- The tech industry is under attack.
A backbone of our economy is burning trillions of dollars,
firing thousands of employees
and threatening all of our investments.
Bankers and politicians tell us not to worry
while they deal with war and inflation.
But the truth is our society is changing.
Some of these tech giants will absolutely vanish.
I mean needed to understand if
this is the tech bubble 2.0.
And what I found out left me feeling uneasy.
Welcome to the darwinism of the tech sector.
This year the top 100 tech firms
lost $2.8 Trillion with a T.
Billionaires have lost ungodly amounts of net worth.
And while some call this a market
adjustment, others think that's just a sugarcoated
way to say, "get your life jackets".
So is this like the '90s? That decade gave us some amazing things.
Britney Spears, Game Boy and the dot com bubble.
One of the largest collapses ever
caused by easy money and speculation.
Back then, the US Economy was booming
and the Fed was in the hands of a fellow named Alan Greenspan.
You might have heard of him.
He designed the modern US Financial system
and happens to be one of the
people blamed for the collapses of 2000 and 2008.
Thanks Alan.
Basically, Greenspan pushed super low interest rates,
flooded the markets with easy money
and started this investing frenzy.
Already sounds pretty familiar.
And in all this, the internet came along.
By the mid 90s, people realized that the internet
might just be the greatest invention since the wheel.
It was madness.
Starts were launched like bootleg fireworks.
One IPO after another shooting up into
the sky, creating this marketing spectacle, promising
riches and an exciting future.
But the problem was just that
many of these companies were literally built to advertise.
Built to push up share prices,
monetization, profits and sound business models.
Really didn't matter if you could
just drum up some excitement.
And boy did it work.
- Just two months after hitting the 4000 mark,
Nasdaq is already challenging the 5000 mark.
The Nasdaq was on steroids, going from 1,095
to 5,000 in march of 2000.
And then,
- Let's talk about the speed with which we are watching this market deteriorate.
- We're red everywhere essentially, down by 4-5%.
- We're down over 16%.
- Dow at the same time has fallen about 18%.
- The stock market is now down 21%.
- The economy crashed, wiping out so much wealth that
it took 15 years to reach that level again.
So the question is, are we destined for this to happen again?
If we overlay the market from 2000 and now it
looks like it could be the start of a collapse.
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OK, we're in 2022 and we got bad news.
A few things looked just like the '90s,
and no I'm not talking about birkenstocks or choker necklaces.
We just exited a period of cheap money,
speculation and massive growth that brought
the markets to unprecedented levels.
And trust me, that's not a good thing.
In fact, the Pandemic accelerated all of this.
It disrupted entire economies, and the global GDP
dropped by over 3.4%, burning $2 trillion.
And despite all this, for tech stocks,
it was peaches and cream, baby.
Powell and the Fed did what they do best.
They brought interest rates down to essentially nothing,
flooding the markets with easy cash.
And then the US government pumped about
$5 trillion into the economy, three times what they
spent with the entire 2008 recession.
Now, all these measures seem to be
the best choice at the time.
But when the economy is basically drugged, sooner
or later you're going to wake up in
a stranger's bed with an overdrafted bank account.
And we can't forget.
There's also a critical social element here.
The Pandemic changed the way we live.
People relied more on the Internet and started
dreaming of working from a tropical island.
That happened to me.
And this was gold for tech stocks.
It meant more ecommerce, more zoom meetings,
Netflix, Spotify, OnlyFans.
And these companies rallied,
expanding offers and services.
But deep down, it was generating a monster.
The Pandemic was looked at as a time of struggle.
But the reality is, with so much
money pumping into the system, many people
actually had more money than ever before.
You probably personally know someone who made
more on unemployment during that period than
they ever made in their entire life.
And there's only so much you can do
with your money when you're locked inside.
So what do you do with it?
You invest it, of course.
And as a result, housing, stocks and
cryptos all pump, threatening a massive bubble.
Now, the question is, is it going to pop?
Did it already pop?
Well, we have a combination of explosive factors.
The Fed has been raising interest rates,
but that's not enough.
They tried this in '99, right before
the collapse, but it was too late.
