If you haven’t rebalanced in over a year, rather than buying the dip, it’s a better idea to make sure that you have enough safe, and are not invested in stocks or funds. We’re overweighting an additional 20% safe in our sample pie charts. For those of us who are too light in equities, we’re taking a dollar-cost averaging approach in 2023. Email [email protected] if you'd like our 2023 Sample Pie Chart. 
​
Why Two-Year Returns are Deceiving 
We’ve been hearing a lot of people boast that they are still up over the past three years. That actually doesn’t mean much. The system was flooded with cash and low interest rates, which caused asset bubbles to balloon up and inflation to soar.  It’s important not to confuse a secular bull market and an emergency pandemic rescue with wisdom. The next recovery will not be a three-month recovery fueled by $5 trillion of new cash being printed up and handed out to everybody with a heartbeat.
 
21st Century recessions can take seven years or more to recover. (The Dot Com Recession took 15 years.) So it’s very important to have a strategy that can protect our wealth in the event of what has become rather common in the 21st-century – severe downturns of more than 50% in bear markets.
 
Braggarts were aplenty in 1999, before being wiped out by October of 2002. A balanced plan with regular rebalancing pulls the emotions (and hubris/devastation) out of the equation. Also, a 50-year-old investor who is overweighting 20% safe only has 30% at risk – with total equity losses of -16.5% in the event of 55% losses.
 
15-Year Returns 
If we want to know how our plan is really performing, it’s important to get a chart of our account versus the S&P500 over a 20-year period. That chart will include The Great Recession and the Pandemic. It should still look like a lot of gains, since we’ve been in a secular bull market since the bottom in 2009. However, if we see that the lines run in parallel, we are vulnerable to losing half or more of our wealth in the next downturn – twice as much or more of the current -19-26% losses. If our plan is running beneath the S&P500, then we may have even more at risk.
 
The Dow Jones Industrial Average lost -55% in the Great Recession, dropping to a low of 6547 on March 9, 2009. It took about seven years to recover. (Lehman Bros. investors never recovered.) Also, it’s important to remember that our portfolio comes back slower because 10% of $1 million ($100,000) is a heck of a lot more than 10% of $450,000 ($45,000). Going forward, achieving a 10% annualized gain is likely to be difficult.
 
Never Confuse a Bull Market with Wisdom 
It’s pretty easy to make gains in a bull market. It’s pretty easy to lose a lot in a recession. Counting on things doing well going forward because we’re still in the black over the 3-year period is not a very efficacious strategy. Again, the 2020-2021 bull market was financially engineered to keep us from entering a severe recession during the pandemic, which many economists worried could be as bad as the Great Depression. However, flooding the market with cash has left us with is unsustainable debt loads, overpriced assets, strained budgets, drained savings accounts, and very high consumer debt. This is of enough concern for the US to be listed in the top 10 of developed world countries that are the most vulnerable to financial instability, due to the massive amount of corporate leverage (source: IMF). Be sure to read my Bank blog for additional information.
 
 

Be The Boss of Our Money
It’s time to know exactly what we own and why, and to be the boss of our money, rather than having blind faith that someone is protecting our wealth. When we don’t understand or believe in our plan, it could be because it is intentionally opague. If you’d like an unbiased 2nd opinion from me personally, where you will understand clearly exactly what you own and how much you have at risk, email [email protected] for pricing and information.
 
Bottom Line
Having blind faith that somebody else is protecting our wealth for us works well in bull markets. However, it can be devastating in bear markets. And the sad thing is, there’s really not much you can do to about losses once they happen, outside of hoping and praying to recover. That’s why it’s important to be the boss of our money now. Our time-proven 21st-Century strategies with regular rebalancing earned gains in the Dot Com and the Great Recessions, and outperformed the bull markets in between. This plan can also incorporate ESG investing (whereas most ESG funds are actually invested in major polluters, including Exxon Mobil).  


​Email info @ NataliePace.com or call 310-430-2397 if you are interested in learning time-proven investing, budgeting, debt reduction, college prep and home buying solutions that will transform your life at our next Financial Freedom Retreat. We spend one full day on what's safe, helping you to protect your wealth and reduce money stress. ​

Check out Natalie Pace's Apple Podcast.
Watch videoconferences and webinars on Youtube.

