On April 1, 2022, H.R.3617 The Marijuana Opportunity Reinvestment and Expungement Act (the MORE Act), passed the U.S. House of Representatives. On April 4, 2022, the U.S. Senate referred the bill to its Committee on Finance, which is chaired by Ron Wyden (D: OR). Senator Wyden is one of the sponsors of another piece of cannabis legislation, alongside Senators Cory Booker and Chuck Schumer. Below are a few important things to note about whether or not a cannabis decriminalization bill is likely to pass the Senate, and why criminal justice experts believe it is so important to pass now.

Will the U.S. become the Next Nation to Decriminalize Cannabis?
Is the bill likely to pass the Senate? The MORE Act passed the House largely on partisan lines. Three Republicans voted yes, and two Democrats voted no. Most political pundits believe that the act is destined to fail in the Senate. There it would require all of the Democrats voting “Aye,” plus at least 10 Republicans, for a total of 60 votes. Without that support, it is likely to fall under a filibuster.

Senate Majority Leader Chuck Schumer plans to introduce legislation that he, Cory Booker and Ron Wyden drafted “very soon.” They are currently seeking comments from senators on their draft legislation. Cannabis legislation is likely to be hotly debated over the next few weeks, as Senate Majority Leader Schumer seeks to prioritize cannabis legalization.
 
40% of U.S. Drug Arrests in 2018
 
According to the Pew Research Center, 40% of the U.S. drug arrests in 2018 were marijuana-related, mostly for possession. This is down from 52% of all drug arrests in 2010, largely due to the number of states that have decriminalized cannabis. The ACLU notes that “despite roughly equal usage rates, blacks are 3.73 times more likely than whites to be arrested for marijuana.”

Americans Favor Legalization of Marijuana
According to a Gallup Poll conducted in November of 2021, 68% of U.S. adults support legalizing marijuana. That’s way up from only slightly more than half in favor of legalization from a 2013 survey, and about 1/3 from 2001.

Which Companies Win if the U.S. Legalizes Marijuana?
Tilray is in an excellent position, not only with its many popular brands like Sweetwater Brewing, but also with its stake in MedMen, a retailer with a big footprint in California. There are a few other brands that could do well, including HEXO (through their Molson Coors JV brand Truss CBD USA). Check out my recent blog on cannabis for additional information. It’s worth repeating that decriminalization has many hurdles in The U.S. Senate that might trip up the legislation.

Meanwhile, Luxembourg is set to become the first European country to legalize weed. (The Netherlands has a “liberal” policy.) Germany has also promised to make recreational marijuana legal. Analysts believe the political process for legalization in Germany is at least a year out.

Bottom Line
Cannabis decriminalization is split on party lines in the U.S., which makes it vulnerable to a filibuster. Legislation would need to pass with 60 votes, rather than just a simple majority. Senate Majority Leader Chuck Schumer and Senators Booker and Wyden have made cannabis decriminalization a priority, and are trying to secure the votes for their bill. Americans are behind them. However, with 50 G.O.P. Senators (half of the Senate), there will need to be bipartisan support – something that has kept pot legalization a pipe dream in the land of the free and the home of the brave.


Full Disclosure: I own shares in a few cannabis companies, including Tilray and HEXO.

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If you'd like to learn 21st Century time-proven investing strategies to protect your wealth, or how to pick stocks from a No. 1 stock picker, join us for our June 10-12, 2022 retreat. Email info@NataliePace.com or call 310-430-2397 to learn more and to register. Click on the banner ad below to discover the 18+ strategies you'll learn and master. 

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Chinese EV Market Hits 20%. Tesla Hits a Trillion (Again).
 
 
Sales of electric cars hit 6.6 million in 2021, more than tripling their market share from two years earlier, according to IEA.org. This amounts to 9% of the global market share, up from 2.5% in 2019.

China has the fastest EV sales growth, with 3.4 million sold in 2021, for 20% of the nation’s fleet in December – tripling the country’s sales of 2020. In fact, this year’s sales in China are more than all of the EVs sold in the world in 2020.
 
Europe’s 2021 EV sales were 2.3 million, with about half a million EVs sold in the U.S. Germany is the largest EV market in Europe, which is why Tesla just opened a factory in Berlin. Interestingly, however, Norway has the largest EV market share, with 72% of the country’s vehicles, followed by Sweden and the Netherlands, at 45% and 30%, respectively (source: IEA.org).
 
The growth of EVs in China and Europe bodes well for Tesla and the Chinese automakers. Sales have more than doubled for the Chinese car companies, with Tesla at 65% growth year over year. Meanwhile GM sales were down -10.5% year over year in the 4th quarter of 2021, and Ford was up a mere 4.8%. (Email info@NataliePace.com with Auto Stock Report Card in the subject line to receive that file.) Tesla sold 936,000 vehicles in 2021, with 480,000 produced in China. The company is expected to sell 1.5 million units in 2022, an increase of 60%. However, even with the wind at the back of EV automakers, that doesn’t mean that everything is smooth sailing.

Backlogs, Bottlenecks and High Commodity Prices
We are all feeling the pain of inflation, particularly anyone who still drives a gas-powered vehicle. However, so are our businesses. The auto industry has been hurt by rising costs of commodities, including nickel, and supply chain bottlenecks. Tesla favored auto sales at the expense of their solar and battery power businesses in 2021, which helped to keep their EV output robust. The question is, “Will that work in 2022?”

Tesla’s net income in the 4th quarter of 2021 was $2.3 billion. We won’t know how much these headwinds will impact Tesla’s revenue and profitability until they report on their quarterly Vehicle Production and Deliveries, likely on or near April 2, 2022, and their 1Q 2022 earnings report, around April 26, 2022. Nio’s February 2022 vehicle deliveries (6,131) were up 9.9% year over year, but were -36% below January’s (9,652). Ford also reported that total vehicle sales in February 2022 were down -20.9% year over year (and were flat in January).
 
The auto companies will report their March and 1Q 2022 production and deliveries tomorrow or Monday. Judging from what has already been released, the news is not predicted to be great, although it’s certainly better for electric vehicle manufacturers than for gas combustion engines.
 
Commodity & Nickel Prices
Profits are going to be under pressure for all auto manufacturers due to the increase in commodity prices, and particularly a nickel shortage due to Russian boycotts. On March 13, 2022, Elon Musk warned of this. Indonesia is the largest producer of nickel, followed by the Philippines and Russia.
​

​As you can see in the chart below, nickel prices soared when Russia invaded Ukraine. According to S&P Global, about 70% of the world’s nickel production is used in stainless steel, with just 5% used to make batteries – the power behind electric vehicles. However, in order to increase range, more nickel is now being used in batteries, and it is a higher grade (Class 1, 99.8% purity). We’ll know just how pressing the situation is on the manufacturing side in the next day or two, when the vehicle deliveries reports are released by the automakers. Again, we won’t know how dire the pricing is until the earnings reports are released at the end of next month.

​

Which Companies are the Most Vulnerable?
Electric vehicles are by far the fastest growing vertical in auto sales. Those newer EV-only companies are enjoying stellar growth. Those older companies that leaned into trucks and SUVs are suffering with sluggish growth and high costs. That competitive disadvantage is compounded by debt, liabilities, Other Post-Employment Benefits (OPEBs), and, in the case of Ford Motor Company, a junk bond rating.
 
