hey what's up guys stock market dipped
by seven percent in last few days
it might be the new beginning of the end
in this video i will explain
why there is a decent probability that
the market already reached its peak
and now it's reversing then i will
explain how you can protect yourself
as an investor first and foremost
let's take a quick look what is going on
in the stock market
pre-pandemic s p 500 reached its
all-time high at that time at
around slightly below three thousand
four hundred dollars
when pandemic reached united states
market react quickly
by reversing its gains and taking a dip
s p 500 dropped from three thousand four
hundred dollars
all the way down to two thousand two
hundred dollars and lost
thirty five percent in just one month
while the entire economy in the united
states closed down
and the federal reserve stepped in and
started pumping liquidity
into the system in order to prevent
further market declines
with conjunction of the dropping federal
fund rate to zero percent
stock market once again rallied and was
unstoppable ever since
just recently we reached new all-time
high in s p 500
and market sapped at three thousand six
hundred dollars
in few months market rebounded by sixty
percent
and it looks like we might see a
reversal in the market
just in two days market dropped by 7
but you may think to yourself this is
just a pullback this is not a market
drop
market will continue to rally this
market is unstoppable
but is it really nothing goes forever in
this finite world everything eventually
will come to end
it is very important to learn from
history
those who would not learn from history
are doomed to repeat it
if we ask ourselves when in history we
have seen similar situation
2008 housing bubble 2001.com bubble
i would say way further than that the
closest
example would come from 1929 great
depression
just recently federal reserve printed
lots of liquidity
and dropped interest rates to zero
percent this pushed markets even higher
levels with unprecedented evaluations
shiela p e ratio now it's more than 30
which means
your yield is very low you can expect
three percent rate of returns for the
next decade
similarly in 1929 federal reserve
turn its printing press push lots of
liquidity into the market
drop interest rate to zero and as a
consequence
stock market reached unprecedented
levels once again
chili pe ratio reached 30 as well even
today it was slightly higher than we
were in 1929
so these are fundamentals now let's look
at technicals
if you look at the technicals it's very
similar picture
sorry guys this chart doesn't have the
best quality
but this is the only chart i could found
that is almost
up to date in 1829 market dropped by 40
in just one month in 2020 market dropped
by 35
in also one month in 1929
market rebounded by 46 giving a false
positive bull market to investors
that lasted over 100 days
in 2020 we have similar analogy market
rebounded by 60
or so with slightly more than 120 days
and we know what happened after 1929
market dropped by over 82 percent and
the entire economy
went into long-lasting depression just
recently in two days
market dropped by seven percent bringing
the volatility and uncertainty back
could this be the beginning of the end
well that's a difficult question to
answer
but we cannot ignore the similarities
between 1929
and 2020 in both fundamentals
and technical level now let's take a
look what milton berg
has to say about 2020 market he is a
founder of his own consulting and
research firm
that offers investment advisory service
exclusively to institutional investors
let's take a look at this video let me
talk about the long-term action before
we discuss the short-term action
okay it is common belief amongst wall
street
that the federal reserve has the ability
to raise stock prices
if they lower rates they do quantitative
easing stock prices go up
now let's look at history the japanese
have been involved in quantitative
easing for 30 years
40 years the japanese stock market
peaked in 1989
has never made a new high but let's look
let's look a little bit closer to home
the chinese stock market in u.s dollar
terms peaked in 2015 china has been
easing
in in local cars returns it peaked in
2007.
greece is down 90 from its peak in 2007
despite the fact that the euro
european um central banks have been
doing
this i think they said anything anything
it takes to boost the markets into goose
economy
uh united kingdom peaked in 2007 is down
43
in us dollar terms italy peaked in 2007
is currently down 61 percent in u.s
dollar terms
so to suggest that uh that the federal
reserve central banks have the ability
to create bull markets is very very
strange we are in a major worldwide bear
market
the basin began at 2000 secondary top in
2007
we have yet to recover and even looking
at our market and we took out a new bull
market
the s p small cap index peaked in 2018
as of yesterday's close is down nearly
19
from its peak in 2018 which is two years
ago
so the federal reserve has been easing
easing and easing and quantitative
easing so on a long term basis
there's very little evidence that
long-term bull markets
are coincident with uh loose monetary
policy
and many other facts involved other than
federal reserve on the other hand
when the federal reserve makes a major
change in policy in other words they go
from tightening to easing
or they go from easing to more easing
that serves as a shock to the system and
bulls or gooses up
stock markets for a short period of time
but i do not believe
that that the federal reserve movements
have a true
long-term effect on stocks in other
words when the fed eases
the same factors that get the stock
market to rally are the same taxes get
the economy to rally
if the s p if the federal reserve eases
as they just did in in 2020
and the stock market therefore rallied
but if it doesn't follow through with
the gain in the economy
the stock market will not continue
higher because if arizona does not have
a direct ability
to goose the stock market on a longer
term basis so what we have is step one
the fed panic the fed eased the fed
though
raised increased the balance sheet to
was it nine trillion dollars
the markets rallied will this affect the
economy
we don't know i i tell you i'm very
confused by the following
interest rates are at record lows
interest rates and record lows are
suggesting that the markets don't expect
inflation
you know and on the other hand when the
federal reserve increases
the money supply and the federal debt
increase its balance sheet they're
trying to create inflation
gold and silver are rallying in
anticipation of that inflation
that the fed is creating well if the fed
is creating inflation why would the
long-term interest rate be one percent
or so
it should be up three four five percent
so there are some conflicting factors
going
going going in the markets today we're
trying to analyze we're trying to figure
it out
the most likely answer is that off the
march lows the shock
of the federal reserve and central
bank's role are doing what they do
gave liquidity to investors hands so
anything they buy is going to up in
value be it bonds be it stock speed
