The Global Stock Market Crash JUST HAPPENED. And Its Much Worse Than We Could've Imagined…

Summary

The global stock markets experienced a significant downturn, with Japan's market hitting a 40-year low, potentially triggered by a carry trade collapse as Japan raised interest rates. Investors fear a recession, with indicators such as rising unemployment and an inverted yield curve signaling economic uncertainty. Amidst market volatility, Lockheed Martin's stock surged, hinting at defense investment trends. Concerns about potential wars in the Middle East and the Ukraine, along with unsustainable U.S. government spending, add to the market's instability, prompting caution in investment strategies.

Takeaways

• 📉 The Japanese stock market experienced its worst day in nearly 40 years, with the crash being worse than any day during the pandemic, except for Black Monday in 1987.
• 💰 The carry trade, where large corporations and Wall Street firms borrow in Japanese Yen at low interest rates to invest in other countries, is a significant factor in the market's downturn, especially with recent changes in Japan's interest rates.
• 🧐 Renowned investor Warren Buffett has been cashing out, doubling his cash position recently, which may indicate his expectation of a market correction or collapse.
• 🌐 Global fears of a recession are growing, with historical parallels being drawn to post-World War I economic patterns, leading to the Roaring '20s and then the Great Depression.
• 📊 Indicators of a potential recession include rising unemployment in the USA, an inverted yield curve on government bonds, and slowing consumer spending increases coupled with increasing debt.
• 🛡️ Amidst global market instability, Lockheed Martin's stock initially rose by over 20%, suggesting some investors see value in the American military industry.
• 💥 The possibility of war in the Middle East, particularly involving Turkey and Iran, is adding to financial market instability and concerns about escalating conflicts.
• 💡 The US government's spending and debt accumulation, with 30% of the federal budget paid off by taking on more debt, is a significant concern for investors.
• 💸 Modern Monetary Theory, which involves increasing the money supply without concern for debt, is being adopted by the USA and other countries, raising historical red flags about unsustainable economic practices.
• 🚨 The US Social Security program, the largest expense of the US government, may need to change or shut down within the next decade due to demographic and financial pressures.
• 🤔 The script concludes with a cautionary note, advising viewers to be safe with their money during times of market volatility and uncertainty.

Q & A

What was the significance of the Japanese stock market's performance today?

The Japanese stock market experienced its worst day in nearly 40 years, crashing worse than at any time during the pandemic, except for Black Monday in 1987.

What is a 'carry trade' and how does it relate to the recent stock market movements?

A carry trade involves borrowing money in a currency with low interest rates, such as the Japanese Yen, and investing it in other countries with higher interest rates. The recent increase in Japanese interest rates has led to concerns about increased debt payments and reduced access to cheap money for Wall Street firms and financial institutions.

Why did Warren Buffett decide to cash out after Japan raised its interest rates?

Warren Buffett, known for his investment acumen, may have anticipated a market correction or collapse, as he nearly doubled his cash position after Japan's interest rate increase, suggesting he expects market instability.

What historical economic pattern is investors currently fearing might be repeated?

Investors are concerned about a pattern similar to post-World War I, where a brief recession was followed by a period of economic growth known as The Roaring 20s, which was then followed by the Great Depression, the worst economic downturn in modern history.

How does the current situation of unemployment and job creation in the USA relate to recession fears?

The rising unemployment rate and falling job creation in the USA are concerning as they align with the 'sum rule', a recession indicator that suggests a downturn if the 3-month moving average of the unemployment rate rises by half a percentage point from its low in the previous year.

What is an inverted yield curve and why does it signal economic uncertainty?

An inverted yield curve occurs when short-term US treasury notes have higher interest rates than long-term treasury bonds. This is unusual because long-term bonds typically have higher yields due to greater risk. An inversion suggests that investors prefer the safety of long-term bonds during periods of economic uncertainty, indicating they view the short-term as very risky.

Why is consumer spending behavior in the USA a concern for the economy?

Consumer spending makes up about 70% of the American economy, and while it has been increasing, the rise is slowing and much of this spending is through debt. High levels of debt and bankruptcies among consumers could lead to a recession if economic conditions worsen.

What does the VIX indicator measure and why is its recent spike a concern?

The VIX is a volatility indicator for the stock market. Its recent spike to levels only seen at the start of the pandemic indicates high uncertainty among investors about the stock market's future.