And actually, it almost never works.
Right now, war and inflation are
pushing the whole economy down.
The Nasdaq just declined 28% and
did it faster than in 2000.
So is the armageddon coming?
Or is there a Bruce Willis coming to save us?
Let's start with the good news.
We might avoid the mayhem for two main reasons.
First, in the late '90s, nobody looked at metrics
like profits or sales when judging a company.
It was all about hype, even more than today.
Tech IPOs had outrageous returns,
like 600% or even 700% in a single day.
Nowadays, people understand what the Internet really is
kind of.
What I'm trying to say is
tech companies tend to have better business plans
these days, and VCs do a bit more
diligence before throwing money at new startups.
OK, second reason. Today, there's a
lot of room for growth.
Every company is essentially turning
into a tech company.
Everything has an app, even when it
doesn't make sense to have an app.
Have you ever had to download an app to park your car?
It's getting ridiculous.
But beyond pointless apps filling your
phone, there are entirely new technologies
and platforms being built right now.
Cloud computing, AI, VR, health care, electric cars.
Tech is just going to get bigger, solve more
problems and make more money in the long term.
But are we actually safe and sound?
Not even close.
Because there's another tsunami on the horizon.
And if you work in tech, brace yourself.
The tech industry is stumbling, and
that means a lot of casualties.
Let's put it like this.
Amazon
Meta
Coinbase
Microsoft.
Now take Y Combinator.
It's one of the most successful
startup accelerators of all time.
They gave us companies like Airbnb and Coinbase.
Recently, Y Combinator sent an email advising
all startups to plan for the worst.
Basically, whoever is aiming to raise money should change
their plan, because things are about to get bleak.
Even the money printer that is Google
just warned their employees they better shape
up quickly or blood will be spilled.
The market right now is unpredictable, and when
companies look at unpredictable, they seem dangerous.
But strangely, at the same time, we're in the
middle of one of the hottest job markets ever.
It sounds like a joke, but it's true.
In tech, hiring reached all-time highs and
candidates are snapped up in weeks.
But yet over 39,000 people have been sacked this year.
How can that even be?
Well, one reason is we might be living in the past.
Let me explain.
According to The Economist, after the
dot com bubble burst in 2000, it took a
year before work started disappearing in tech.
So maybe we're still benefiting from the boom of the
past few years and we don't even know it.
I hope not.
It appears to me that even though many
companies are cutting down on staff, there's still
a huge shortage of tech talent.
Remember, every company is becoming a tech company.
Companies who have been looking for workers for the
past year are simply now able to hire people
who used to work at these high growth, exciting
businesses before the money dried up.
But no matter what, the sector is changing.
We might avoid a mayhem like 2000,
but this crisis is causing natural selection.
It is adapt or die.
Take Netflix, one of the greatest victims here.
They fired over 450 people and aren't stopping.
That's because they realized their business
model of shared accounts and billionaire
investments was played out.
That model only works in a boom period.
Eventually, money dries up and you need to show
the world you can actually produce consistent profits.
Companies who fail to change their business
models will be the ones to collapse.
What I see with the tech market
is very similar to the crypto market.
I think if we looked at Tech or Crypto
as these separate islands unaffected from the rest of
the financial world, then we could confidently say that
they are oversold and now's the time to buy.
But the world doesn't work that way.
Everything's connected now.
Here's my word, we never saw a
collapse in price of regular, non-tech, non-growth companies.
I'm talking about the boring stuff like
pipelines, trash collectors, insurance builders those stocks
haven't gone down much, but in a
true market crash, they will fall too.
My theory is that's our biggest risk
even though Tech and crypto had these
massive selloff events, regular stocks haven't.
If regular stocks get hit, you can bet
that Tech and Crypto get hit even harder.
Now, it is possible that regular stocks don't even get
hit this time around maybe all the money that was
pumped into the system will keep those from dropping.
But my point is, it's possible.
Will this be worse than 2000? Probably not.
But we shouldn't take those risks lightly.
Now, from here you might be wondering what
safe stuff can I even invest in?
Well, I got you covered with
this video on recession-proof ETFs. It's a must watch.