Transcription
The stock market crash that we have seen unfold over just the last couple of days already rivals the crash at the beginning of the Great Depression in 1929. So first, let me show you what I mean when I say that this crash already rivals the Great Depression. This right here is a table of the 25 worst 3-day percent changes in history in the stock market. And you can see, as of April 7th, the current market crash over the last three trading days is at number 11. Number 10 was the Great Depression, and number 12 was also the Great Depression. You can see, as you move down the list all the way to the number one worst 3-day performance, we see 1987, which was Black Monday; the Great Depression; the financial crisis; World War II invasion. Those were all examples of 3-day market performances that were worse than right now. But as it stands right now, we are already seeing stock market performance levels that match the damage that was happening during the Great Depression.
But the shocking thing about this performance recently is that, by and large, it's not actually retail investors that are selling. If you take a look at this chart, you can see that last week hedge funds had the biggest day of selling stocks since at least 2010. On one day alone, they reached about $40 billion worth of sales, which makes sense considering the rumors that there are many hedge funds getting squeezed out right now because they were overleveraged and now they're facing margin calls. Now you might think, well, it's institutional selling, but it's also got to be retail, right? Not so fast. Last Thursday alone, individual retail investors purchased $4.7 billion in new stock purchases. In other words, the small retail investor is still buying the dip.
Now, historically, small retail investors do not have the best timing, and many times they are wrong. But so far, as long as retail doesn't eventually get squeezed out and capitulate and sell at a loss, this does represent a massive transfer of the ownership of assets from institutional investors to the hands of small retail investors. And there are actually examples of this kind of thing happening in the past and retail not capitulating. In fact, this was one of the large outcomes that happened in 1987, one of the other historically large market crashes. In other words, these types of movements where the market crashes over 20% in the course of just a couple of weeks are because very big money gets pushed out for some reason, which shoves the markets lower. And assuming you keep your cool and assuming you have cash to deploy, people like you and I get to take advantage of this.
Now, it doesn't seem like this is just an unfortunate side effect of what the current administration is doing policy-wise. It actually seems like this might be one of the express purposes of what they are doing. The current Treasury Secretary, when he was asked about the carnage in the markets, basically just said, "We don't care about that." Most equities and assets are owned by the top 10% in America. And even though 62% of Americans own stocks, that means 38% of Americans don't own any stocks at all, and that is further concentrated among upper-income Americans, with only 25% of lower-income individuals owning any stocks whatsoever. In fact, if you take a look at this chart, it shows how bad the problem has gotten. This is a chart that shows the S&P 500 measured by the median income in the United States, which means that compared to the median income, the S&P 500 has gotten extraordinarily overpriced or expensive over the last 100 years, which is one of the reasons why lower-income households are finding it so hard to get ahead. These days, asset prices have been inflated beyond the point of affordability, making it harder and harder to escape the rat race.
Now, don't get me wrong here; I think that many of the things the current administration is doing is completely backwards. And while it does have the effect of pushing down asset prices, it's not like it's going to have the effect of making things better economically long term. There are a lot of good things the current administration is doing and a lot of really stupid things, including the tariffs. And no, it doesn't seem like it's just a negotiation tactic, but that is a conversation for another video. Now, one of the reasons I say this is because if you look at the yield on the 10-year government bond, it is now back up higher than it was on the so-called liberation day. In other words, one of the goals from this administration is to push yields lower so they can refinance the debt, make government spending costs lower, so that they can lower the cost of just the interest on the national debt. But that's not what is actually happening. While the stock market has been plummeting, treasuries have been getting sold off as well, pushing interest rates higher. So it's not like there is a flight to safety going on where people are selling stocks and buying US treasuries instead. This isn't resulting in lower borrowing costs for the government; in fact, as of right now, it's resulting in higher borrowing costs. And this is one of the reasons why I think it is logical to expect more short-term pain ahead, which means your window of opportunity to take advantage of this is definitely not over yet, but it is small and probably shrinking.
Because all it's going to take is some good news—some tariffs being rolled back, some trade deals being made, tax cuts on individual households, better-than-expected jobs numbers or inflation numbers, or the Federal Reserve coming out and giving expectations of future rate cuts—these are all things that could send the market soaring on a dime. Which means that you cannot afford to miss out on the prices you're seeing in the market right now. That's why people always say that money is made during bull markets, but fortunes are made during bear markets, because those are the opportunities to buy assets at actual discounts to their true value. So if you have money to invest but you don't know when to buy and you don't know what to buy, I have created a course that is literally perfect for you. I teach you exactly how to take advantage of this extremely rare opportunity and buy world-class assets at fantastic prices. I teach you how to identify bear market bottoms; I teach you how to filter out the great companies from the garbage companies; how to know exactly what you should be paying for these companies; and much, much more.
Bear markets are extremely rare, and if you miss out on this opportunity to buy the best assets in the world at prices they may never be at again, just because you didn't know when it was going to bottom out and you didn't know which assets were actually on sale, you're going to be kicking yourself for years hoping there will be another pullback. Don't let that be you. I've got everything you need to know to take advantage of this, linked in the description below. This is a chart of the global money supply, and you can see that it has continued to increase. One thing that people usually don't recognize is the lag time between monetary policy and financial markets. We saw this very clearly during the market crash in 2020, when markets bottomed after falling 35% from top to bottom on March 23rd. But you can see by March 23rd—you can see here on the US money supply chart—by March 23rd, liquidity had already started to skyrocket. In fact, zooming in closer, we can see that on February 24th, the money supply was just around $15 trillion. Yet on March 23rd, one month later, when the market bottomed, the money supply had already increased by a whole trillion. Meanwhile, that whole entire time markets kept falling. In other words, there is a lag time before the new money that is created can enter the financial system, work its way through, and start to bid back up asset prices. Now there is an even larger lag time between that and when that newly created money hits the prices of goods and services. But even financial markets take some time to respond.
At the end of the day, when you look at just the price action of the markets right now, this does not look like a market bottom, and current policy stance indicates more pain to come as well. But at the end of the day, all of this volatility simply means opportunity for those who are able to look past their fear and invest according to logic, not emotions. And anybody who does that is probably going to be very happy they did, probably very soon. And don't forget to get my bear market investing guide; I have it linked below. And I forgot to say this before, but it is heavily discounted right now. Normally it's a lot more expensive than this; I put it on sale for you guys because this is such a unique opportunity to take advantage of it. And what you'll learn in there is literally worth tens to maybe even hundreds of thousands of dollars for your portfolio over the span of your investing. As always, thank you so much for watching. Have a great day.