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Crypto, Gold and Stocks All Crash.
The U.S. House Decriminalizes Cannabis Again.
The Risk of Recession in 6 Charts. 
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How Will Russian Boycotts Effect U.S. Multinational Companies?
Oil and Gas Trends During Wartime
Russia Invades Ukraine. How Have Stocks Responded in Past Wars?
2022 Crystal Ball in Stocks, Real Estate, Crypto, Cannabis, Gold, Silver & More. 
Interview with the Chief Investment Strategist of Charles Schwab & Co., Inc.
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My 24-Year-Old is Itching to Buy a Condo. Should I Help Him?
The 12-Step Guide to Successful Investing.
​Gardeners Creating Sanctuary & Solutions in Food Deserts.
The Bank Bail-in Plan on Your Dime.
Rebalancing Your Nest Egg IQ Test.
Answers to the Rebalancing Your Nest Egg IQ Test.
​
Important Disclaimers
Please note: Natalie Pace does not act or operate like a broker. She reports on financial news, and is one of the most trusted sources of financial literacy, education and forensic analysis in the world. Natalie Pace educates and informs individual investors to give investors a competitive edge in their personal decision-making. Any publicly traded companies or funds mentioned by Natalie Pace are not intended to be buy or sell recommendations.

ALWAYS do your research and consult an experienced, reputable financial professional before buying or selling any security, and consider your long-term goals and strategies. Investors should NOT be all in on any asset class or individual stocks. Your retirement plan should reflect a diversified strategy, which has been designed with the assistance of a financial professional who is familiar with your goals, risk tolerance, tax needs and more. The "trading" portion of your portfolio should be a very small part of your investment strategy, and the amount of money you invest into individual companies should never be greater than your experience, wisdom, knowledge and patience.  

Information has been obtained from sources believed to be reliable. However, NataliePace.com does not warrant its completeness or accuracy. Opinions constitute our judgment as of the date of this publication and are subject to change without notice. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. Securities, financial instruments or strategies mentioned herein may not be suitable for all investors.

Would it be more financially advantageous to just stop making everybody else rich at our own expense? Have we ever thought of yield in terms of the money we save when we eliminate bills?

Below is a new way of thinking about wealth, where we emphasize keeping the money in the family. Imagine just how much money we would save if we stopped paying the landlord, the utility company, the gas station, the auto manufacturers, the health insurance company and the insurance salesmen, and started paying ourselves first. Below is the ROI on that strategy.

Owning Your Own Home
Let me preface this by saying that buying a home at the top of the market and having the value fall beneath the value of your mortgage is one of the worst investment hells anyone can endure. There are at least 10 points to consider before buying your own home that are outlined in the Real Estate section of The ABCs of Money, 5th edition. However, once all of these points line up, the purchase can be a powerful way to start building personal wealth – if we are buying a home we can afford, in a neighborhood we love, at a good price.

Before making the purchase, it’s a good idea to consider ways that we might earn income from the property – to think bigger. Having rental income means that we can afford more, and that often equates to a better place with less cost per square foot.

Should We Have an ADU* or Rent Out a Room?
*Additional Dwelling Unit
Most of the time, it’s a good idea to consider whether you might be able to get a bigger place and monetize it with some income. Having each family member living in their own tiny place is not very cost effective. Should you think about moving the parents into an ADU out back? Would your college grad benefit from renting out the basement for a few years to pay off student loan debt? Can you earn extra income by renting out a guest house?

Anyone who considers being a landlord needs to know the basics on local rental laws, short-term rental policies, taxes and more. Before renting to a family member, you want to be sure that you have a high likelihood of getting paid. Rental income is a business, and there are considerations and details that must be addressed. However, under the right circumstances, passive rental income can be a great “money while you sleep” supplement to your hard-earned labor.
I’ll be hosting a Real Estate Master Class in the fall. Email [email protected] if you’d like to be put on the wait list for this course. We also talk about real estate on the 3rd day of our Financial Freedom Retreats. Join us April 22-24, 2023 online. (Click for additional information, including pricing, hours, testimonials and the 15+ things you’ll learn and master.)
 
Solar Panels Versus Making the Utility Company Rich 
If the average cost of solar for a well-insulated 2500 square foot home is under $20,000, then the yield on that purchase can be as high as 15%, with just 5-7 years to pay off the panels. See the math below.
 
Solar panels = $18,000
U.S. tax credit (you may qualify for state or local credits, too) = 30% (-$5,400)
Total Cost = $12,600
Monthly electric bill = $200 (typically reduced to under $50/month) = $1920/year in savings
Time Period to Pay Off $12,600 = 6.56 years
Yield on $12,600 investment after pay-off = 15.2%
You’ll want to make sure that you plan to own your home for a few decades, and that you reduce your KW usage before the quote. Be sure to read, “How to Save Thousands on Your Electric Bill,” in The ABCs of Money, 5th edition, for essential tips on solar. A 15% yield on a safe, income-producing hard asset such as solar panels is beneficial for our budget and for the planet, as most utilities are still at least 60% powered with fossil fuels.
 
Powering Your Electric Vehicle With Solar
You’ll need more panels if you plan to power your EV. So, after you get your kilowatt usage down (with the tips outlined in The ABCs of Money, 5th edition), be sure to consider how much additional KW you’ll need to top off your EV.
 
