hey guys how's it going it's Andy from Magoo investing happy Friday it's always fun waking
up in the morning getting on twitter and seeing that hashtag stock market crash is trending
and then you look at the overall market and it's down like two percent and it's really funny
because just like a full year ago the stock market was actually crashing but we're seeing a lot of
panic today and in today's video I kind of wanted to talk about some of the main catalysts that
have been pushing the stock market down overall because compared to what we've been seeing in the
past year this is not actually pandemic related this has to do with some of the responses from
the federal reserve to try to combat some of the problems of the pandemic it is really interesting
because we've gotten to the point now where the Nasdaq which is the tech heavy index is down for
the year it's in the red and we got to the point yesterday uh it was like during the middle of the
day where we got into correction territory a correction is a move that's 10 below what the
all-time high was so we got very close to that did not close that level but it got to the point and
made me start thinking I’m starting to get more and more comments of people asking is this the
bottom should we start buying in and I’m going to be giving my opinions on the overall stock market
because I have been very vocal for the past couple months about why I’ve been keeping a majority of
my portfolio in cash because I’ve been expecting a move like this for a long time and while I don't
think that we're close to where we're going to end up it's a good time to start talking
about the plans that I’m making so in today's video I’m going to be one talking about the
catalyst that I’ve been pushing the stock market down overall kind of explain what's happening
two I’m going to talk about some important things to remember when buying in as the market falls
because when I look around I see a lot of people talking about buying stocks that I would not
personally be touching right now and then part three I’m going to be talking about what my plan
is going forward and some of the stocks that I’m targeting to buy as the stock market falls overall
so is the stock market crashing right now no but there's a lot of misinformation about what a stock
market crash looks like and I want to talk about some of the some of the wording that you'll often
hear around investing in the stock market the first one is a correction a correction is a 10%
move to the downside and it usually results in just some normal market movement at this point
we've gotten very close on Thursday the market closed down like 9.6% from its all-time high so
it's very close a bear market is a move that's 20% down from the all-time high and that happens every
couple years and we have the shortest bear market in the history of the stock market back in march
and I think it lasted like a month and a half until the market got to a new all-time high which
ended the bear market and then we have a market crash and a stock market crash is a term that gets
thrown out a lot and there's no real number that defines what a stock market crash looks like but
in my mind a stock market crash has to do with how violently the stock market moves to the downside
you could have the market give up 30 of its value over the course of six months I wouldn't call
that a crash but when we think back to last march when the stock market fell like 35% in the course
of like four weeks that would be a crash a crash has to do with how quickly the stock market falls
and not the actual number amount so we are now into correction territory and that's going to be
something to watch going forward whenever the stock market falls I think it's important to
kind of step back and look at what catalysts are pushing down the market overall because
sometimes it's just the natural movement of the stock market to start selling off especially as we
get towards historic levels where we're reaching all-time highs and yesterday the big catalyst had
to do with federal reserve chair Jerome Powell and he came out and had some statements that
it's really interesting because both sides of the coin the people that are trying to
reduce inflation we're not happy and the people are trying to keep the stock market up we're
also not happy so it's really interesting to see both sides of the coin being kind of upset
with what Jerome Powell said so yesterday he spoke about the plans of the federal reserve
he said the plan is to keep interest rates near zero until we've reached maximum employment
and the inflation rate reaches around two percent at this point we are still way below
the two percent inflation rate it's actually been below that level for the majority of the past like
five to ten years but he did see that some of the bond movement did kind of peak his interest and so
he's going to be watching that going forward and so he expected to see higher rates of inflation
going into the summer and a lot of investors took that comment as meaning that they expected
the federal reserve is going to have to raise interest rates by the time we get to the summer
and we'll talk about what that actually means so here's why inflation can be bad for the overall
stock market as inflation goes up the value of the dollar decreases and so people are not as
able to buy as many goods and it may seem like oh you know what the money doesn't really change it
just decreases in value slightly but we know that the minimum wage has not changed with inflation
it means that the lower income areas do not have as much buying power as they did before
