 Good day, fellow investors. Nine years into one of the longest bull markets in the stock market history, euphoria and complacency have replaced prudence and patience. So in the first years 2009, 2012, everybody was reminding about the stock market risks, etc. However, over the last five years, with the SAP 500 returning 10% per year, that prudence and risk focus has been replaced by euphoria and complacence that stocks can only go up, it's best to invest in stocks, invest in index fund, etc., etc. However, this complacency is typical late cycle behavior and that is what we are going to discuss today. We're going to discuss, show what's going on in the economic cycle, why the economy is in the late part of the cycle, how that reflects the stock market cycle, which is again the stock market has its ups and downs, pretty much correlated with the economy. We're going to explain the typical behavior of the late part of the economic cycle. Then we're going to discuss how to invest in that late part of the economic cycle. And then I'm going to finish with four key mindset investing rules to keep in mind when it comes to investing, especially over the long term. So we have one cycle from 2009, one part of the cycle from 2009 till now. So as investors, as long term investors, we have to learn how to invest over many, many cycles and do that sustainably. Most people invest in the excitement of one cycle and then when it goes down, lose all that they have made, which doesn't allow them to look forward that one cycle. So let's start. On the economy, the one thing that's easily forgotten is the word cycle. The economy and markets are cyclical, but as I said, that is so easy to forget. The US economy is in the second longest economic expansion in history. However, the growth is much lower than the average growth in the past, which leads some to say that the economic growth will last longer, as it takes more cumulative GDP growth to reach a peak and then in the recession. However, if we look at the right slide here, I think that the lowest line, the blue line that represents the current economic expansion is just a sign of weakness of the economy, not a sign that there is more room to grow. But okay, we'll see what happens. This chart from JP Morgan asset management will help a lot to show us how everything works in a cycle and how we must not forget that everything works in the cycle. Leading economic indicators compared to SAP 500 performance show pretty good correlation, especially over the last nine years, the economy has been going up, has been doing very well and stocks have been going up. Similarly, 2009 recession, economics down, stocks down, 2002, 2007, economics up, stocks up and the same pattern evolves, evolves over time. What do you think will happen next? I think a recession is overdue and a decline in the stock market too. Further, if you look at the right chart, it shows initial jobless claims versus the SAP 500 performance. When the jobless claims levels really hit bottom means that the economy cannot grow that fast anymore and a normal reversal in the cycle is something completely natural. So we'll see how that evolves over time. But again, a risk of a downturn in the economy and consequently in the stock market is higher than a continuation of growth. Now, what is the factor that kills that economic expansion? Well, that's usually interest rates. The Fed starts increasing interest rates to prevent the economy from overheating, to prevent higher inflation and whatever, or simply be possible to lower those interest rates in the next recession. But some of those hikes, one of those future hikes, triggers or is too painful for the economy and triggers a downturn in the economy, which then triggers all the upside of the cycle to reverse and then lead the economy into recession. The point is that every cycle continues to grow and then there is economic development over time. However, it's pretty clear here at some point the Fed cannot increase interest rates anymore, which leads into an economic downturn and then we have a recession and a stock market crash in consequence. Also, the unemployment rate is another useful indicator of where we are in the cycle. Unemployment cannot go much below 4% and stocks usually don't do good when unemployment is below 4%. So it's most likely here that, again, we will see a recession because unemployment either goes down or up. When it bottoms out, then it usually leads to a contraction in the market, contraction in the economy and consequently contraction in the stock market. Also, the current state of the economy is fueled by the stock market by higher home prices and that pushes confidence higher. This is a very important chart. So households net worth as a percentage of disposable personal income is now at extremely high levels. So the net worth of the households is 680% of disposable personal income and in a crisis in an economic downturn that is usually around 520%. That difference comes from high stocks and high asset prices, which when there is an economic downturn really push down the confidence of people and people are usually most confident in the late part of the cycle, which we see in this case again. The population simply feels extremely rich just before the next crash is about to come. 1999, we were rich, we have the internet, 2007, we were rich, we had housing, 2018, 2019, we are rich, we have record high stock prices. But remember, cyclicality. Another indicator of cyclicality is the yield curve. When the yield curve flattens out or when it gets close to zero, when there is no difference between the 10 year treasury yield and the two year yield, that's usually a sign that we are close to a recession. So we know that we are in the late part of the economic cycle. Let's see the behavior in the late part of the stock market cycle. There is always typical behavior. The first thing is concentrated gains. Gains are not spread across the board, but the top stocks in this case, the hottest stocks, the stocks that the herd tends to follow and invest mostly in those have added the most gains to the whole index. And just those make things look great. Let's see. If I compare Amazon, Apple, Facebook, Netflix and Google versus the SAP 500, you can see that those stocks are all higher than the black line at the bottom, which represents the SAP 500. Netflix is up 400% over the last five years, then Amazon 281%, Facebook 180%, Apple 160%, Google 83% and the SAP 500 at this point just 45%. So most of the gains come from a concentrated investments from the fang stocks in this case, and that is typical of late part stock market behavior. Further, the market now believes that holding cash is risky and it is relatively risky, but that involves a lot