Why did Lockheed Martin's stock value increase significantly amidst the global market downturn?

Lockheed Martin, the world's largest military company, saw its stock rise by over 20%, possibly due to investors seeing value in the American military industry amidst global instability and potential conflicts.

What is the current concern regarding the US government's spending and debt?

The US government is currently spending a significant portion of its budget through taking on new debt, much of which is used to pay off previous debt. This pattern, along with the adoption of modern monetary theory, which involves increasing the money supply without concern for debt, is raising concerns about the long-term stability of the American economy.

How does the situation in the Middle East, particularly involving Turkey and Iran, relate to global financial markets?

The potential for escalation in the Middle East, with Turkey possibly sending troops and Iran considering an attack on Israel, could lead to increased instability and the involvement of Western powers, including the US, which may impact global financial markets.

Outlines

00:00

📉 Global Stock Market Tumble and Carry Trade Impact

The first paragraph discusses a significant downturn in global stock markets, with Japan experiencing its worst day in nearly 40 years, surpassing even the pandemic's impact. The script attributes this to the 'carry trade', where large corporations and Wall Street firms borrow in Japanese Yen at low interest rates and invest in higher-yielding foreign currencies and stocks. The recent increase in Japanese interest rates has caused concern among these investors, fearing increased debt payments and reduced access to cheap capital. Warren Buffett's decision to cash out, doubling his cash position, is highlighted as a potential sign of an anticipated market correction. Additionally, there's a mention of recession fears, drawing a historical parallel to post-WWI economic patterns, suggesting a potential economic downturn following the rapid asset price increase post-2020.

05:01

📈 Recession Indicators and Consumer Spending Trends

The second paragraph delves into various indicators pointing towards a possible recession. It starts with the observation that some countries, like Canada and Germany, have been in a per capita recession for years, masked by high immigration numbers. The 'sum rule', an unemployment-based recession indicator, is discussed, noting the rising unemployment rate in the USA as a potential sign of an economic downturn. The inversion of the yield curve, a phenomenon where short-term treasury notes have higher interest rates than long-term bonds, is highlighted as another recession signal. Consumer spending, which accounts for 70% of the American economy, is mentioned as a concern, with slowing growth and increasing debt among consumers. The paragraph also touches on the VIX volatility index, which has spiked to levels seen at the onset of the pandemic, indicating high investor uncertainty. Lastly, geopolitical tensions, particularly the potential for conflict in the Middle East, are presented as a risk factor for the financial markets.

10:02

💣 Escalating Geopolitical Conflicts and US Fiscal Concerns

The third paragraph focuses on the escalating geopolitical conflicts, particularly in the Middle East, and their potential impact on the financial markets. It discusses the possibility of Turkey's involvement in Palestine and the recent tensions between Iran and Israel, which could potentially draw the US and Western powers into a larger conflict. The ongoing war in Ukraine and its financial implications for the US are also mentioned. The script then shifts to discuss the US government's fiscal situation, with a significant portion of the federal budget being financed by debt. The rapid increase in national debt and the reliance on modern monetary theory, or money printing, are presented as unsustainable practices that could lead to a financial crisis. The paragraph concludes with a warning about the potential collapse of the American economy due to these massive deficits and the need for immediate corrective action.

Keywords

💡Stock Market

A stock market is a place where shares of publicly traded companies are issued and traded, either through exchanges or over-the-counter markets. In the video, the stock market is central to the narrative as it discusses the global market's performance, particularly noting the significant downturn in various countries' stock markets, which is a key theme of the video.

💡Carry Trade

A carry trade is an investment strategy where an investor borrows money at a low interest rate in one currency and invests it in another currency or financial instrument that offers a higher interest rate. The script mentions that large corporations and Wall Street firms have been engaging in carry trades using Japanese Yen, which has contributed to the stock market's volatility when Japan raised its interest rates.

💡Interest Rates

Interest rates are the cost of borrowing money and are set by central banks. They play a crucial role in the economy by influencing the amount of money that people and businesses are willing to borrow and save. The video discusses how Japan's decision to raise its interest rates for the first time in years has impacted the stock market, as it affects the cost of borrowing for investors engaged in carry trades.