and so when you're looking at the overall market and trying to predict consumer spending inflation
is not good for spending overall and so for different stocks what inflation will mean
is that revenue is going to look decent for a bit but it means that companies are going to really be
struggling when it comes to profits and earnings because as inflation goes up usually those are the
two metrics that you see go down and so one of the ways that you see inflation be affected has to do
with an influx of money to the overall economy and the place that we've seen that in the past year
has definitely been the stimulus packages and so this is the federal reserve pumping money into the
overall economy to try to boost as much spending as possible because as the pandemic hit you're
worried that businesses were going to really be struggling as people weren't going outside
and that was kind of the plan to reduce interest rates to zero to promote spending because
if you've been paying attention to your savings account at all you're making pretty much no money
at all and so that's the federal reserve trying to promote spending overall and it's allowed these
companies to borrow money because there's not really any downside like a high interest rate
because if you can borrow it pretty much zero the companies that have the ability to pay that back
reliably are going to be able to take advantage of that but those numbers can't last forever and
I had a lot of people on my channel asking if I thought that was going to be the catalyst that
pushes the market down and I don't really think so because while you cannot keep interest rates
at zero forever we have kept them at zero for a majority of the past decade and it was only back
in like 2018 when interest rates first started climbing so we've been at zero for a long time
so I’m not super worried about that but it is the inflation that I’m really worried about that's
why these stimulus packages have had more of an impact on the federal reserve's decision than the
actual keeping interest rates at zero and one of the things that people were talking about in his
comments from yesterday has to do with the maximum employment levels and based off the numbers that
we've been seeing so far the expectation is that we're not going to reach those numbers until the
end of this year so that's going to be a long way away it's definitely going to be the inflation
that's going to be the thing that people are going to watch going forward to determine if we're going
to have to raise interest rates and when that happens that's going to be a pretty big move to
the downside is my expectation but what's really interesting so far is the areas of the market that
have been selling off in 2020 the winners by far were the tech heavy Nasdaq which was up 43
overall which is an incredible year when you take an average of 100 stocks but so far in 2021 the
areas that have sold off aggressively have been the attack heavy stocks and so at this point the
down jones is still up and you compare it to how well it did in 2020 being up only seven percent
it makes sense that people are taking profits because the areas that did very well in 2020
might not be poised to do as well going into 2021. so let's move on to part two where I
talk about some of the important things to kind of consider as the volatility and the just the
market moves overall and the main thing for me with this change in the market is I am done with
speculative stocks I’ve been done with speculative stocks for a bit but this has been a great example
of when things are going well you can bet on some of these diamond and the rest stocks that's why
this past summer when things were going pretty well the money supply was looking really good and
the federal reserve was trying to boost spending as much as possible that's why I aggressively
went into companies like Sonos Stock (SONO Stock) that I thought was in a fantastic spot to do well
during this time of an economic boom or at least the trying to promote an economic boom and I did
very well in that position but at this point I think speculative stocks are off the table
for the time being one of the best examples of a speculative stock has to do with virgin
galactic stock which is ticker symbol $SPCE this is a fully speculative stock because it's mainly
focused on commercial space travel which is still a long way away and they don't really
have a lot of reliable revenue coming in it had a fantastic run to the end of 2020 but it has been
selling off aggressively so far in February and going into march as the market has switched from
investing in these speculative stocks and moving more towards value and the stability
of a blue chip stock so we've seen that with something like a virgin galactic we've even been
seeing that with tesla which was one of the high flyers of 2020 being up almost 700% overall but
as of right now it's down 18% on the year and it doesn't have anything to do with a changing of
how successful the company's been but areas that did very well in 2020 are selling off
because people made a lot of money there and they want to lock in those profits because
the areas that are going to sell off the most aggressively are the ones that put on a lot of
value in the past year and so speculative stocks I do not think are a great spot to invest anymore
we're going to be watching them to see when the market eventually bottoms out to see if we can
buy back into those speculative stocks but for right now speculative stocks are off the table
