Valuetainment - February 16, 2021


NEXT MARKET CRASH： 10 Signs it's Coming


Episode Stats

Length

19 minutes

Words per Minute

193.26968

Word Count

3,691

Sentence Count

338


Summary


Transcript

00:00:00.000 Many people are claiming there's a bubble going on today, and there's a lot of people that are
00:00:03.000 getting upset when saying, market's not going to crash, this thing's going to go up, this is the
00:00:07.060 greatest economy we've ever had, you got to keep investing into the market, so who is right? So
00:00:11.000 today, I'm going to be a lawyer. I'm not a lawyer, but I'm going to be a lawyer, and I'm going to
00:00:15.760 give you 10 points on why I am leaning towards a bubble and a crash, and you will have to make
00:00:21.340 that decision for yourself, and pick apart my argument below, comment, say I totally disagree,
00:00:26.160 you have no clue what you're talking about, but I'm going to make my case. We'll do some math,
00:00:30.080 I'll give you some trends, some of it will be technical, some of it will be simple, but by the
00:00:34.560 end, you'll be able to make a decision for yourself whether I'm making a good case or not. So let's
00:00:38.280 get right into it. So there's this guy named Warren Buffett, who's a very wealthy man, very successful
00:00:42.880 man, who took his Berkshire Hath away from where it was to where it's at today, he's worth around
00:00:48.320 $80 to $100 billion, and when he gives advice about money, people listen, he has a famous saying
00:00:53.740 that he's been saying for a long time, you've heard this before, you've read this before,
00:00:58.160 be fearful when people are greedy, be greedy when people are fearful. Are people scared today? Are
00:01:05.180 people greedy today? What do you think? You answered that one right there for yourself. So
00:01:08.680 if you got to be fearful when people are greedy, and today everyone's being greedy, thinking they're
00:01:12.940 going to, oh, GameStop, or Robin, you know, American Airlines, Bitcoin, people are so greedy today.
00:01:17.600 Maybe we ought to pay attention to what he said. Matter of fact, check this out. There's a guy named
00:01:21.320 Michael Jordan, okay, who has a rookie card. This is his best rookie card, 1986 Fleer, and PSA is the
00:01:28.020 top grading company in the world. There's only about 300 of these graded at 10, okay? Let me first
00:01:33.900 give you the history of what happened with this thing here. Just March 22nd, which is 11 months ago,
00:01:39.460 this card sold for $48,000. Then it went up to $51,600. This is when the last dance came out. It came
00:01:45.900 out a little before that. Then it went to $96,000. Then it went to $150,000. Just a month and a half
00:01:51.680 ago, two months ago, this card was selling for $151,000 in the marketplace. You know what it just
00:01:56.320 sold for? $738,000 for one card. In 11 months, this card went from $48,000 to $738,000. Now, is it a
00:02:08.280 $748,000 card? Absolutely not. Is it a $738,000 card today when there's 300 of these out there?
00:02:15.640 I don't know about that. So why are people spending this kind of money? Is it because they're greedy?
00:02:19.360 Is it because they made a lot of money? Is it because everyone's making money in the stock market
00:02:22.120 and they have extra money to spend? I can't answer that, but I'll let you answer that one here. Now,
00:02:25.960 let's get a little bit more technical here. So many times when you want to price a company's
00:02:32.380 PE ratio, price to earnings, you take the formula and you divide whatever the stock's price
00:02:38.220 is by their earnings. You divide that and you come up with the PE ratio, right? So PE ratio,
00:02:44.660 typically, historically, you know, companies are between 15 to 17%. Domestic is about 17.47% today
00:02:53.200 on PE ratio. Let me give you a couple examples of companies where their PE ratio is right now. You
00:02:59.980 ready? So Tesla right now's PE ratio is 1,243, meaning it is overpriced, meaning people are banking
00:03:11.300 on what this could go in the future, but it's not worth $763 billion today, which is why so many people
00:03:18.640 are shorting the Tesla stock. Now you may say, Pat, give me a break. It's Elon Musk. You talk a lot of
00:03:23.700 good things about Elon Musk. Elon Musk is a genius. No question about it. As long as he runs Tesla,
