Crash Soon?

Assalamu alaikum everyone. I hope you are doing well. Today is July 10th, Wednesday. And Tesla is currently at 264, actually close to 265. Bitcoin is at 57,700. And today we're going to talk about perhaps some similarities with 2021. And similarities in the markets between now and 2021 and whether or not we should be concerned about a crash coming soon as we experienced in 2021 and 2022 when we had a bear market. So I think people who are following this channel know my position on this matter and how I am bullish, but I do like to look at alternative opinions to make sure I'm not missing anything. And so Charles Schwab actually came out with a piece today regarding their observations of similarities between today's market and the market in 2021. So I'd like to take a look at the information they provided and I'll provide you with my opinion on it. As always, this is not financial advice. So be sure to do your own due diligence before making any investing decisions. And thank you very much for all the likes that you have been leaving do leave a like on this video. If you enjoy it and you'd like other people to watch it as well. All right, so starting with Tesla. So Tesla actually has notched its 10th session of gains, which is something that we haven't seen in a while. And if you add today, and it's up slightly today as a recording this at least, and we will have reached that 11 straight days of gains. This is why I always encourage investors to pick out the stocks or ask themselves what stocks are out of favor. And not necessarily to wait for them to be in favor because if you wait for them to be in favor, then you may be too late. You may end up finding yourself. Okay, they were up. Let's see if there's a pullback so I can get back in. And then that pullback never comes 10 days later. You're still waiting for a pullback. So always ask yourself when you're investing. What is out of favor? And those are, I think, a good starting point. The answer to that question is a good starting point for where to allocate capital. Hamdulah, our growth portfolio continues. It's March and Shala. We will reach 100,000 in Shala sooner rather than later. Obviously, Tesla has been a big part of this March, but our other positions are doing just as well. And in some cases, even better. So going to the Charles Schwab piece, winners are large and few and far between basically. So if you look at the S&P, yes, it is reaching new all time highs all the time. But the 10 largest stocks as a percentage of overall market cap for the S&P are now at levels we haven't seen in the last 40 years. So yes, the indexes are reaching new all time highs all the time, but the concentration of these indexes is also at all time highs. And in fact, if you look at the number of advancing names and you compare it to the number of declining names, then the number of advancing names is actually losing ground to the number of declining names. So you have more stocks actually moving downwards than you have moving upwards. And the advancing to declining line, that's that orange line. You can see it falling while the S&P 500, that's that dark blue line, that is going up. So this is something that is important to keep in mind. What it means is that if you're invested in the S&P 500, for example, then it's, I think you have less, you have less diversification, then you may think that you have. So a turnaround in a few names could really impact your investment and the performance of the S&P. So in this respect, I understand what the Charles Schwab article is suggesting, which is that because there is more concentration, there is more risk in the S&P 500. And they are looking at the following chart, they provide this chart and they say, look, the top half of the chart, that shows you the S&P 500. And the bottom half is showing you the percentage of S&P 500 stocks that are above their 50-day moving average. Now, if you look at the left-hand side of this chart, you can see the S&P 500 is going up pretty steadily in 2021. But you can see the orange line below it, that is actually moving downwards, it's trending downwards. And then you have a peak at the end of 2021 in the S&P 500, followed by the bear, the, basically the bear market that we had in 2022. And so if you look at the right side of this graph, you can see something, they're arguing, something similar, wherein you have the S&P 500, it's going up. So that's the blue line, it's going up in this 2024. But the orange line below it is trending downwards. So the question that they're posing is, is this a repeat of 2021? Excuse me. What I would argue is that this is actually correlation, it's not necessarily causation. This is not, this is not indicator that has been tried and true like other indicators that would suggest a bear market is upon us. So it's important not to fall in the trap of, you know, calling a bear market or waiting for a bear market, because a lot more money is lost waiting for a bear market than is lost in a bear market. So the Buffett indicator will look at the market cap of public equities and compare it to the GDP. And typically everything above 100% is considered overvalued, the market is overvalued if public equities are more than GDP and it's undervalued if public equities are less than GDP. But right now we're closer to 200%. And this is concerning. I think that there is a reason for concern here. However, what I would say is that we've been at elevated levels for the last 15 years. Yes, we did reach, you know, similar levels in 2021, which was followed by a, as I mentioned, the bear market in 2022. But we only retraced back to 150%. And then we started climbing again. 