The Practical Islamic Finance Podcast
The Practical Islamic Finance Podcast
🌟 The Best Market Recap: 12-18-2024 🌟
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🌟 The Best Market Recap: 12-18-2024 🌟
In this episode, we will cover:
- Intro and Market Update
- Market Reactions to Fed Cut
- VIX Surge and Historical Insights
- Tesla, Bitdeer, and Bitcoin Updates
- Predictions for 2025 and Beyond
- Q&A and Final Thoughts
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salam@practicalislamicfinance.com
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Our podcast is about helping people ethically build wealth. We cover a broad range of topics including stock and crypto investing, product reviews, and general financial well-being.
DISCLAIMER
Anything you hear in this video is an opinion. It is not personalized financial advice. Make sure you do your due diligence before making any investment decisions.
Assalamu alaikum, everyone. I hope you are doing well. We got a big pullback in the markets by the way uh apologize for my voice I'm going to try and make it through uh the live and hopefully it is audible for you and everything is clear I wanted to make sure I went live today because of the massive pullback that we got in the market and um you know we were expecting I have mentioned you know in the beginning of january you'd probably get a pullback and so we have been taking profits and being disciplined about the profits that we have keeping some amount in cash and then pullbacks like we got today are times when we can take advantage of this I think the long story short here if you're short on time and you want my take the fact of the matter is nothing about today has materially changed anything in the markets what I mean by this is that we were expecting a point cut and that's exactly what we got all that has changed the only thing that I have the only things that have changed are the expectations for rate cuts in the future that's it So nothing else has changed, only our perception of what the future will bring. And if I know anything about the markets, it's that we are a hundred percent of the time wrong about what happens in the future. Sometimes we get the ballpark, right? But in terms of actually knowing what is going to happen, basically the Fed market participants are have a record of always not knowing what the future holds. So because today did not involve any material change in the markets, I don't think it should be a cause for panic. And I do think it is a buying opportunity. Obviously, I haven't made any, well, I actually did buy, but not today, but not in response to this pullback. By the way, if you want to become a PIF member, I'm forgetting to mention this in our lives. If you want to become a PIF member, make sure to do so, so you can follow our trades move for move. You can do so using the link in the description. Sorry about that. All right. So the Dow was down more than a thousand points today. The Nasdaq was down close to eight hundred points. The S&P was down two hundred points. Russell was down four point four three percent. The VIX shot up seventy seven percent. So that's a lot. And here's the good news. Historically speaking, investing when the VIX is up as much as it is. has always yielded, almost always yielded better returns than when the VIX is down. So now with the VIX at twenty eight, it becomes an extremely, I think, attractive time to be nibbling on our favorite positions. And again, we're focusing on only investing in the top one percent of assets. So I really think that these types of pullbacks should be looked at as, you know, fire sales and taking advantage of it. We finally got the pullback in Tesla. This is why we send out our one K email and why we take the strategy that we take. We like to snipe at opportunities as they present themselves. And so we've pulled back from around four eight into four forty. There's probably more pullback here. And with Bitdeer, we're down eight and a half percent today. Iris Energy, we're down close to twelve percent. TSM is down two point five percent. MicroStrategy is down ten percent. And Bitcoin is actually pretty solid still above a hundred thousand. I thought it, I thought it may have dipped below a hundred thousand earlier, but we're still at a hundred thousand. In fact, our low today was a hundred thousand, two hundred. The Dow, I'm sorry, the Doge is at thirty six cents. and um and this is getting really interesting uh for doge I have been wanting to you know buy on dips here uh salon is at two oh eight all right so thank you for bearing with me and my voice While I make it through this, I do leave a like if you enjoy the live. All right, so what happened today? The Fed cuts by a quarter point as we thought it would. But it did indicate fewer reductions ahead. That is, it thinks that fewer reductions are coming based on its point of view from where it stands today. And I can tell you that that's going to change, especially in light of the fact that we have a new administration in the United States coming January the Which means that there's going to be a whole host of new policies. Trump has mentioned a lot about tariffs and tax cuts and deregulation. And this concoction of new policies is going to dictate a new economic environment. That will likely change the forecast of the Fed in the coming months. That being said, the reasons for the Fed now not wanting or not seeing a need to cut as aggressively as previously indicated is because it sees the economy as in a in a resilient place. It's not that worried about the economy. And so this is something that's actually good. It is good that the economy is doing well. And the Fed is noticing that it's doing well. And therefore doesn't really think that it should prioritize economic health at this point, over inflation worries. So if we don't get the same number of cuts, but the reason is because the economy is doing well, earnings are good, companies are growing, the equity markets, I think, will still fare well in twenty twenty five. So reading the key points here, the Federal Open Market Committee cut its overnight borrowing rate to a target range of four point two five to four point five. Back to the level where it was in December twenty twenty two. Today was a closer call, but we decided it was the right call. And by the way, I said this last week, I said the market is pricing in a ninety five percent chance of a cut. Sorry, of a cut today. But I thought that probability was way too high. And Jerome Powell, I think, confirmed that when he said that, you know, it was a close call, but we thought it was the right call. So I thought the probabilities were way out of whack in the markets. Because all the economic indicators were suggesting that the economy was doing well. quite good. And therefore the unemployment was under