Even considering a higher cost for the panels, the savings and yield are likely to be even higher. Most of us spend $2000 or more each year on gasoline. That means our utility and gas bill could potentially drop from $4,400/year or more to $600 or less, putting the yield at over 25% on our investment (after the payback of the panels).
 
Mass Transit and Micro Mobility
Some people are saving $8,000 or more each year by jettisoning the car. The annual drain of our income toward a car payment, insurance, gasoline and maintenance is often thought of as a “bill,” rather than what that money could purchase that we might enjoy a lot more, like a great vacation.
 
Should our next car be a bike? People in Amsterdam commute to work, school and play, even in the snow. It is one of the most bike-friendly cities in the world. A few years ago I interviewed Mayor Winterer (former Mayor of Santa Monica, California). His family of four had five bikes and one car. They bridge the gap with ride-sharing apps. He said, “In 2017, between my wife and I, we spent a little over $2000 on Uber and Lyft. That is so much less than the cost of owning a car.”

If we’re working from home 2-3 days a week, would it be worth it to take mass transit instead of owning a car? $8,000 buys a lot of Uber rides to places we don’t want to (or can’t) bike to.
 
Should we factor in the car savings when deciding between a job that will allow us to work-from-home and one that demands us to commute to the office every day?
 
Health Savings Accounts
Health savings accounts allow us to stop making the health insurance company rich, and start building up an impressive long-term health care retirement plan. HSAs work best if we are healthy and spending an arm and a leg on health insurance. Since the biggest cost in retirement is health care, having our own nest egg means that we can save a lot on supplemental health care insurance. Get additional information on HSAs at IRS.gov and in The ABCs of Money, 5th edition.
 
Bottom Line 
Gasoline, utility bills, cars, housing and health care are all spiraling out of the range of affordability in today’s inflationary world. As consumers, we have to think outside the box in order to make our budgets add up. If we add in this new ROI investing angle, where we keep the money in the family and stop making everyone else rich at our own expense, we can protect our wealth and future, while also shielding ourselves from equity and fixed income losses.


Email info @ NataliePace.com or call 310-430-2397 if you are interested in learning time-proven investing, budgeting, debt reduction, college prep and home buying solutions that will transform your life at our next Financial Freedom Retreat. We spend one full day on what's safe, helping you to protect your wealth and reduce money stress. ​

Natalie Wynne Pace is an Advocate for Sustainability, Financial Literacy & Women's Empowerment. Natalie is the bestselling author of The Power of 8 Billion: It's Up to Us and is the co-creator of the Earth Gratitude Project. She has been ranked as a No. 1 stock picker, above over 835 A-list pundits, by an independent tracking agency (TipsTraders). Her book The ABCs of Money remained at or near the #1 Investing Basics e-book on Amazon for over 3 years (in its vertical), with over 120,000 downloads and a mean 5-star ranking. The 5th edition of The ABCs of Money was released on September 17, 2021. 
​​​​
Natalie Pace's easy as a pie chart nest egg strategies earned gains in the last two recessions and have outperformed the bull markets in between. That is why her Investor Educational Retreats, books and private coaching are enthusiastically recommended by Nobel Prize winning economist Gary S. Becker, TD AMERITRADE chairman Joe Moglia, Kay Koplovitz and many Main Street investors who have transformed their lives using her Thrive Budget and investing strategies. Click to view a video testimonial from Nilo Bolden.

Check out Natalie Pace's Apple Podcast.
Watch videoconferences and webinars on Youtube.

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Are You Anxious or Depressed over Money? 
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2023 Crystal Ball for Stocks, Bonds, Real Estate, Cannabis, Gold, Silver.
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Is Your Pension Plan Stealing From You? 
The FTX Crypto Fall of a Billionaire (SBF). 
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Will Ted Lasso Save Christmas?
3Q will be Released This Thursday.
Apple and the R Word.
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The Real Reason Why OPEC Cut Oil Production.
The Inflation Buster Budgeting and Investing Plan.
No. Elon Musk Doesn't Live in a Boxabl.
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Will There Be a Santa Rally 2022?
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10 Misleading Broker/Salesman Pitches.
Why are Banks and Dividend Stocks Losing Money?
ESG Investing: Missing the E.
Bitcoin Crashes.
Crypto, Gold and Stocks All Crash.
The U.S. House Decriminalizes Cannabis Again.
The Risk of Recession in 6 Charts. 
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How Will Russian Boycotts Effect U.S. Multinational Companies?
Oil and Gas Trends During Wartime
Russia Invades Ukraine. How Have Stocks Responded in Past Wars?
2022 Crystal Ball in Stocks, Real Estate, Crypto, Cannabis, Gold, Silver & More. 
Interview with the Chief Investment Strategist of Charles Schwab & Co., Inc.
Stocks Enter a Correction
Investor IQ Test
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​What's Safe in a Debt World?
Money Market Funds, FDIC, SIPC: Are Any of Them Safe? 
My 24-Year-Old is Itching to Buy a Condo. Should I Help Him?
The 12-Step Guide to Successful Investing.
​Gardeners Creating Sanctuary & Solutions in Food Deserts.
The Bank Bail-in Plan on Your Dime.
Rebalancing Your Nest Egg IQ Test.
Answers to the Rebalancing Your Nest Egg IQ Test.
​
Important Disclaimers
Please note: Natalie Pace does not act or operate like a broker. She reports on financial news, and is one of the most trusted sources of financial literacy, education and forensic analysis in the world. Natalie Pace educates and informs individual investors to give investors a competitive edge in their personal decision-making. Any publicly traded companies or funds mentioned by Natalie Pace are not intended to be buy or sell recommendations.