150% is still historically considered elevated levels for the Buffett indicator. So, you know, if you're following this indicator, and I think you can see that since 2000 from this graph, you can see that since 2000, we've basically been above 100%. For the vast majority of time. So I do think that this is trending upwards over time and perhaps, you know, the reason for this is could be the subject of an economics paper that never gets read. But if you're what this chart does tell us is that if you're just relying on this, then you're going to miss a lot. If you're if you're relying on the traditional assumption that everything above 100% is overvalued, then you're going to miss that. You would have missed out on the majority of the bull market that we've experienced in the last decade and a half, basically. And moving forward, I think the same is true. And nevertheless, I don't I don't deny that this is, you know, at least I brow raising, but I think there's a much more important metric that really will determine the direction of the market. And that is the liquidity cycles, the global liquidity cycle is really the boss with regards to the markets and what direction they end up taking. And I covered this in previous slide the global liquidity cycles have been basically four years long in recent history. And the market has tracked these global liquidity cycles extremely closely. And you can see in 2022 global liquidity was contracting in the market contracted, but now we are at a point in the cycle where liquidity is set to increase. And it's actually not set to peak until 2025 actually the second half of 2025 and some are saying even into 2026 this remains to be seen will obviously be keeping a close eye on it. But there are some anecdotal evidence that suggests that this this corresponds with what we can expect in the near term future. For example, you have us money market fund assets are now above the $6 trillion mark. So in other words, there's $6 trillion in money that is outside of equities that's sitting on the sidelines. And what would move them back into equities is if the the interest rates. Fell, and this is what we are expecting. So inflation has been cooling. If you look at whether it's core CPI or CPI. It is headed in the right direction, albeit still above the 2% target that the Fed has said, but it is headed in the right direction. I do think that there is reason for optimism that it will continue heading in the right direction in the second half of this year. After all, the hotter than expected inflation prints that we got in the first half of this year were largely. Concentrated in 2 sectors insurance and housing and I think insurance will come down and so will housing. Now, it's not going to be linear in its progression downwards. We may have some bumps along the way. Tomorrow's inflation reading will be extremely important. So I'll be following that very closely. However, I think the trend nonetheless, regardless of tomorrow's number, the trend nonetheless is downwards. And this is what the market is banking on. And if you look at what the market is pricing in, in terms of probabilities of a rate cut, which, you know, supports the our understanding of where we are in the liquidity cycle, the probability of rate cut is actually close to 75% close to 75% in September. So with that, the conclusion that I come out with is that I understand the point that Charles Schwab is making in terms of the concentration in the SMP. And perhaps if you're invested in the SMP, this could be a concern for you. However, even those top names, they're pretty diversified in the number of, they have a number of different. Now, irons in the fire, so to speak. And so just because it's one name doesn't mean it's one business. There's diversification within these companies as well. So perhaps that concentration is overrepresented by just looking at the number of names. However, the connection that they are making is kind of a leap. They're mistaking correlation with causation. I don't think there's going to be a, you know, a bear market because of this lack of breadth in the indexes and the concentration in them. I think there'll be a bull market because of what we expect the liquidity picture to be globally in the second half. That seems to me a connection that is causal and not just correlation based. So with that, if you want to remember and aren't following our portfolios, do become a member link to do so is in the description. And leave a like as I mentioned, I'll take some questions very quickly. Now, while I come to everyone, thanks Abdullah. Nice to see you. What reasons make you believe Tesla has a special edge for humanoid robots? I understand that the thesis for FSD, but maybe there are other companies that are better suited for humanoid robots. So the reason why I think this for Tesla is the advantage in AI and the advantage in mass production. So if you think about it, the cars that Tesla is producing that have FSD already, which is a version of a version of, sorry, I went off screen there because I have a running nose. So another reason for you guys to have to see that. So the cars that they have are essentially robots with wheels. They have AI, they have mass production of these robots with wheels already. So what we're talking about here with humanoid robots is just an adjustment so that their AI is now tailored for a different looking machine, but it's a machine nonetheless. And they have mass production in place on a scale that no other company has. So it's one thing to build a prototype. It's another thing to build something in mass. And Tesla has experience during this. And well, the next question says, Boston Robotics arguably has way better tech, but not able to mass produce like Tesla could. Exactly. And I think that the way better tech, that is only a function of Boston Robotics has, or in Dynamics, I believe, has been in this business for a very long time. They make cool YouTube videos. You see prototypes of the next, you know, their next most advanced prototype all the time. But they've been doing this for a long time. Tesla has really only gotten started with its robotics project. And I think that that gap is going to, it's going to narrow and they'll eclipse them very soon. In fact, Elon must tease in the last 24 hours that they have a new design for their human or robots, which will come out in the second half of 2024. Are you considering AI stocks to add to the portfolio? Yes, I am. And it would be great if we could find an AI stock that was suitable for a small cap portfolio, which we are building right now. Sam Alekuma Ken, Alekuma Sam Wilson, nice to see you. Do you think ETH is good for a quick swing trade until its ETFs are live within a couple of weeks? It's tough to say Wilson because it's tough to gauge how much is already built into the price right now. What I can tell you though is that crypto generally, I kind of covered this yesterday, it's in fear territory. So crypto generally I think will do better in the coming weeks than it has been because it already has fallen a considerable amount. But for ETH specifically, we know that the ETFs are coming, the bounce came when the approval happened, but we know that the