Tax Credits
EV tax credits have helped Tesla and the Chinese EV automakers to incentivize consumers to buy. Tesla and GM no longer qualify for these credits in the U.S. China is cutting their NEV (new energy vehicle) subsidy by 30% in 2022 and will end the incentives at the end of this year. Click for a list of automobiles and their U.S. tax credits.

Valuation
Tesla stock is very expensive. The current P/E is 222, while the forward P/E is 104. An average P/E is about 17. Yes, growth stocks can take a slightly higher P/E. However, should a company with $5.5 billion in net income and $54 billion in revenue be worth over a trillion dollars? Are retail investors factoring in price or just following the memes?

​Bottom Line
It’s a risky time to be buying high in auto stocks, even EV auto stocks, particularly given the war, inflation, rising interest rates, negative yield curve and high gas prices – all of which can drag the economy into a recession. While Tesla is trading near its all-time high, some of the Chinese automakers with higher growth are trading near their 52-week lows. So, if there is an April rally, at least some of these can be picked up for a bargain.

​Full Disclosure: I own shares in a few Chinese EV makers.

If you'd like to learn 21st Century time-proven investing strategies to protect your wealth, or how to pick stocks from a No. 1 stock picker, join us for our June 10-12, 2022 retreat. Email info@NataliePace.com or call 310-430-2397 to learn more and to register. Click on the banner ad below to discover the 18+ strategies you'll learn and master. 
​

The stock market has been sinking since stocks hit a high on January 4, 2022. The S&P 500 is down 6% since that date. A lot of people are thinking, perhaps hoping and praying, that if they just sit tight everything will resolve itself. However, is that realistic?
 
Below are six charts and six different forces that could drag the economy into a recession over the next year or two. Since 21st Century recessions have been steep and deep, it’s worth it to protect your wealth before the plunge. When you wait for headlines, it’s too late. Making data-driven decisions is far more efficacious. (Continue reading for more details.)
 
​High Gas Prices (Recessions are Indicated in Grey)

​High Gas Prices
You don’t need a chart to tell you that gasoline prices are at all-time highs. Russia supplies about 11% of the world’s oil. Boycotts could drive prices higher. (Read my special blog on oil and gas.)

The U.S. is in a better seat than most countries since we produce as much oil as we can consume. However, a disruption in the global oil market pushes oil and gasoline prices higher, nonetheless. Companies see their sales and revenue sink when the consumer has to cut back spending in order to make ends meet in the household budget. (This negatively impacts the economy, but is better for the planet.) Since almost 70% of the U.S. economy driven by the American consumer, high oil prices slow economic growth and have a strong correlation with recessions.
 
Rising Interest Rates (Recessions are Indicated in Grey)

Rising Interest Rates
​The Fed Funds rate is predicted to rise to almost 2% this year and plateau at 3% in 2023-2024. That may seem pretty low. However, it’s a long way from zero. As you can see in the chart above, rising interest rates are correlated with recessions. The Federal Reserve Board is going to try to negotiate a “soft landing.” However, if they have to raise rates rapidly to combat inflation, the faster they tighten, the more likely the recession hits.
 
Since over half of the S&P500® companies were at or near junk-bond status before interest rates started rising, that puts enormous pressure on zombie companies that must borrow from Peter to pay Paul to continue operating, and increases borrowing costs, particularly for highly leveraged companies. Those companies tend to be the most vulnerable to share price drops, which further impedes borrowing. You might remember that during the Great Recession, stocks dropped on news of problems at Bear Stearns. The Lehman Brothers bankruptcy and TARP bailouts sparked another big plunge, with the bottom occurring on March 9, 2009, on news that General Motors and Chrysler might declare bankruptcy.
 
Certain industries are certainly going to be more vulnerable than others, like airlines. Rising interest rates are negative for a bond market that is already illiquid and negative-yielding.
 
Inflation

Inflation
As you can see in the chart above, inflation is highly correlated with recessions. Inflation might peak at 9% this year before it starts abating. Household budgets are already strangled, with consumer debt at an all-time high. The sunset of pandemic support is likely to hurt Millennials and Gen Z. Student loan payments, which were paused during the pandemic, are set to begin again on May 1, 2022.
 
Higher prices will make a tight situation worse. It will also weigh on corporate earnings, as corporations find their profitability strained with supply-chain bottlenecks and high commodity prices.
 
War: 9.11.2001 Before and After

​War
Wars are negative for stocks (and the environment) especially in the first few years. Check out the charts above for market performance in 911 and Pearl Harbor. Click to access my blog and video conference that discuss wars and their effect on the economy in greater detail.
 
Yield Curve

​Yield Curve
Negative yield curves are 100% correlated with recessions. As you can see in the chart above we’re just a hair above zero again.
 
Elevated Asset Prices

​Elevated Asset Prices
Elevated asset prices are very highly correlated with recessions too. The sad news is that the more elevated the stock market becomes, the more severe the plunge. If we’re using the Buffett Indicator (chart above), stocks today are more expensive than they’ve ever been. Using Professor Robert Schiller’s CAPE ratio, before the Dot Com Recession stocks were slightly more expensive than today, with the Great Depression falling into third place. In other words, most financial indicators reflect elevated asset prices, even with the slight pullback in stocks.
 
Bottom Line
When six out of six indicators are all pointing to a Recession, it is very important to protect your wealth. Stocks dropped 38% in the 2020 pandemic recession. The Dow Jones Industrial Average sank 55% during the Great Recession, and the NASDAQ Composite Index slid 78% during the Dot Com Recession. When you lose more than half you have to spend a great deal of the bull market just crawling back to even. That’s why having a plan to protect your wealth today its key.
 
Fortunately, there is a time-proven, 21st Century wealth strategy that earned gains in the Great and Dot Com Recessions, and outperformed the bull markets in between. Better yet, it’s easy-as-a-pie-chart. You can read about this respected and efficacious system in The ABCs of Money. You can learn and implement it at our June 10-12, 2022 Financial Freedom Retreat. Or you can start with an unbiased 2nd opinion of your current wealth plan. Email info@NataliePace.com or call 310-430-2397 to learn more. If you're interested in sustainability and healing our planet, be sure to check out The Power of 8 Billion: It's Up to Us. 
 

Gas prices hit a record high this week. As a result of the Russian invasion of Ukraine, followed by worldwide sanctions and boycotts of Russian oil and other goods, prices have soared. Economics 101 tells us that limiting supply without decreasing demand is going to make the prices climb.
 
Economists are also fond of saying that the cure for high prices is high prices. As you can see in the chart below, whenever consumers curtail their driving habits, whether it is due to a pandemic or a recession, gasoline and oil prices plunge.

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U.S. is Oil Independent
The United States is virtually oil independent. We produce about 20% of the world’s oil supply, and we also consume about that amount. In 2020, the U.S. became a “net petroleum exporter” for the first time since at least 1949, according to the Energy Information Association.
 

In reality, there’s a lot more trade that goes on. Russian petroleum imports accounted for 7% of the total imports to the U.S. Prior to the Invasion of Ukraine, supply and demand determined whether U.S. oil stays local, or goes to Mexico or another country. Additionally, when we fight a war in the Middle East or on another continent, we do not ship our oil over to the conflict. Rather, we purchase it locally. According to the former Secretary of the Navy Ray Mabus, oil and war have a price on lives – with one soldier killed or wounded in every 50 convoys of oil during the wars in Afghanistan and Iraq.
 