ALWAYS do your research and consult an experienced, reputable financial professional before buying or selling any security, and consider your long-term goals and strategies. Investors should NOT be all in on any asset class or individual stocks. Your retirement plan should reflect a diversified strategy, which has been designed with the assistance of a financial professional who is familiar with your goals, risk tolerance, tax needs and more. The "trading" portion of your portfolio should be a very small part of your investment strategy, and the amount of money you invest into individual companies should never be greater than your experience, wisdom, knowledge and patience.  

Information has been obtained from sources believed to be reliable. However, NataliePace.com does not warrant its completeness or accuracy. Opinions constitute our judgment as of the date of this publication and are subject to change without notice. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. Securities, financial instruments or strategies mentioned herein may not be suitable for all investors.

Check out Natalie Pace's Apple Podcast.
Watch videoconferences and webinars on Youtube.

Other Blogs of Interest
Why We Are Underweighting Banks and the Financial Industry.
You Stream all the Channels. Should You Invest, Too?
NASDAQ is Still Down -26%. Are Meta & Snap a Buy? 
2023 Bond Strategy
Emotions are Not Your Friend in Investing
Investor IQ Test
Investor IQ Test Answers
Bonds Lost -26%, Silver Held Strong.
2023 Crystal Ball for Stocks, Bonds, Real Estate, Cannabis, Gold, Silver.
Tilray: The Constellation Brands of Cannabis
New Year, New Healthier You
Tesla's $644 Billion Fall From Mars
Silver's Quiet Rally. 
Free Holiday Gift. Stocking Stuffers Under $10.
Cash Burn & Inflation Toasted the Plant-Based Protein Companies
Save Thousands Annually With Smarter Energy Choices
Is Your FDIC-Insured Cash Really Safe? 
Giving Tuesday Tips to Make Your Charitable Contribution a Triple Win.
Is Your Pension Plan Stealing From You? 
The FTX Crypto Fall of a Billionaire (SBF). 
Crypto, Gold, Silver: Not So Safe Havens.
Will Ted Lasso Save Christmas?
3Q will be Released This Thursday.
Apple and the R Word.
Yield is Back. But It's Tricky.
The Real Reason Why OPEC Cut Oil Production.
The Inflation Buster Budgeting and Investing Plan.
No. Elon Musk Doesn't Live in a Boxabl.
IRAs Offer More Freedom and Protection Than 401ks.
Will There Be a Santa Rally 2022?
What's Safe in a Debt World? Not Bonds. 
Will Your Favorite Chinese Company be Delisted?
75% of New Homeowners Have Buyer's Remorse
Clean Energy Gets a Green Light from Congress. 
Fix Money Issues. Improve Your Relationships. 
24% of House Sales Cancelled in the 2nd Quarter.
3 Things to Do Before July 28th. 
Recession Risks Rise + a Fairly Safe High-Yield Bond
DAQO Doubles. Solar Shines. Which Company is Next in Line?
Tesla Sales Disappoint. Asian EV Competition Heats Up. 
10 Wealth Strategies of the Rich
Copper Prices Plunge
Colombia and Indonesia: Should You Invest?
10 Misleading Broker/Salesman Pitches.
Why are Banks and Dividend Stocks Losing Money?
ESG Investing: Missing the E.
Bitcoin Crashes.
Crypto, Gold and Stocks All Crash.
The U.S. House Decriminalizes Cannabis Again.
The Risk of Recession in 6 Charts. 
High Gas Prices
How Will Russian Boycotts Effect U.S. Multinational Companies?
Oil and Gas Trends During Wartime
Russia Invades Ukraine. How Have Stocks Responded in Past Wars?
2022 Crystal Ball in Stocks, Real Estate, Crypto, Cannabis, Gold, Silver & More. 
Interview with the Chief Investment Strategist of Charles Schwab & Co., Inc.
Stocks Enter a Correction
Investor IQ Test
Investor IQ Test Answers
​What's Safe in a Debt World?
Money Market Funds, FDIC, SIPC: Are Any of Them Safe? 
My 24-Year-Old is Itching to Buy a Condo. Should I Help Him?
The 12-Step Guide to Successful Investing.
​Gardeners Creating Sanctuary & Solutions in Food Deserts.
The Bank Bail-in Plan on Your Dime.
Rebalancing Your Nest Egg IQ Test.
Answers to the Rebalancing Your Nest Egg IQ Test.
​
Important Disclaimers
Please note: Natalie Pace does not act or operate like a broker. She reports on financial news, and is one of the most trusted sources of financial literacy, education and forensic analysis in the world. Natalie Pace educates and informs individual investors to give investors a competitive edge in their personal decision-making. Any publicly traded companies or funds mentioned by Natalie Pace are not intended to be buy or sell recommendations.