00:03:28.020 Tesla, this thing's going to go to a price like that. However, let's take a look at some other
00:03:32.440 companies, what their PE ratios are. So Tesla was what? If you want to get a little closer,
00:03:36.520 1,243, right? Let's look at Microsoft. Big company, Bill Gates, PE ratio, 36.3. Now you can
00:03:43.480 just stay right here. If we go to Facebook, what's Facebook? Facebook PE ratio, 26.71. That's a big
00:03:49.420 company ran by Zuck. He's still running it. Let's go to another company like Apple. What is Apple's PE ratio?
00:03:55.240 36.27. Let's go to another one. I don't know. Give me another one, Kai. Let's do Amazon. Okay.
00:04:02.700 Amazon's PE ratio is 77.90. High, right? Let me take you back to Tesla. You mean to tell me
00:04:09.920 1,256 Tesla? You mean to tell me Tesla's a $771 billion company based on today, not future earnings?
00:04:17.000 I don't know about that. This is concerning. So now, if the average historically PE ratio for a company
00:04:25.600 has been 17.47, take a look at this. Today, it is 39.86. Look at the history of PE ratios for S&P 500.
00:04:35.380 Look at the history of it. 12, 13, 26. Okay. You know, 23. Okay. Let's go to 01. 9-11 happens.
00:04:47.280 42. What happens after 9-11? Boom. It drops, right? Okay. Let's go over here. PE ratios. Look how high
00:04:55.440 it is. Mortgage. Boom. You remember that? The bust, the bubble. Boom. 39.86. These are three trends that
00:05:02.300 we can look at. Now, let's go take a look at Shiller. And by the way, for the max and amend,
00:05:07.900 you need to know that the lowest PE ratio we've ever had was 5.31, which is 1917. The highest we
00:05:13.620 ever had was 09. That's the big market crash, 123. Right? Now, let's go to Shiller PE ratio. With
00:05:19.900 Shiller, the difference between Shiller is Robert Shiller came out with the PE ratio and they called
00:05:23.620 it the Shiller PE ratio. What he did is, typically when they see PE ratio of Tesla being, you know,
00:05:28.780 the number I showed you, which is what? What was it? 1,200? The 12-month PE ratio trailing
00:05:35.860 12-month of Tesla is what? 161.61. 12-month, which is still high. Not 1,200, but still high.
00:05:43.300 What Shiller did is, he went 10 years, is what he did. So all he did is he took that PE ratio,
00:05:49.420 that's the day or maybe 12 months, he said, let's go 10 years and see what numbers it gives
00:05:53.700 us. And look, we found that here. Take a look at this. Today, the Shiller PE ratio is 35.65,
00:06:00.900 second highest ever. When it was 30, it was Black Tuesday. What happened to Black Tuesday? Look at
00:06:06.980 this, how the market dropped. You see it? What happened in 9-11? Boom, market dropped. Look where
00:06:13.700 the PE ratio was, Shiller PE ratio, 10 years. We're at 35.65. That is not a good trend to be looking at.
00:06:21.080 So, so far, we've covered a few different things. We've covered PE ratio. Tesla, I give you a few
00:06:25.980 other companies. We've covered Shiller PE ratio. We've covered when people are fearful, greedy,
00:06:31.220 greedy, fearful, Buffett. We've covered the Jordan card that I showed you out of nowhere of $48,000.
00:06:36.440 Oh, buy it for $738,000. How do you have that kind of money? Now let's go to the next one. The next one
00:06:41.160 is interest rates. Let's look at interest rates, okay? So when you look at interest rates, here's what
00:06:47.160 you see. The history of interest rates in America, okay, this kind of worldwide kind of gives you an
00:06:52.320 idea. You don't see anything being above what it is today. Today is as low as it's ever been. Now,
00:06:57.000 if we really kind of break it down so you can see it even deeper, this is what you will notice. This is
00:07:02.580 the federal funds rate 62-year historical chart, okay? Rates were just a little over, you know,
00:07:11.960 a decade ago. They were what? 5.21, okay? 6.55. So 2001, market tanks. We take it down to 0.98 under
00:07:21.220 a Bush administration to help the economy come back up, but we raise the interest rates again,
00:07:25.680 right? Obama comes into office, takes office. He keeps it low, below 1% for nearly his entire term.
00:07:33.380 And then Trump comes and says, we can't keep it at this. The rates go a little bit higher,
00:07:37.260 but then eventually COVID hit. We have to take the rates low to what? 0.09. We haven't been this
