Mark: Lots of people are about to get very
rich. But why? Well, the data strongly implies that global recession is coming, that's if we are
not already in one. But surely that means people will lose money, right? Well, only if they don't
understand the economics behind the recession. But Mark, economics sounds so boring. Far from
it. I'm going to be explaining how you can avoid getting sucked into a dangerous money trap,
as well as outlining what you should be aware of right now, and finally sharing my thoughts as a
seasoned investor so you can ride the financial waves and come out on top. Let's get started.
Mark: Hi guys, It's Mark.
So the stock market has been historically proven to be one of the best ways to make money over the
long term. But despite this, as many as 90% of new and experienced investors still lose money.
This is because of one of the most dangerous money traps when it comes to investing. I've
seen many of my friends fall for this over the years, and every time it is a hundred percent
avoidable if they just look at the data in front of them. I'm talking about a sucker's rally.
Mark: A sucker's rally is a slang term
referring to a temporary rise in an asset like a stock or the market as a whole, which continues
just long enough to attract investment by naive or unsuspecting buyers. This is kind of like building
a fortified town in a zombie apocalypse. While everything is in chaos around you, inside your
little bubble, things are operating as normal. But it's only a matter of time before the zombies
break in and everything comes tumbling down. Mark:
I remember my granddad talking about the 1930s rally. Before this, the market had fallen nearly
50%. It was a devastating crash and lots of people lost money. However, the 1930s rally that followed
took the market all the way back up to 20% below its peak. Everyone was filled with hopium,
which clouded their judgment when they looked at the markets. Now, I wish this story had a happy
ending, but the people that piled in all of their excess money actually participated in the biggest
sucker's rally in history, as in April 1930, it crashed again, eventually ending down 89% from the
1929 high. The market didn't reach the highs of the 1930s again for another quarter of a century.
That's over two lost decades of investing. Mark:
So if these sucker's rallies are such dangerous money traps for investors,
then how do we know when we're in one or instead at the start of a new bull market? Well,
the stock market is influenced by a variety of factors. So to answer that question, let's look at
what's currently happening. But first, I'd like to thank today's sponsor, Masterworks. Masterworks is
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Mark: Let's come back to that shocking statistic that
90% of both new and experienced investors lose money in the stock market. This is in large part
because 90% of people don't understand the factors that influence the markets. And because of this,
they don't get why their investments are going up or down in value. This was made very
clear during the pandemic because people were chucking money into every stock under the sun
and making decent returns. Most didn't understand why it was going up, nor did they care. The same
is true when the market is crashing. Most people don't take the time to learn why
their investments are losing value and instead opt to sell everything before it's too late.
Mark: So let's take a look at the three main
factors that are currently at play. First, we have geopolitical tensions. The effects of the Russian
invasion of Ukraine have been far reaching. It's putting global supply chains under strain,
leading to the flow of goods stagnating, dramatic fuel price increases and product shortages. I've
seen this firsthand in my businesses as I now have to order stock in preparation for Christmas due to
the shortages, as it's better to have it than not. I've never had to do anything like this before.
Mark: This supply chain
pressure contributed to the highest levels of inflation that we've seen in 40 years, as in June,
consumer prices increased by 9.1%. Since then, it looks like inflation might have peaked,
as recently the good news is the energy component that has been a big part of the inflation spike
has receded somewhat. While gasoline is still up 44% year over year, it was minus 7.7% in July.
The Fed have achieved this by a series of interest rate hikes. However, this is more like medicine,
as the real issue contributing to inflation is the constant supply chain issues that need to be fixed
at sourced. But that's no easy task. However, hopefully the recent drop in inflation to 8.5%
means people will stop holding onto their wallets as tightly and start spending more. Therefore,
it may help boost company earnings and have an overall positive impact on the stock market.
Mark: Secondly, let's talk about currency. As well
as worrying about our everyday items increasing in price, we also have to consider the currency war
going on right under our noses. The Euro recently slid in value to 90 cents. I never thought I'd
see the day when the Euro was worth less than a dollar. I guess football really is soccer now.
At the same time, the British pound hit a fresh two and a half year low of $1.10. As the US dollar
is the world's reserve currency and seen as a safe haven, it was supported by people moving away from
riskier assets, helping it reach a 20-year high. Now, as the value of the US dollar rises globally,
the US stock indexes tend to rise along with it. Over the last 20 years, about 40% of the time the
S&P goes up when the dollar's value rises. Mark:
Thirdly, a big discussion at the moment is around China's economic collapse.
Speaker 3: In China, a terrible part of history
could be about to repeat itself. Speaker 4:
The Chinese economy is on the brink of collapse in just a matter of days.
Speaker 5: And how this could quite
literally leap China to the edge of the next great depression in a very short amount of time.
Mark: The Wall Street Journal reports that
debt that's currently building up in China due to the collapse of the real estate market is worse
than the 2008 subprime nightmare. If Chinese banks collapse under heavy debt that they can't repay,
then as the West are heavily invested in these markets, it could have consequences for all of us.
BlackRock, which is commonly referred to as the company that owns the world, has been heavily
involved in the Chinese market through loans. They are the biggest asset managers in the world,
which means they manage other people's money, probably including yours in some way or another.
That's why I'm carefully monitoring the situation in China as it could pull us into a great
depression if we aren't careful. So if the market starts to go up, maybe take a closer look at these
factors before adapting your investment strategy. As who knows, it could be a sucker's rally.
Mark: However, if the market
continues to trend downwards, let me give you my thoughts on all of this as a seasoned investor.
Take a look at this graph. This is the period in time we were discussing at the start of the video.
Let's be honest, it looks absolutely terrifying. A monstrous crash with a glimpse of hope thrown in,
followed by an even greater crash. But now look at this graph. As you can clearly see,
over a long period of time, the devastation becomes nothing but a moment in history. Ever
since my early twenties, I've been an investor, and one moment in particular has stuck with me
all these years. And now seems to be the most appropriate time to share it with you.
Mark: I remember getting home from
work one day and calling my broker, as I'd heard the stock market was beginning to rise. During
this short phone conversation he had unknowingly told me that my investments had made me more money
than my entire month's wages. I couldn't believe it. The temptation to sell was intense. I couldn't
stop thinking, "What if the market crashes and I lose it all?" But after a chat with my mentor,
I decided not only to hold but invest more. My stocks began to rise and I was so happy. Well,
that was until Black Monday rolled around in 1987 and wiped out all my returns,
essentially smashing that like button. Oh, sorry, I mean reset button.
Mark: As you can probably imagine,
I was pretty upset about this and I was ready to throw in the towel and quit investing. However,
unlike a lot of my friends, I listened to the age old saying, "It's not about timing the market.
It's about time in the market." Now, this was something I'd heard so many times before, but when
you're in this kind of situation, it's so easy to let your logic go out the window. You start
thinking, "Is this time different? Will the stock market ever recover?" And the dreaded, "Should I
cut my losses before it's too late?" But I held the assets that I believed in long term and came
out the other side richer than ever before. Mark:
By the way, if you want to start investing and get a free stock slice worth up to a thousand dollars,
then just use the link below and sign up to public.com. It's a completely free way to get
ahold of some assets. Luckily, I wasn't in a position that meant I had to get my money out
as soon as possible. This is because I had spent time building up various passive income streams.
If you like to do the same, then I recommend watching this video next where I run through
how you can make a thousand dollars of passive income in 24 hours. But don't click on it just
yet. Make sure to subscribe if you want to grow your wealth, okay. I'll see you over there.