ALWAYS do your research and consult an experienced, reputable financial professional before buying or selling any security, and consider your long-term goals and strategies. Investors should NOT be all in on any asset class or individual stocks. Your retirement plan should reflect a diversified strategy, which has been designed with the assistance of a financial professional who is familiar with your goals, risk tolerance, tax needs and more. The "trading" portion of your portfolio should be a very small part of your investment strategy, and the amount of money you invest into individual companies should never be greater than your experience, wisdom, knowledge and patience.  

Information has been obtained from sources believed to be reliable. However, NataliePace.com does not warrant its completeness or accuracy. Opinions constitute our judgment as of the date of this publication and are subject to change without notice. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. Securities, financial instruments or strategies mentioned herein may not be suitable for all investors.

​Additionally, consumer debt is elevated, while savings are pretty much depleted. That means that bank deposits are lower this year than they were when everyone got a free check from the U.S. Treasury.
 

Money Market Funds
In the Great Recession, banks and brokerages were bailed out. In the next financial crisis, money market fund rules (redemption gates and liquidity fees) are intended to buoy up the financial services industry. Learn more about the money market fund rules and how they apply to each of us in my 2021 blog.

​Bottom Line
Banks, brokerages, insurance companies (remember AIG?), fund companies and other financial services corporations tend to suffer greatly in recessions. Everyone is hoping that the 2023 recession will be mild. However, it’s a good idea to consider underweighting the financial services industry, particularly in countries that have elevated risks (like the U.S.). (Banks in another country that is featured at our Financial Freedom Retreat is paying double the dividend for less risk.)
 
If you’d like a Bank Stock Report Card, email [email protected] with Bank Stock Report Card in the subject line.
 
​

Check out Natalie Pace's Apple Podcast.
Watch videoconferences and webinars on Youtube.