00:07:45.100 low for a long time. Go to the history of America, what it looks like, okay? Here, what we have. What
00:07:51.320 happened in 81? This is Carter. If you look at Carter when he came in, rates went to the roof.
00:07:55.500 CDs were paying 15, 16% at one point. What happened with Carter? Once President Reagan came up,
00:08:00.580 came up with Reaganomics and he brought it lower. So when you look at this and you say interest rates,
00:08:06.540 who cares about low interest rates, Pat? Well, let me show you 30-year fixed and I'll kind of give
00:08:10.600 you an idea why this is so important to look at. If you go right now and we type in your zip code,
00:08:14.920 this is Boca Raton. Interest rates today for 30-year fixed is roughly what? 2.875 at this bank.
00:08:22.520 Chase is 2.92. Let's just say 3% is the interest rate today for what? For 30-year mortgage rate.
00:08:30.520 Today's what? 3%. So then let's just go do math. What does this have to do with anything, Pat? I don't
00:08:35.760 know where you're going with this. Can you kind of help us out better on some of what you're doing?
00:08:38.880 Yeah, let's just say you're buying a $500,000 house today. I'm going to do the math for you.
00:08:42.700 Say you're buying a $500,000 house today and you are going to go with the current rate, which is
00:08:48.660 what? 3% over 30 years. Your payment today would be what? Say over here, your payment would be what?
00:08:54.200 2,108. Why is that such an important number? Let me show you something simple on the paper here and
00:08:59.360 hopefully this will make sense. Here's how rates work. When interest rates are low, price of homes
00:09:06.620 are what? High. But when interest rates are high, price of homes are what? Low. Meaning, right now,
00:09:15.740 if the rates are 3, I'm going to be able to buy a $500,000 house because I'm solving for this. I'm not
00:09:21.620 solving for this. I'm not solving for this. When people buy a house, they say what? I can't afford $2,000 a
00:09:27.260 lot. Nobody says, I can't afford a half a million dollar house. You go to your banker at Chase at
00:09:30.940 BWA, you say, I think I can pay $2,000 a month for a mortgage. Let me do the math. You qualify for
00:09:36.140 a 3% interest rate. We can go as high as $500,000. Great. I get that pre-approval letter. Then I go to
00:09:42.020 my realtor and I say, we can look at houses all the way up to what? $500,000. Now, here's the problem.
00:09:49.020 Watch this here. If I raise this interest rate to 6%, which is what it normally was, it's $3,000.
00:09:56.200 Same value house, but the rate went up to 6%. If that interest rate goes to 9%, what happens?
00:10:02.840 Mortgage goes to $4,000. The couple sitting there at the bank saying, I can't pay $4,000 a month,
00:10:08.460 but it's still only a $500,000 house. So come over here. I've done some math for you to simplify,
00:10:12.960 to take a look at this. So if I get a $500,000 house at 3% 30 years, I'm paying $2,108 a month.
00:10:19.160 Total I'm going to pay over 30 years is $7.58. If that goes to 6%, I'm paying $2,998,
00:10:24.840 $1,079. If it's 9%, $4,001,448. This is the problem. The problem is the following. If I am
00:10:33.840 solving for what? If I'm coming in and I'm solving for the payment of $2,108 and I tell my mortgage guy,
00:10:41.400 hey, I can only do $2,100 payment per month. And the rates today are 6%. Guess what I can only get?
00:10:48.980 I can only get a $351,000 house to be at that payment. Did that make sense? Which means today
00:10:58.220 I may be able to afford a $500,000 house because rates are 3%. But if the rates go to 6%, I can only
00:11:03.080 afford a $351,000 house. And if the rates go to 9%, I can only afford a what? $262,000 house.
00:11:11.840 Which means today real estate is inflated. And if they keep the interest rates this low,
00:11:17.380 Powell keeps saying he's going to stay for another three years. Interest rates low, price is high.
00:11:22.240 Interest rate goes high, prices go down. So this is one other thing to be thinking about where people
00:11:28.560 are buying houses left and right. Oh, it's just interest rates are so low. If it goes the other
00:11:32.660 way around, do not be surprised if these same $500,000 houses are selling for $400,350 and same
00:11:37.700 million dollar homes are selling for $700,000, $600,000 if that were to happen. So now let's
