hey guys how's it going it's Andy from Magoo investing happy Tuesday today instead of talking
about individual stocks I wanted to have a discussion about the overall stock market
and so if that's not something you're interested in I’ll be back tomorrow with my normal breakdowns
of the different stocks but there have been some things happening in the stock market for
the past couple days and going into last week that have kind of spooked me a little bit so
in today's video I kind of wanted to talk about some of the things that I’m feeling about the
overall stock market and I know people don't like it a lot of people want to come to my channel and
hear me be very bullish on everything because things are good when the stock market goes up
but there are three things that I’ve been seeing in the stock market it has me feeling like we're
going to have some sort of stock market crash in the future and when I say stock market crash
I don't mean some catastrophic meltdown where the stock market falls like 40% in a couple days
but I’m kind of betting at this point that I think the stock market's going to have a correction
early in 2021. a correction is a 10% move uh going into a bear market is a 20 move so this is kind of
the reason why I have the most amount of cash city in my portfolio that I’ve ever had and if you want
to see exactly what stocks I own right now and how much of a percentage of my account I have in cash
I’ll link that video up above right now but based off of the stuff we saw last week with the IPO’s
of Airbnb Stock (ABNB Stock) and DoorDash Stock (DASH Stock) that almost doubled within the first
couple days of trading had me feeling a little bit strange and I also wanted to show this incredible
technical analysis that I saw on twitter about Airbnb Stock (ABNB Stock) because it's expected
to crash because it would look like a house if it did that and while I do like Doordash Stock (DASH
Stock) more than ubereats (UBER Stock) because it loses significantly less money it's kind of
hard to justify a move of 100% from an IPO and I’ve always talked on this channel about IPO’s
being a risky investment if you want to buy into one of these because it's very difficult to
judge the value of a company and put it on the stock market and see how the investors actually
feel about it and so we've seen some of the IPO’s that were supposed to happen towards
the end of the year with a firm and Roblox Stock delaying their IPO to try and get a
better valuation before going public so we're seeing a lot of hype around these IPO’s recently
and it's making me feel a little bit strange about the stock market so I did some research
and I’ve come up with three reasons why I think the stock market could crash in the upcoming month
and I kind of wanted to share those in today's video and so I want this to be a discussion so
I’d love to know how you guys are feeling about the overall stock market in the comment section
down below but before getting started I do have to say that I’m not a licensed financial advisor and
this is not financial advice anything you hear in this video is just me giving my own opinions
on the stock market and you need to do your own research before making any investment decisions
also if you've been enjoying these videos really appreciate it with that like and subscribe button
as would help my channel out a lot also I do have a second channel now and that will be the top
link in the description if you want to go learn more about financial education and just kind of
the basics of investing okay so reason number one where I think the stock market could crash in the
upcoming month has to do with greed and so one of the most famous investing quotes I feel like most
people have heard at this point comes from warren Buffet talking about how you should feel fearful
when people are greedy and greedy when people are fearful and if you look at the market right
now I feel like most people would agree that people are being very greedy at this point but
I wanted to look at some of the numbers that kind of back up and kind of quantify how greedy people
are feeling right now and so there's a couple things that I like to look at the first one is the
uh the greed index uh this index looks at the number of stocks hitting 52-week highs compared
to 52-week lows and based off of that uh it's considered the extreme greed uh area of this index
also the s p 500 is showing extreme greed by being above the 125 day moving average by 8.3 percent
which compared to the last two years shows extreme level of greed as well and then looking at the put
to call ratio for options is currently sitting at 61 percent making it on the lower end of the
entirety of 2020 showing greed uh and currently the Nasdaq has helped almost 100 in the past two
years and this article I found talked about the results of some of the bubbles that we've seen
in the past century and so this article talked about the percent based off of the two-year move
of the overall stock market the percentage of the bubble bursts and based off of the 100% move that
we've seen so far with the Nasdaq in the past two years the article says we have around a 50%
chance of a bubble popping a bubble popping would be a huge downside move to the overall stock mark
the last two bubbles that we've seen we saw the housing bubble which cratered housing prices and
then we saw the dot-com bubble bursting in 2000 which shot the Nasdaq down I think was like 60%
or something like that and it took up until 2015 to recover so 15 years to recover from that bubble
also I wanted to point out that we had the best November since 1928 and the best overall month
since 1987. and so if you've been around the stock market or you know a little bit about the history
you'll know that 1987 was a huge year for the stock market and not in a good way
October of 1987 you have what is considered black Monday black Monday was a day that the Dow Jones
fell by almost 23% in a single day and is the largest drop in the history of the stock market
so recovering a little bit the following month after that massive crash
makes a little bit of sense but does it make sense to have our stock market which has been
rallying for the past I know six months have the best months since that point
I personally don't think so also a fun fact from that is that black Monday created circuit breakers
