weird dose of calamity, right, which kind of extended that market into these kinds of crazy highs. And the only thing I want to point out is, if you've been a consistent investor like the way I've been, I've been adding to my portfolio since I finally got comfortable with my finances back in about 2014, I'm still on target.
Any investor's goal is to kind of rise with the market, and that's an average of 8% per year, right? And technically, the S&P is still, year over year, 8% and then 8% up again from 2019, right? So just keep in mind, we're still kind of on the path here. We're just shedding off a lot of heat. So any kind of apocalyptic terms you hear, it's kind of hard to say if they're right or not. It's also hard to say if anyone's going to be like, "This is going to be something quick." Again, so many unprecedented factors. So the only thing we can do is stick to our plan and just make sure that we're being responsible, we're being safe, and we're understanding that the only way to lose this game is to put yourself in a position where you're a forced seller.
You always want to be in the driver's seat it when you start liquidating your assets. And so making sure that you're investing small, never over leveraging, and making sure you have enough to get through any period wherein you unexpectedly lose your job, because you never know how the layoff game's going to play out, right? So that's the main thing we want to keep giving you throughout these conversations, is that confidence to keep investing, because there's still opportunities, especially during a bear market. If anything, the weird, sad thing about this is watching the statistics roll in, wherein I just saw a report where round about 73% of accounts open for retail investors haven't added anything to their positions or been active in the past three months.
You're seeing people kind of bail already, and that's the worst thing that can possibly happen. We've seen this amazing democratization of investing thanks to platforms like Robinhood, Webull, all of them doing pay-for-order flow (PFOF) and doing commissionless trading, which may also go away in the middle of all of this. Justin, you and I never talked about how the SEC is looking into payment for overflow and seeing if it's even a thing that should happen or if we're getting back to commission trading and all that. So much to unpack.
But Justin, how do you think about this? You can't time the market, obviously, but what are some of the momentum plays we can be doing right now as we watch both very, very rapidly rising inflation, higher than expected, obviously, downturns hitting, layoffs coming, that sort of thing? We're getting compressed on both sides by negative forces. Prices are rising. Wages are going down. People are losing their jobs. Stock prices are going down and all that. How do I kind of play that when I've got those two forces converging right now?
Yeah. I mean, there's a lot of forces, to your point, that are converging right now, and there's a lot of different ways to play it. I guess, is there a certain area that you think our listeners would want us to kind of focus in on first here?
I guess let's talk inflation first, because that's the main thing. All of us are kind of thinking, "Let's not do any short-term growth." I get that, but they want to make sure that... What phase in the market are we in right now, do you think, Justin? Are we still in the initial selloff, that sort of thing? Are we still looking at just energy and stuff like that, or is there anything else we can be thinking about in terms of the buy right now scenario? I'm not buying as if it's the bottom, obviously. I'm not YOLOing into Spotify just yet, but give me a second, right?
Yeah, no, I mean, Spotify, and we could talk about that in a second, but the inflation stuff is being felt across different areas of the market. Obviously, if you've bought anything recently, it's likely more expensive, gas included. And because gas and energy is included, then transporting all those goods are more expensive for whoever is selling the goods. And because those goods are then more expensive to transport, they have to supplement higher prices, and then consumers feel it. So gas and oil and energy underlie almost everything, because you need energy to move things from point A to point B, even whether it's physical goods or even digital goods, to a certain extent, for the technology that runs those digital goods.
So in terms of inflation, everything is being felt there. And so if we're looking of places to actually start making money now, a lot of it is inflation linked to assets. For longer term, to your point, we can talk about Spotify, Apple, some of these things, but in the very, very immediate term, those inflation-linked assets are things that do really well. And I think we had touched upon this very briefly during our last call last week, for those of you who had tuned in, but effectively, our new pick that we've released, called Texas Pacific Land Trust, is something that has potential to do really well right now.