At face value, you might think that the U.S. is in a position to benefit from a ban on Russian oil. However, many US oil companies have businesses in Russia. The ban means that there could be a material write-down in the 1st quarter earnings report, as well as missing out on a substantial piece of their revenue. One exception to that is Conoco Phillips. Conoco Phillips exited their Russian interests in 2015. I’ll be talking about this more in my videoconference on Thursday, March 10, 2022. If you’d like an Oil Stock Report Card, email info@NataliePace.com with Oil Stock Report Card in the subject line. You can also read my blogs on Oil & Gas and other Companies with Business in Russia from earlier this week.

The Consumer Has Power Over Prices
High gas prices are hitting consumer wallets very hard, just as many are still struggling from the pandemic hangover and high inflation. However, on March 20, 2020, gas prices plunged to their lowest ever, into negative territory (-$37.63/barrel). Oil futures traders were paying buyers to take a delivery of inventory that they simply didn’t want to take. What happened? Production was still high. However, people were locked down and stopped driving. Time and again, we’ve seen that when gasoline prices rise too high, or another shock limits consumer buying power, prices plunge. (Also helps to heal our planet.) The consumer has more power than most know.
Work From Home
Work from home should have the effect of people driving less. The commute from your bedroom to your home office in your pajamas doesn’t require gassing up. However, there’s at least one other trend that is very reliant upon oil and gas, which might be the reason that demand is still high.
 
Flight to the Suburbs
High prices in cities forced a lot of people who wanted to buy a home to look in the suburbs. In the city, it’s easy to walk, take a bus or the subway, or ride a bike to get around. The further you live from basic needs, the more you have to jump in your car for everything, from grabbing a gallon of milk to enjoying a meal at the local café. That is why the most energy efficient suburbanite has a much higher carbon footprint than an energy hog, who lives in the city.
 
1/3 of CO2 is from Oil, Gas and Coal
Driving less is very good for the planet. Over 1/3 of the current CO2 in the atmosphere was put there by just 20 of the largest oil, natural gas and coal companies in the world. Of course, they didn’t put it there on their own. We bought it and used it. The cure for high prices is to drive less, and a big piece of the cure for healing our planet is to do the same.
 
Victory Gardens, Local and Organic
Limiting plastic use will also go a long way to lowering gasoline prices. Over half of the barrel of oil is used for making plastics and other petro products. Now is the time to consider having a Victory Garden in your own backyard, at the local school or university, your church and anywhere where you can. If we can grow local organic food and pick it directly from our gardens, without covering it in plastic and then throwing it in a plastic bag, we will limit the amount of oil that has to be drilled and refined to produce plastic, as well as the gasoline used to truck the food to us from far away. Gardens and healthy soil also help to sequester carbon.

The Challenge
The challenge really is for all of us to be more aware of where oil flows and how our fingerprints are on these high prices. The great news is that if we succeed in this challenge, we will have a lot more money for things we like more than pumping gas and throwing things in plastic bags. We will also be meeting the challenge needed to heal our planet in time to avoid catastrophic consequences from Mother Nature (which we are already seeing and experiencing).
 
Are You Interested in Solar and/or an Electric Vehicle?
Should you consider solar panels, if you live in a sunny state? Utility costs are rising, and were already very expensive for many of us. On average, customers saw a bump of 7.6% per MWH on their bills over the past year.

Homeowners with solar pay about $30-$40/month on utilities (while also having a very low carbon footprint). For most people that is a savings of at least $70-$80/month. If you live in a sunny state and take advantage of the available tax credits, your payback time on the panels could be 4-7 years. Thereafter, it’s like having a bond that pays you a yield of 5% or higher (much higher if you are powering your own electric vehicle with your solar).  The U.S. is still offering a 26% tax credit in 2022.
 
If you are interested in solar for your home, there are many things to consider before you get the quote. I’d suggest that you read the chapter “How to Save Thousands Annually With Smarter Energy Choices” of the 5th edition of The ABCs of Money. If you live in a cold or cloudy state, you can still insulate and incorporate a few energy-saving tricks to cut your heating and cooling by 90% or more.
 
Fueling an EV is Half the Cost (or More) of a Gas Guzzler
Should you drive an electric vehicle? With gasoline prices at $4.10 (nationwide average), much higher in some areas (like California) and a little lower in others, the cost of an electric vehicle just got much more affordable. The Department of Energy advises that on average fuel costs are half for EV owners. You can also save on maintenance, as there is no engine (only batteries). Some states are greener than others. Driving an EV on the West Coast can be very planet-friendly, while driving an EV in the Gulf States and West Virginia can be 80% or higher powered by fossil fuels.

Bottom Line
The cure for high prices is high prices. If we want lower gas prices and to heal the home planet, we need to spread the word that driving less, eating local and organic, and kicking our plastic obsession are all ways to reduce demand.
 
FYI: I’m going to be hosting a videoconference today about Stocks in Wartime. If you’d like to join us live, email info@NataliePace.com with VIDEOCON in the subject line. If you’d like to watch it back, go to YouTube.com/NataliePace.
 

On February 24, 2022, Russia invaded Ukraine. Since then, some corporations, like BP, have moved fast to denounce the aggression and to divest themselves of Russian investments. Apple, Ikea, American Express, Mastercard, VISA, TJ Max, Nike and more announced they will suspend their businesses in Russia. The list grows each day. National Grid and Unison Energy in the United Kingdom are refusing to unload ​Russian liquified natural gas (LNG) when it arrives in dock. Airbnb.org acted swiftly to assist housing refugees from Ukraine.
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On March 5, 2022, Russia blocked Facebook in the country. (Myanmar did the same thing to silence dissent during their coup in 2021.) YouTube is reportedly still available in Russia, even though the platform has blocked access to Russian state-controlled media.
 
On the other hand, JP Morgan Chase, Morgan Stanley and many of the more than 3000 multinationals with business in the land of the aggressors have been radio silent about their exposure to Russian businesses and customers. Boycotts of McDonald’s, Pepsi and Estee Lauder, who do business in Russia, are making headlines because so far these companies appear to be continuing operations as usual. On Friday, Shell purchased “heavily discounted” oil from Russia, promising to donate the profits to humanitarian aid in Ukraine. There aren’t any sanctions on Russian oil and gas, so the purchase was legal, though not without ample criticism.
 
Oil and Gas are Still Flowing
In an interview with Bloomberg TV on February 28, 2022, Jamie Dimon, the CEO of J.P. Morgan, acknowledged that banks are working with government officials to implement sanctions, but warned that there were workarounds for SWIFT and that there could be unintended consequences for sanctions. One of those potentially damaging consequences is the need for Russian oil and gas in Europe and Ukraine. About 1/3 of Russia’s economy is linked to oil and gas, and their top customers are Europe and Ukraine. While the Nord Stream 2 pipeline has been scuttled, Russian gas flows through three other pipelines, through the Ukraine to Europe. Infrastructure damage to these pipelines would disrupt the gas market, and prices could spike. Of course, that would be Russia shooting itself in one of the few revenue streams available, which is likely why those pipelines are being spared from the shelling.
 
 

J.P. Morgan and other banks appear to be assisting in the work-around for the Russian oil and gas industry. J.P. Morgan’s research team issued an update on the industry on March 4, 2022, writing, “The west has taken careful steps to ensure that current SWIFT (Society for Worldwide Interbank Financial Telecommunication) and Russian bank sanctions do not prove to be an obstacle for Russian natural gas exports to Europe.” Bank reports are difficult enough to parse, much less understand how much of their revenue flows in from any particular country or client. However, there are reports that J.P. Morgan is the main U.S. banker for Gazprom – Russia’s largest publicly traded gas company by revenue. J.P. Morgan is also Rosneft’s bank, a Russian oil company.
 