being it being it silver be gold be junk
bonds
that will not last forever only question
is what will the next turn be
will it be a deflationary term where
silver and gold go back down stocks go
back down
and yields remain low or will be a an
inflationary return
where yields start turning up and stocks
continue higher and gold and still will
continue higher and that's the kind of
information
uh where we're looking at and we're
grappling with this point just
let's just look at market action since
june 8th the s p is up 2.88
since june 8. not a great move it's made
a minor new high
the dow is down 1.16 the new york stock
chain is down one percent
sp small caps it down two percent mid
cats are down one percent uk is down
eight percent
uh russell is up zero point seven
percent the cac in paris is down six
percent and nikkei is down three point
five five percent
so while it feels that the markets have
been breaking out because these great
fang and nasdaq stocks
are up 90 since june in reality
most markets worldwide and most stocks
worldwide somehow
peaked on june 8th now what took place
on june 8th to get the markets to peak
well one thing you
have to realize is that the fed balance
sheet peaked on june 10th
i know people are aware of that fed
balance sheet is down nearly 300 billion
dollars from its peak on june 10th
so while the fed is trying to talk the
market up talking about expanding the
balance sheet
the reality is they expanded the balance
sheets from march to june to june 10th
and subsequent to june 10th the balance
sheet is slowly slowly declining
it doesn't have to decline it's just not
increasing and i think that's having a
direct effect on markets as i said on a
short term basis
fed action does move markets and if the
whole movement in the capital markets
are based on a losing fed
when the fed stops loosening and even
the balance sheet just stops growing it
goes down some 200 300 billion dollars
that's enough to peak market that's
number one but number two is we are so
something else on june 8th
they tremend and when i say june 8th
it's not necessarily that day
june 8th june 10th through june 11th
it's sort of mid-june
so tremendous speculation in markets let
me give you an example
we've studied all market crashes
panicked like crashes in history now we
had one in march
i say we had one in march because the
nasdaq declined some 30
in in about a month nasdaq's five day
volume was his greatest in history
and that sort of compares with the type
of creation we saw in 1987 where the
market was down 32
in a little bit over a month with the
highest five-day volume in history
and so too in 1929 the market declined
from 50 percent over a short period of
time
and it battled basically with the
highest five-day volume in history
now let's look at the highest five
daylight history the five-day volume in
1929 remained record for 32 years
the five-day volume in 1987 remained a
record for eight years
the five-day volume into the so-called
crash so-called capitulating panic
in 2020 has lasted for three and a half
months
because on june 8th that period the week
of june 8th nasdaq volume was 30 percent
greater than it was
five day volume or 30 greener than it
was at the lows
now how could we even say we had a
capitulative low
in in march if the one of the greatest
signs of a low is panic volume
when you so greater volume to the upside
i'm interpreting to suggest
that you're seeing panic violence to the
upside which we call capitulation to the
upside
which is something very typically seen
in commodities markets
commodities markets don't bottom on high
volume commodities markets generally
peak on spike action and high volume and
that is
the reasons for it we don't get into the
reasons at this point but basically
let's just say that people are forced to
cover shorts and commodities
and uh and people are so excited about
the
uh they'll no longer be oil in the
ground peak oil or uh
or you know silver is being uh being uh
um uh there's no more supply for silver
and so on
so it forced them to buy the commodity i
think we saw that in nasdaq
i think this fang uh craziness
where the value of the six greatest
stocks in nasdaq is greater than all
european indexes combined
plus mexico and canada you take the
value of the
canadian index the mexican nixon all
european index combined them
you have six stocks in america that
would greater market value than all
those markets
so i think this is a commodity type move
and these these stocks yes they're great
companies
and yes i have great earnings but you
know rca was a great story in 1929 it
was a great company with greater it's a
great future they
made radio ultimately they made color
television that stock didn't create
didn't get it to a new eye for another
25 years
i'm not suggesting we're having that
type of situation i'm just trying to say
people are caught up in nasdaq
as evidenced by the great increase in
five-day volume
but it's not just nasdaq you know the
sap small cap index
generated its highest volume in history
in the week of june 8.
39 greater than the panic volume we saw
in at the march lows
there's something going on in this
market that is not normal is not being
recognized
and it just hits me that the markets
basically peaked
along with the balance sheet on june
10th of 2020.
he made a great parallel between federal
reserve stop pushing liquidity in early
june
and market rally when pandemic reached
the united states
federal reserve pumped three trillion
dollars into the economy
and increased its balance sheet from 4
trillion to
7 trillion dollars which peaked in early
june
since that date the balance sheet is
going sideways and even slightly
declining
let's take a look at the markets snp
small cap stock
is down by 18 percent uk index is down
by eight percent
russell 2000 is down by three percent
least can go on and on
but you may ask yourself yeah yeah but
look at s p 500
it's up by a lot since june 8. and yes
this is true
the main reason why i think s p 500 is
up while other indices are down
is because everybody knows s p 500
nasdaq
and don jones after june 8th retail
investors and
institutional investors piled in and
continued to pumping liquidity into
those markets
since they are the most popular and
well-known markets among investors
but eventually chicken will come home to
roost
and we won't see market highs for no
reasons
if the federal reserve stops pumping
liquidity eventually
all investors will follow and leave the
market and then we know what will happen
market will deflate and hopefully we
will reach normal evaluation levels
only time will show what will happen in
the future no one can predict the market
with
absolute certainty but we cannot ignore
the history and assume that the market
will continue to go up forever
as mark twain once said history does not
repeat itself but it does rhyme
i believe the best hatch against the
market risk
will be precious metals such as gold and
silver and even bitcoin might do well in
uncertain markets
let me know what do you guys think about
this current market
leave your thoughts in the comment
section below smash that like button
and subscribe