00:11:43.520 go back to this. So is that a sign of a market crash? Yes, because we have kept the rates low
00:11:50.460 for a long time and we can't go low for too long. Sometimes you would do it to just boost
00:11:54.540 the economy a little bit, but to keep it for this long, since Obama came in, we kept the rates low
00:12:00.420 below 1% since 08 for this long. This is like a bodybuilder being on steroids, growth hormone,
00:12:06.680 everything you put for 20 years. You know what happens to you eventually? You have a heart attack.
00:12:12.560 The market's about to have a heart attack if we continue like this. This is not something that's
00:12:16.540 sustainable over and over and over and over and over again. That's another argument I'm making to you.
00:12:22.580 Now let's go to a completely different argument. We just decided to raise the minimum wage to what?
00:12:27.300 $15 an hour. It's about to become official because Biden's got the Senate House and obviously he's
00:12:33.180 the president and Kamala can vote. So it goes to $15 an hour. CBO does a case saying, hey, if we go to
00:12:40.140 $15 an hour, I just want you to know, we're going to lose 1.4 million jobs. 1.4 million Americans are
00:12:45.920 going to lose their job. No, we have to go to $15 an hour. You can't make a case today. It's going to
00:12:50.820 $15 an hour. No problem. Which industry has the most minimum wage employees? Which industry?
00:12:58.620 Wall Street that funds most of these political campaigns? No. Real estate? No. Which industry
00:13:06.400 has the most employees making minimum wage? Well, let's take a look. Well, according to U.S. facts here,
00:13:13.720 if you go and look at it, food preparation and serving related has the most minimum wage employees.
00:13:23.640 Last 12 months, lots of jobs were lost. No? Around 15 million jobs were lost in hospitality,
00:13:30.760 hotel, restaurants. So the industries that took the biggest hit, those small restaurants that took
00:13:36.700 the biggest hit, now we're going to raise the minimum wage for the waiter, waitresses that work
00:13:40.420 there. And the bus boys, we're going to now take them. So I'm running a restaurant, I'm already
00:13:44.860 running on small margins of 3%, 4%. Now you're adding that on top of it? If restaurant business
00:13:51.000 industries go out of business, who gets affected? What do you buy at restaurants? You just buy burgers?
00:13:55.640 No, you buy beer, alcohol, liquor, paper. Man, other industries could be affected. Yeah. You know,
00:14:01.920 I spoke to Andrew Zimmerman, who has his own show, and he's been around TV for a long-term expert when it
00:14:06.960 comes down to a restaurant, and he goes, deals with the White House when it comes down to restaurants.
00:14:11.240 He says nearly 50 million people are affected by this entire decision that was made with the
00:14:16.300 restaurant business. You know, with the COVID shutdown, they're being affected tremendously.
00:14:20.760 Does that potentially lead to a bubble and an effect? Maybe, because it's delayed pain that's
00:14:25.800 about to come up to small business owners. And what are we going to do? Every single time send $1.9 trillion
00:14:30.140 to people? Is that really effective? Well, now that we're talking about the $1.9 trillion,
00:14:35.060 why don't we take a look at the $1.9 trillion and how much money we've printed in the history
00:14:41.300 of America? I don't know. Let's just take a look. You ready? Here's what it looks like
00:14:45.700 on what we've done, history of America, when we print money. Da-da-da-da-da-da-da, 2000. Look,
00:14:51.040 we're at 2000. Nothing crazy, okay? And then all of a sudden, what do you see? Goes up, goes up,
00:14:56.800 goes up. And what are we doing 2020 with COVID? Look at this from 08, how much we printed with
00:15:02.200 quantitative easing. But then look at that spike. Vroom, we go up. That's a scary sight.
00:15:09.740 Some say 40% of all the money in the history of America was printed just in 2020. Some say it's
00:15:18.560 18%. But it's between 20% to 40%. Almost a fifth of all U.S. dollars were created this year. Fifth,
00:15:28.380 which means what? 20%. So do we keep solving problems by printing money? We got a printing
00:15:34.200 press. Let's just keep printing money. It's okay. We'll solve the problem that way. That's the way
00:15:37.700 to go about solving the problem, right? That's what we should do. No, that leads to fake success