for me so what am I going to do with the overall market because I get a lot of questions asking you
know is now the time to buy in we've been seeing some of my favorite stocks be at a discount that
I’ve mentioned in previous videos but right now I’m heavily invested in a cash I’m sitting at 45%
of my portfolio overall so I’ve been waiting for this drop for a long time but
I think the main thing to think about is I’m going to be as patient as possible when
I was learning the swing trade there were three different types of entries that you could take to
kind of determine where you wanted to buy in and buying into the stock market is probably the
easiest part of the stock market because you can make as many narratives as you want about why now
is the best time to buy in so let's talk about the three different zones because I think it's an
interesting way to kind of discuss when to buy into the overall market so entry number one is
buying right as it reaches its own these zones if you've ever seen me draw lines on the chart
if support and resistance in my mind is not just a solid line it's usually a range of different
prices where the prices are all based off of where people are buying and selling the second that you
break in that zone and buy in that's considered an entry number one and the whole idea is that
any time it goes into that zone you're going to be buying in what that does is you get as many trades
as you possibly want the second that goes into that area you buy in but what are the risks of
that if the stock continues to fall you're going to be holding at a worse price instead of just
waiting to see what actually happens entry number two was waiting for the actual bottom of the
stock or the overall market this is easier said than done I was pretty good about picking the
bottom last year I think I bought in on April 1st and the market bottomed on march 23rd so I did
pretty well with that but it's really hard to pick the actual bottom but the way that I’m looking to
buy in is the entry number three that is waiting for the stock market to bottom and wait for it to
start pushing up and out of that zone and so what this means is you're going to have to be patient
because you have no idea when the stock market's going to bottom but you're going to be waiting and
collecting as much information as possible one of the downsides is that you're not going to be
buying in at the best price but you're picking the trade-off of buying in when you think that
the market's going to continue to rally higher instead of waiting to see is it going to fall
lower so this is the safer approach in my mind and that's what I’m going to be waiting to do because
it's so hard to pick the bottom I don't want to be buying in and having the market continue to fall
and so I’m going to be as patient as possible and wait to see when we find the bottom and wait for
the push up and then I’m going to start buying in so I think we're still a long way away from that
if someone was looking at the overall market and didn't really care about the trading aspect of it
I’d be fine buying in right now I would be doing dollar cost averaging where maybe I’d put in
a certain percentage of my cash like in every week and just start buying on the way down but
since I consider myself more of a trader I’m going to be patient and here's the three concepts
that I’m going to be doing as the market falls overall number one is I’m done with speculative
stocks I think the time has passed for betting on these speculative stocks because as we wait
to see what happens with the federal reserve raising interest rates I don't think those are
the places to invest anymore so I’m going to wait until the volatility stops and then maybe I’ll
take another look at speculative stocks number two patience is a virtue I think trying to buy
in the second the market falls is always a bad plan you're likely going to be buying in and the
market's going to continue to fall so I’m going to be as patient as possible wait for the bottom
and then wait for stocks to rally for a couple days and then I’ll start buying it
it's going to hurt because I’m not going to be buying at the best price possible but it allows
me to feel more confident with my trades and it's less likely that the market's going to continue
to slide after I buy in and then number three I’m only going to be buying stocks that I love
not like in the past year I have shed off some stocks that I liked in the past but didn't love
something like a planet fitness that I thought was great for 2020 but now I have sold it off
as 2021 has made it not look as attractive to me so the areas that I’m going to be looking to
buy are the stocks that I absolutely love and it's not that frequently that they go on sale
stuff like an apple stock (AAPL Stock) Microsoft Stock (MSFT Stock) adobe stock (ADBE Stock) that
have incredible track records but it's not very often that you can see them go on to an actual
discount so there's going to be the stocks I’m watching to see as the market falls overall but
I’m going to be as patient as possible and those are the three main concepts that I’m watching to
determine when I’m going to be buying in which stocks to buy so let me know what you guys think
about the overall market right now things are falling we're starting to get some deals some
of the top flyers of 2020 are on sale now stuff like a tesla stock (TSLA Stock) let me know if
you've been buying in there or you're going to be waiting to see what happens with the overall
market thanks for watching I appreciate all the support and I will see you in the next video.