Other Blogs of Interest
You Stream all the Channels. Should You Invest, Too?
NASDAQ is Still Down -26%. Are Meta & Snap a Buy? 
2023 Bond Strategy
Emotions are Not Your Friend in Investing
Investor IQ Test
Investor IQ Test Answers
Bonds Lost -26%, Silver Held Strong.
2023 Crystal Ball for Stocks, Bonds, Real Estate, Cannabis, Gold, Silver.
Tilray: The Constellation Brands of Cannabis
New Year, New Healthier You
Tesla's $644 Billion Fall From Mars
Silver's Quiet Rally. 
Free Holiday Gift. Stocking Stuffers Under $10.
Cash Burn & Inflation Toasted the Plant-Based Protein Companies
Save Thousands Annually With Smarter Energy Choices
Is Your FDIC-Insured Cash Really Safe? 
Giving Tuesday Tips to Make Your Charitable Contribution a Triple Win.
Is Your Pension Plan Stealing From You? 
The FTX Crypto Fall of a Billionaire (SBF). 
Crypto, Gold, Silver: Not So Safe Havens.
Will Ted Lasso Save Christmas?
3Q will be Released This Thursday.
Apple and the R Word.
Yield is Back. But It's Tricky.
The Real Reason Why OPEC Cut Oil Production.
The Inflation Buster Budgeting and Investing Plan.
No. Elon Musk Doesn't Live in a Boxabl.
IRAs Offer More Freedom and Protection Than 401ks.
Will There Be a Santa Rally 2022?
What's Safe in a Debt World? Not Bonds. 
Will Your Favorite Chinese Company be Delisted?
75% of New Homeowners Have Buyer's Remorse
Clean Energy Gets a Green Light from Congress. 
Fix Money Issues. Improve Your Relationships. 
24% of House Sales Cancelled in the 2nd Quarter.
3 Things to Do Before July 28th. 
Recession Risks Rise + a Fairly Safe High-Yield Bond
DAQO Doubles. Solar Shines. Which Company is Next in Line?
Tesla Sales Disappoint. Asian EV Competition Heats Up. 
10 Wealth Strategies of the Rich
Copper Prices Plunge
Colombia and Indonesia: Should You Invest?
10 Misleading Broker/Salesman Pitches.
Why are Banks and Dividend Stocks Losing Money?
ESG Investing: Missing the E.
Bitcoin Crashes.
Crypto, Gold and Stocks All Crash.
The U.S. House Decriminalizes Cannabis Again.
The Risk of Recession in 6 Charts. 
High Gas Prices
How Will Russian Boycotts Effect U.S. Multinational Companies?
Oil and Gas Trends During Wartime
Russia Invades Ukraine. How Have Stocks Responded in Past Wars?
2022 Crystal Ball in Stocks, Real Estate, Crypto, Cannabis, Gold, Silver & More. 
Interview with the Chief Investment Strategist of Charles Schwab & Co., Inc.
Stocks Enter a Correction
Investor IQ Test
Investor IQ Test Answers
​What's Safe in a Debt World?
Money Market Funds, FDIC, SIPC: Are Any of Them Safe? 
My 24-Year-Old is Itching to Buy a Condo. Should I Help Him?
The 12-Step Guide to Successful Investing.
​Gardeners Creating Sanctuary & Solutions in Food Deserts.
The Bank Bail-in Plan on Your Dime.
Rebalancing Your Nest Egg IQ Test.
Answers to the Rebalancing Your Nest Egg IQ Test.
​
Important Disclaimers
Please note: Natalie Pace does not act or operate like a broker. She reports on financial news, and is one of the most trusted sources of financial literacy, education and forensic analysis in the world. Natalie Pace educates and informs individual investors to give investors a competitive edge in their personal decision-making. Any publicly traded companies or funds mentioned by Natalie Pace are not intended to be buy or sell recommendations.

ALWAYS do your research and consult an experienced, reputable financial professional before buying or selling any security, and consider your long-term goals and strategies. Investors should NOT be all in on any asset class or individual stocks. Your retirement plan should reflect a diversified strategy, which has been designed with the assistance of a financial professional who is familiar with your goals, risk tolerance, tax needs and more. The "trading" portion of your portfolio should be a very small part of your investment strategy, and the amount of money you invest into individual companies should never be greater than your experience, wisdom, knowledge and patience.  

Information has been obtained from sources believed to be reliable. However, NataliePace.com does not warrant its completeness or accuracy. Opinions constitute our judgment as of the date of this publication and are subject to change without notice. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. Securities, financial instruments or strategies mentioned herein may not be suitable for all investors.

​Ted Lasso. White Lotus. The Crown. Wednesday. Star Wars. Are You Subscribing to Everything? Should You Invest as Well?
 
 
Walk into a movie theatre and it might be empty. Fire up a friend’s television, and you are likely to be bombarded with every streaminag choice available. Which companies win in that scenario?
 
Streaming Wars or All in the Family?
Each service has its own hits. One week White Lotus is the show everyone is watching, another week it is Wednesday. A few more users might even fire up their Apple TV subscriptions when Ted Lasso’s 3rd season finally drops this Spring. So, does the company revenue seesaw with the changing whims of pop culture, or is it fairly constant and hopefully increasing?
 
Looking at revenue and paid memberships, both increased in the low single digits for Netflix. Warner Bros. Discovery saw a slight fall-off of revenue (-11.0%) and U.S. based TV-subscriptions year over year, but increased the DTC division by 2.8 million subscribers, to almost 95 million worldwide. A WBD/Amazon partnership expired in Sept. of 2021, which negatively impacted results in 2022. However, WBD CEO David Zaslav is very keen on activating multiple platforms that offer WBD content. In the 3Q 2022 earnings call, Zaslav said, “You can't be saying the only way to get me is to come through my portal.”
 

While companies are getting more proprietary about viewing their content only on their page (except for perhaps WBD going forward), families and friends try to overcome the segregation by sharing their subscriptions. However, if budgets tighten in 2023, will we start seeing more selectivity? Will people hit the pause button on their subscription more frequently, to watch the hits when they’re hot and flip loyalties when the new content dries up? Will there be more content in general in 2023, now that the pandemic isn’t limiting production schedules so dramatically? Can advertising revenue bridge the gap?
 
Netflix is warning that their new paid sharing platform has caused some cancellations in their Latin America test market. The plan is to start rolling out paid sharing in the U.S. in Q1 2023. Netflix is still expecting revenue growth of 4% in the first quarter (8% on a F/X neutral basis).
 
