Question:
Like, if you started buying the dip eight
months ago and it's still dipping,
there's gotta be a different term for that.
While gas prices are climbing, distracting everyone, cryptos
and stocks are kind of falling apart.
So will the markets keep crashing?
How does this all end?
To answer that, we need to go
back to the start of the issue. The pandemic.
Just place yourself back in time. 2020.
It just started.
2020, sounds nice.
It has kind of a ring to it.
Maybe this will be the roaring twenties 2.0
and things are generally fine for a while.
You hear on the news about some new virus,
but you're like, eh that'll never be over here.
That's just the news trying to scare us.
Ebola, that came and went. No big deal.
But all of a sudden a switch flips and
everyone you know is staying home for two weeks.
A temporary lockdown to try and
get the virus out of here.
Two weeks of relaxation, I'll take it.
Tiger King just came out. I have something to do.
And then two weeks turns into a month, and
you realize Netflix has, like six good shows.
So you make sure to have as many screens
as possible in front of you at all times.
Laptop screen for Zoom calls and slack
TV screen on for background noise.
Phone screen in hand,
maximum stimulation, just the way nature intended it.
But even that gets kind of boring.
That's when you hear about stimulus checks.
$1200 check. Yeah, sure I'll take it.
That's something to look forward to, at least.
Apparently the market has been crashing ever
since COVID hit, and the US government
is trying to keep the country afloat. That's weird.
You think, like, the line at the store has never
been longer, but I guess people are out of work.
The government finally figures out how to get
you your check, but you have no idea
what you're going to do with the money.
Your friends on Facebook, they're buying
even more screens to look at.
Your sister put down a payment on
a brand new car, a Lexus.
Pretty nice, but you're bored.
A buddy in your group chat
keeps mentioning Tesla and Bitcoin.
I mean, you have some time, so
you decide to look into it.
Like, what if your one $1,200 turned into $10,000?
That'd be pretty sick.
So you punch Bitcoin into Google.
You read a couple of CNBC articles
like, you get it, but not really.
It's digital money, but there's only so much
of it and the price can go up.
Kind of weird, but kind of cool.
Tesla also seems cool.
That Elon guy, he talks like his brain is faster than
his mouth, so he must be some kind of genius.
Plus, it's good for the environment, right?
So you split your money into a
few exciting stocks and cryptos. Ethereum. Yeah, sure.
That guy also talks like his brain
is too fast for his mouth.
So you sit back and dream that the
market will take your twelve hundred dollars and
just launch it to the absolute moon.
And guess what? It does.
Three months into the pandemic, you're looking at returns
that beat even the best hedge fund managers.
You and your boy in the
group chat are laughing about your gains.
You try to talk faster than your mouth can keep up with,
but that has the opposite effect of Elon and Vitalik.
Either way, you're hooked on
this whole investing thing.
Your YouTube feed went from this to this.
You're officially a retail investor.
You hate hedgies, business, markets, supply,
Demand? No problem.
Meanwhile, the small business
landscape is falling apart.
Your dad's tile business has had
the slowest quarter in a decade.
Service is terrible, literally everywhere.
Purchasing supplies and parts is like
some kind of weird scavenger hunt.
The world feels pretty bad, but the markets
are still doing great and people are still
hot on Instagram, so things must be okay.
I'll just stick to the markets, you
think to yourself while researching how to
take a margin loan out on Robinhood.
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Back to the video.
Everyone you know has now gotten into investing
and you hear even more Stimy checks are coming.
You know that if you can get some dollars into
crypto and Tesla before that, you'll make a fat return.
And guess what? You do.
Big business is booming.
The government is printing more money than it ever has,
and they actually say, this is totally fine.
We have much more control over inflation than
we did in the '70s. You see these levers?
These are the economy, and we
know how this all works now.
So you're sitting there at your computer and you pretend
like you're the guy from Limitless, picturing the cause and
effect of the third round of stimulus checks and you're
like, okay, everyone who gets their check is either going
to spend it or invest it.
People who invest it will help
out stocks and crypto right away.
People who spend it will most likely spend
it at big businesses, and then eventually they'll
help out stocks and maybe crypto later on.
Plus, the Federal Reserve made interest
rates go to essentially zero.
So this way big businesses can
spend and make the economy good again.
Your conclusion? Investment go up,
and they do.
Time passes and you've just had
some small ups and downs.
But after a year of pandemic, you
are still sitting on massive gains.
The S&P 500, Tesla, Bitcoin.
You have diamond hands.
I mean, it's basically impossible
to lose money in investing.
How doesn't everyone do this?
Why would you ever sell?
Meanwhile, all of your friends are looking for
jobs, but somehow there's also a job shortage.
And just about every local
restaurant has closed for good.
You just picked up a fourth screen, another laptop
that you have dedicated for price charts because you
are not going to miss the next Gamestop short squeeze.
Oh, and like, inflation is getting weird.
It's creeping up higher and higher.
And that guy in C-SPAN just
keeps reminding you that it's transitory.
And you're like, transitory makes total sense.
And then the impossible happens.
Bitcoin collapses in May 2021.
You're like, that can happen?
Your crypto account drops by 50%
over the course of three months. This is bad.
What's going on?
So you start digging into real research.
