 Good day, fellow investors. Welcome to the stock market news with a long term twist. This week's big topic was DEVOS and mostly for investors, most importantly, Ray Dalio and Seth Klarman. Seth Klarman came out with his letter warning investors. Ray Dalio was talking about his macro predictions about stock market going down, crashing. I'll show you how we are already in a bear market, so that actually happened. And this is very important to understand the risks of the market. Something that people, and we'll see later Seth Klarman talking about it, people really don't grasp after such a long period of stocks only going up. So the topics for today will be about the risks that might impact in the future the stock market that are impacting the stock market and the risks that we have to keep in mind from social tensions, the economy, debt of the economy, China, the US relationships, the gap issue, the current Goldilocks period that is creating a feeling of high confidence both in Europe and in the United States. And I will try to use as much data as possible to attach facts to what Ray Dalio and Seth Klarman have been saying so that you can make your picture of the risks and the reward and later we will finish with how to invest. Because when you put everything into a personal perspective, that will give you clear answers on what to do, when to do and how to do it. Because after all, it's all about you. And the mission of this channel is to improve your financial well-being by limiting your risks and possibly increasing your returns. However, to do that, you must think about the risks. So let's see what these guys have to say about the investing risks in the current market. Social tensions. As Seth Klarman wrote in his letter, it is not hard to imagine worsening social unrest among a generation that is falling behind economically and feels betrayed by a massive national debt that was incurred without any obvious benefit to them. So there is a big wealth gap. There is huge debt piles. And we will see later that the US national debt has really exploded. The debt per citizen is, in this case, 66, almost 67,000. Debt per taxpayer is closing in on 180,000 per US citizen. And as Klarman says, this debt we will see later with the wealth gaps and everything hasn't brought much benefit to most US citizens. And this is a big, big risk for Klarman over the long term, even if nobody is thinking about this for now. Further, Daileo goes deeper and discusses, okay, things might change over the next decade. We have now already some House representatives talking about 70% income taxes on those that make 10 million. And these people are already seeing, okay, this might happen. This might impact the future. We are now in lower taxes. Taxes might go up. People forget that in the 60s, 70s, taxes were corporate taxes were above 50% in the United States. Further, on the debt Klarman wrote, for one thing, he details the way virtually every developed country has taken on mounting debt since the financial crisis, a trend that he says could lead to financial panic. He cites the increasing ratio of government debt to gross domestic product from 2008 to 2017 to a point exceeding 100% in the United States and nearing that figure in France, Canada, Britain and Spain. So if we look how the government debt in relation to GDP exploded over the last 10 years, this means also that, okay, the debt is okay if it's higher, if interest rates are close to zero. But if and when interest rates go up, governments will be burdened by this a lot. And this will lead to trouble because the governments will have to increase taxes to pay this debt because the economy didn't grow at 50, 60% or 100% as the debt did. And that's a big, big, huge risk for the economy, for the system. And Klarman says that the seeds of the next major financial crisis or the one after that may well be found in today's sovereign debt levels. And he says that there is no way to know how much debt is too much. But America will inevitably reach an inflection point where up on a suddenly more skeptical debt market will refuse to continue to lend to asset rates we can afford. Low interest rates, you can afford that. High interest rates, you can't afford that. By the time such a crisis hits it will likely be too late to get our house in order. And that's the key risk I think for the next decade are government debts and the huge debt piles that have been created to get out of the previous financial crisis. So they added more debt to the system to solve the previous problem which was caused by too much debt and too much leverage. So it's a very tricky position here. And we must think, okay, how are we going to position ourselves given the risks that we'll probably materialize over the next five to ten years. Perhaps nothing will happen in the next 12 months. As Delio said, we are still in the seven, eight inning. The stock market is a little bit wobbly but they are now saying 2020 will be a slowdown for all economies globally and that might impact stocks in general. But we'll see later that stocks have already been impacted which is a big warning signal. Let's continue. Then we have other risks, China and the US. Nobody knows what will happen there. There is a big range of possibilities from conflict to cooperation. However, at a great panel in Davos, Delio and others commented how productivity growth, which is the key when it comes to businesses, long-term productivity growth is happening in China and it's highly likely it will grow at 5, 4, 3% over the next decades which will have a huge impact on the global economy. So yes, there is risk but you have to always look, okay, risk and positives. China is a top-down economy controlling everything, dictating what their citizens have to do, which is a completely different system than a bottom-up economy of the United States of the Western world. China is continuing to grow. If there is a fire, they just run immediately to put it out oppositely to what the Western world does. So we have to really always balance the risk and reward there. And the most likely thing is that China will continue to grow over the next one, two decades and that it will be the leading economy of the world, something to think when it comes to investing. Also, we don't know, Claremont says that there might be an isolated America as the post-World War II international order