💡Warren Buffett

Warren Buffett is a renowned investor known for his long-term investment strategies and outperforming the stock market. In the context of the video, his decision to increase his cash position following Japan's interest rate hike is highlighted as a potential indicator of his expectation of a market correction or collapse.

💡Recession

A recession is a period of negative economic growth that lasts for at least two consecutive quarters, indicating a decline in economic activity. The script discusses fears of a looming recession as a contributing factor to the stock market's downturn, drawing parallels to historical economic downturns like the Great Depression.

💡Unemployment Rate

The unemployment rate is the percentage of the labor force that is unemployed but actively seeking employment. In the video, the rising unemployment rate in the USA is mentioned as a sign of a potential recession, as it historically precedes economic downturns according to the 'sum rule'.

💡Yield Curve

A yield curve is a line that plots the interest rates, or yields, of debt for a range of maturities. An inverted yield curve occurs when short-term interest rates exceed long-term rates, which is traditionally seen as a sign of economic recession. The video script discusses the inversion of the yield curve as an indicator of market uncertainty and a potential recession.

💡Consumer Spending

Consumer spending refers to the money spent by households on goods and services. It is a significant driver of economic growth. The video highlights that consumer spending makes up about 70% of the American economy, and a slowdown in its growth, coupled with increasing debt, could signal a potential recession.

💡Volatility

Volatility refers to the degree of variation of a trading price series over time. In the context of the stock market, as mentioned in the video, high volatility indicates uncertainty and risk, with the VIX index being a measure of expected market volatility. The script notes the VIX's spike as a sign of investor concern about the market's future.

💡Lockheed Martin

Lockheed Martin is the largest military company in the world, and its stock performance is mentioned in the video as an anomaly during the market downturn. The company's stock initially rose significantly, suggesting that some investors saw value in defense investments amidst global instability.

💡Modern Monetary Theory (MMT)

Modern Monetary Theory is an economic theory that argues that a government, which issues its own currency, can increase money supply without worrying about budget deficits as long as there is no inflation. The video discusses MMT as a potential concern for investors, as it suggests that the US and other countries are relying on money printing to finance their budgets, which could lead to unsustainable debt levels.

Highlights

Japanese stock market experienced its worst day in nearly 40 years, worse than any day during the pandemic.

The only worse day in Japanese stock market history was Black Monday in 1987.

Carry trade involving Japanese Yen is a hypothesis for the stock market collapse.

Japan's low interest rates for nearly two decades have made it a safe bet for borrowing cheap money.

Japan raised interest rates for the first time since 2007, causing concern for Wall Street firms.

Renowned investor Warren Buffett increased his cash position significantly, signaling a possible market correction.

Fears of a real recession are growing, with historical parallels to post-World War I economic patterns.

GDP per capita recession in countries like Canada and Germany, despite overall GDP growth due to immigration.

US unemployment rate rising and job creation falling, which historically precedes a recession.

Inversion of the yield curve, a reliable recession indicator, is currently flashing signs of economic uncertainty.

70% of the American economy is consumer spending, and recent trends show slowing increases alongside rising debts.

Volatility in the stock market, as indicated by the VIX, has spiked to levels seen at the start of the pandemic.

Lockheed Martin, the world's largest military company, saw a significant increase in stock value amidst global market decline.

Geopolitical tensions, including potential military escalations in the Middle East, contribute to market fears.

US government spending and debt accumulation are at historically concerning levels, with 30% of the federal budget paid by debt.

Modern Monetary Theory and its potential risks are being adopted by countries, including the USA, raising concerns about unsustainable debt.

Investor caution advised in times of market volatility, with a reminder of past market rebounds and potential for recovery.

