Stock Market & Oil Crash – What Should Investors Do?

Hi, I’m Jimmy and this video we’re looking at the continued crash of the stock market and we’re gonna take a quick look at the crash that’s happening in oil right now. First, we’ll get a quick understanding of what’s happening and why it’s happening, and then we’ll look at where there might be some opportunities for our investment portfolio. And hopefully we can use this information to get us closer to our personal goal of achieving financial independence. OK. Before we get to the massive drop in the stock market that’s been happening over the past few weeks. I personally think that it’s important that we keep our cool in situations like this. I truly look at these events as opportunities and this is genuinely no time to panic. This is very much a fear driven selloff, a very legitimate fear driven selloff. But I think it’s important that we recognize what the fear really is purely from an investment standpoint. And I think that most of us can agree that the investing fear is centered around people spending less or not going out as much, or perhaps manufacturing has really taken a hit from many of the different quarantines that are happening, particularly in China. Those are legitimate investing fears and they’re all legitimate concerns. So I don’t want to come off as taking this fear too lightly. I’m just trying to stay unemotional. And if we can do that, well, then, does the stock market crash look like an opportunity? And to me, in many ways, it really does. So let’s recap the big picture concern. So because of the virus, much of China’s manufacturing has slowed down and in many cases, it’s come to a complete standstill. I did a video where I touched on some of this recently, but in that video, we looked at the Baltic Dry Bulk Index and this is what that chart looks like. So basically what this index does is it gives us an idea of the cost of shipping goods via dry bulk chips. And if we’re curious, this is an example of what a dry bulk chip is, just so we could visualize. So as things slow down in China, well, this index really got hit. And then as China got a minor grip on what’s been happening recently, well, the reaction of the index was that it’s slightly recovered. Now, I bring this dry bulk index out again because this is really confirmation of the fear. Manufacturing gets worse. People slow their spending. And together, these two together bring the global economy to a recession. And this is very possible and something that needs to be watched. But let’s ask each of ourselves a question, and we’ve got to try to answer this in a non-emotional way as best we can. So if we owned, let’s say, Microsoft or Disney, you know what? Let’s focus on Disney, because in case you haven’t heard, Disney has understandably shut down a few of their parks. Some of their parks around the world have had to be shut down in different countries. And I did a video on Disney not too long ago, and I got quite a few people saying that their parks are shut down and profits are going to plummet. Since, you know, when the products are closed, they can’t make any money since the park is closed. So I understand the reaction. But if we were to take a bigger look at the stock market crash or as Disney as a whole, as the entire business, what are we really looking at here? And don’t take this as me pushing Disney. There’s lots of examples. Disney is just one example of many companies that are in a very similar position. I’ve just recently done a decent amount of research on Disney. So it’s sort of fresh in my mind. OK, so don’t forget, we want to stay as non emotional and analytical as we possibly can during this. So Shanghai Disney is closed. Tokyo Disneyland is closed. Hong Kong, Disney is also closed. And another a few more. And it’s very possible that this list continues to change. But in reaction to this, Disney stock has been cut by about 25 percent. But what if we found out that Disney’s entire park segment accounted for just 37 percent of twenty nineteen revenue? Does it make a 25 percent pullback in there in their stock price? An overreaction? Maybe. Maybe not. But what if we also learned that the international portion of their park segment only accounts for about 6 percent of total revenue? And then what if we learn that Shanghai, Disney, the Shanghai Disney Resort, which is closed right now? Well, Disney only owns 43 percent of that property. Hong Kong Disneyland own Disney only owns forty seven percent of that property. My point is Disney’s stock and so many other stocks just like them, have seen huge price drops in their stock price for something that perhaps in the long run doesn’t deserve such a huge pullback in their stock. Because in my mind, this interruption in the economy, as serious as it is, is likely at the end of the day to be somewhat temporary. So I think it’s on us to identify opportunities in our research to go to the bullpen of stocks that we might have lined up ready for when the stock hits the right price. I think it makes sense to look at those and say, all right at the end. Hey, how much is this company really affected by what’s happening right now? And this brings us to another crash that’s happening right now. And that’s a crash in oil prices. This is a chart of Brant Oil. And as we could see, oil, the oil prices have really been hurt, not just from the decrease in demand from the virus, but mainly because it seems that Saudi and Saudi Arabia and Russia have gotten into an oil production standoff and that’s driving the price of oil way down. Saudi Arabia has lowered their monthly prices. Russia has come on, said they’re going to continue to produce. So prices have rightfully reacted by got going significantly lower. Now, I think it’s important to point out that generally lower oil prices is a positive thing for the overall economy. When we switch over to the average price per gallon in the United States of a gallon of gasoline, or we can see that it’s been drifting lower over the past year. And this is the most recent data that I could find. It goes up to a few days ago. That’s not going to count accounting for the eight, nine, 10 percent drop that’s currently happening in the oil markets. So this is going to get even better for the average consumer. Oil prices being down generally should lead to lower energy costs. And overall, this tends to be a good thing for the economy. And then we know that interest rates have been lowered recently, which is also supposed to be a good thing for the overall economy. And then on the flip side, well, we have the negative side of this. People are afraid, rightfully so. We can see that in the price of a lot of different things right now. And we don’t know when the virus is going to get under control. But the real question is, the non-emotional question we must answer is, do we think it will get under control at some point? I think it will. And if it does, well, at that point, after a bit of a ramp up period, the economy could go back to its normal growth. And that will be further fueled by lower interest rates, lower energy costs, assuming oil prices stay down, which many people think that it will stay at least somewhat reasonable. Well, if that were to happen, then once again, the stock market could continue to move higher. In fact, lower interest rates alone should have should they should cause stocks to be worth more today than they were before interest rates dropped. So if you want to better understand why interest rates have such a major impact on the fair value of stocks, actually did a video on that. I talk about how falling interest rates affect the overall economy and individual stocks. That could be a good next video for you to watch. And I really want to thank you for sticking with me all the way into the video if you can try to stay calm through this whole thing. And I really appreciate you. Stick with me. Thanks. And I’ll see in the next video.