continued to erode. The markets ignored the longer-term implications of a more isolated America, a world increasingly adrift and global leadership up for grabs. So something to keep in mind, okay, how will this look long-term? Sanctions we discussed in Russia, okay, they're not buying equipment to drill from American companies as they did. They are now developing that equipment in-house, which leads to, okay, they are losing, the Americans are losing their market. So over the long-term, there are always two sides to sanctions. On the stock market, Ray Dalio says how most people are levered long, long stocks, long equities, long bonds, everybody is long. And the last 10 years of stocks can only go up, up, and up, really created the situation where most people, most pension funds, most everything is long stocks. However, the risks as the stock market goes up, and as we enter the late part of the cycle, the risks increase. And that is what people forget to think about. Further, another big risk for the environment is the wealth gap, the increasing wealth gap that we have to really start thinking about for the next decade, because it might hit us hard. If we look at household wealth in the US, the richest 10% of families went from 20% of wealth to 50% in 2013. So the rich got richer, the poorest 50% of families didn't go anywhere, and the families between the top 10% and the poorest, so 80% just increased a little bit their wealth. Similarly, top 1% huge increase in wealth and the inequality in wealth really approaches the levels of the 1920s, the roaring 1920s, which led into a depression and everything that followed. Median household network by quintiles, the first and second quintile, so 20, 20%, 40% is practically nothing, and the top 20% is really rich with a net worth of approximately 600,000. If we look at the share of total assets by asset category, the poor, the bottom 90% of the population has 73.5% of the debt. So how are they going to drive the economy? How are they going to increase productivity, increase spending when they are already so burdened by the debt? And the top 1% has 49% of the stocks, 41% of the stocks are under the next 9%, so the rest, the bottom 90% has just 9% of the stock market, which is crazy and a big wealth gap that might lead to issues in the future. Just to keep a positive attitude, Raylio says that he hopes that he will be positively surprised in the next 10 years, which is always a possibility. We always have to think, okay, this can happen, this can happen, these are the risks, they don't need to materialize, they might materialize, and that's the key when it comes to investing. Something can happen, but it might not happen, and if it didn't happen, it doesn't mean, oh, you were stupid for not protecting yourself or something like that. It simply means, okay, it didn't happen, that's life, and that's the key when it comes to investing. You have to invest in a way that you don't lose and that you are protected for whatever happens and take advantage of the upside as much as possible. Gambling usually, if the bad thing happens, isn't a great way to invest. So that's the key message, and the key message here is, okay, how can I not gamble what I have, so not risk what I need in order to get higher, get better returns and improve my financial life. So how to invest and keeping the risks in mind? Individuals, professional investors and financiers are prone to project their own recent experiences into the future, said Claremont wrote. So when adversity is absent, like it was in the last 10 years, investors become complacent. They assume good times will continue and they grow careless about risk, perceiving it through rose-colored lenses. And this is crucial to understand because it is important to perceive, to implement the risks that might happen in the future into your investing strategy, not what has happened in the last 10 years, because that has happened and it is unlikely that it will replicate. It is possible that the SAP 500 jumps another 200% in the next 10 years, but it is unlikely, the biggest likelihood that it goes sideways, drops 40-50%, goes up, goes down, anything can happen. And that's what you have to implement now in your investing strategies. To continue with Claremont, I'm convinced as an investor that the world I live in every day has gotten more short-term oriented. The pressure on the game changed the game. Some investors are too quick to demand ephemeral fixes. Why aren't you restructuring? Why aren't you doing a spin-off? Why aren't you buying back stock? So, yes, after nine, 10 years of zero interest rates, after everybody has got a high fix on debt, they are doing very short-term investment thinking, doing buybacks, taking on short-term cheap debt to do buybacks that might become expensive debt in the future, which leads to risks and increases the risk of the market. And the risks have already been materializing in some places, which tells you, okay, things are not that good. Ford Motor Company is down 44% over the last five years. That's a huge decline. Kraft Heinz was down 40% over 2018. That's another big, big decline for a very important stock. Ford, Kraft, for very important stocks that discuss the economy, how things are working. And you might say, okay, parts of the market are really in a bear market. China has been 20% down last year. So that's something to put into perspective. Okay, not everything is looking that good. Not everything is great because these are big, big hits for those people that were invested in such stocks. And this is material for every portfolio. And you have to be careful, okay, what will happen in the next 10 years so that I don't lose money like the investors in Ford, which we knew higher interest rates, slowing down economy, the economy reaching the limit in productivity will do bad for the car industry. And that has been reflected in the stock price. Speaking of Kraft Heinz, tomorrow I'll do an analysis of a stock as it is down 40%. It still pays a dividend. It has a lower low PE ratio. So is it a buy or not? We will dig into the company. I will show you my ways of analyzing such a businesses and whether that is what I am looking for when it comes to investing. Looking forward to your comments on the risks of the stock market. How are you positioned? Thanks for watching and I'll see you tomorrow with Kraft Heinz analysis.