Oil Prices are Surging
Even with help from banks and an exclusion of oil and gas from the sanctions, oil prices are already at $115/barrel. Prices could surge to $120/barrel if the Ukrainian conflict continues and the sanctions widen to include an outright ban on Russian oil products, unless Iranian oil is infused into the market. The all-time high for OK WTI crude hit $142.52/barrel on July 4, 2008. Incidentally, the U.S. imports about 600-800 kbd (thousand barrels per day) of Russian oil, according to the J.P. Morgan report, mainly consisting of fuel oil feedstocks and some crude. (Plastic is made from oil feedstocks.)

Will the Russian Boycott Damage the Earnings of NATO Companies?
So, how much damage can a Russian boycott create for multinational companies? Is that why McDonald’s, J.P. Morgan and others have not issued a press release outlining their position? Gazprom was the largest publicly listed gas company in the world in 2019. However, its share price began sinking on February 16, 2022, and tanked after the invasion. It’s now worth about 15% of what it was valued at in January of 2022. BP announced it would take a “material non-cash charge” for divesting itself of its Rosneft ownership. However, the move will also hit BP’s revenue. In 2021, Rosneft was responsible for an RC (replacement cost) profit of $2.4 billion.
 
McDonald’s reported their 2021 full-year earnings on February 2, 2022. In that report, the company noted that 53% of their revenue comes from the “international operated marketplace,” driven largely by the U.K., France and Russia. Yes, you read that right: more than half. The New York Times is reporting that Russia makes up 9% of the company’s total revenues. If McDonald’s announces a suspension of operations, savvy investors are going to be worried about the next earnings report. Since McDonald’s is a Dow Jones Industrial Average component (one of just 30 companies), that would affect the index, which is broadly considered as a gauge of the “stock market.”
 
The Cost of War
First and foremost, our hearts and prayers go out to the Ukrainian people who have had their country invaded, and are suffering unimaginable harm from the killing, bombs, infrastructure disruption, lack of food, cold temperatures and loss of life and home. May there be peace, no more bloodshed, accountability and rebuilding.
 
As I indicated in my blog on the Russian Invasion on February 24, 2022, war is expensive and costly – far beyond the horrific loss of life, the devastating destruction of homes and land and the hostile tensions. The worldwide ramifications ripple far beyond the hotspot. We live in a very interconnected global economy. Russia and Ukraine will be hit the hardest economically, but the damage will not be limited to those nations. The invasion of Ukraine is compounded by the already fragile economic condition that the pandemic left the world in. The ever-alarming reports of the catastrophic effects and costs of climate change continue. In plain words, the situation isn’t good for investors. There can be a substantial loss of personal wealth that can take a decade to recover, if ever.
 
Email our office at info@NataliePace.com if you’d like a Bank or Fast Food Stock Report Card, or if you are having any difficulty accessing our report on the Russian invasion. Call 310-430-2397 or email info@NataliePace.com if you’re interested in a time-proven, 21st Century wealth protection plan that is easy-as-a-pie-chart. Yes, this works for retirement plans, too. We’ll be teaching this plan at the March 18-20, 2022 online Investor Educational Retreat.

​Other Blogs of Interest
Oil and Gas Trends During Wartime
Russia Invades Ukraine. How Have Stocks Responded in Past Wars?
Zombie Companies. Rescue, Rehab or Liquidate?
Spotify: Music to my Ears. 
​Cannabis Crashes. 
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
Real Estate Risks.
​What Happened to Ark, Cloudflare, Bitcoin and the Meme Stocks?
Omicron is Not the Only Problem
From FAANNG to ZANA MAD MAAX
Ted Lasso vs. Squid Game. Who Will Win the Streaming Wars?
Starbucks. McDonald's. The Real Cost of Disposable Fast Food. 
​The Plant-Based Protein Fire-Sale
​What's Safe in a Debt World?
Inflation, Gasoline Prices & Recessions
China: GDP Soars. Share Prices Sink. 
The Competition Heats Up for Tesla & Nio. 
How Green in Your Love for the Planet?
S&P500 Hits a New High. GDP Should  be 7% in 2021!
Will Work-From-Home and EVs Destroy the Oil Industry?
Insurance and Hedge Funds are at Risk and Over-Leveraged.
Office Buildings are Still Ghost Towns.
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.
2021 Company of the Year
​Almost 5 Million Americans are Behind on Rent & Mortgage. Real Estate Hits All-Time High.
Rebalancing Your Nest Egg IQ Test.
Answers to the Rebalancing Your Nest Egg IQ Test.
Videoconferencing in a Post-Pandemic World (featuring Zoom & Teladoc).
Sanctuary Sandwich Home. Multigenerational Housing. Interview with Lawrence Yun, the chief economist of the National Association of Realtors. 
10 Budget Leaks That Cost $10,000 or More Each Year.
The Stimulus Check. Party Like It's 1999. 
Would You Pay $50 for a Cafe Latte? Is Your Tesla Stock Overpriced?
10 Questions for College Success.
Is FDIC-Insured Cash at Risk of a Bank Bail-in Plan?
8 Money Myths, Money Pits, Scams and Conspiracy Theories.
Why Are My Bonds Losing Money?
The Bank Bail-in Plan on Your Dime.

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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.

​Corporate Boycotts of Putin’s War
With a Special Analysis of Oil & Gas Trends
 
Sports Clubs Were the First to Act
The German football club FC Schalke 04 removed Gazprom (a Russian natural gas company) from their jerseys on February 25, 2022, the day after Putin’s invasion of Ukraine. The Poland, Czech Republic and Swedish soccer clubs announced that they will not participate in World Cup qualifiers scheduled to take place in Russia in March.

Despite the rather cryptic tweet by Gazprom on February 19, 2022 (above) and social media pressure, it doesn’t appear that JP Morgan has taken any steps to limit their banking and capital funding relationships with Gazprom. However, BP became one of the first multi-national corporation to censure Putin’s invasion of Ukraine. Today, two BP representatives, Bob Dudley and Bernard Looney, resigned from the board of the Russian oil company Rosneft effective immediately. BP vows to “exit” its 19.75% stake in the company and take a “material non-cash charge” in the first quarter of 2022. That report is expected in May.

S&P Global Ratings cut Russia’s sovereign rating to junk on Saturday, writing that the international sanctions imposed on Russia could have “significant direct and second-round effects on economic and foreign trade activity, domestic resident confidence, and financial stability,” which could weigh on growth. The Conference Board expected Russia’s GDP growth to be a rather tepid 2.0% in 2022 before the conflict, compared to 5.1% in China, 4.4% in the United Kingdom, 4.0% in Europe and 3.7% in the United States.

Will Europe Boycott Russian Natural Gas?
Over the last 5 years, Russia has supplied around 40% of European natural gas. Some countries are more exposed than others. Italy is the most exposed, since 50% of its electricity comes from natural gas and 95% of that amount is imported. This is why none of the sanctions (so far) include what would hurt Russia the most – a boycott of oil and gas.
​
Will Russia retaliate against NATO nations’ sanctions and withhold oil and gas from Europe – cutting off its most important source of income? That’s equally difficult to imagine, as Russia needs riches to fund its military aggression. So, investing in natural gas expecting it to spike in price isn’t a guarantee.  