67 Replies to “Stock Market & Oil Crash – What Should Investors Do?

  1. You are a legend <3 Honestly finally someone who really understand the value of a Company ♥️ Long on DIS! 😎

  2. That’s awesome that you talked about DIS. I just bought more DIS shares today! Great content awesome video, Jimmy! Keep up the great work.

  3. Thanks for sharing & interpreting some of the macro statistics. Times like these will show how well we did our homework with our holdings. BTW, DIS licenses Tokyo Disneyland to Oriental Land Co; doesn't own it. I assume they get the licensing fees whether it's open or not.

  4. Great points. Metal Bum is excited to buy cheap stocks. Glad I am so stock loaded full of silver and gold from last year of buying Gold!

  5. 2:41 Don't forget that a shutdown Disney parks still create costs. It is not just the lost revenue, it is also a "new" cost without coverage. You have to look at cash flows, if you want to understand how much closed down parks will effect Disneys revenue. [I don't own any Disney stock, have never owned any, and will likely never buy any. I find those kinds of companies to complicated and to boring to follow. I also never consume any Disney products, so I know almost nothing about them.]

  6. People call this a crash but the market is now where it was in October 2019. There's a lot of downside to go still. But I agree, in the long term this market will likely recover. It all depends on how much worse this virus can get before it gets under control. The more the virus rages on the longer will the recovery take.

  7. Thanks for a unemotional take. I've been especially looking at Disney these past few weeks slowly adding to my position. Hasn't disney plus not even launched in Europe?

  8. Good luck… you don't take into consideration the fact that many businesses will fail if we don't find a cure in the next months

  9. When the 30 year treasury was at 2% Warren Buffett said if you buy at that level it's like owning a stock with a PE ratio of 50 where the earnings can't increase for 30 years. There are a lot of great dividend paying stocks today yielding 3 %, 4% or more where earnings and dividends will be increasing. He was making the case that stocks are extremely cheap relative to bonds at these levels.

  10. Won't even lie. I sold 50% of my portfolio, bc i was in deep red & for tax purposes for 2021. Lucky thing for me i kept all stocks in my td acc & didnt touch main VTSAX. I know i cant buy again for 30 days but thats only for my td acc. Perfect buying opportunity for vtsax admiral shares

  11. Just started investing last August. I used to say damn i should have srarted earlier… just after 2009. This market crash is like a dream come true to me. Im here for the long run.

  12. American Nero to the rescue,
    America’s riches gifted to the few,
    The last two years of the Dow has vanished,
    Just as sanity was quarantined and banished.

  13. You continue to ill advice viewers.

    This is not a fear driven drop in stock prices it is a stock drop based on earnings. It is a rational response to a contraction in earnings.

