How the Fed is crashing the market.
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WHAT HAPPENED?
the S&P500 went down 2% on Wednesday, tech stocks took a huge beating and the NASDAQ fell 3%, Ethereum went down to $3,500, and Bitcoin fell to the low 43,000 range so we had a huge market correction. Was this week the start of the market crash of 2022?
THE REAL INVESTOR QUESTION:
Why do stocks, specifically tech stocks, and even things like Bitcoin go down when people are afraid of inflation? Think about it – if prices are going up – don’t you want money to be invested in assets? Isn’t Bitcoin supposed to be a hedge against inflation? That’s a really good question. In order to understand the answer – you have to learn how the Federal Reserve controls the interest rates.
HOW DO INTEREST RATES ACTUALLY WORK?
Enter the Federal Fund Rate. That is the cost at which commercial banks – banks like Wells Fargo, Chase, Citibank, etc. borrow or lend their money to other banks. Why would banks borrow money from other banks – can’t they just print it? No – they can’t. They need to borrow money in order to meet what are called “Overnight Reserve Requirements”.
Banks lend their money to us but they can’t lend all their money out because if people go to withdraw, the banks need to have money in their vault, which is why they are required to hold a minimum in relation to how much they lend out – that is the law. If banks have too little – they have to borrow from other banks with “excess capital reserves”. Today that rate fluctuates between 0% and .25% so it’s very cheap for banks to lend, and borrow.
THAT STILL DOESN’T EXPLAIN IT:
The Federal Reserve has $8.7 trillion dollars on their balance sheet – if you go to their website – https://www.federalreserve.gov – that’s how much money they have in assets – think of this as their “investment portfolio”. The report is now showing us that the Fed wants to start selling the assets off after they’ve “tapered” (stopped buying, aka money printer go brrr). Normally they would have waited a couple years before doing that. And how it affects us, is the risk vs reward in the form of increased interest rates for bonds.
HOW DO BOND RATES AFFECT INVESTORS?
Once the federal reserve starts to sell the bonds, the price of those bonds will fall but their yields will go up. That’s just how it works. Bond yield, dividend yields, are inverse to prices. If prices go up – yields go down, if prices fall, yields go up. That’s how rates are “truly controlled”. They’re just influenced by way of buying or selling or buying bonds and other assets.
As of right now – the Fed has not started selling but they told they’re highly considering sometime before the summer of this year – and once they sell, interest rates on bonds will go up which will make the fixed income assets much more attractive to investors. In fact, since the Fed announced they could be selling, the 10 year treasury bond yield went up to 1.7%.
I STILL DON’T GET IT:
The reason tech stocks with high valuations are so affected, is because bond interest rates affect how we value the future cash flow of that company. This is called the “DCF” or discount cash flow model. https://cnb.cx/33fTXS4
HOW DOES IT WORK?:
Watch the video to find out how all of this affects Bitcoin and stocks.
*None of this is meant to be construed as investment advice, it’s for entertainment purposes only. Links above include affiliate commission or referrals. I’m part of an affiliate network and I receive compensation from partnering websites. The video is accurate as of the posting date but may not be accurate in the future.
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Exllent prediction
brain dead rn
Wow, aged perfectly
I’ve learned so much in two days on your channel then I have my whole life.
Your the best More please!. Have you tried quant PlutoHQ Trading, Ninja, TradeMo?
Nice video !! I am convinced that the poor too could be rich , if they invest wisely and diversify their income. Investment isn’t a get rich scheme but key towards financial growth and stability
I really feel left aside hearing and seeing several testimonies from people on profits they make from Bitcoin/Forex Investment. Can someone recommend a good expert that trade on my behalf and generate profit for me
will there ever be recovery???????
You explained why Bitcoin would go down with higher interest rates, but you're not explaining why in Bitcoin went down with increased inflation.. as you said when inflation is high interest rates are low. Equation is high right now but Bitcoin is still going down and you're saying it's going to go down inflation is low and interest rates are high so it's just going to keep going down quite sure I understand
Bro thank you soooooo much this is such a great video I know there is a lot of time that went into putting this together. I appreciate you sharing this knowledge and always making easy to understand I am going to watch this about 10 times to learn how to apply it on my investment journey
Interest rates go up to incentivize people to buy bonds
Andrei, your presentation skill is the best.
lost everything but i am not hopeless. took a pil to sleep.
