 Good day, fellow investors. Welcome to the long term stock market news. Now, when I say that stocks might fall another 60%, the intention is not to scare you. And this comes from Ray Dalio's last message that we also discussed this Wednesday when we discussed his performance. But today, we're going to dig deeper into portfolio balancing. What happens if stocks fall and how to put yourself in a balanced way so that it doesn't matter that much to you? Let's first see what Dalio said. So in a Facebook message, he just quickly commented on his performance, but the key in what he said that if you're worried when the stock market goes down, this means that your portfolio has no balance. And therefore, the key with everyone's portfolio should be to have balance. And we're going to discuss today, what does it mean to have balance? What can happen to stocks? We're going to go back into history to see Dalio's perspective on the current market, to compare that to the 1930s that he often mentions. And then we're going to discuss, okay, how, what are the different ways to have balance in your portfolio? The way Dalio has balance, which is very complex. And the way Warren Buffett has balance, which is very easy and practically anybody can do that. So let's start with history and then go on to portfolio balance. The key when I say that stocks can drop another 60% comes also from Dalio. And his quote that every asset class will probably drop 70% or more once or twice in your life. And this is the most important piece of news you can hear anywhere, anytime, because that's the core you need to know for your profession. And then Ray Dalio as an economist, historian likes to compare the current environment with what happened in the past. So we'll learn from history. And in 2015, he wrote an article about comparing back then in 2015, but this will also explain his current position in portfolio positioning and his, let's say, relatively bad performance over the last three years, 2016, 2017, he was up one or two percent, but he's prepared for something different. And the key is here to understand something. It's impossible to time. That's why it's important to be prepared because things are impossible to time. Ray Dalio in the conclusion of his article says, please understand that we are not sure of anything. But for the reasons explained, we do not want to have any concentrated bets, especially at this time. So we are not sure of anything. Ray Dalio, Sven Karlin, we are not sure of anything. We can just position ourselves so that whatever happens, we end up okay. And the biggest risk when it comes to investing is being sure of something because the markets, the economy, those can always prove you wrong. And you can never predict. In hindsight, it's easy to look at them, but you can never know what will happen. Therefore, the key is to be prepared. Let's see what is Dalio seeing as a possibility that might happen and an extremely important possibility that everyone should be prepared for. So he likes to compare this environment with the 1930s because that limits reached a bubble top, the long term cycle causing the economy and markets to peak. 1929, 2007. Now we are in 2019 also at markets peak. Interest rates hit zero amid depression. 1930s, 2008, 9, 10, 11, long period with zero interest rates. Money printing starts kicking off what he calls a beautiful, leveraging 1930s and consequently 2010s. The stock market and risky assets really, thanks to the money printing, 1943, 1946 and 2009, 2018, we can say. The economy improves during a cyclical recovery, very good economy after 1933. Similarly from 2009, good data from the economy, strong jobs, all that you see. And then the central bank starts to tighten, resulting in a self-reinforcing downturn. And we have seen the central bank being tight on that tightening 2018, but now already the minutes from the Fed that came out and Powell with his speech are easing the situation because we already see what just a little bit of tightening did to the markets. If they continue to tighten, then there will be more trouble in the markets. But if they don't tighten, then there will be more trouble down the road. And that's something very difficult to balance. And the Fed and monetary policies never manage to balance things like that. On top of everything, valuations are relatively high. We are now at a price earnings ratio of 20 for the SAP 500, thanks to improved earnings and declined stock prices. Similarly to where we were in the 1940s, 1946, 7 also above 20. And the key for daily is that from such a position, it is very likely that stocks will not go anywhere or will go significantly down for a long period of time. After the 1937 peak, there was a big decline in stocks that therefore I say stocks might crash for another 50-60%. However, from 1947, if we look at the long term performance of stocks, it took a long, long time for stocks to get back to similar levels. We talk here about more than a decade. Okay, there was a war. So that took a little bit of time. But in 1947, we go to 1950, 150, 1950. So that's 15 years for stocks to get back. And the decline was very, very severe. And there was really 10, 15 years of negative returns for stocks. And these are all things that can happen. So we can be seeing the SAP 500 20% lower in 2029. And that's a possibility that few, few take into account. And therefore, the key is to have a balance for whatever might happen out there. Because we can have stocks going down. We can have inflation. We can have populism. We can have a big recession because we are