And we've taken the approach with them similar that we've taken with other people. Instead of necessarily picking who's going to be the front end facing company, we'd rather be the ones who are picking the people supplying them. So we talked about this with MP Materials. Instead of picking Tesla, Lucid, whomever, let's pick the company that's helping supply the batteries and the materials for those batteries, so whoever wins doesn't matter. It just matters that batteries are being made. TPL is in a very similar position. Doesn't matter who's mining the oil. It just matters that people are mining.
And for them in particular, they're the largest landowners in the entire state of Texas. And something that's pretty mind-blowing to a lot of people is that drilling for oil in one part of the world is not the same thing as drilling for oil in other parts of the world. If you want to replace the oil that's in Russia with the oil that's being drilled in America, there are two different types of oils. There's heavy oil, white oil, sweet oil, crude oil. There's a bunch. And all the refineries here that then take that oil, refine it, and turn it into something that we can use, are set up for certain types of oil. Given Russia and other countries are massive exporters of oil, we have a ton of refineries here in the U.S. who are set up for that type of oil. If we want to go replace that with oil in the U.S., we can do so. However, we need to rebuild a lot of those refineries. Who owns the land sitting under the oil drilling and refineries? Texas Pacific Land Trust. And so rather than figuring out who can do and build all these goods most efficiently, we're just owning the underlying asset, which is the land itself, which ultimately needs to get drilled upon.
And with companies now looking to even spend more money than buying more goods and more products to fuel the infrastructure needed to actually mine the oil, and that makes the price of oil go up, again, you're owning the land that is being leased out at higher prices. I mean, as everyone knows, land doesn't have... There's no cost. If you own it, it's on the market to say how much that is worth. There's no actual infrastructure cost with running the land. You're just constantly leasing it out. You just own the right to it. So for them, they can continuously jack up the price, and their costs stay exactly the same. It's a stock that's very low market cap, most analysts don't cover, but for inflation length plays in the short term, I mean, this is one of our favorite stocks. We've been investing in it for almost a decade, and I think right now is another great time to revisit it.
And the main thing, too, is just watching for any of those situations where you're either dealing with people who are leasing out the commodities, like land for TPL, or finding moments where you have real commodities that are going to benefit from prices going up without margins increasing too much. Major thing right now, the big headline as markets close as we speak is that U.S. Steel Corp, X on the New York Stock Exchange, is up 8% off of just truly awesome earnings potential, so that's awesome to see/ there's always going to be little moments to grow.
But just make sure that you're not overleveraging as you roll through this, because inflation, while it has the potential to peak with interest rates going up and up and up, you're going to see, down the line, certain costs go way up, too. We're going to be seeing in the fall way more food inflation, as the initial costs of grain and corn and everything are going to massively increase the costs of raising animals to go to slaughter here in America, here, everywhere else. So just keep in mind that even if we see inflation start to peak July and August, we're going to be seeing certain expenses pop up even more as certain other costs go down. So the main thing you need to learn from this economy is looking into how much the economy reeled from March 2020 until basically now on the supply chain side of things. You're going to see more reverberations even from this. We're going to be talking about the grain shortage that started in February of 2022 all the way into February 2023 as certain crop costs just absolutely skyrocket as supply and demand try to keep up with just an interesting period of confluence throughout the world. So keep that in mind as you move through.
But in the meantime, the other thing you're looking into, audience, is companies that are making really strong moves despite market forces keeping them down, which is why we're talking a lot about tech this week, too. At the beginning of this week, Justin wrote a really awesome report on Apple, looking into WDC. Once again, Apple, the most valuable company in the world, is kind of looking a little bit undervalued, honestly, just because of how they are diversifying what they're doing.
First of all, they're adding new chipsets. And second of all, getting into buy now, pay later, which is absolutely gigantic, especially in a period where people are trying to think about how they can better afford things. Justin, can you take me more through your thoughts? Did you get a chance to catch a lot of WWDC this week? How is Apple going to be able to kill it throughout this kind of really wild period? Obviously it's going to go down as the overall market continues to go down, as people flee risk and go into bonds and all that, but what else are you thinking about in terms of how Apple's going to play this one, dude?
