Transcript
0:00 Investors, look at stock charts every single day and over 90% of us are reading them completely wrong. What surprised me is that even Joseph Carson, probably one of the most popular finance YouTubers with millions of views every month, is making this exact same elementary mistake. In his recent video, something has gone terribly wrong. With over 250,000 views, there is a quite a lot of chart nonsense, but not a single person in called him out. So, yes, Joseph, something has gone terribly wrong, but it's not the underperformance. It is the way you are looking at these charts.
0:54 Now, don't get me wrong. I have a lot of respect for Joseph Carson. He's transparent and shares his portfolio publicly, and his video are really pleasant to watch. He's one of my favorite YouTubers, but if he's wrong, he's wrong. I must call him out, even if he likes Duolingo. My name is AdEconomics. I'm a contrarian value investor. Usually, I don't teach anything on this channel. I prefer when people make mistakes because it creates a better opportunities for investors and stock pickers like myself.
1:33 But, this error is so silly, so common, and so misleading that if Joseph Carson is making it and out of 265,000 views, no one is even aware of it, it's really time to say something. So, today I will show you the problem fooling 90% of investors, why the charts are wrong, and the simple fix that will completely change the way you look at stock prices forever. AI is suggesting me that if I say the word forever, it will improve my retention. Now, let's go straight to the point and watch a couple of clips from Joseph's video.
2:17 >> The important question I believe for investors is what is causing this market to go up? Why is the S&P 500 and the QQQ doing so well in 2026? That could answer the question of what's happening with my portfolio or similar ones that aren't seeing much of a upswing this year. And one of the best explanations of what's driving this market is a concentration of investors into a specific sector. Semiconductors and tech hardware and equipment, just those two sectors contributed nearly 85% of the S&P 500's year-to-date gains. So, the vast overwhelming majority of the gains year-to-date, the reason that the markets are moving up are because of semiconductors and hardware and equipment.
2:58 >> Basically, he's saying that he is underperforming because the market breadth is very slim. Only a few stocks are carrying the market returns. So, it has been very difficult for investors without semiconductors in their portfolios. I agree with him. It is a difficult year. However, many other YouTubers have a lot of exposure to semis. For example, the YouTubers on top of my mid-season rank recommended the right stocks. So, it's not that this trend was impossible to forecast. It's just that Joseph and I didn't. At least he has ASML in his portfolio. I don't even have that. Anyway, I'm doing all right. You can watch my last portfolio update in this video right here. Let's move to the next clip because this is where I really don't get it. Let's see if you can spot the nonsense.
3:57 >> When you look at companies like this that are up so much year-to-date, I think the best exercise is just to zoom out 10 years and look for any type of anomaly. This stock is one that has been flat for 5 plus years. It had a big bump in 2020, then it gave up a lot of the returns. And then for about 5 years, this company just remained flat and then it had a sudden burst in gains.
4:18 Practically all the gains in just the past year. We look at Western Digital Corporation and you see a very similar trend. We zoom out 10 years and this company has been literally flat for 9 years straight until we get into late 2025 and then 2026 where it had its epic boom. Revolution Medicine shows very similar type of story. You zoom out to 10 years, completely flat for 10 years and then all of a sudden gains in the past year and a half. Seagate Technology, we look at the exact same type of thing. Zoom out to 10 years, completely flat for an entire decade until the past year and a half. Micron Technology, and it's literally flat for eight and a half of the years. It made no gains until the past year and a half alone.
4:57 >> Have you noticed anything wrong? Let me help you out. Let's take a one of the companies it shows, Western Digital. Does it look flat to you? To me, it does not. From 2012 to 14, there is 300% gain followed by 70% crash, then a 200% gain, then 68% crash. It looks very cyclical like semiconductors typically are, but there were plenty of potential gains for investors who timed it correctly. Of course, if I add 2026, now the earlier part looks completely flat simply because the recent gain have been extraordinary. Let's take Micron.
5:45 Joseph says, >> And it's literally flat for eight and a half of the years. It made no gains until the past year and a half alone. >> Look how flat it is for nine years, and then it exploded. Really. So, let's take out the last year. Does it look flat now? Nope. It's just an optical distortion of these wrong charts. If you think I'm exaggerating, I'm not. Joseph really believed MasterCard was steady compounding while Micron was flat.
6:19 >> We look over the past 10 years at MasterCard. Both Visa and MasterCard are examples of companies that grow at a very consistent basis, and even their stock price grows at the same pace. Over the past 10 years, the gains have been incredible. It's been up 500% not counting dividends. And we look at this and it's a very linear growth from MasterCard. Again, every stock is going to have some level of dips, but what we don't see is 10 years of being flat and then suddenly a spike up a year and a half ago. It's really difficult to pick a stock that's going to do well that hasn't done well for eight years or 10 years. That's just difficult to do. Most people aren't going to predict that Micron or that Sandisk will be the stock to buy three years ago.
6:59 >> Let's look at Micron returns from 2016 to 2025. Does it seems like Micron did nothing? Incredible returns. Let's compare it with Joseph's stable compounder MasterCard. Micron did much better during all this time, but after outperforming MasterCard and the index for nine years, they did so well in 2026 than the previous nine years look completely flat. Unless you click the magic button right here, the logarithmic scale, and finally the chart makes some sense. The mistake almost every retail investor is making is analyzing long-term charts using a linear scale instead of a logarithmic one. That sounds complex and difficult, but the concept is really really simple.
8:00 On a standard linear chart, every single inch on your screen represents an equal amount of dollars. Like in Joseph charts here, one line every $200. On a logarithmic chart, every single inch represents an equal percentage change. 50 to 100, it's a double. 100 to 200, another double. Another double, and so on. Linear charts fools investors believing that old compounding never even happened.
8:37 Here it's why it's so extremely important. Let's take a stock that went from $1 to $2. Let's say Amazon in 2003, you double your money, it's 100% return. Now, imagine that the same stock years later go from 90 to $100. This is a 11% gain. If you look at that on a standard linear chart, the $10 gain from 90 to $100 look on your screen 10 times bigger than 100% gain that double your money in 2003. Think about how completely misleading that is. A 11% gain looks huge, while a 100% returns that double your money looks basically flat. By default, all trading platforms and websites will show you the linear chart, the wrong chart. You need to click L or log to level the playing field.
9:43 Now, you see the difference? The 100% gain in 2003 looks much bigger than the 11% gain in 2018. Linear charts are fine for short terms or day traders, but if you are analyzing a stock for a time frame longer than 1 year, you must must use a logarithmic chart. Since I want to be constructive and not only criticize, I'm asking Joseph to add the log scale to Qualtrics, and even better, since it's a platform for long-term investor and not for trader, set it as a default. Some of you have asked about my valuation framework and how I value stocks. As I mentioned earlier, I usually prefer to keep my edge to myself, but since I need a little bit of money, I decided to run a small experiment. I'm going to take on just three people for a 12-hour one-on-one mentorship, where we talk about stocks and valuation methods. Because of the heavy time commitments and since I don't have much time to spare, it's strictly limited to three people who can keep my formula secret, are serious about investing and valuation, three have money to invest and pay me for my time. If you want to apply, there is a Google Form linked in the pin comment below. I hope you find this video helpful. Share it with your friends who use linear scales for long-term investing. Leave a like. Leave a comment. Oh, an important reminder, watch out for fake emails from scammers impersonating me. I will never email you directly. I always answer right here on YouTube. Next week, I'm going to Florence, so see you in a couple of weeks with a big surprise.
11:38 Peace out.