What Do Influencers Recommend Us In Crisis?

Written by 
Polina Median
November 22, 2022

Answer: Samsung

Hover your cursor over the buildings and look at the connections between the companies

graham stephen humphrey yang bloggers portfolio

Let’s be honest, we are all tired of the crisis/recession/inflation context. When there is so much pressure on your financial stability, all we want is to hide and wait for it to be over.

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In today’s article (but there's also a video on YouTube), we will look at the crisis strategies of 2 popular financial influencers. Why they suggest to hold cash? What stocks should we invest in? Is it true that there’s going to be less competition on the market and more.

According to Nassim Taleb’s antifragility concept, in times of turmoil we are supposed to build resilience and even thrive. So I was looking for advice from some popular influencers on how to do it. Two videos caught my eye: Humphrey Yang’s "How to Invest When Interest Rates Rise" and Graham Stephan’s "How To Use The 2023 Recession To Get Rich." 

Here are some recommendations they give us and our critical view:

Holding cash 

Both Humphrey and Graham suggest to keep more cash and put it in savings account.

Graham says that in "2018 cash was the best performing asset and had you just been saving your money in a high-yield savings account (HISA) you would have far outpaced the market."

It means that HISA yield minus inflation was better than the market performance.  But let’s compare it with the simplest investing strategy - index investing: 

Holding onto cash for one year yes, but as a long term strategy it won’t work. Because by investing you might underperform this year but outperform next year and in the long run you profit more when investing. The volatility is higher (such as now) but returns are higher, too. 

Holding some cash in HISA might be good but as a temporary solution for some part of your savings, but don’t transfer all your savings there.

Everything becomes less expensive 

First, not everything. In order to keep up with profits companies are actually rising prices. And secondly, that’s true that companies’ valuation is falling but be careful with the reasons for it. If Apple's share is falling because of shortage of chips - then it’s temporary bottleneck in supply chains that can be restored. 

If it’s Moderna, then it’s clear why they are down 50% this year. Maybe there isn’t much application of it in the post Covid future? And there’s no point in buying it?

There is less competition on the market

Also doubtful statement. It’s actually tightening because companies are fighting for clients. In fact, according to EY global mergers & acquisitions (M&A) are up 35% compared to average of the previous cycle (2015-19). It means that bigger fish buys weaker players to increase the market share. 

After every bear market comes bull market

True in the long run, after each sunset there is sunrise, but it sounds overly optimistic because unlike in nature these dark periods in the stock market may last long. Have a look at previous historical rebounds:

They might take from 3 months to 10 years and come in different shapes: V, W, L and even K (like in pandemic).

Act lean and cut expenses

It’s not easy when everyone around increases prices. In February Amazon increased the price of Prime membership plans by 15%. Disney rises prices 38% as it surpassed Netflix in the number of subscribers on its streaming platforms.

If you have a goal to save for the new iPhone, figure out 2 things: what takes the largest chunk of your budget and what has risen the most. The highest inflation is seen in Energy and Food categories, but cutting costs on food and gas is not an option in many cases. However, pricy cereals and bakery products might come with the same price as fruits and vegetables now. 

Instead of thinking about cutting costs on gadgets that went up 7.2%, but comprise a small percentage of the total expenditures ($489 per year on average), it’s worth reconsidering subscriptions because they eat up more budget. According to C+R Research in 2022 Americans spend on subscriptions $219 monthly (or $2628 annually). And the inflation in this subcategory is 5.5%.

Invest long-term and diversify

Great non-trivial advice, very specific for the current market 🙃

What should I buy then? 
Graham doesn’t tell us but Humphrey does. He mentioned Vanguard Value ETF and sectors like Consumer Staples, Financials and Health Care. Is it really a good hedge? How did they perform in the last year?

Well, we see that they performed poorly. 

What industries benefit from the inflationary process and provide some kind of hedging for a retail investor’s portfolio? 

We did a research on how to create an anti-inflationary portfolio. The winners during times of high inflation are sectors that can transfer increased prices to consumers.