Yeah. So if you don't know what WWDC is, basically it's their Worldwide Developer Conference. They do it every single year. Effectively, they release and talk about new software, new computers, I mean, everything of the sorts for across their product suite. It's basically a way to hype themselves up, long story short. But during these conferences, a lot goes on that we anticipate or don't anticipate. On the anticipation side, they talked about new software specifically for their new MacBooks, and they talked about a handful of other things.
But there were some things that they were not supposed to be talking about that caught us a little off guard in a good way, and this is what's using our overall thesis. And before we even get into that, Apple itself is an absolute behemoth of a company. If they sold just AirPods alone, the revenue associated with that, they would be one of the top 100 companies in the U.S. And that's just one product. Think about their computers, their iPhones. I mean, there's just so much they're generating revenue from. So what we're about to say is just more of a reason to hold them, not the reason to hold them.
But anyway, so at the conference, what we had seen is that they introduced the M2 chip for their entire new suite of Mac products, which was not supposed to happen. They also upgraded their 13-inch MacBook Pro, which is the second highest selling laptop in the world with that M2 chip design. Then I think for the most important thing is their push into FinTech. So when you're buying a company of their size, you're either looking at it from two perspectives. Either they're huge, they're growing slowly, because when you start making billions of dollars, it's hard to double and make two billion to four billion to eight billion and so on and so forth.
But with them, a lot of their innovation stems around breaking into new fields, not necessarily making their iPhones better. So for them, health has been a huge area. They've been focusing on pushing into health tech. They've pushed into a lot of other areas, VR and AR. One area that they've been really focusing on as of late has been FinTech, and FinTech for them has been a absolutely massive push, and it's come in small waves. First, there was Apple Pay. Then they launched an Apple-branded card. And now is this buy now, pay later option, where you can effectively pay in installments.
For those of you who aren't familiar with this, effectively, you go to Best Buy, let's call it, and you buy a $5,000 TV. Well, maybe you don't have $5,000, or maybe you do and you just don't necessarily want to invest that right now into a new TV, and you want to break it into installments. What a lot of other companies do, like Affirm, Klarna, PayPal, and others, is you can pay $100 over the course of X months, $1,000 over the course of Y months. And that's historically been companies' entire business models.
But what Apple just did is kind of bring that within their own ecosystem. They have really good data on you, so they can understand what your credit should be, isn't. You can see your spending history. And it's all integrated into a seamless experience. So if you're an Apple consumer, there's no need to ever use Klarna or PayPal or any of these companies ever again, because you just pull out Apple Pay and you can choose to do it right there, super seamless, super easy.
And from Apple's perspective, they just added themselves into the FinTech ecosystem and could potentially add on billions of dollars of revenue by breaking this out, collecting interest from their consumers, and working with these companies to ultimately sell more products. So is FinTech the future of the company? No, not necessarily. They're working on a car. They're working on a lot of other things. But it's an area of massive rapid expansion on top of what they're doing now. So if you think about Apple, they're like an octopus in a sense. They have different arms, different tentacles. Their core products is what they've been famous for, and now launching into healthcare, cars, FinTech is the rest of their arms.
And so this FinTech area most people were not anticipating this massive push in, and that's something that has us truly excited. Again, if you strip all of this away, we still think Apple is massively undervalued, given a lot of its growth metrics still at this stage and where the stock is trading, but this is stuff that gets us excited that gives Apple that opportunity to continuously not just grow, but grow fast and do so efficiently.
And it's not even that, too. A quick bit of inside baseball, audience. Remember, Justin and I both worked at the same company before we ended up here. We just ended up working at the same company at different times that more touched the eCommerce side of things. And a lot of our former colleagues in the eCommerce world ended up at places like Affirm, Klarna Afterpay, because that was kind of the big, hot, new thing in the last two to three years, right? Everyone in that space is kind of shitting themselves, because all of those companies do buy now, pay later, but they do it in partnership with banks, right?