​In the event of a severance in the natural gas relationship between supplier (Russia) and customer (Europe), the U.S., Qatar and Nigeria might benefit, as you can see in the chart below.

Will Natural Gas Prices Soar?
The peaks and valleys of natural gas prices reflect both supply and demand side shocks. In December 2000, natural gas prices soared to $8.90 per mmBtu, almost quadrupling from the start of the year, when gas prices were at $2.36. It was an abnormally cold winter, and there was an increase in demand for natural gas for heating (source: GAO.gov). This occurred at a time when supplies by both utilities and marketers were unusually low. With increased demand and higher prices, gas companies increased production. By the end of October 2001, prices were back down to $2.46 mmBtu.

​In October of 2005, gas prices soared again, spiking from $6.35 in October 2004 to $13.42. This time, it was an unexpected drop in supply that was the culprit. Hurricanes Rita and Katrina disrupted production and delivery from the Gulf of Mexico. By September 2006, prices were back down to the $4.90 mmBtu range. And those are where prices are again today, after a knife-like slice just before the Russian invasion of Ukraine.
 
As of February 23, 2022, natural gas prices are $4.59. If prices spike, it’s important to remember that they can also plunge. In anticipation of the U.S. Invasion of Iraq (March of 2003), natural gas prices doubled to $12.03 at the end of February 2003, and then plunged back to $5 by the end of March, only a month later.
​
Supply Side Disruptions
If the report from Gazprom is accurate, then Europe and the Ukraine have dangerously low gas inventories. The EIA.gov reports that the U.S. storage is on the low end, based upon 5-year averages, at just 1782 Bcf. Without sanctions, boycotts or withholding, prices could remain fairly stable. However, whether it is a decision made by a government or multiple Ukrainian pipelines destroyed by Russian missiles, there could easily be a supply-side disruption that factors into already low storage. (Ukraine lies between Russia and Europe so destroying the pipelines that funnel Russian gas into that region would be counterproductive.)
 
Any severe supply side disruption would cause gas prices to soar in the near-term (2-12 months). In the past, high prices prompt an increase in production, which floods the market with supply, bringing prices back down again. The higher the price, the more swift and severe the decline.
 
Demand
The only good news is that February is the last winter month in Europe. Demand for heating could abate in the coming weeks. However, if summer is as hot as it was last year, then demand for natural gas to power air conditioners will be high.
 
Prices of Natural Gas and Oil
As we’ve seen in the chart above, natural gas price summits tend to be rather short-lived. On the other hand, oil prices can stay elevated during prolonged periods of conflict. War requires a lot more gasoline than peace does.
 

ESG Considerations
Many people are not aware that just 20 fossil fuel companies are responsible for over 1/3 of CO2 emissions since 1965 (source: ClimateAccountability.org). BP is 3rd on that list, behind Chevron (#1) and ExxonMobil (#2). If we care about the environment and are committed to climate action, then it’s essential to make sure that we are not profiting from polluters, particularly in our 401k, mutual funds or managed brokerage account. It’s also critical to decrease our oil addiction. These companies are simply supplying the fuel that we power our cars and lives with.
 
I’ll be outlining easy ways we can power green and reduce our carbon footprint in my new book The Power of 8 Billion, which will be released in the coming month. Email info@nataliePace.com with The Power of 8 Billion in the subject line to be notified if its release.
 
Bottom Line
Be careful betting on natural gas at this time. While supply side constraints could push gas prices up quickly, the fall can be just as fast. Oil prices, on the other hand, could remain elevated in 2022, as a flight to the suburbs increases gasoline consumption. The trend for electric vehicles is positive for natural gas and negative for oil companies in 2025 and beyond. Many electric grids around the world are still powered 60% or more by fossil fuels (mostly natural gas), so this isn’t as clean of an alternative as many drivers might think. In 2020, EV sales were 3 million – about 4.1% of total car sales (source: IEA.og).
 
If you’d like an Oil or Gas Stock Report Card, just email info@NataliePace.com. If you’d like to divest your portfolio of oil and gas investments, you can learn how at our Investor Empowerment Retreats. The next one is March 18-20, 2022. Early Bird pricing ends on Feb. 28, 2022 (Monday).
 



Our easy-as-a-pie-chart investing, with regular rebalancing, earned gains in the Dot Com and the Great Recessions and has outperformed the bull markets in between. So, if you are a Buy & Hope investor, it’s important to read between the lines of rhetoric, understand the true trends, and consider adopting a strategy that works in a 21st Century world marked by overvalued equities, unprecedented leverage and deep downturns.
 
If you’d like to see the charts of past war-time shocks to the stock market, lined up with the average P/E of the day, just email info@NataliePace.com. You can watch my videoconference on the Ukrainian Crisis, which features 5 things every Buy & Hold investor must do now and 3 essential strategies for Pie Chart Investors, at YouTube.com/NataliePace. (If you don't know the difference, you'll learn in the free videoconference.)

​Putin made good on his threats and invaded Ukraine last night. The Dow Jones Industrial Average started the day down over -800 points. After the U.S. announced sanctions, the markets recovered. The Dow rose 92 points (0.28%). The NASDAQ Composite Index posted a gain of 3.35% (436 points). However, the market, similar to wars, is not something that is won in a day, but over time. The conflict isn’t going to disappear. So, what’s your best strategy? How did stocks behave in past periods of bloodshed and conflict?
 
Attacks, particularly those that are unexpected, are definitely a market driver, especially in the near-term. Usually there is a drop. (Today there was an unexpected rally; we’ll see how long that lasts.) The stock market was closed for four trading days in an attempt to calm investors after 9/11, and there was still a sell-off on September 17, 2001, when the market opened. (That’s not all there was to the story. Keep reading.)
 
Over the past 24 hours, I’ve seen a flurry of pundits blogging and blabbing about wartime market statistics. Some of the numbers quoted are simply wrong. Others have been shaved to support whatever message they wish to convey. (I’m going to let you see the data for yourself below.) A lot of media and broker-salesmen are going to be pointing to overall market gains in attempt to calm roiled nerves into accepting their premise that you should just Buy & Hold. However, is that really the best strategy today?
 
As one example, Fortune just published an article writing that “from 1939 until the end of the war in late 1945, the Dow saw increases of 50%, more than 7% per year.” The cumulative gains between the beginning of 1939 and the end of 1945 were actually only 36%, for annualized gains of 5.14% (source: FRED). (Not sure where the Fortune writer is getting his data.) To get to that sum, however, you have to overlook pretty steep losses between 1939 and 1941. The simple statement that there were gains over the period doesn’t reflect what people experienced at the time, as the chart below indicates.

​If you lose a third of your wealth over a 3-year period, you might lose your home. Your credit score plunges, which increases your cost of borrowing. You might have to take on debt to make ends meet. You can’t buy low at the bottom. You don’t have any money. In fact, when the bull market finally comes, you are hoping and praying that you’ll make up losses, rather than enjoying the gains.
 
As I averred above, the stock market plunge of the Dot Com Recession and the terrorist attack on 9/11 are often misrepresented. Between December 31, 1999 and August 31, 2001, the Dow Jones Industrial Average dropped from 11,497.12 to 8,663.50, for losses of -24.6%. The correction was already quite steep before 9/11. After a bounce up to 10,021.50 at the end of 2001, the DJIA slid again in 2002, ending the year at 8,341.63 – just -3.7% lower than the low in August of 2001 (before the terrorist attacks on the Twin Towers).

