Customize this section by editing the text, adding your own copy, using the options above to bold, Let's look at point 3 above. Nasdaq stocks are now cheap compared to S&P stocks. In 2021 they were expensive but their savaging in 2022 has pushed their valuations to below the S&P. In particular, the Covid stocks, like Zoom, Netflix, and Amazon are now very cheap.
We shouldn't buy something just because it is cheap. We need for that cheap stock to begin a bull market before we buy. But we should certainly be putting cheap stocks on our watchlist to monitor.
Finally, let's look at the first point above. What does it mean?
Long duration stocks are stocks that are often not making money. Their profits are in the future. That could be stocks like biotech which need years to create and market a drug to high tech stocks like Uber which have yet to make a profit but keep promising to.
Let's be clear, even a stock like Tesla, which pages a profit, doesn't make money from selling cars. That is a massive money loser. They make money selling carbon credits. They are really making money due to tax and credit incentives promoted by the US government. As an operating car company, they are bankrupt. They are also a long duration stock.
Short duration stocks would be companies with strong balance sheets and real profits right now.
Short durations stocks, like the Dow Industrials, have dramatically outperformed the long duration stocks like the Nasdaq.
Why? The Fed.
Rising interest rates help short duration stocks compared to long duration stocks.
through raising rates. The market hasn't done that yet so long duration stocks are still suffering.
But the time will come this quarter when the market will think that the Fed is through and start to buy Nasdaq type stocks with both hands. Then, when the Fed actually eases money supply, the Nasdaq will outperform the S&P and Dow by a long shot.
I'll keep you posted when that happens!
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