control. And therefore the incentive to cut interest rates was simply not there. All right. And the Fed indicated that it probably would only lower twice more in twenty twenty five, according to the closer watch dot plot. So what is what are they talking about? By the way, this is a a bird's eye view of interest rates, and you can see here. that we are at relatively elevated positions compared to near-term history. But if you extend the history beyond that, beyond the last, you know, we're actually not that elevated in terms of absolute levels for our interest rate. And it is expected, based on the Fed's comments, that we're going to bring it down to around a neutral rate of three percent. So what does that look like in their dot plot? So here, each dot, so each member of the committee will put a dot on where they think the appropriate level of interest rates will be for the period. And so for twenty twenty four, OK, this is done. We're already here for twenty twenty five. They're saying, you know, just below four percent is is where we'll end up. So, again, two twenty five base points cuts is what the Fed is predicting today. This will likely change. And then for twenty twenty six, we'll probably be below the three point five percent level for interest rates. And then twenty twenty seven is where we'll get to around three percent on the interest rate. And that's basically what's going to be the neutral rate. And that's what the Fed is predicting in terms of the timing of the cuts for next year. Basically, you have to go out all the way to June or actually May for there to be a higher likelihood than not that we get an interest rate cut. So based on today's Fed, there's a more likely than not probability that we stay until May until we get our next interest rate cut. Now, I want to emphasize that nothing has changed. in the markets. Only expectations for the future have changed. The liquidity levels haven't changed. Well, the interest rates were cut. So that's what changed. But this is what we expected. But the reason for the drop today is not because liquidity levels have changed, not because the prospects for the economy have changed. If anything, they've improved. Not because there's a new war that has broken out. Not because anything... fundamental has changed about the world. Only perceptions, only investors' minds and investors' sentiment about the future has changed. And I think that should be instructive with regards to how we react to the pullback that we got today. So things like this chart have not changed. So if we look at Bitcoin and we compare it to gold, I mentioned this yesterday. So Bitcoin now has more assets under management than all the Bitcoin ETFs have more assets under management. than all of the gold ETFs. And if you look at the BlackRock iShares ETF, IBIT, and how it shot up to fifty seven point eight billion versus a gold ETF like IAU and how long it took it to get to thirty three billion, you can see the stark reality, the very undeniable the undeniable reality of uh the an asset that we hold in we have a lot of exposure to in our portfolios uh which is bitcoin and so this chart hasn't changed because of today nor did Nor did the stock to income model change. And the stock to income model, which has given us a very good idea of where the price of Bitcoin should be over time. with the price of Bitcoin on this chart in green and the model's prediction for its price in that off-white color. This is predicting a projected price for Bitcoin towards the end of twenty twenty five north of three hundred thousand. This model hasn't changed. And if you extend beyond that, it is predicting a million dollar price for Bitcoin in uh twenty twenty eight that has not changed uh so uh in light of this I just want people to kind of you know stay calm uh we have been on a very strong run in the markets pull back the pullbacks like this do happen and I think if you know where you're putting your money they can present some really intriguing opportunities all right so with that let's go to questions inshallah Salam, everyone. Is our thesis and fundamentals for BTC still strong? I think they've been, as they are now, stronger than they've ever been at any point in the past. Baha has the right mentality. He says, I thought Black Friday was in November. Yeah, I agree. I think dips like this should be viewed as opportunities. All right. Sanbrother, do you think BTC will have a deeper correction? It's really anyone's guess how deep the correction goes. I would stagger my way into positions and stagger my way out of them as well. I don't think that the correction will last for a long time, though. I think the recovery, inshallah, will be pretty quick. I think BTC will definitely pump if something like a Bitcoin reserve asset or Bitcoin being designated as a reserve asset by the United States is actually done. I think that will cause a big pump. Sorry, guys. I'll talk about Micron, inshallah, tomorrow. Thanks for your well wishes, brother. Inshallah. Thanks, Rashad. Thank you, Squared Circle. Appreciate it. Thanks, Chocolate. Thanks for coming. Thank you all for your well wishes. I really love you guys. Thank you. Thanks, Marnie. I appreciate it. Thank you so much. I really appreciate it. You guys are the best. Kango Inc. has not been on my radar. Let me make sure I make note of it. I'll take a look, inshallah. I'm totally fine, Alhamdulillah. Thank you for your concerns. Thank you, Yasmeen. Really appreciate it. Well, there sounds like fifty years ahead in the future, yeah. Thanks. We never left investing in crypto, brother. Thanks, Karim. Really appreciate it. Awesome, Avadil. I'm glad you're enjoying your gains. And if you're not a PIF member yet and you're watching this, then do become a PIF member. Thank you, Karim. Really appreciate it. Yeah, I do think that there are other considerations here, including the cost of debt. I've mentioned this many times. So in terms of being neutral, I don't think the Fed is completely neutral. And so its policies will skew towards making money cheap versus making it expensive or holding rates higher for longer. Or else Powell will be out of the jobs very quickly. Thanks, Dr. Khalid. I really appreciate it. Now, I'll probably be buying before Q&A if the pullback continues for sure. Thanks, Brother Khan. Appreciate it. Thank you all. Thanks, Ms. Nass. I'm glad you enjoyed it. Hey, thank you all for the well wishes and nice comments. Taking the time to write it down really means a lot to me. I honestly love you guys. And thanks for tuning in and putting up with my voice. Leave a like if you enjoyed the live. You were able to make it through my voice and understand what I was saying. Become a PIF member if you aren't already. Until next time, make sure to take care of yourself. As-salamu alaykum and peace be upon you all.