ETFs are coming, so it's hard to gauge how much is priced in versus not. Hani says Sam Alekuma Ken, in terms of AI companies, any hope of iRobot company to catch up, I bought its high when it was in the 60s and now below $10. Yeah, iRobot has been quite a disappointment, they had so much potential in terms of what they could have been and then they just didn't follow up. Needless to say, I'm glad I sold when I sold years ago now, but I think there are faster horses in the race, I haven't really seen proof of competence by management yet. All right, sorry about that. Does your conclusion regarding S&P 500 apply to SPUS? Yeah, I do think that SPUS, I think their correlation with the S&P 500, I haven't looked at it recently, but I'm assuming it's pretty strong, so it would follow that SPUS, what I said applies to it as well. Sam Alekuma Ken, been with PIF several months, one of the best investments I've made. Well, thank you for saying that, that always makes my day when I hear that. Do you think BTC will go lower or is $57.77 a good point to further invest in BTC? So the answer is, I don't know, obviously, I'm sorry, but I think objectively speaking now is a good time, given where we are, what we know about fear and greed in the market right now, what we know about the selling pressure that the German government is exerting and the effect that that's happening on its price, what we know about perhaps some Mt. Gox liquidations happening and perhaps more happening in the near term future, that now is a good time to maybe dollar cost average. So buy regularly, or if you want to deploy a certain amount, maybe divide it into a few different chunks and just buy over the next two to three weeks, but I think that now is a good time to buy. So just to be very concise, I think that now is a good time to buy. And yes, it may go down further, that's why we don't make our buys in one false hoop, we stagger our way into our position, we stagger our way out of our position. Boston, yeah, I mean, it's so chocolate, what I was saying, yes, Boston Dynamics, especially a Tesla acquires them. Yeah, it's possible Tesla acquires, but who knows, I mean, it seems like Tesla is just doing everything on its own. Recently, it was in Elon Musk was in talks with Oracle to set up servers for XAI, and they just decided, Elon Musk decided that it was going to take Oracle too long to set up the servers that they needed so that just can bring everything in-house. So really the bias for Elon Musk that companies is vertical integration as much as possible. I worked for a Fortune 500 tech company, and indeed it and other tech companies are pouring money into AI right now. All my older projects got canceled due to funding issues. Yeah, I mean, this, I think, we may be at like a 1995, 1996 internet moment with AI, like we're in the beginning stages, and perhaps we reach euphoria over the next few years. But I do believe that we have runway still for this AI play, and it'll make a lot of people a lot of money. So I'm going to come again. Generally speaking, what are the plans for the crypto for you after this board? I'm potentially moving everything to BTC or complete sell off the stocks. Yeah, it's a good question. It's, it's, it's not out of the question to sell out everything. It's just going to depend on our level of conviction at the time because there are periods of time where, historically speaking, it just hasn't really paid off to hold on to Bitcoin. So like if you look at the 12 to 18 months after the having, that's when most of the gains happen. And then after that, until, until you're getting closer to the next having, the performance of Bitcoin is quite poor. And so if you followed that strategy of just being invested right before the having and for the 12, 18 months after the having, you did a lot better than just holding. And never selling. But of course, there is some timing involved in that. So it depends on our level of conviction. We may end up just selling out entirely. It also depends on, I sent an email out to members of the newsletter newsletters free, by the way. If you want to add your email to it, I sent it out on Sunday talking about when I in the, when I sell. And so there are, you know, different factors that go into that decision. So we'll, we'll have to wait and see in short. But I definitely think the alts, we're, we're going to get rid of most of those. The only thing I get is that I haven't enjoyed PIF earlier. Thank God that I really appreciate that. Thanks. Oh, thanks. I feel the same way telling friends and family. Thank you. I appreciate it. Hope we don't fall into an AI bubble. Yeah. And that's why, you know, valuations are very important, keeping an eye on valuations. Keep an eye on, you know, our watch list, our buy and sell prices. That's extremely important. So thanks for finding and joining PIF. Wow. This is turning into a great ad for PIF. I really appreciate it, guys. I really do. Why are you coming? Chocolate. Well, let's say I just don't see how it can be brother, my sister team. Let go of 75% of their workers, but productivity hasn't dropped mostly software engineers using Microsoft co-pilot as their AI. Yeah. A lot of jobs in the future are going to be different than the jobs of today. That is for sure. And I think one of the most important jobs of the future, which is one of the most important jobs historically, is the job of being a good parent, a good father and a good mother. And I think that is something that you will never be able to outsource. I think governments around the world should consider cutting a salary to stay at home moms. I think that would be a great idea. It is a career. They should have, I don't see why they shouldn't have like a salary and, you know, retirement benefits and just encourage them to stay at home. I think this should be a government policy. And this is something that I think would solve a lot of things because, you know, a lot of problems in society can be traced back to, you know, parents that are absent and, you know, having a lot of things that I think is extremely beneficial, money well spent. All right. All right. Thank you all. Yeah. Everyone watching, please drop a like. Thank you all. I really appreciate it. Hamdulawa. Good vibes only in our community. This is a big blessing. I really appreciate it. Thank you all for tuning in. Until next time, make sure to take care of yourself. Assalamu alaikum and peace be upon you all.