So they always had to pay a fee to do their business, right? Apple doesn't have to do that. Justin, what is it? Apple is sitting on, what, $28 billion of just free cash just on their balance sheet, a truly obscene amount of money, not quite a bank level, but enough where they don't necessarily have to pay fees. They can basically be a bank themselves without actually having to apply for a bank charter. I mean, if they want to do more stuff, they obviously eventually will have to apply for some kind of charter. But how do you even play this right now if you're Affirm, Afterpay, Klarna, those sorts of things, Justin? Is the world on fire, or can you just find other opportunities outside of your entire market getting completely smooshed by Apple, basically?
I mean, in the short term, I don't think they have too much to be worried about, especially some of these ones who are deeply entrenched with so many different retailers across so many different industries. And it's not like Apple's rolling this out to all their users tomorrow and they're just going to completely take the market share. But in the long run, yeah. I mean, it's definitely frightening. Having said that, there's enough room for Visa, MasterCard, American Express to exist, a ton of different card providers, so there is room for multiple providers to exist. So Affirm, Klarna, Afterpay, PayPal, they can certainly still continuously take market share and grow.
There's no reason they can't, but it just introduces another player into the mix. And then as we know, Apple is amazing at executing, so there's a real chance that this ends up hurting them. Is it going to hurt them tomorrow? No. Should they have something to be scared about? 100%. It's another serious competitor who just stepped into their space. But it by no means says that they can't succeed in the long run.
Exactly. So it just makes this space even more interesting, even bigger. I mean, this is probably the best time to start the BNPL game, but obviously it's one of those things where no matter what, it's not going to be a momentum play for a long time, as people are going to be very cagey about spending for the next probably year, just looking at various ways in which... It's not going to be a yearlong recession or anything, but nobody can predict that. But it's one of those things where consumer confidence is going to take a little bit to pop back from this. So we'll have to see. So strong move by Apple, really excited to see them pull that off. I'm still waiting on that Apple car, though. I want the EV space to go completely bonkers once Apple steps into the ring.
But obviously, they're going to be really cagey, really slow, methodical about that. So that's the main thing I'm excited for. But as we keep moving forward, there's also other opportunities in tech, too, and that's what we're really excited to see, various plays in which tech companies are still innovating. It's not a Meta situation where they're making these gigantic, huge changes that are thousands of years away, like making a metaverse or whatever. So another thing that's really exciting is Spotify. You literally released that maybe an hour before we came on the air today, Justin. Can you take me through your thoughts on Spotify and why potentially, they've got a lot of room to grow, why they're a little bit undervalued across the next year?
Yeah, 100%. It's a really good question. And so the reason a lot of investors are being scared about Spotify is because if anyone's been paying attention to Netflix, it's like this is the cap. You reach a certain point and you can't monetize them any further. And while obviously Netflix is a lot bigger than Spotify, people are kind of viewing that in a similar capacity. They're also a little nervous that if you look at Netflix, there's Hulu, there's HBO. There's a bunch of other people in the field. And while, yes, you pay, or users do pay across platforms, it starts becoming a little commoditized when there's that many platforms.
And so also, people are fearful that that will happen with Spotify. And while that's definitely possible, to date, we haven't really seen an actual competitor outside of Apple Music. Amazon does have a platform, but it doesn't nearly have the acceptance or market share potential that Spotify does. But what Spotify can really do and why it's different than Netflix is, yes, 90% of the revenue is due to the subscriptions. Same thing as you see in Netflix. Instead of paying for video, you're paying for audio. But their kind of next step in their playbook overall is to go past that. They want to get into other genres of music or just audio in general.
So they want to get into podcasts. They eventually have been rumored to want to go into audiobooks. And so you think about how big the audio industry is, if you truly go across things, live shows, there's a lot of different options that are easy to spin up and easy to generate outside of video-based content like Netflix. And so that's going to be their next push. And so if you've seen them pay these massive, massive contracts to people like Joe Rogan and others, it's because they want to do exactly that. And the way they'll monetize people is, yes, they can have subscriptions, but what they can also start doing is do a lot of advertising, which, if anyone follows Google or Facebook, is how they make all their money. So there's a ton of opportunity there.