00:15:43.340 and fake money. And what is fake success and fake money? Do you ever met a fake rich person?
00:15:48.700 What happens to them eventually? They lose the cars. They lose the house. They lose everything
00:15:52.300 because they were fake rich. They were never rich. They were rich on the outside, but they were never
00:15:57.380 rich on the inside. You ever see this? People look very happy. Oh my gosh, it's so wonderful. I'm so
00:16:02.180 blessed. As if they have zero problems. Deep down inside, they have a lot of issues. There's a lot
00:16:05.920 of fake millionaires today, a lot of fake success today, a lot of that going on today. And by the way,
00:16:10.360 we can't blame many of them because we are promoting this. This is the greatest time to get rich.
00:16:15.940 Take advantage of it. Be greedy. This is what you should do. And folks don't realize,
00:16:20.580 we're not talking about set some money aside. We're not talking about emergency fund. We're
00:16:24.500 not talking about get ready that if something bad happens, we're not talking about the rainy day.
00:16:28.480 All we're talking about is flamboyant. This person did this, that person did this. All this stuff
00:16:33.140 comes together. So now, let me go to another one. Excess evaluations I already gave you when we talked
00:16:38.860 about Tesla, but some of the excess evaluations with Robin Hood, GameStop, American Airlines, you know,
00:16:43.860 Bed Bath & Beyond. What is that all about? That is another sign where the market today can be
00:16:49.200 manipulated because of one person sends a tweet. This person goes on GameStop, Reddit.
00:16:53.440 Strange things are going on when companies are being overvalued and they're not worth that. Even
00:16:57.560 the Doge coin CEO says, we're not a $10 billion company. I don't even know what the hell is going
00:17:03.480 on here. We're not a $10 billion company. The CEO makes a comment like that. Where the own CEO
00:17:09.340 is concerned about that. Even Musk said, I think we're overpriced today in a tweet. But people are
00:17:15.760 saying, no, we're not. Keep buying. Keep buying. Keep buying. That's another concern. And then last
00:17:20.780 but not least, economic expansion went for how long? I think economic expansion went for 128
00:17:27.300 months. No one's even talking about it today. But economic expansion went for about 128 months. Okay,
00:17:31.560 when you go for 128 months of economic expansion, then comes COVID. We forgot about it, that the
00:17:35.780 market grew for 128 months, nearly 11 years. And then because of COVID, we had to shut down and the
00:17:41.020 market tanked 35% in one month, if you remember that. And then what happened? But take COVID out.
00:17:46.980 COVID never happened. Say COVID never happened. There is no coronavirus. Nothing happened. And 2020
00:17:52.880 goes the way it did. How does the market go? Where does it go? $35,000? $40,000? That's still a bubble
00:17:59.160 that's been going for 11 years. No economy expansion goes for 11 years. And the debt of the country keeps
00:18:05.720 rising the way it's rising for us. And the interest rates, that's not sustainable. Eventually,
00:18:11.580 there is a crash that's going to come. And it's not going to be pretty. And this wasn't a crash in
00:18:17.480 2020. We did not have a market crash. But 2020 was such a bad year. No, no, no. People got
00:18:23.320 unemployment benefits. People got stimulus checks sent to them. People got bailed. People got bailed
00:18:28.360 out in so many different ways where people didn't even want to get a job because they were making more
00:18:32.320 money staying home than getting a job. This is not a sign of a market that's growing. Okay?
00:18:37.760 This is an 11-year bubble that's been brewing, that's been going up. And when it drops, it is
00:18:43.380 not going to be pretty. So having said that, that's my argument. I made about 10 or 11 points to you.
00:18:48.940 You agree? Put thumbs up. You disagree? Put thumbs up. But give me your argument below.
00:18:53.520 And if you want to find out more, you say, Pat, this is scary. What if this actually does happen?
00:18:57.080 How can I prepare myself? I got a video I also did titled, Eight Ways to Prepare for a Market Crash,
00:19:01.900 If you've never watched it, click here to go watch it. Take care, everybody. Bye-bye.