Energy has a positive correlation to inflation because the revenues of energy stocks are naturally tied to energy prices, a key component of inflation indices, such as CPI(Consumer Price Index) and PPI(Producers Price Index), with the second being the predecessor of inflation for CPI.

REITs own real-estate assets and may provide a partial inflation hedge via the pass-through of price increases in rental contracts and property prices. 

Banks and insurance companies historically benefit from growing interest rates. Although the cost base for banks increases, i.e fed rates at which they borrow increase, they can more than make up for it by transferring this increase to borrowers and even increasing their profit margins while doing so. 

Utilities are also an inevitable payment in everyone's budget. As natural monopolies, they should be able to pass on cost increases to consumers, but their pricing power is often limited by regulators. However, the regulator usually allows some increase in tariffs caused by higher energy prices and inflation, which helps companies maintain profit margins and sometimes even slightly increase them.

Food and staple retailers can usually transfer the growing cost of goods to consumers and even increase profit margins given enough consumer spending power. 

You can have a look at a good Inflation-proof portfolio in Gainy app here.

Buy real estate once the market is flattened

Graham also said that "Wall Street consensus is that National housing prices are going to decline seven percent with a worst case decline of 10 to 15 percent." 

So if you know that the housing market is going to go down - why not short it? Jake from TradingLab made a video on why and how he’s shorting the housing market and if we look at the strategy it’s performing scarily well.

You can also see what it is comprised of and follow this strategy in Gainy in one click

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because I want to check what my friend has just sent me
The company developed and maintains technological products and services, namely Snapchat, Spectacles, and Bitmoji. Snapchat is the third most popular app among millennials and gets high profits from ads on the platform. Since TikTok is not available to invest in yet, Facebook is boring, we see Snap as a good choice to diversify your portfolio. We don’t know what keeps those kids so glued to screens in Snapchat but if companies profit from it, we can get a share thanks to investing in their stocks.
because xBox brings us together with friends
Microsoft is the second biggest company on the market in terms of capitalization. Xbox, Skype, Windows Office 365 are all part of Microsoft business as well as it develops, licenses, and supports a wide range of software products and services, as well as designs and sells hardware. The company’s future is as bright as it’s past with all the money the company invests in disruptive tools like AI. Next time you plan to buy another game for the Xbox console, you might also consider buying a Microsoft stock which is not very expensive.
because we want schools to be cooler
So we packed peanut butter and jelly sandwiches for the kids, now it’s time to go to school. The K12 Inc. is an educational technology company. The company offers a private education program, software and education services built to teach online for preschool students up to grade 12 or K-12. The company’s earnings soared up after the pandemic because we came to realise that online learning is not far in the future and may continue the trend.
because we like to treat our pets and ourselves, too
The American manufacturer of supermarket food JM Smucker Co also operates a pet food business including brands such as Milk-Bone and Meow Mix. It’s also the producer of the peanut butter JIF, kid’s all-time favorite filling. The company offers a 2.96% dividend yield and in the third quarter reported a 7% increase in net sales.
because we love playing games
If there is one game to teach you financial literacy - it’s Monopoly, which belongs to Hasbro, as well as unparalleled portfolio of approximately 1,500 brands including MAGIC: THE GATHERING, NERF, MY LITTLE PONY, TRANSFORMERS, PLAY-DOH, BABY ALIVE, DUNGEONS & DRAGONS, POWER RANGERS, PEPPA PIG and PJ MASKS, as well as premier partner brands. The company generates strong cash flows and pays regular dividends. The company’s business moves along the online trend and develops digital content in the form of TV shows, films, computer games.
because everyone has a favorite childhood hero
Disney is a widely diversified company which owns everything from toys to apparel, and books to video games: Disney Parks, ESPN channel, Pixar, Hulu and so much more. And now it bets on streaming services with Disney+ and threatens Netflix’s market share. The company revenue suffered a major drop last year due to closure of Disneylands, but has opened them in October and foresees a strong comeback.
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