    The expected drop in EARNINGS due to the the Coronavirus and the oil price drop is in the order of 25%, and the hope is that this will not go on for more than 12 to 18-months. This is the fastest time that a vaccine against the Coronavirus is expected to me available; however, it will still not be mass produced for the 7+ billion people in the planet. This will take some more time.

    In fact, this is now a reaction to an earnings loop linked event. The Coronavirus lowers demand in general, and this affects, also, oil prices, and this affects oil related stocks; however, the stock drop due to the Coronavirus is not complete. Therefore, at the moment it appears as though the drop in Coronavirus is affecting oil, but the drop in oil stocks is making the Coronavirus worse.

    This is what this drop in stock prices means.

    This is, particularly, true of hospitality stocks such as restaurants, hotels, airlines, movie theaters, and amusement parks; however, it is, also true of oil producers and suppliers and manufacturers of products and services for the oil industry. People are expected not to gather or travel as much in the foreseeable future.

    Therefore, demand in general has received a shock; however, supply has, also, received a shock since places like factories and large service centers have difficulties in gathering the required workers at once due to safety issues again associated with the virus. Think about Facebook, Apple, and Google ordering workers to stay home and work from home.

    This is the reason that interest rate cuts are ineffective since it is not only a demand driven event, but it is, also, a supply driven event, and for this reason those that understand this have suggested either a tax cut to consumers or direct cash deposits to both consumers and suppliers.

    At best the cut in interest rates is avoiding bankruptcy in many companies that borrowed heavily to invest in non productive uses of this capital such as buying their own shares. Now, some of these corporate bonds are classified as junk.

    Small investors would be better advised to stay on the sidelines until the stock drop is nearly finished and greater clarity on ways of organizing workers, consumers, and companies is visible.

    Small investors are already taking a direct hit with the stock market drop in their current holdings whether these are in stocks, ETFs, or mutual funds. Advising them to increase their exposure and risk is foolish. Many of these investors will require cash in order not to default on their own loans if they will be unable to go to work.

  14. Jimmy – A very good video and the information on Disney was interesting. I think you should have disclosed whether you own Disney stock..

  15. I'm happy you brought up DIS as an excellent example. I said the same thing to a coworker about 3M making mask ~ we have to look at % of segment, margin, and saturation of products … and not just increase in top line. Also, what happen when Coronavirus blows over sooner than we think ? … sounds like you would have an inventory issue.

  16. No panic, it´s all good, the only thing bugging me is: HOW DID WARREN KNOW THO??
    You are not gonna tell me he was stashing massive amounts of cash just because he was feeling cute.

  17. Disney is also gonna get hit because of fear of movie theaters and cruises. This dude must own Disney. Also, he doesn't mention the potential for exponential deaths being reported on the news in the US each night etc

  18. Time to shop good deals. A lot of the prices are back to where they were about 2 years ago. Thats when I started investing.

  19. 22000 is the next level to watch (2018 lows) if we hold there then its a great time to buy if not then the next level is 18000 and of we fail to hold there then dear God we are going back to 2008 lows

  20. Thanks Jimmy great vid as always! We were due a drop is it the end of the world? I don't think so. My prayers for those effected by this disease. I believe we will get through this. Peace

  21. Hi im in a little pickle right now because i have a lot of money in margin right now, i was planning on doing a quick flip on a stock I liked and the market went down so i held but the market kept going down. Im down around 35% this month and i was wondering should i sell my margin right now or continue to take a risk.

  22. Jimmy you are so great that I am sad that you are already married. Just kidding, but every video you do, helps us a lot, more than you think. Best regards from Spain.

  23. As i started investing in us company in recently, Great falling hurts a lot.
    But It is an oppurtonity (in long term) to buy the good company because as you say, for example , I think microsoft didn’t lose its cloud and office revenue 20% because covid19 or oil price down 😂
    It would be applied to most of companies ( sorry to energy company..)

  24. I appreciate that some YouTubers like you and Sven Carlin still talk sense amid this panic – thank you!
    Though you rightly point out that temporary closures of theme parks are not the end of the world, I'm not sure if there aren't other risks in their business model right now.
    Aren't cinema revenues still an important source for them? How easily can they shift the marketing of their movies from traditional cinemas to digital – and how much will they lose If theatre attendance plummets?
    All this is temporary – but so far, DIS has only fallen to a valuation which I found ambitious a year ago, already.
    Could you discuss airlines in this context, please?

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