which are put in place to halt the trading of the overall stock market if the market falls
or goes up significantly in a certain amount of time it's kind of the idea that a lot of the
panic takes over and you have panic selling and the idea of the halt is that it gives 15 minutes
for investors to read more about the information that's uh released about the overall stock market
to try to remove as much emotion as possible and we have this with individual stocks where a stock
will get halted right before major news comes out that's expected to move it significantly
and yeah so that was uh implemented after black Monday and in march we saw that four times happen
so that is the first time I’ve actually seen that in action and it was fascinating to watch
even though the stock market was crashing at that point so reason number one of greed uh we've been
seeing some crazy levels in 2020 and I don't think it's justifiable based off of the history of what
we've seen with the stock market so number two I wanted to talk about IPO’s and SPAC’s and so I’ve
already talked about Airbnb Stock (ABNB Stock) and doordash stock (DASH Stock)'s IPO and how
crazy they were this is something where if you got in early you could have made a lot of money but
it does not make a lot of sense that these people that are getting paid millions of dollars to
find the correct valuation of these companies are missing by a significant amount by 100 percent
and so I’ve been seeing some people a lot of people I actually really respect like Jim Cramer
comparing these IPO’s to the dot-com bubble burst in around 2000 but I think the scarier
part comes from the huge increase in companies electing for space instead of the traditional IPO
so the traditional IPO process you have to go through the new York stock exchange and
there's a bunch of criteria that you have to meet to be able to list on the stock exchange
but going with the SPAC as an acquisition company allows these companies to kind of avoid some of
the hurdles that make it difficult to become a publicly traded company and in the past couple
years we've seen a massive increase in the popularity of this method and so as I mentioned
the amount raised in 2014 was 1.8 billion from space and that number is expected to hit 15
billion in 2020 so that is a huge increase in just a couple of years and I wanted to compare this to
the dot-com bubble of 2000 because I think I see a lot of similarities between the two and a lot
of the crazy movement that we've seen with a very popular space which I’ll mention in a little bit
kind of justifies me trying to compare them and so during that bubble internet stocks are all
the rage with almost 40 percent of all the venture capital in 1999 going to those internet companies
and I just wanted to read this explanation that I found about the dot-com bubble that I found
on Investopedia and I want to compare it to a well-known stock in a second so companies that had
yet to generate revenue profits and in some cases a finished product went to market with IPO’s that
saw their stock prices triple in one day creating a feeding frenzy for investors and I want you to
think about a very popular stock from 2020 if you see if we're on the same wavelengths when I think
of that definition I think of Nikola Stock (NKLA Stock) so Nikola Stock (NKLA Stock) has a hydrogen
and electric truck that didn't actually run so it didn't have an actual product it had a lot of
speculation about their badger truck which had a lot of hype behind it but it didn't have an actual
working model at that point their entire revenue came from installing solar panels on their founder
Trevor Milton’s house and analysts claimed that their founder lied about their tech
capabilities with their battery so at this point we're seeing a lot of similarities
they had no revenue no profits and in some cases they did not have a finished product
and we saw a lot of hype behind Nikola Stock (NKLA Stock) and I’ll put up the one year chart
you're going to see how crazy of a year it's had there's so much hype behind it and then you
started to see some of the cracks in the actual company you saw the revenue numbers come out their
CEO and founder stepped down and so it just shows that a lot of the people that are quote-unquote
investing it's mainly based off of speculation and not based off of the actual company and the
product that they're producing and I think that's really scary and so SPAC’s are used to avoid some
of the requirements set by the new York stock exchange by having a certain market cap certain
profits or a certain level of revenue and so you only have to meet a couple of the criteria but
for a company like Nikola Stock (NKLA Stock) that didn't really have a working product at that point
I had very little revenue I think was like thirty thousand dollars from installing the solar panels
and no profits this was a way that the company could get a lot of capital uh based off of going
public but not actually have the requirements to be on the stock exchange so that brings a lot of
very popular stocks that are mainly built off of speculation and not based of the actual underlying
company and I think that's very comparable to what we saw in 2000 when a lot of these companies
were just building up a name brand to try to be recognized with this boom that we saw with
the internet companies and then when the stock market crashed a lot of these companies didn't
actually have the financial capabilities to survive a crash and survive through it
and I’m kind of worried that we're going to see similar things we've been seeing the trend of
space becoming more popular to kind of circumvent these regulations that are put in place by the
new York stock exchange and that scares me a lot so that's reason number two why I think that we
could see a stock market crash we've been seeing a switch of IPO’s being the most common way of
listing on stock exchange to space becoming the kind of preferred way to go on the stock exchange
but it has so much risk because you're buying a company based almost exclusively on speculation
and hype not as much on the actual strength of the company so that worries me a lot
and reason number three has to do with changes to the overall stock market that we've seen in 2020.