​The losses of the NASDAQ Composite Index between the highs of March 9, 2000 (5,046.86) and Oct. 10, 2002 (1,150), were even more severe, at -77.2%. Why did the stock market correction happen before 9/11? Was there another factor at play? Can it help us to understand where we are today?
 
In 2000, stock prices were very bubblicious. If we refer to the Buffett Indicator, which measures the total value of all publicly traded stocks against GDP, Dot Com stocks were the most expensive in history, outside of one other time – today. Stocks were very pricey in 2007, too, a time of real estate and stock investor euphoria that ushered in the Great Recession.

There are a few key differences between the Dot Com Recession, the Great Recession and today, which were all periods of elevated asset prices. Before the Dot Com and Great Recessions, there was room for the Federal Reserve Board to cut interest rates to spark borrowing and economic growth to try and lift us out of the market troughs. Today, interest rates are at rock-bottom, and have to rise to combat inflation. The Federal Reserve Board will try to negotiate a “soft landing,” to raise rates without sparking a recession. However, elevated asset prices and the invasion of Ukraine present complications that could make that difficult. Market returns are typically lower when the tightening cycle begins, and can be negative if interest rates rise too rapidly. In short, 2022 was unlikely to experience anything close to 2021’s 27% market rally in the U.S. before Russia invaded Ukraine.
 
Debt was high before the Great Recession. Today it is astronomical. Debt and leverage were already elevated before the pandemic, and then shot into the Nethersphere when trillions were printed up to help states, cities, consumers and businesses survive the lockdowns. Now, while GDP growth is still strong enough, is when we want to start reducing the debt load. The Federal Reserve unloaded all of the bonds they had purchased in early 2020 by 2021, and announced that they will start reducing their Treasury and asset-backed security holdings this year. The Beltway has had difficulty agreeing on how to balance the budget and put the U.S. on a more fiscally responsible path.

Another way of looking at today’s world, while also factoring in the harsh and heartbreaking backdrop of the Ukraine Crisis, is that the 21st Century has been marked by asset bubbles that present a different type of economy than existed in the last century. Most wartime events get folded into an average annualized gain over XYZ period, but are actually a rollercoaster, often with a severe two years or more of losses close to the inception of the war or attack. The elevated stock prices of the Dot Com Era ushered in sharper declines than were experienced during Pearl Harbor, World War II and even the Vietnam War. That’s one of the reasons why Buy & Hope worked better in the 20th Century and has been a Wall Street rollercoaster in the 21st. During wartime and periods of elevated stock prices, Modern Portfolio Theory with regular rebalancing works better than Buy & Hold.
 
Our easy-as-a-pie-chart investing, with regular rebalancing, earned gains in the Dot Com and the Great Recessions and has outperformed the bull markets in between. So, if you are a Buy & Hope investor, it’s important to read between the lines of rhetoric, understand the true trends, and consider adopting a strategy that works in a 21st Century world marked by overvalued equities, unprecedented leverage and deep downturns.
 
If you’d like to see the charts of past war-time shocks to the stock market, lined up with the average P/E of the day, just email info@NataliePace.com. You can watch my videoconference on the Ukrainian Crisis, which features 5 things every Buy & Hold investor must do now and 3 essential strategies for Pie Chart Investors, at YouTube.com/NataliePace. (If you don't know the difference, you'll learn in the free videoconference.)
 

​

​Other Blogs of Interest
Zombie Companies. Rescue, Rehab or Liquidate?
Spotify: Music to my Ears. 
​Cannabis Crashes. 
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
Real Estate Risks.
​What Happened to Ark, Cloudflare, Bitcoin and the Meme Stocks?
Omicron is Not the Only Problem
From FAANNG to ZANA MAD MAAX
Ted Lasso vs. Squid Game. Who Will Win the Streaming Wars?
Starbucks. McDonald's. The Real Cost of Disposable Fast Food. 
​The Plant-Based Protein Fire-Sale
​What's Safe in a Debt World?
Inflation, Gasoline Prices & Recessions
China: GDP Soars. Share Prices Sink. 
The Competition Heats Up for Tesla & Nio. 
How Green in Your Love for the Planet?
S&P500 Hits a New High. GDP Should  be 7% in 2021!
Will Work-From-Home and EVs Destroy the Oil Industry?
Insurance and Hedge Funds are at Risk and Over-Leveraged.
Office Buildings are Still Ghost Towns.
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.
2021 Company of the Year
​Almost 5 Million Americans are Behind on Rent & Mortgage. Real Estate Hits All-Time High.
Rebalancing Your Nest Egg IQ Test.
Answers to the Rebalancing Your Nest Egg IQ Test.
Videoconferencing in a Post-Pandemic World (featuring Zoom & Teladoc).
Sanctuary Sandwich Home. Multigenerational Housing. Interview with Lawrence Yun, the chief economist of the National Association of Realtors. 
10 Budget Leaks That Cost $10,000 or More Each Year.
The Stimulus Check. Party Like It's 1999. 
Would You Pay $50 for a Cafe Latte? Is Your Tesla Stock Overpriced?
10 Questions for College Success.
Is FDIC-Insured Cash at Risk of a Bank Bail-in Plan?
8 Money Myths, Money Pits, Scams and Conspiracy Theories.
Why Are My Bonds Losing Money?
The Bank Bail-in Plan on Your Dime.

​
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.

It’s not all that surprising that after a pandemic forced us all to stop traveling and having vacations, there are a few companies in travel and hospitality that are in trouble. This is exacerbated even more by the amount of debt in the world today (which was already heightened before the pandemic). Rising interest rates make it more expensive and difficult to borrow money, particularly for the most troubled firms.
 
What is a zombie company? It is a company that is so heavily indebted and so weakened by revenue losses that they are having difficulty making even the interest payments on their debt service. The Federal Reserve describes such firms as “highly leveraged and unprofitable.” In a July 30, 2021 report, it was noted that zombie firms were concentrated in retail and manufacturing. The pandemic severely damaged the travel and hospitality sectors. Many of the companies are in junk bond status, with revenue that is far below 2019 levels. The question on the minds of policymakers is whether or not travel, work, and lifestyle have suffered structural shifts that will force some of these firms to rightsize and/or restructure operations based upon lower expectations of revenue. Work from home, Zoom conferences and even climate action have impacted travel choices. Will that remain the case as the world moves out of a pandemic mindset and into living with the risks of COVID as an endemic virus?
 
The IMF pointed out recently that governments are going to have to decide which firms to support, which to restructure and which will have to liquidate. In an IMF blog on Feb. 23, 2022, Ceyla Pazarbasioglu and Rhoda Weeks-Brown wrote:
 
​Shoring up these systems is critical as there are shortcomings in many important areas at present and countries may need to tackle many cases at once. There is not much time to prepare… Governments were right to support firms financially through the worst of the pandemic. They recognized the initial large premium on speed over precision and provided rapid support without distinguishing between enterprises that could be saved and those that should not. Now policymakers should calibrate financial support and direct it efficiently to companies that are in need. They should also be prepared to restructure or liquidate badly scarred firms.
 
How Do You Know Which Companies are Zombie Firms?
If you have a 401K, an IRA or any kind of investment portfolio, now is the time to know what you own. As you can see in the chart below, zombie firms become more common and problematic during recessions.

​Stock market downturns precede recessions. Zombie firm implosions increase uncertainty and investor anxiety, and accelerate selling. If you look at a chart of the downturns in 2000 and 2008, each major slide was associated with a bankruptcy, bailout or restructuring.
 

