 Good day, fellow investors. Will there be a crash? Will there be a recession? Of course, there will be. But in this video, I will show you how it doesn't really matter for your investing, for your portfolio and that you should focus not so much on the stock market news that the media produces, but on real fundamental data. In this video, we'll discuss politics and economics versus business news. Earnings are the key, not economics. Market valuations, how those impact long term returns. Will there be a crash? How to take advantage of that? How to focus on earnings and take advantage of volatility and then invest when you are happy with the business earnings? Over the past few years, I've been making videos, articles on macroeconomics, on GDP, housing economy, Europe, Japan, everything that is very interesting from an intellectual perspective. But as time goes, I see more and more, okay, it doesn't really add value to my investing perspective, to my investment returns. And even recently, I'm subscribed to Wall Street Journal newsletter. And in the last two weeks, there were four headlines about US housing, about the US housing market. Two were extremely positive growing and two were extremely negative. And then when I see all those news, I said, okay, I have to make a video about for people how to differentiate between the news, the noise, something not important and the real deal. And I will give you five things that five steps that will help you deal with the news, differentiate from the noise and focus really on the things that matter for your portfolio. For example, the SAP 500 has been flat since January 2018. But the fact is that nobody could have predicted where the SAP 500 could have gone. It could have been up 20%, down 30%. Nobody could know that. And that is something that the news, the media, they are focused on the short term and you see that volatility over the last few years, over the last year and a half. But you cannot predict that. And therefore, you should not focus that much on the macro, on economics, on GDP, but you should focus on the businesses because a lot of businesses did really well over the last year. And that is what we have to focus on. So I'll take this opportunity to discuss the real news and the news that could be important for your portfolio. And I'll go through five steps that will indicate, okay, how am I going to tackle the news versus the long-term businesses? The first piece of information extremely important is that your long-term investment returns are driven by earnings. In 1999, SAP 500 earnings were 58.55 points. Today, we are at 130 points. That is an increase of 122%. Consequently, how did the market do? Well, the SAP 500 was at 1282 points in 1999. And now it is at 2757. That is 115% up. So we have 122% and 115%. Therefore, investment returns are perfectly correlated with the long-term earnings growth that stocks will deliver. And over the past 20 years, we have had a dot com crash. We have had a great recession. We have had a commodity crash, boom and bust. But still, companies, businesses kept doing well. So over the next 20 years, businesses will probably grow, earnings will probably grow. And therefore, that's what you can expect. Will there be market crashes? Will there be recessions? Yes, yes, yes and yes. But will those things impact your long-term returns? If you focus on investing in businesses, a margin of safety value investing, then you don't have to worry about stocks crashing or recessions because those in the long term actually improve your returns. The second key thing is to keep an eye on valuations because the market is extremely differentiated and valuations are also the driver of your returns. In 1999, the S&P 500 was at 1282 points with earnings of 58.55 that leads to price earnings ratio of 22. Thus, the earnings yield was approximately 4.5%. 4.5% yearly earnings yield compounded over 20 years leads to 3091 points. There have been some dividends. So again, we are there. So if you look at the valuation that the market offers, that is what you can expect over the long term to be your long-term investment return. The current market valuation is similar 21.1. So you can expect long-term investing returns of around 4.5% as it was the case over the last 20 years. That can be a little bit higher, a little bit lower depending on future valuations. But the businesses, the dividend yield of around 2% is what will deliver your long-term returns. However, in the meantime, can stock crash and what should you do? Well, yes, of course those will definitely crash sooner or later. Stock market is always volatile. But if you keep that long-term fundamental earnings yield perspective on stocks and we later discuss how you can get even more than 4.5%, then okay, this is my return line when it is below the stock prices of what I buy are below. I buy more. I reinvest the dividend. When it is higher, I buy something else. And that's how you can really take advantage of those crashes and not worry about them, but be happy about them because those are opportunities. Further, the market is extremely differentiated and volatile. So learn about the business because that is the key to understand when it comes to investing. If I look at the top 10 positions of the SAP 500, the PE ratios vary extremely and I can tell you that returns will also