And if they can prove that their ad space in terms of audio is super beneficial, then they can also start generating a lot of money. And how early on tapped on they are in terms of that opportunity is very early stages. They made $200 million in the last year from advertising revenue specifically on podcasts, and we estimate that to be 2% of their actual potential. Pair that with advances in audiobooks and other industries, and they have a real chance at doubling, tripling, quadrupling their revenue over the next several years.
And so when we look at their projections and a lot of people are thinking on a 10-year time horizon, we look at their projections based on what we're seeing now, and they're projecting to get to over a billion users and $100 billion in revenue. And while those seem like ridiculous, ridiculous numbers to hit, we truly believe those are possible based on what we've been seeing, the opportunity out there. And although they're very similar, and I understand the comparison between these video platforms like Spotify and Netflix, truly believe they're differentiated enough to say to the fact that it warrants this long-term investment for us.
Exactly. And the other thing you need to be watching for, audience. So you look at all that, you look at all this potential growth modifiers and all of that coming out of Spotify, all that's genuinely very exciting, but I'm sure a lot of you are thinking, "Okay, give me something concrete to chew on. How do I know that Spotify's vision is coming into focus?" And that's another moment of a little bit of inside baseball from people in the advertising/eCommerce space. The thing that's going to really blow Spotify up is if they can master their algorithmically served ads product, that is, you have a bunch of podcasts hosted on Spotify. You have the people with those podcasts mark where they're saying, "And now we'll just do an ad read," which is kind of a classic podcast thing.
You don't hear us do it because we're super small. We're not small enough to do on-read ads. And also, we're a subscription-based business, right? We're probably not ever going to have ads in this podcast, but knock on wood. We'll see. But having that moment where you have an actual ads marketplace the way you have when somebody types in a Google searcher or the way that it gets generated during an Instagram experience/being just on the Facebook home feed, right? If they nail that and they have an actual algorithmic ads marketplace that works, it doesn't kind of ruin the experience for a lot of these bigger and even medium tier podcasters, and you can have the same sort of monetization journey to start up to make money in a podcast that, say, you do if you start a YouTube channel, that's going to be positively gigantic.
There's so many little things that Spotify can do to completely disrupt and own the audio-only space, and so that's really exciting to watch. But just keep looking for moments like that. It's all going to come down to, can they get an algorithm and a ad product to work seamlessly enough that amateur podcasts can get the same kind of decent enough experience that people get on a YouTube video? So honestly, very excited to see all that. And that's the main thing that's going to be the differentiator for Spotify's revenue journey. I think I interrupted you, Justin. Did you want to add anything on there?
No, I think that makes a really good point, honestly, to tack on on top of what I was referring to. I think it's a pretty well-rounded thought on Spotify. Again, if anyone has any questions, we're happy to answer them. Just feel free to DM Peter or I on the side, even after the session ends if need be.
Exactly. And audience, obviously you've seen us be kind of really nose to the grindstone for the last few weeks. A lot of you have been asking just, "What are the actual specific momentum plays you're doing throughout this bear market?" Audience, you may also have noticed that for the past two weeks, I haven't released a YouTube video. That's because I have been completely nose to the grindstone, refining a kind of five-module experience giving our really detailed thoughts on how to play through this particular variety of bear market, how to invest through not a recession, but a current selloff, how to play your game and keep things sort of tight during inflation, so just making sure I cross all my Ts, dot all my Is.
And that'll be out soon, so you'll be getting really, really detailed thoughts in terms of how, again, you're not timing the market, but there are certain things you can do throughout the particular downturn, certain signals you can watch that can kind of signal, "Okay, now I should shift my dollar cost averaging from this moment to this moment." So that is coming very soon, and it's going to be extremely detailed. I have nine hours of footage that I am cutting down into something more coherent, so give me a hot second here. It will be pretty awesome.
