Not Your Mothers Market

Happy Wednesday. It’s been a great week as I have finally upgraded to two monitors at work. It’s also going to be 75 degrees in Charlotte all weekend long which is incredible.  

Of course, this means I’m leaving and heading to NYC this week where it will be low 50’s. I go up at least once a quarter to remind myself what great pizza and breakfast sandwiches taste like.

I’ve spent the better part of the last 10 years focused on the financial markets. I’ve spent time writing investment research, networking into hedge funds, as well as building consumer financial products at a few different startups. The space is complex and so incredibly deep with possibilities. With this, I of course have many opinions with how regular people should invest over the long term. Shockingly, I disagree with most traditional practices. 

The stock market isn’t the same as it used to be. We cannot look at 1998 markets and try to compare them to today’s market. That’s like trying to tell me a horse & carriage is the same as a 2025 Toyota 4Runner SR5. Sure, both get you places that you want to go by using wheels and some type of energy, but a horse & carriage doesn’t have a 14-in touchscreen, a Trailhunter Underbody Protection, or cost $65,000. Both are the same in their purpose, but accomplish the end goals much differently. Side note, not sponsored by Toyota.

Traditional methods tell you to invest in your 401k and IRA every year, buy a S&P 500 mutual fund, plus a few other mutual funds, then forget about it. Then by 65, you have a nice nest egg you can live off of for the next [undetermined] amount of years you’re alive. This is good, and I agree that people should do this, but it is not the only thing consumers should do.

Investing in the stock market and economy is an extremely underrated tool when it comes to understanding how the world, capitalism, and business works. The way the economy works is extremely complicated, but most of the time it is actually pretty straightforward. So here’s Margot Robbie in a bubble bath to explain. Just kidding, I don’t have that budget, but if you didn’t get that reference from the Big Short, please go watch that movie.

Anyways, when schools and articles tell people to just “set and forget” when it comes to investing, I disagree. In college I actually argued with a professor about this premise. I argued that even though this strategy is great, it disincentivizes people to actually learn about how capitalism and the economy works. I saw this time and time again when working on consumer finance products. When consumers just “set and forget” they don’t have an incentive to understand how the money and economy revolves. To this, I believe people should allocate part of their investing portfolio toward individual companies. I’ll get into why below. 

Understanding the Current Environment

Backing up a second, I know I said that understanding the economy is “actually pretty straightforward”. For those who took any advanced economics classes, you may be writing an email to me explaining how dumb that statement was, so let me explain. 

Let’s look at today’s market conditions as an example. In the past few weeks we’ve experienced a correction-level decline in the markets. This, along with many other corrections, are caused by a chain reaction of events that can all be traced back to a handful of (or just one) catalysts. In the recent scenario, here’s what happened: 

1. Tariff and trade policy set in motion by the current administration is unclear and uncertain.

2. When Investors are uncertain about a significant economic driver (tariffs) they flee to safer assets that won’t be as affected. Aka, they start selling. 

3. After a few weeks, consumers see their 401k balances down 5% in a month. Even though it’s just on paper, people feel less rich and stop spending as much.

4. Consumer spending falling means companies make less money and profits start to fall.

5. Investors get scared by this potential decline in earnings, and sell more stocks. 

To put it visually:

The longer this reaction keeps going, the more money gets sucked out of the economy. After this, companies start laying off people. This is when a recession starts. People may spend a little less if their 401k balance is down in a month, but when you lose your job, people start cutting spending to a dramatic level. 

At any point, this chain reaction and circle can be stopped by a new piece of news or a settling of circumstances. For example, let’s say the Administration says that new trade deals have been established and all tariffs will be removed, this would immediately lead to a rally in the markets, which would lead to higher 401k balances, which leads to higher spending, which leads to higher profits. 

Pretty straightforward. One thing causes another. Of course, within each event is a series of macro and microeconomics theories at play, but unless you plan to become a PHD in economics, you don’t need to worry about them. If you do plan to become a PHD in economics though, you should probably stop reading this.

Investing in Individual Companies

I feel like I’ve lost the plot throughout my rants this entire newsletter, so now I present to you me trying to reel it all back into a main point.

I think everyone should invest in individual companies over the long term. For example, in the last 7 years, I have bought Apple, Amazon, and Spotify. I use these products every single day of my life and could not live without them. These are positions I will hold onto for the next 10 years plus, and may never sell. 

If you are using a product everyday, and can’t live without the product that a company provides, buy stock in that company. In some cases, it can pay off significantly. 

My favorite example of this comes from my dad. In 2016, my dad and I got some men’s clothes from Lululemon and they were unbelievable. So, my dad bought some Lulu stock. Since then, the stock is up nearly 500%. There wasn’t a complex thesis or a 60-page research paper he built to prove his thesis, he simply liked the product and bought stock. It was that simple. 

Once you start to do this, you start to learn. Why is this stock down in the past year? Did I notice anything fundamentally different in the product as I was using it? Did the product get more expensive? Did I stop using the product in the last year?

When you invest and follow an individual company's stock, you notice these things naturally. Through that, you learn how a company operates and how their decisions affect the bottom line and therefore the stock price. Investing in individual stocks is one of the best ways to learn how the economy and business works. 

With that being said, don’t only invest in individual companies. Still invest heavily in mutual funds and ETFs but allocate a healthy amount toward individual stocks as well. 

Disclaimer: The information provided in this newsletter is NOT financial advice. I am not a financial adviser, accountant or the like. This information is purely from my own due diligence and an expression of my thoughts, my opinions based on my personal experiences. 

Song of the Week

New Years Day - U2

Remember when Apple put U2’s album on everyones IPhone and it became a meme? Annoying as that was, U2 is an incredible Rock and Roll band with a cult-like following. Vertigo, Where The Streets Have No Name, Pride (In The Name Of Love), are all electric songs to get the day going. New Years Day is no different. Turn this song on to start your day and thank me later.