2020 has seen a lot of changes for pretty much every part of the world but I think the stock
market has seen some significant changes and mainly that has to do with the lockdowns that
we haven't seen so we came out of the longest bull market in history of the stock market which was as
over 10 years at that point and then we went into a global pandemic the stock market crashed and
then we had the shortest bear market in history as the stock market recovered back in April
and so during that time we've been seeing retail traders be more impactful in the past
retail traders only made up it was ten percent of the actual trading volume in 2019 so that is a
it is a part of the overall stock market but they didn't have as much weight as what
we've been seeing in 2020 where that number has gotten up to 25 percent this is comparable to
the dot-com bubble when online trading became very popular and resulted in some crazy moves
in price and I feel like we've seen that in 2020 one of the examples I would think of is
Tesla Stock (TSLA Stock). Tesla Stock (TSLA Stock) is a fantastic company I have nothing against it
but does it justify a 650 increase in one year maybe not I think it's a huge reason because of
the increase in retail traders and the popularity of investing in the stock market and so we've been
seeing some very interesting things another example I want to point out has to do with
hertz stock (HTZ Stock) which filed for chapter 11 bankruptcy in May and just want to look like the
stock price was going to continue to fall and go to zero eventually retail investors came and kind
of saved the day and so hurt stock jumped from 56 cents to five dollars and fifty cents over the
next two weeks uh so after declaring bankruptcy 171 000 retail investors on RobinHood decided that
would be a good idea to buy the stock and it's actually really interesting because you know this
is a bankrupt stock and hertz stock (HTZ Stock) actually tried to have a stock offering during
that time to take advantage of the popularity of the stock and the ridiculous increase in price to
try to raise money to avoid going bankrupt and the SEC did deny that because they're going to
be worthless stocks but it's just a really interesting example of retail traders being
able to prop up a bankrupt company that these millionaire and billionaire investors are running
for the hills away from and retail investors are like sure I’ll buy in I have nothing against that
we've been seeing that a lot with the airline stocks the crew stocks and just stuff like that
where retail investors are buying stocks that the professionals wouldn't even touch at this point so
it's been a major change to the stock market and while this isn't a huge reason for why I think the
market could crash it does worry me a bit because it's hard to predict where these retail traders
are going because they're buying bankrupt stocks so I think it's very difficult to judge where the
market's going and that's why I put it as number three on this list so just to summarize the three
reasons that I’m worried about the stock market crashing in the upcoming weeks or months uh has
to do with number one greed number two the switch from IPO’s to more space because they don't have
the backing of an actual company like we do with the IPO’s that have the requirements set by the
new York stock exchange and now number three we've been seeing some changes in the stock market that
makes it very difficult to predict where money is going to be moving in the next couple months so
those are my reasons why I’m a little bit wary I am not expecting a major crash not like a 40%
move I am expecting the correction which would be around 10 and I’m going to be looking to use the
money that I have set aside uh to buy back into the market and take advantage of that but right
now I have I think it's like 30% of my account sitting in cash so I’m going to be very patient
and I do have you know 70% still in the market so I’m going to be able to take advantage of the uh
if the wave just continues to ride higher because I do have money still in the market so
let me know what you thought about my video let me know what you guys are feeling about
the overall stock market and I will see you tomorrow in another video so thanks for watching