Very well explained. I just subbed.
Hmmm the explanation of DCF (or TVM) as cause of the sell off is a bit hard to analyze. My guess is the market is highly leveraged and if the interest rates go up, the cost of the loans used in the investments will go up also.
Another angle is if the interest rates goes up, bonds get cheaper. A cheaper and safer investment is attractive to some.
Maybe some are just taking profit and waiting for the price to come down significantly before buying.
DRIP will be your best investment. DYOR
"automagically" I'm going to use that from now on
If you're interested in 1-to-1 lessons on staking, trading and mining cryptocurrencies & DeFi, for ROi with KESCO's trade crew, please let me know.
Best regards.
Worries me your explanation of yield. if the payment amount (coupon amount/dividend amount) stays the same then of course yields go up when asset prices come down and vice versa.
Thank you for awesome explanation
@Andrei_Jikh : china is making value of bonds go down since they are losing everything in their big banks… the inflation created in usa, canada and other countries who signed blank checks to companies during the pandemic lockdowns and to citizens have created a chimera of depression and inflation to come. This is worse than everything I had imagined in my uchronic earth-scifi short novels
just found the channel and can't help but wanna listen to the news from his POV from now on. I have been against Crypto for 10 years, and against the concept of trusting web for money since 2005. Being a programmer, I learned how frail everything is. Taking as much things offline and in cold hard formats, physical medias, currencies… is the only way for reality minded people to survive. Be against the law of the jungle (crypto anarchy) and be realists. Save yourselves. I saw a teacher while in college lose EVERYTHING in the NORTEL stocks scandal. Learn about the NORBOURG scandal in canada too… you might benefit a lot!!! Crypto is like this scandal.
Chinese banks crashing the economy since AUGUST 2021… don't you think this is a problem? that affects the us$… china being the biggest owner of us treasury bonds. The big problem : even Paul Martin, ex canadian prime minister, and economist, said : "The 2008 crisis once you see the next crisis… will have felt like a picnic at the park with your family on a beautiful sunday. The next crisis will be much worse" 2010. "Krash : les dessous de la crise"
Wonderful. Genius u r.
The real question is: who has been receiveing those 40 bi a month for all this time from money printed out of thin air?
Answer:
Definitly not me!
i hate this guy
Bitcoin fell because kazakhstan is in civil war over energy cost. kazakhstan has a huge roll in crypto and bitcoin mining because of their low energy cost.
I am already out of the marked since last mounth.
you cant stop the flow without having having great influence. The rich gets richer and the poor doesn't. Taken huge risk can only get you far, make scarifies and dont just ponder on how people make good outcome even with the crises going on
🖕🖕 really appreciate you for your helping I got my account unbanned you are a pro
you're my favorite youtuber at the moment. keep it up.
The meme in the beginning has me dying I’m high and I love it
The amount of time we spend believing we can't is more than enough time to learn how you can.
– my Brain
Peter is a broke college boy! There is no way!
Wow, you made it so clear. Thanks for the video!
I would think that bonds yield higher interest rates the more the Fed sells because of lien position. As the Fed promises more people $, your chance of getting your yield goes down, so interest rate should come up to incentivize bond buyer.
Interesting Video:
Reading about people grabbing multi-figures monthly as income in investments even in this crazy days in the market,any pointers on how to make substantial progress in earnings?would be appreciated…
Quantitative Easing has inflated the equity markets for many years. Money going to companies instead of flowing through the economy. That time is over and the interest on $18 trillion Quantitative Easing is due.
nice video I'm new to cryptocurrency and I don't understand how it really works. Can someone guide me on the right approach to investing and making good profit from cryptocurrency investment
Zynga stock
Great
It'sgreat
After watching so many YouTube tutorial videos about trading I was still making losses untill Mr George William started managing my investment. now I make $6,800 weekly. God bless Mr George William . His been a blessing to my family.
inflation is killing your money
covid crash 2022
There will be no crash, only a pullback. Rinse repeat, same game from 2007 until today.
BTFD all the way🚀