of stock market investing timing. You don't know whether currencies will crash first or etc. So the overwhelming mindset is to be long stocks and just invest in index funds. That is very, very dangerous at this point in time and the risk reward should be really kept into consideration when we are in the late part of the cycle. I'm not saying sell everything. I'm just saying look at your personal financial situation, your personal financial goals and then compare the risk and reward because keep in mind we are in the late part of the cycle. In the 1960s, there were the nifty 50 stocks, 1990s, the dotcom bubble, 2007, there already was one trillion dollar company, which was Petro China. So everybody was investing in oil stocks. A lot of losses from there later as oil prices fell. So there is always this cyclicality that usually bursts somewhere and then we have, we see big declines. So in the late part of the cycle, I think it's smarter not to go with the herd or at least see what the herd is doing or what the herd is not doing and what the herd is pricing in or what is just sentiment, positive sentiment. So differentiate between high risk investments following the herd and low risk business investment. That is one of the key things when it comes to the late part of the cycle. Another signal of the very late part of the stock market cycle is increased volatility. And over the past two months, we have really seen increased volatility stocks have shown something also in since 2018, something that we haven't seen for many, many years. But we are here and increased volatility is typical of the late part of the cycle because the herd doesn't know what to do. The herd usually buys what is in favor, what is doing good. And now things are not doing that good anymore. So we'll see how the herd decides. A subsequent crash in stocks of 10-20% would lead to much, much more selling by the herd. The same herd that was buying and pushing the SAP 500 to record highs. So when it comes to investing, I'll start with one thing, manage your exposure with cash. If there is a crash, do you have more money to buy into the crash? If stocks fall 50%, do you have the money to average down? If you have, then you are well positioned now. If you don't have the luxury to see stocks going down 50%, then you are in a very, very risky position because when stocks fall 20%, you will start getting scared, loss aversion, you will be afraid to lose more and you might sell like most of the people did between October 2008 and March 2009. And that's why you have to keep in mind, okay, if stocks fall 50%, what do I do? And you have to have the cash to average down and buy at, you will not catch the bottom, but buy as stocks go cheaper. And this is investing over the long term market cycle. Also, you'll probably have made exceptional gains in the last 10 years. So as you did so good, you might want to take off some of those gains and really get the money, let's say, get the money and balance your risk reward in the portfolio in relation to the risks of the late part of the economic cycle. The second thing is, okay, we have a lot of companies that have been benefiting from the strong economy, but we don't know how those companies will behave in the next part of the cycle. So the key is to really buy great businesses that will do well no matter what in the economic cycle and especially no matter what in the business cycle. Those are the kinds of businesses that will not go bust, that will continue to pay dividends, continue to produce cash and that you can sleep well and average down no matter what, because you're buying great businesses. I think in the next few days, I'll make the stocks to buy in December, and that will, I will focus on great, great businesses that you can average down without fear if those go lower. Another thing that comes from investing over the market cycle is exciting returns versus good, boring returns. The SAP 500 went up 50% over the last five years, thanks stocks 100%, 200%, and those are very, very exciting returns, and those are very tempting returns to jump in. We all want 200% per year or in two, three years, right? But those are exciting returns and those stocks as they go up, some of them will also crash heavily in the next downturn. So that is the risk and reward. By buying great, boring businesses, you might find good returns, good, boring returns lower than the 200% in three years, but those boring returns might be sustainable over the long term. And that is the key when it comes to investing. You have, if you can find long term returns, no matter the cycle, positive returns, no matter the cycle, over the long term, you avoid those big declines like the 2000.com bubble crash, etc. And you have constant returns over time. When you add the magic of compounding over the long term, you're far, far better off by investing in boring, steady, good returns than by investing in exciting returns. If I look at my portfolio, I have some exciting potential investments, but most are boring investments, good returns overlooked by the market, nobody wants to invest in them. But I wish to find more of them. And I wish to see, okay, give me two market cycles and then come back to the investment returns to my businesses that are kind of boring, and then we'll see who fares better over those cycles. And to finish with, as I promised, the four key takeaways when it comes to investing go for good returns that are consistent over time over market cycles. Be careful of the cost of exciting investments. I think that Bitcoin investors, how they used to call themselves are very wary of that. Be careful of exciting returns and focus on good, steady, long term business returns. Sell the sexy when it is high and buy the boring when it is low. And to finish, investing should be like watching paint dry, investing should be boring, like watching grass grow. And I hope to be the most boring investment channel on YouTube, doing a lot of analysis, doing a lot of researches, but in the long term to be the most profitable over stock market cycles. In the next video or the video after that, I'll try to, the free stocks to buy, I'll try to focus on three good businesses that will deliver good long term returns over the cycle, which will give you an idea of free stocks to, let's say, follow no matter what or to give you an idea of what to look for to be, let's say, to sleep well and be able to invest over the cycle. And then if those become cheaper, simply buy more because you are not, you know, you're going buying good businesses that will provide good returns over time. And that will allow you to compound your investment over time. Thank you for watching, looking forward to your comments and I'll see you in the next video.