Advertising Revenue
Netflix just added advertising to their revenue stream. While diversifying a revenue stream is always good for business, other streaming services are reporting that the macroeconomic downturn has impacted ad spending. The CFO of Warner Bros. Discovery told investors in the 3Q 2022 earnings call that “advertising is by far the greatest variable impacting our financial performance for 2023.” Advertising revenue was down -11% in the 3rd quarter 2022 for WBD.
 
FX
The strength of the dollar creates a headwind for multinational businesses that are U.S. based. F/X reduced Netflix revenue by 8% of revenue and is expected to hit WBD revenues by $160 million for the full 2022 year. The real question is whether or not the dollar will continue to reign supreme in 2023.
 
Debt, Leverage and Valuation
Warner Bros. Discovery has the most leverage (and the lowest credit rating) of the streaming services, at BBB-, to Netflix’s BBB+, Apple’s AA- and Walt Disney Co.’s BBB+ (positive). As WBD CEO Davis Zaslav points out, most of the Warner Bros. Discovery debt is “cheap, largely fixed, and long dated debt.” WBD has about $2.4 billion cash on hand, with about $1 billion of debt coming due in 2023, and about $1.4 billion coming due in 2024. The company had to dip into their free cash flow in 3Q 2022, to the tune of about $192 million. So, investors will be interested to see if WBD was able to generate free cash flow, while cutting expenses, in the 4th quarter. The company reports earnings on Feb. 23, 2023 (at 4:30 pm ET).
 
​In addition to having legacy debt, WBD has legacy brands, such as Harry Potter, HBO, TNT, Discovery and more. They are also expanding the products of each brand, including launching a Hogwarts Legacy game. So, it is possible for the company to get on the right side of its mountain of leverage.
 
Valuations
Investors have marked the WBD share price down to a P/E of 7.23. So, if this company ever makes the kind of positive headlines that Netflix does, there could be upside. Of course, we still have the macro economy to deal with, which could weigh stocks down again in 2023. (NASDAQ dropped by a third last year, and is still down by -24%.)
 
Most streaming companies are trading at very lofty valuations, with Disney at a P/E of 65, Netflix at 40 and Apple at 26. Should a company like Netflix that generated only $4.5 billion in net profit last year be worth $163 billion? As you can see in the Buffett Indicator chart below, when share prices get too outlandish, the plunge tends to be swift and severe. Only WBD and Paramount Plus are trading at low P/Es, at 7 and 5, respectively.
 

​Bottom Line
While streaming is likely to remain a popular, low-cost form of entertainment in 2023, as household and ad budgets get constrained, ad spend could sink and subscriber churn could increase. Content will continue to be King. Cost increases, like paid sharing, could backfire. Most streaming companies are very overvalued. As we head into a year that most economists believe will see a recession, it will pay to be aware of the macro and industry-wide headwinds.
 
 
 
If you’d like a Streaming Stock Report Card, email [email protected] with Streaming Stock Report Card in the subject line.

Email info @ NataliePace.com or call 310-430-2397 if you are interested in learning time-proven investing, budgeting, debt reduction, college prep and home buying solutions that will transform your life at our next Financial Freedom Retreat.
​

Check out Natalie Pace's Apple Podcast.
Watch videoconferences and webinars on Youtube.

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Answers to the Rebalancing Your Nest Egg IQ Test.
​
Important Disclaimers
Please note: Natalie Pace does not act or operate like a broker. She reports on financial news, and is one of the most trusted sources of financial literacy, education and forensic analysis in the world. Natalie Pace educates and informs individual investors to give investors a competitive edge in their personal decision-making. Any publicly traded companies or funds mentioned by Natalie Pace are not intended to be buy or sell recommendations.

ALWAYS do your research and consult an experienced, reputable financial professional before buying or selling any security, and consider your long-term goals and strategies. Investors should NOT be all in on any asset class or individual stocks. Your retirement plan should reflect a diversified strategy, which has been designed with the assistance of a financial professional who is familiar with your goals, risk tolerance, tax needs and more. The "trading" portion of your portfolio should be a very small part of your investment strategy, and the amount of money you invest into individual companies should never be greater than your experience, wisdom, knowledge and patience.  

Information has been obtained from sources believed to be reliable. However, NataliePace.com does not warrant its completeness or accuracy. Opinions constitute our judgment as of the date of this publication and are subject to change without notice. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. Securities, financial instruments or strategies mentioned herein may not be suitable for all investors.

NASDAQ is Down By -26%. Does That Make Meta a Buy?
 
The macro economy can have a dramatic effect on every company, acting like gravity dragging share prices down in recessions, and providing hot air to help prices soar in shoot-the-moon frenzies. However, as we head into another challenging year, it will help to underweight industries that are especially vulnerable, while hanging onto ones that might be more buoyant. Consumer staples, utilities and precious metals tend to lose less in recessions. So, are there any technology essentials or safe havens that corporations and individuals will stockpile, even when their budgets are strained?
 