vary extremely over the next 20 years. Forward price earnings ratios of the top 10 SAP 500 go from 10.6 from JPM, 15 for Apple, to 60 for Amazon. Of course, Amazon is growing much faster. But if you understand that business, you can understand the long-term fundamental burn business yields and shift your focus from the news to those fundamentals. And those will enable you to understand the long-term earnings yield and invest accordingly. What's very interesting to see is that if we take a look at these SAP 500 holdings from 20 years ago, only two companies that were there are still in the top 10. That's Microsoft and Exxon. All the others have been removed by other companies. Therefore, it's extremely important to look and to try to understand your investment. Where will it be over the next 20 years? This doesn't mean that if a company falls out of the top 10, it will be a bad investment. You just have to understand the business earnings, the potential dividends, the cash flows and that's why it's very important to follow a business over a longer period of time. When you follow a business over a longer period of time, you understand the business much better than 99% of anybody else and you understand it better than the media. You understand it better than the short-term news that impacts stock prices. We have seen Apple drop. We have seen Facebook drop significantly. So when you understand that long term business trajectory compared to all the media noise, that gives you an advantage. So again, you forget about the media, what Trump will do, trade wars, etc. And you focus on the earnings yield. It will be volatile but not as much as the stock price, which again gives you an opportunity. So as I mentioned, how to take advantage of volatility, the easiest way to take advantage of volatility is to rebalance your position in relation to the earnings yield that position offers. For example, Apple was at the high of 232 just six months ago, then it went to a low of 142 and now we are back to 173. So the problem is that Apple's earnings and business weren't impacted. Earnings didn't crash 50% as the stock price did. So the market focuses on the short-term, on the noise, on the earnings, but on the short-term earnings. But if you look at the long-term earning power, how a stock works, how a stock moves over a few years, you understand the cycles of its products, etc. Then you can really easily understand what happens, what will happen, how to invest, and you will not worry about stocks crashing. In this case, Apple from 232 to 142, that's a big stock market crash. And here you have it, a crash. So don't worry about it, just invest in line with what is the business doing. I didn't buy Apple, but in the summer of 2018 I, for example, invested a bit in Brazil, because I did find an interesting business there, and I was happy with the dividend and with the earnings yield. The stock did really good, so I'm now in a, let's say, positive position, nice position to think about what to do and compare it to the rest of portfolio. But the stock market will always be volatile, earnings didn't change at all, the stock price is just up 50-60%. So when you understand the long-term business, when you understand how to follow it, the economy, what will people do, no matter what, no matter what happens in the news, then you can take advantage of that volatility. And finally, number five, it's crucial that you are a business owner. You don't care about the stock market, you don't care about the news, you don't care about the noise, you focus, okay, am I happy as a business owner of that business? When you start thinking as a business owner, everything is easy, really easy, because okay, I, if you even can think that there is no stock market, that there is no quote that goes up and down every day, and you invest in the business and you expect your returns to come from the business, everything gets easy. For example, if you invest now in the S&P 500 over the next 20-30 years, you can expect a return of around 4.5%. So you can buy that and forget about it. If you want 7%, you have to buy good businesses when their price earnings ratios are around 14. And we have seen Apple close to that level just a few months ago. 10%, you have to do the same, but you have to buy at the P ratio of 10, or higher ratios, but with future expected growth. So you have to be able to calculate to know the business to understand what's going on and where will it lead in the long term. 15%, you have to look at great businesses in distressed sectors, value investments, cyclical investments and take advantage of the market's short-term focus. This implies a lot of work, but it is possible still to find such opportunities even in this market. To summarize, forget about the news, focus on business reality, long-term reality, earnings are the drivers of your investment returns, be a business owner, focus on earnings, and that will allow you to take advantage of the market's irrationality, or better to say, volatility. News, Trump, trade wars, Mexico, Canada, whatever was the main topic of discussion over the last few years doesn't really matter for your portfolio. So if you want to focus on business, to be a business owner, please subscribe to this channel. Looking forward to your comments, thanks for watching and I'll see you in the next video.