5 Factors for Identifying The Most Vulnerable Companies
 

1. The Higher the Dividend, the Higher the Risk
2. Revenue is Substantially Lower Today Than in 2019
3. Highly Leveraged and Unprofitable
4. The Firm is Unable to Make Key Interest Payments
5. Larger Firms are More Likely to Be Rescued Than Smaller Companies

 
And here is more color on each point.
 
 
5 Factors for Identifying The Most Vulnerable Companies
 
1. The Higher the Dividend, the Higher the Risk
If any company is offering you an interest rate above 3%, you are taking on risk to earn a very small yield. This is heightened with higher interest rates, particularly when they are coupled with longer terms. If you own bonds, bond funds or a private placement investment, it’s time to know what you own. Shorter terms and high creditworthiness are essential as we cycle out of free and easy money and into more expensive, tighter policies.
 
2. Revenue is Substantially Lower Today Than in 2019
Airlines, casinos, hotels and even cruise ships are showing outstanding year-over-year revenue growth. However, when you compare today’s sales and net losses with 2019, it becomes clear that extreme rightsizing is going to be needed to survive, unless there is a massive increase in travel and sales. The Retail Apocalypse continues to weigh down the economy, particularly as the Work-from-Home trend limits the need for business attire.

3. Highly Leveraged and Unprofitable
The 2020 and 2021 losses in the airlines, cruise lines, commercial real estate and casinos were enough to wipe-out most of the companies had there not been government support. The airlines, cruise lines and casinos are all rated as speculative (junk bonds). If you’d like to see the Stock Report Cards of key companies in these industries, just email info@NataliePace.com with Zombie Stock Report Cards in the subject line.

4. The Firm is Unable to Make Key Interest Payments
The rating agencies offer details on which companies are coming up on key payments, and even their ability to meet these. You can also check the company’s cash on hand in their earnings reports. The interesting thing about some beleaguered, low-rated firms is that some still use funds to repurchase their own stock. MGM Resorts repurchased $1.75 billion shares in 2021. This is just one of the reasons why you don’t use a rising stock price as your due diligence analysis of the fiscal health of a firm.

5. Larger Firms are More Likely to Be Rescued Than Smaller Companies
During and after the Great Recession, 489 banks failed. FDIC-insured depositors simply found a new company name on their bank statements. However, investors were keenly aware of the losses that their stock and bond investments suffered from holdings in Lehman Bros., Countrywide, Washington Mutual, Merrill Lynch, Bear Stearns and the many smaller, community banks that failed (and were absorbed by larger firms). Despite the sins of Boeing, many of which were outlined in the new Netflix documentary Downfall, the company is more likely to be rescued than the airlines, which have experienced a cycle of restructuring in all of the 21st Century recessions. Boeing is a Dow Jones Industrial Average component, just as AIG was prior to its bailout in 2008.

​Bottom Line
Zombie firms could begin to usher in stock market weakness. The typical market correction can be stretched over a period of 18 months or longer, with the market dropping and then stabilizing at a new low each time a large company fails. The top of the market in the Dot Com Recession was March 2000, with Dot Com stocks bottoming out with losses of -78% by October of 2002. The Great Recession started from a high in October of 2007, and was down -55% by March of 2009. Because market dives tend to be a series of unfortunate events over an extended period rather than an instant crash, your best strategy is not jumping all in or all out. Rather, make sure that you are safe, protected, hot and diversified, and that you know what is safe in a world where fixed income assets, like bonds, can lose money and are high-risk, negative-yielding and potentially illiquid. We’re overweighting 10-20% safe in our sample pie charts for 2022.
 
Wisdom is the cure. It’s time to step off the Buy & Hope Wall Street rollercoaster and into time-proven, 21st Century systems. They are easy as a pie chart.
 
 

A couple of decades ago, executives (including Steve Jobs) had a vision that music would be in the cloud, and you could access your favorite artists on demand from anywhere at any time. Today, Spotify, Apple Music and others are prolific. Spotify claims that people in 184 countries and territories have access to 82 million tracks. Saturday Night Live even folded the company into a sketch this year.
 
Many of us heard about Spotify recently when there was a backlash against the company for removing Neil Young music, when the artist protested Joe Rogan’s podcast on Spotify. Harry and Meghan’s Archewell Audio also has a podcast on Spotify.
 
Scandal
The Joe Rogan/Neil Young scandal hasn’t cost Spotify as much as you might think. The company traded at $175/share on Jan. 26, 2022 (the day it removed Neil Young’s music at “his request”). Today, shares are trading for $163.74. That’s down a little. However, the current price is down significantly from the high of $387.44 set on Feb. 19, 2021. What happened over the past year?
 
Churn
Churn happened. In short, Spotify’s price was quite lofty. Big money movers decided to lock in profits. Shares dropped. All of this happened before the Rogan scandal.
 
Churn isn’t something unique to Spotify. As Liz Ann Sonders, the Chief Investment Strategist of Charles Schwab & Co. Inc., revealed in our interview last month:
 
More than 90% of the NASDAQ’s members had at least a 10% correction at some point in 2021. As of the first few weeks of 2022, 45% of NASDAQ stocks were down at least 50% from their 52-week highs. 
 
When I asked the Senior Index Analyst of S&P Dow Jones Indices who was selling, he emailed me that it appeared to be institutional. There is a lot of hot money out there, seeking quick profits. That creates volatility.
 
In a world where equity prices are very expensive in general, it pays to know when your favorite stock has soared to the nether sphere. The hot, institutional money certainly is aware of it. If you are trading and you don’t know valuation strategies, now is the time to get savvy. If you haven’t read my 2022 Crystal Ball blog yet, click to access. You can learn about how to evaluate hot stocks on your own at our March 18-20, 2022 Financial Empowerment Retreat. Click to access that flyer or email info@NataliePace.com to learn more.

Value
Spotify is still cash negative, with a net loss of 34 million euros in 2021. Smaller companies have to worry about borrowing costs in a rising interest rate environment. Spotify has 2.86 billion euros in cash and cash equivalents, and is increasing its cash accumulation quarter over quarter, despite the loss on paper. Since there are no earnings, we have to use another method of valuation than price-earnings ratio. The price-sales ratio for Spotify is down to 2.94, compared to an industry standard of 7.05 and Apple’s 7.71. Spotify is currently valued at $31.47 billion, compared to the high of over $51 billion in March of 2021. And, of course, buyers today are paying less than half for shares, compared to February of 2021.
 
Growth
Spotify leads the industry in growth, with revenue growth of 24% in the most recent quarter. (How many of your friends subscribe to Spotify versus Apple Music, Sirius or UMG?) The company’s forward outlook is projecting flat growth in the 1st quarter of 2022. (This projection was issued after the Joe Rogan scandal, so it should be factoring that in.)
 
Share Repurchases
Spotify has a share repurchase program in place to the tune of $1 billion, of which about $101 million has been used.
 
Bottom Line
Spotify’s current price is music to my ears. Of course, a war in Ukraine or a Taper Tantrum by investors could stop all the music on Wall Street. In precarious times during an overpriced market, it’s important to be properly diversified and safe, in addition to being hot.