Transcripts

this is what happened in the Japanese

stock market today this is what happened

in the Taiwanese stock market today this

is what happened in the British stock

market today and this is what happened

in the American Stock Market Today all

around the world stock markets took a

tumble and almost every single big stock

took a big dip well except for one but

we will get to that but let's start off

with where this stock market collapse

began and that is in Japan you see

Japan's stock Market didn't just have a

bad day today but it had its worst day

in almost 40 years in fact it crashed

worse today than at any time during the

pandemic the only other time it was

worse was Black Monday in

1987 an Infamous day when the world lost

trillions of dollars in the stock market

in just a few hours but why did this

happen today well there are a few

hypotheses one is something called a

carry trade you see Japan over the last

few years has actually kept their

interest rates low and have experienced

very little inflation and so what a lot

of very big corporations and Wall Street

firms have been doing is borrowing tons

of money in Japanese Yen with low

interest rates and then taking that

money and investing it in other

currencies and stocks of other countries

like in Australia and the US that have

much higher interest rates pretty much

meaning these large investment firms

borrowed cheap money in Japan and have

been using that debt to invest in the

United States and it's estimated that

between 5 and 10% of the entire American

Stock Market is on this kind of carry

trade but what happens when that cheap

money from Japan has their interest

rates go up you see Japan has not raised

their interest rates since 2007 meaning

that they have been a safe bet to borrow

cheap money for nearly two decades but

in March Japan raised its interest rates

for the first time and they did so again

just 5 days ago meaning that now all of

the Wall Street firms and financial

institutions that have been relying on

Japan's cheap borrowing cost now are

worried that their payments will go up

on their debt or that they will no

longer have access to cheap money for

future investments into the stock market

and one person who may have actually

seen this coming is the renowned

investor Warren Buffett a man who has

been known for outperforming the stock

market for about 70 years well he

decided to cash out pretty much

immediately after hearing this news out

of Japan now this could have been a

coincidence because he has been cashing

out slowly over the last 12 months but 4

days ago he nearly doubled his cash

position meaning that he expects some

sort of Market correction or collapse in

the near future and that brings us to

the next point about why the global

stock market appears to be showing signs

of collapse right now and that is fears

of a real recession you know one of the

interesting tidbits I always bring up is

that after World War I the world was

expecting to experience something like

the Great Depression essentially

something terrible was supposed to

happen after the war and the Spanish Flu

decimated the world population and

Global Industries and one somewhat brief

recession did happen in 1920 and 21 a

single-ear recession that was fairly

quick but also a very large downward

Spike but then after this downward Spike

the world experienced what was called

The Roaring 20s a time when we hear

about the glitz and Glam and wealth

explosion that everyone got to

experience but in reality only the top

half of the wealthiest people got to

really reap the financial rewards of the

Roaring 20s because asset prices began

to Skyrocket and debt was very cheap to

borrow but if you were a lower middle

class person or were working as

something like a farmer then you

actually lost ground during the Roaring

20s but hey as long as the people who

owned assets got richer that's all that

matters right anyways what followed

after the Roaring 20s was the Great

Depression the worst and longest

economic downturn turn in modern history

a horrible economic decade that

essentially needed a World War to take

the world out of this economic downturn

and now today investors fear we may be

following a similar pattern we

experienced a brief and sharp downturn

in 2020 then asset prices skyrocketed

for the better part of 3 years and now

there are some fears we might be heading

into a very long recession now if you

follow this channel you know that a lot

of countries like Canada and Germany

have actually been in a GDP per capita

recession for a few years now however

High immigration numbers are making the

total GDP increase therefore governments

and Wall Street are able to say that the

whole economy is growing and everything

is fine and dandy even if it means that

the average person is actually losing

economic ground however there are other

signs of a looming recession

unemployment in the USA keeps rising and

job creation keeps falling in fact the

unemployment rate is actually the

highest it's been since the pandemic

started and this is important because of

something called the sum rule it's a

Fairly reliable recession indicator that

indicates a downturn if the 3month

moving average of the unemployment rate

Rises by half a percentage point from

its low in the previous year it's a

mouthful but essentially if unemployment

keeps steadily Rising a recession almost

always follows and that appears to be

something that is happening right now in

in the United States there's also

another indicator that has been flashing

signs of a nearby recession and that is

government bonds an inversion yield

curve occurs when the interest rate on

the shortterm US treasury notes exceeds

that of a long-term treasury bonds

normally long-term bonds have higher

yields than short-term ones due to the

greater risk over a longer period

however during periods of economic

uncertainty investors prefer the safety

of long-term bonds leading to higher

demand and lower yields on these bonds

compared to Shorter term ones now that

is all a mouthful as well but

essentially all this means is that

investors seem to think the USA has a

lot of uncertainty in the economy right