You learn what a supply chain is.
Basically all the steps that a product needs to go
through in order to land in your shopping cart.
And it turns out that raw materials, like the
stuff that you dig out of or grow out
of the ground is now in low supply.
There's not enough people to actually dig it
out or drive it to a factory.
And factories are having to
shut down entire production lines.
Food manufacturers are having to limit staff
to try and prevent COVID outbreaks.
Cars aren't even being made because every car
has like 100 microchips in and we need
raw materials and factories for that to happen.
This is the first big Uh-oh, if we can't get stuff
out of the ground, then we can't make other stuff.
And does that even matter if we can't get someone
to drive the stuff somewhere to get the stuff refined?
And does that even matter if we can't get the stuff
to make the microchips that go back in the trucks to
haul the stuff to refine and make the other stuff?
How do you fix a wheel while it is rolling off a cliff?
You're terrified.
You do what any rational investor would do.
You buy the dip and within two
months you feel like a genius.
I mean, stocks are pretty flat, but the
crypto market is already higher than ever.
You totally forgot about that
whole supply chain nonsense.
You start looking into why your stocks
aren't going to the moon anymore.
You find out what a P/E ratio is.
The easiest way to think of it is the number of
years it takes to pay off an investment with profits.
So a P/E of 10 means ten years
to pay off the investment with profits.
Turns out the current P/E is like 25 for the
whole market, where the long term average is 15.
So that must just mean that stocks will sit
there for a while until profits catch up.
No Biggie, right?
What about inflation?
It was just sitting around 5% for a while,
but now it jumped up to more than 6%.
And they still say that this is transitory.
At least you know that whole supply chain issue.
If that gets better, prices will go down.
But what about the trillions of
dollars pumped into the economy?
I mean, I'm not an economist, but I
know having four times more dollars floating around
isn't going to make dollars worth more.
There's really only one direction that value can go.
So you pondered that for a while and
you do what any rational investor would do.
You buy more. In the next couple of months,
things are kind of boring.
Not much action up or down.
You don't care enough to dig further into the research.
You've turned off your four screens to
go try the outside, your YouTube homepage
reverts back from this
to this.
All seems pretty good in the world,
like, it might be getting better.
It's still a little shaky, but like
the pandemic kind of seems over. Kind of not.
You're still one of the most
successful investors of all time
if you annualize your 1.5 years of returns.
A few months go past,
and this is when things start getting
weird because basically nothing is fixed.
You haven't heard the word 'transitory' in months.
You can literally feel the inflation anytime you
shop and you heard interest rates might go
up sometime in the future, meaning money for
businesses would get more expensive and worst off.
Your investments are starting to slip downwards a bit.
Not a lot, but like enough to be noticeable.
So you sit there and you think about this
before of course, buying the dip. Within a month,
that proves to be maybe not your best idea.
Within two months, that definitely wasn't your best idea.
You're just going to keep your money for now
in the markets, but you're not going to add
anything until stuff starts turning green again.
Because it always turns green eventually, right?
That's when Putin's like, surprise b**es, WAR.
The market freaks out and sells off.
And you realize there's even more to this because
Russia has oil and the world needs oil.
There's like this delicate balance that the world has.
Supply chains are still bad.
So not only do we not have the parts
to dig, transport, refine or build the stuff we need,
we also have to pay more for fuel even if we try.
It's like trying to sprint with a
5'7 Russian strapped to your back.
Meanwhile, inflation is breaking 40
year records month after month.
And it turns out the real
definition of transitory is not good.
Nothing is working.
The whole market has slid.
At this point, maybe you're like the 5th or 6th
most successful investor of all time, just ahead of Bill Wang.
Companies you know and love begin
to slide and So does Netflix.
And that's when a faithful day comes.
The C-SPAN guy, Jerome Powell, you finally decided to
learn his name after two years, tells the World
Interest Rates are going up, stocks Sell Off.
Crypto Sells Off.
Luna has a Catastrophic $40 Billion Crash.
Walmart tax, Target Tax.
What the hell is happening?
Your portfolio was higher a year and a half ago.
All of this for nothing?
When will this end?
And that brings us to today, where nothing is certain.
But what we do know is supply chains
have not fixed themselves and people have less
cash to spend, which means businesses not only
have higher expenses, but also lower sales.
Not to mention the cost of borrow.
is not higher, so high-growth companies
need to reevaluate their plans completely.
How does this end?
Most likely with some more pain.
The Federal Reserve has realized that the
experiment that they're running didn't go exactly
according to plan and changes are needed.
Those changes will cause pain,
at least in the short run.
The issue is we don't know
how dramatic that pain will be.
It's a matter of the emotional reaction at this point.
I personally believe that it will last until we have
a very large player collapse due to too much debt.
That would create some panic right away but end
up acting as a relief valve for the economy.
Like, that bad thing happened,
We can all take a deep breath and
we can just relax a little bit.
But in the meantime, I'm keeping a long term focus
and looking for value deals in the market, knowing full
well that prices might drop further before they recover.
Because that's just how things go.
I hope that was helpful. That was a fun one.
I'd like to thank my channel sponsor FTX
for helping make these videos possible.
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I would like to thank you so much for watching.
I'm Max Maher and I hope you have a profitable day!