If you'd like to see our Music Stock Report Card, email info@NataliePace.com. 
​

Other Blogs of Interest
​Cannabis Crashes. 
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
Real Estate Risks.
​What Happened to Ark, Cloudflare, Bitcoin and the Meme Stocks?
Omicron is Not the Only Problem
From FAANNG to ZANA MAD MAAX
Ted Lasso vs. Squid Game. Who Will Win the Streaming Wars?
Starbucks. McDonald's. The Real Cost of Disposable Fast Food. 
​The Plant-Based Protein Fire-Sale
​What's Safe in a Debt World?
Inflation, Gasoline Prices & Recessions
China: GDP Soars. Share Prices Sink. 
The Competition Heats Up for Tesla & Nio. 
How Green in Your Love for the Planet?
S&P500 Hits a New High. GDP Should  be 7% in 2021!
Will Work-From-Home and EVs Destroy the Oil Industry?
Insurance and Hedge Funds are at Risk and Over-Leveraged.
Office Buildings are Still Ghost Towns.
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.
2021 Company of the Year
​Almost 5 Million Americans are Behind on Rent & Mortgage. Real Estate Hits All-Time High.
Rebalancing Your Nest Egg IQ Test.
Answers to the Rebalancing Your Nest Egg IQ Test.
Videoconferencing in a Post-Pandemic World (featuring Zoom & Teladoc).
Sanctuary Sandwich Home. Multigenerational Housing. Interview with Lawrence Yun, the chief economist of the National Association of Realtors. 
10 Budget Leaks That Cost $10,000 or More Each Year.
The Stimulus Check. Party Like It's 1999. 
Would You Pay $50 for a Cafe Latte? Is Your Tesla Stock Overpriced?
10 Questions for College Success.
Is FDIC-Insured Cash at Risk of a Bank Bail-in Plan?
8 Money Myths, Money Pits, Scams and Conspiracy Theories.
Why Are My Bonds Losing Money?
The Bank Bail-in Plan on Your Dime.

​
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.

​$72 Billion Cannabis Market by 2028
Illegal weed takes a bite out of the corporate cannabis Mecca. Nonetheless, the legal market is predicted to grow from $13.5 billion in 2021 to $70.6 billion in 2028 (source GrandviewResearch).

Which Cannabis Companies are Ripe for Buying?
Most cannabis companies are trading at a multi-year low price. However, that doesn’t mean that all of them are ripe to buy. You might wish to create your own cannabis fund with the companies that you believe are poised for that great product breakthrough, who are also run by executives that can take the company through the end zone. I’ll discuss my favorites and why in an upcoming videoconference. Email info@NataliePace.com with VIDEOCON in the subject line to join us live (or receive a link to watch it back).
 
Innovative Properties continues to show impressive revenue growth, but is quite overvalued, with a P/E of 44.
 
Who is Running the Show and Who is On the Team?
 
Tilray is led by Irwin Simon, the former CEO and chairman of Hain/Celestial. Tilray’s team includes the former co-CEO of Whole Foods. The Green Organic Dutchman is surprisingly strong for a microcap, and is clearly on the move, as exhibited by its sales growth and talent acquisition. This penny stock is looking to compete. HEXO’s CEO was ousted on Nov. 19, 2021 and replaced by the Chief Innovation Officer of Molson Coors who had overseen the Truss CBD Beverage launch. HEXO has a new “Path Forward” that will be more conscious about capital preservation.
 
Should You Purchase a Cannabis Fund?
The funds that are readily available are offered by lesser-known financial services providers. With the amount of debt and leverage in the world, I would be cautious about investing in a cannabis fund from a company without knowing how well it was capitalized. Smaller fund companies almost folded in March of 2020. The ETFMG Alternative Harvest Fund (symbol: MJ) dropped 77% from its 2019 high to its March 2020 low. The Cambria Cannabis Fund (symbol: TOKE) sank by 66%.
 
Building your own fund will require you babysitting the companies and understanding how to trade meme stocks. If the stocks shoot the moon, the trouble should be worth it.
 
What Can the Company Do? What Can the Industry Do? What Will the Market Do?
In the late stage of the business cycle, whenever you are purchasing individual stocks it’s important to also consider what the macro environment is going to do. It’s very difficult for even a strong fish to swim upstream against a crashing tide. While no one is predicting a Wall Street rout in 2022, few are anticipating a roaring bull. (Click to read my 2022 Crystal Ball blog and to watch Schwab’s Chief Investment Strategist’s two cents on equities for the year.)
 
We’ve already determined that the cannabis industry itself should experience tremendous growth, and that there is a strong and swift global shift toward pot legalization. So, the hottest cannabis companies should be experiencing potential tailwinds from the industry itself. There has been a dearth of good news in the headlines. However, when that changes, such as if Germany or Texas legalizes, ready your engines for the rocket ship ride. The low prices of today could put investors on the right side of the trade as the world moves toward decriminalizing cannabis on a more massive scale.

 
We discuss how to add cannabis to your wealth plan without betting the farm, and how to evaluate stocks using our time-proven system, for one full day at our Investor Educational Retreats. You can learn and implement a time-proven, 21st Century investment plan by attending our February 11-13, 2022 Financial Empowerment Retreat. A small investment of time and money could save your nest egg! These time-proven 21st Century strategies earned gains in the Dot Com and Great Recessions, and outperformed the bull markets in between.
 
Call 310-430-2397 or email info@nataliepace.com to learn more now. You can also click on the banner ad below to get testimonials, to learn the 15 things you’ll learn at the retreat, and to get pricing and hours information. It’s going to be conducted online, so it feels like it’s you and I talking directly in your living room. It’s a great way to learn, and you have no travel or lodging expenses.

​Other Blogs of Interest
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
Real Estate Risks.
​What Happened to Ark, Cloudflare, Bitcoin and the Meme Stocks?
Omicron is Not the Only Problem
From FAANNG to ZANA MAD MAAX
Ted Lasso vs. Squid Game. Who Will Win the Streaming Wars?
Starbucks. McDonald's. The Real Cost of Disposable Fast Food. 
​The Plant-Based Protein Fire-Sale
​What's Safe in a Debt World?
Inflation, Gasoline Prices & Recessions
China: GDP Soars. Share Prices Sink. 
The Competition Heats Up for Tesla & Nio. 
How Green in Your Love for the Planet?
S&P500 Hits a New High. GDP Should  be 7% in 2021!
Will Work-From-Home and EVs Destroy the Oil Industry?
Insurance and Hedge Funds are at Risk and Over-Leveraged.
Office Buildings are Still Ghost Towns.
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.
2021 Company of the Year
​Almost 5 Million Americans are Behind on Rent & Mortgage. Real Estate Hits All-Time High.
Rebalancing Your Nest Egg IQ Test.
Answers to the Rebalancing Your Nest Egg IQ Test.
Videoconferencing in a Post-Pandemic World (featuring Zoom & Teladoc).
Sanctuary Sandwich Home. Multigenerational Housing. Interview with Lawrence Yun, the chief economist of the National Association of Realtors. 
10 Budget Leaks That Cost $10,000 or More Each Year.
The Stimulus Check. Party Like It's 1999. 
​Investor IQ Test 2021.
Investor IQ Test Answers
​2021 Crystal Ball.
Would You Pay $50 for a Cafe Latte? Is Your Tesla Stock Overpriced?
10 Questions for College Success.
Is FDIC-Insured Cash at Risk of a Bank Bail-in Plan?
8 Money Myths, Money Pits, Scams and Conspiracy Theories.
Why Are My Bonds Losing Money?
The Bank Bail-in Plan on Your Dime.

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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.