at the end of the long term debt cycle. And then how to balance that? How to balance that into a portfolio? How to invest now? Well, as Dalio says, you are balanced if, when stocks go down, when the stock market crashes, if you don't care, then you have a balanced portfolio because whatever happens, you are okay. And that is what you have to achieve within your portfolio. How to do that? You have Ray Dalio with an all weather portfolio, which is a pretty complex machination of various asset classes, which the key with the balanced portfolio is rebalancing because he always looks at the risk of each asset class he owns. When the percentage in the portfolio of the risk drops or increases, he sells parts of it by something else. For example, if stocks are too expensive, thus the risk of stocks is high, he lowers the portfolio position down and buys something else where the risk is lower from a fundamental perspective, I would say from a fundamental perspective. So that's one way of balancing. The key is, okay, balance. You look at the portfolio every quarter, every six months, every year, sell what's up, buy what's down, and then you rebalance the portfolio. And then, you know, okay, if stocks go down, I'll simply buy more. That's easy. That's the Ray Dalio way. However, we have also Buffett. And what Buffett does is very simple. He manages his cash position. If we look at Buffett's cash position, look at how it is perfectly correlated with market downturns and with recessions. Because the SAP 500, you see how it is in a cyclical way, works in a cyclical way. So you have to take advantage of those cycles and Buffett does exactly that. If we start from the 1990s, 1999, Buffett had almost 20 billion in cash and you can see that amount really decline in the 2000s, 2001 as opportunities arise. So he really goes down to having as little cash as possible when he can deploy that cash. 2002, 2004, he starts again accumulating cash, more and more cash from the float, from the insurance float. And then 2009, he buys Burlington North in Santa Fe and the cash goes down to, at that moment in time, 20 billion is what he is saying. And even currently, he's saying 20 billion in cash is what makes him sleep well because that's the money he needs for insurance catastrophes. And then since 2010, his pile of cash has been growing, growing, growing. And he's waiting for the next cycle to rebalance this cash position with stocks. And he will be happy when the next cycle comes because he will be able to buy things on the cheap. That is what is called rebalancing just between cash and stocks. Now, when I say cash, very important note here, cash is anything for me that's shorter with a shorter term than one year. Bonds, you can play on taxes, short term loans, whatever gives you some kind of yield in the short term, that's all cash for me. So when I say cash, don't think it is in a sock or under a mattress. It's a lot of ways, try to get some yield without any risk or don't get any yield if you have to take too much risk. But anything short term is cash also for Buffett. Buffett is invested in US t-bills, treasuries with maturities of average three to four months. And he's also saving there on taxes. So that's also something you can see how you are taxed differently on t-bills or bonds. But that's a different story. And by the way, thanks Richard B for the comment on that. So you have to see how to prepare for whatever might happen. And I say whatever might happen, that's very important. We can have inflation, we can have a recession, we can have stocks being down for a very, very long term. So that's the message for today. Have a balanced portfolio. We will be talking more about balancing. What am I doing? I'm trying to apply Ray Dalio's schedule, Ray Dalio's scheme of things with Warren Buffett's attitude of investing in great businesses. I looked at all gold miners. I found two. Okay, that might be great business, good business. And I buy that. So I'm hedged with gold, as Dalio says commodity is gold. And I also apply the Buffettian way of looking at great businesses. And that's what I'm working on now. Looking at Russia for now. This leads me to looking at the complete LNG sector, natural gas. Okay, what are the trends there? Claremont is long. So really digging deep into every potential stock, every potential investment, and then building some kind of good business Buffett way long term portfolio that's also balanced also in a daily way, but also in a cash way. So when stocks crash, we are ready to buy more. Also real estate on the side. So whatever happens, I'm balanced. And that's why you will not see me being unhappy if the stock market goes down or happy if the stock market goes up. Really, relative performance is not what matters. And when you're in such a place, you can accumulate wealth over the long term. And that's the core of this channel. That is the core of this long term stock market news. And I hope that over time, if you subscribe to this channel, we can build such a portfolio for you because it's more about mindset and rebalancing so that you can too have peace of mind when investing, sleeping well. And you know that what you own compounds over time. And no matter what happens, you will do well. Because at the end, after the 1930s, after the Second World War, still the world now is a much better place than it was back then. So things will go on, humanity will prevail, be positive, stay positive and look forward to what is coming. Thank you for watching, looking forward to the comments and I'll see you in the next video.