I think, obviously, it's going to be reviewed by the whole team, too, but I'm excited to give you a more comprehensive view on how we're playing this, and just excited to make sure that you have the confidence to stay the course during however long this downturn's going to be, if it's going to be a quick little cute correction, just getting us down back to 2019 levels, or if it's going to be a little bit more extended, as we have a lot of heat in the whole global economy we need to shed. I don't know, man. It's going to be a real interesting period. Being a millennial is super fun. I'm really tired of living in a solid decade... No, it's more like 20 years of interesting times at this point, right?
Yeah. Either way, that's the game you got to play, though. And I'm really excited to make sure that we maintain confidence during these unendingly interesting times. So Justin Kramer, CEO, co-founder here at Moby.co, we are right here at time. I really appreciate you sticking with me a little bit past our heart out here. Any final thoughts for the audience here today, Justin? Anything else we can say in terms of just keep staying the course? Any final thoughts from you, dude?
Yeah. For anyone who are newer investors or even investors who've seen this before, know things will rebound. Anyone who's out there telling you, "This is the bottom. This is when it'll change," it is impossible. Predicting the bottom consistently is impossible. If someone gets it right, I swear it is just luck. It is impossible to call the absolute bottom. The most important thing we can do is know a bottom will come and things will reverse. And so we talk about this briefly in some of our posts, but basically what that means is, if a stock or the market is at, let's make a hypothetical number, 100, and it goes down to 50, it will likely go back up.
And so would you rather buy that stock or index at 55, 60, or are you trying to time the bottom so that even if it touches 50, goes up to 55, you wait for it to go back down, and then it goes back up to 100. You just missed that entire upside over a small $5 deviation. And so what I'm ultimately trying to get at is, time in the market is much more important than timing the market. And so right now, as investors, that's all we need to think about. What positions, what stocks, what investments do we fundamentally believe in?
Are these things that have changed given the course of what's going on over the last few months? If they haven't and the stock prices have significantly dropped, let's add to those positions with whatever dry powder we have. We make our cost basis significantly lower, and then on the way up, we'll have significantly more upside. The stock market may continue to drop, it may continue to fall, but it will ultimately surpass where we are now, and it may come a lot faster than you anticipate.
Exactly. Exactly. And I really love leaving it with that, because the main thing is maintaining your confidence, audience, but not getting so overconfident that you get kind of blindsided. So the main thing, too, is make sure you nail your budget as well. Make sure you kind of expand what you think your expenses are going to be, because again, a lot of those living expenses are going to keep spiking across the back half of this year. We're seeing higher food prices. That's only going to go up, as the fundamental food prices are high now, and all those go into the cost of raising livestock, raising other things. Fertilizer costs are going to go up.
There's not a potato shortage, but potato prices are going to spike, too, which, as somebody whose entire history is from Northern Ireland, makes me sweaty a little bit, but that's just 200 years of history calling out at me, right? So the main thing, audience, is to ensure that you're never in a position where you're a forced seller. Cash isn't necessarily king, but it's really important to make sure that you have a little bit more of that liquidity hanging out just in case things get even goofier on the inflation side of things. So staying the course is really important.
We're really excited to give you the best intelligence as we roll through here. Keep an eye on that simple 200-day moving average in the S&P as well as the S&P 500's price to earnings ratio. Right now it's about 18. It can go down as low as 15, potentially, maybe even lower than that, but things become really interesting in that 15 range. I'll expand more on that in a much more detailed post, hopefully that I have coming out next week. So really excited to give you all that information. Either way, audience. I think that's a good place to end it.
As always, just so you know, this podcast was produced, hosted, and voiced by me, Peter Starr. All of the intellectual advice here, all of the source of our knowledge, comes from our CEO, co-founder, and chief analyst, Justin Kramer. If you have any questions for us, audience, feel free to hit us up at [email protected]. You can also DM me. I'm Moby Starr here on Discord, or even Justin, he's Kapitan on Discord as well. Any other questions you have, feel free to reach out to us. We're really excited to help maintain that confidence throughout this, but make sure you just stick to the plan. But as always, we like to leave you with peace, love, and incremental gains. Everyone be well. Thank you so much for your time.