now and these investors demand a lot of

return in order to invest in short-term

bonds because they view it as a very

risky investment so the near-term seems

risky and the long term seems relatively

okay another sign that is pointing to a

looming recession is actually from the

people themselves you see in the USA

what percentage of the American economy

do you think is from consumer spending

is it 20% 30% 50% well it's actually

about 70% of the entire American economy

and so when people spend less money a

recession is more likely recently

consumer spending has been steadily

increasing but its increase has been

slowing slightly over the past few

months but the more important thing here

to note is is that even though consumers

are spending a little bit more this is

also coming at a time when debts and

bankruptcies are also skyrocketing for

these very same people meaning that

consumers seem to be spending more even

though a lot of the spending is coming

in the form of debt and if economic

conditions get poor enough where the

average American can no longer afford to

pay back something like their mortgages

well then we have the 2008 financial

crisis all over again now those are just

the recession fears but there are also a

few other very strange things going on

right now and one of which could be a

major concern going forward first of all

the vix which is a volatility indicator

in the stock market has spiked to such a

high that the only time that it was

higher was when the pandemic started and

they announced the virtual shutdown of

the entire economy so that number that

volatility number being so high is a

very worrying sign that investors are

extremely uncertain about the stock

markets future in the near term but one

thing that kind of started this video is

actually one company that Skyrocket in

valuation over the last 24 hours or so

when all of the global markets were

melting down what was that company that

company was locked Martin the largest

military company in the world initially

locked Martin stock Rose by over

20% signaling that some investors

somewhere be began to see a lot of value

in investing in the American Military

now eventually that stock did fall down

back to Earth but it brings us to the

next point and that is that there is a

fear in the financial markets that there

will be a war you see the war in the

Middle East is showing some worrying

signs lately one of which is actually

turkey turkey's erdogan stated last week

about how he could send troops to help

in Palestine and if Turkey were to send

troops on the ground that could be seen

as quite an escalation for the war that

may see a response from Israel's allies

including the United States turkey also

recently started showing a pre-war sign

by blocking social media apps like

Instagram just a few days ago to control

online information and as of a few hours

ago news reports have been coming out

about how an Iranian attack on Israel

appears to be likely and this comes

after Israel assassinated one of hamas's

leaders so depending on the Iranian

attack the US and the Western Powers

might get pulled further into the war in

the Middle East and the odds of the war

escalating appear to be much higher than

they were just a few weeks ago that's

not even mentioning the war in Ukraine

which hundreds of billions of dollars

are still being poured into by the

United States government and that brings

me to one last thing a ticking time bomb

that appears to be getting more

attention as of late and it is something

that I talk a lot about and that is the

US government spending right now we are

at a point in history where 30% of the

federal budget is being paid off by

taking out debt and in fact a lot of

that debt is getting created to pay off

previous debt and that debt was taken

out to pay off previous debt and so on

right now the government is on track to

actually run out of money pretty soon in

fact every 100 days the US is adding 1

trillion

to the debt and it's only getting worse

programs like Social Security which were

put in place when the average person

would live to about 64 years old well

they are now being put in place to pay

off the average person who is living to

nearly 80 meaning that Social Security

is paying significantly more per person

per year Social Security is also

currently the largest expense of the

United States government taking up 22%

of the American budget and the program

will have to change or shut down at some

point within the next 10 years now the

USA along with many other countries in

the world seem to be adopting this thing

called modern monetary Theory also known

as money printing essentially meaning

that you don't have to care about debts

anymore as long as you keep increasing

the money supply and this is worrisome

because as someone who has studied

history quite a lot one of the Key signs

of a Dying Empire right before it falls

is these two exact things not paying off

debt and increasing money supply I mean

Rome literally tried modern monetary

Theory near the end of its Empire while

taking on tons of debt and yet modern

economists think that because of reasons

X Y or Z that this time it will be

different but certainly if history tells

us anything it's that the debt will come

due and the entire system could come

crashing down if we do not correct it

soon and that is a major concern that

investors have today it's that at some

point the American economy will no

longer be able to withstand these

massive deficits year after year and

that is why there is a big fear about

what will happen to the American Empire

and everything that resides within it

but for now I encourage everyone just to

be safe with your money do not do

anything stupid in a time of volatility

and who knows maybe this thing will pass

I mean there have been a lot of

downturns in markets over the last even

2 or 3 years or so and every single time

the market has rebounded so who knows

maybe this is a bottom of a market or

maybe not maybe it's a time to buy maybe

it's a time to sell who knows but for

now thank you very much for watching

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