Over the next two weeks, I’ll publish a series of blogs that will examine the various specializations in technology, and report on how each is expected to fare in 2023.
 
For our first in the series, we’ll examine social media companies, which are heavily reliant on advertising revenue.
 
Advertising expectations 

Magna is predicting that global ad revenue will increase almost 5% in 2023, from $795 billion in 2022 to $833 billion this year. Traditional media (publishing and television) are expected to contract -3-4%, with audio staying flat, and digital media showing growth of an expected 8%. Despite this forecast, social media CEOs are laying off staff, cutting costs, beefing up their own share repurchases (if they can) and navigating a challenging environment.
 
Meta Platforms
On Feb. 1, 2023, Meta Platforms (Facebook, Instagram, WhatsApp) announced an increased commitment to share repurchases of $40 billion, in addition to the $10.87 billion remaining in the previous authorization. That pleased investors, even though quarterly revenue was down -4.47% year over year and net income was down -55%. Share prices jumped and have doubled since the lows in November of 2022.
 
Can the rally continue? Is the buyback plan enough to keep shares high in a challenging year? Meta CEO Mark Zuckerburg characterized 2023 as the “Year of Efficiency.” Meta laid off 11,000 employees in November of 2022 – about 13% of its workforce. More layoffs are expected. The restructuring charge is expected to be about $1 billion.
 
​The Meta outlook for the 1Q 2023 is that revenue will be flat year-over-year, with annual net income coming in about the same as 2022. According to CFO Susan Li, Meta is counting on AI and improved spend performance to keep advertising dollars coming in. “While we are still contending with the broader macro uncertainty and signals landscape weighing on advertiser demand in the near-term, we are making good progress on our roadmap and are already seeing improvements to ad performance and measurement from the investments we’ve made,” according to Li.
 
Meta is benefitting from the popularity of Instagram, and in particular of their Reels – short user videos, enhanced by music and special effects. Meta is also finding novel ways to monetize Whatsapp. AirFrance is using Whatsapp to allow customers to share their flight information with family and friends. Meta is encouraging companies to engage with their customers and even answer questions on the app.
 
Buybacks and the trend toward digital ad spend helps Meta, while the expensive share price, FX, layoffs and a weak advertising industry are strong headwinds that could drag the price and valuation down.
 
Snap Inc.
Snap Inc. isn’t quite as solid as Meta heading into next year. In 2022, the company posted another net loss of -$1.43 billion. That marks eight years (at least) of cash negative operations. Will Snap Inc. ever find a pathway to profitability? Will a weak advertising climate exacerbate the corporate missteps (Snap Spectacles) that has Snap trading lower than its IPO (in Feb. of 2017), and down -85% from its highs in August of 2021? According to CEO Evan Spiegel, "We continue to face significant headwinds as we look to accelerate revenue growth.” Snap expects that the 1st quarter of 2023 will see year-over-year revenue declines of -10% to -2%.

On the positive side, the company reported a 17% increase in daily active users in 2022. Snap ended the year with $3.9 billion in cash and marketable securities. And the augmented reality development sounds promising. However, according to the Evan Spiegel, Snap’s CEO, "We continue to face significant headwinds as we look to accelerate revenue growth.”
 
TikTok
TikTok, owned by ByteDance, is privately held. Twitter is now Elon Musk’s playground. Weibo, China’s Twitter, saw revenue decline by 25% year over year in the most recent quarter.
 
Bottom Line
If ad spending is curtailed beneath the rather ho-hum expectations, all of the social media companies will suffer. This is an area that I would underweight.
 
2023 started out with a bang on Wall Street. However, with Meta valuations expensive again (with a P-E of 22), it’s hard to imagine Meta share prices staying as lofty as they are today, even with a plump repurchase plan in place. Meta has a $481 billion market value and about $41 billion in cash and marketable securities to help them survive a weak 2023 (and beyond) and continue to crush Snap Inc.
 
Meanwhile, Snap is flying closer and closer to the trees. Investors might have given up on the company, but 375 million daily active users are still engaged.

If you work in the industry, you might have a unique perspective that we are not considering in this blog. If you do, we would love to hear from you. Please email [email protected] with Social Media in the subject line and give us your two cents!
 
If you’d like an Advertising Technology Stock Report Card, email [email protected] with Advertising Technology Stock Report Card in the subject line.

Email info @ NataliePace.com or call 310-430-2397 if you are interested in learning time-proven investing, budgeting, debt reduction, college prep and home buying solutions that will transform your life at our next Financial Freedom Retreat.
​