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Holy smoke as it was a students talk ladies and gentlemen don’t let these last two trading days fool you that were really good days it was still in ugly ugly months so what i thought would be interesting today is kind of review exactly what happened and kind of give the four reasons on why this happened we were talking about over two trillion dollars oh that’s what

Two trillion dollars looks like over two trillion dollars worth of wealth of stock market wealth wiped out in a single month guys so that is a massive massive number there so i just want to kind of go through all this with you guys here today hope you enjoy this hope you enjoy it as always hit a thumbs up if you do let’s get into this so first off if we just look

At some of the big dog stocks since kind of the end of october a lot of these stocks lost massive amounts of value we’re talking about amazon well over a hundred and fifty billion dollars worth of value just an amazon stock alphabet sock google mcdougal over seventy billion facebook stock over 30 billion netflix stock over 26 billion apple stock even and there was

The one that held up the best but even that one still lost about eight billion dollars worth of wealth there okay now if we look at the dow chart this just tracks kind of the dow jones industrial average what you’re gonna see is is one many more red days than green day’s in the month of october but not just that you’re gonna see days when the market was red it

Was way worse than when it was green okay the best day i can find out there as far as a green day was one day on october 16th we had the market go up five hundred forty-eight points whereas eight hundred and thirty two points was the worst downside move okay so we had two days that were worse than the best green day okay eight hundred and thirty two points one day

Six hundred and eighty points down another day and one that was down five hundred forty six points so that was about equivalent to the 548 day so you just kind of see it was all it was ugly ugly month but that doesn’t even tell the true story the truth is stocks that have under 100 billion dollar market cap got hit so much harder than a lot of the big companies

So if you’re just looking at the dow 30 or just that nasdaq average with spf 500 average you’re gonna find that a lot of the big companies kind of help keep things together specifically kind of app and it was not up until the end that one’s kind of fallen more recently google was kind of holding up for a while until they report earnings at the very end of october

Here and then you had microsoft which is held up very strong a lot of those really big stock kind of help everything look a little better than it really seems but the companies that i have a hundred billion or less market cap some of those companies have gotten absolutely hammered i saw their stocks go down twenty plus percent just in october alone a lot of those

Stocks were down between thirty and fifty percent since they hit their highs in 2018 guys so we’re talking about massive massive moves in a lot of the smaller companies now what are the four reasons in my opinion on why this hasn’t went ahead and happened in october okay the first reason is around in my opinion the china tariffs okay these tariffs continue to scare

People they’ve scared people throughout october and i would say heard about the 25% tariff possibly coming as china numbers have come up they’ve looked pretty weak okay they look like they’re weakening and weakening and this all scares a lot of people out there because when you think about it it china has been such a growth engine for a lot of the world and a lot

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Of the big companies that if that market slows at a massive massive way a lot of people say well maybe some of our growth gets taken away there because that’s just been a massively growing market and a lot of companies are gonna look to move production to other countries out of china or maybe back to the states or something like that so a lot of people are looking

At it as man we had that huge cheap labor benefit of a lot of companies using chinese labor over there china was benefiting growing huge and you know that produce a lot more profits for a lot of the big american companies maybe that slows down a lot of people are worried about that we don’t know if some sort of deal is going to get done here within the next month

Or two between president xi jinping and president trump we don’t know if some type of deal can get done here a lot of people are not feeling very confident about deal getting done in my opinion if there is a deal that gets done it’s gonna be a minor deal it’s not gonna be something where all those tariffs get taken off of china or something like that overnight i

Don’t think that any deal is gonna come out of that okay what i think it will be is i think it will be on certain products out of china and maybe some tariffs can get removed but that’s if they even announce a deal because we know president trump he doesn’t seem the most eager to get a deal with china and at the same time a lot of chinese culture and in president

Xi jingping they can they have a lot of you know you know we’re gonna get our way or it’s the highway type situation so you have two countries that maybe just find a match here and maybe that 25% tariff ended up getting hit and a lot of people are scared of that how is it gonna affect the overall economy how is it gonna affect china is it gonna you know send china

Into a recession over there because they have been a market that has just been a growth piece for years and years now so that is scaring people and that is part of the reason that’s one of the four reasons why the market fell in the month of october reason number two is around interest rates in the fact that interest rates are actually rising for real okay this is

Not the 1st 2018 hasn’t been though or october hasn’t been the first time interest rates have risen it’s just the first time i think is starting to really set in to investors that wow interest rates are really rising and they should continue to rise we’ve heard the feds to come out several times and reiterate they plan on continuing to rise yeah probably throughout

2019 and that’s just the way they see it and a lot of people are getting scared of this because the a lot of investors in their mind have gotten so used to zero percent interest rates or these so artificially low interest rates over the past decade that also now when you actually get to a member like a normal interest rate is not 0% or 1% guys maybe over the past

Decade or so that was normal but that is not normal historically like a 5 to let’s say 10% interest rate is pretty normal historically so now as we start to move toward a 5 to 10 percent interest rate a lot of people are getting real freaked out on no one’s gonna buy houses no one’s gonna buy cars you know credit card numbers are gonna go way up as far as the

The payments people have to make cuz a lot of those credit cards are actually have a variable rate so which means as the interest rate goes up you have to actually pay more and more money by the way if you have any credit card debt get it paid off asap ok get your credit card debt paid off asap do anybody watch this completely random personal finance tip but the

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Payments you up to pay on that are gonna be substantially more as interest rates continue to climb so something to keep in mind but anyways the interest rates that’s really scaring a lot of people out there and a lot of in the investor community and they’re like wow this is the fed has no the fed has shown no weakness as far as interest rates or as far as oh yeah

Maybe we won’t raise them they’re pretty confident that were they’re gonna keep raising them and that’s the way it is and that’s just freaking investors out right now okay reason number three is that there are a lot of almost every single company was in a blackout period for october what i mean by a blackout period is a lot of companies out there a massive amount

Of companies have huge share buybacks on right now what a share buyback is is basically when a company uses its own cash and investments to go ahead and buy its own stock back it ends up you know making less and less shares out there and it ends up making eps look way better over the coming years as long as that company can keep net income the same or go up okay

And it makes the eps look better and better more money you know funnel back to and shareholders in the form of dividends or whatever it is okay so a lot of companies love to buy their share of the shares back and we have a ton of companies that either buy back with cash or actually buy it back on debt however the month of october there was a huge blackout period

Where most companies out there actually could not even buy their own shares back okay and now here at the end of october going into november most companies will start being allowed to buy their own shares back they’ll move out of that blackout period but the fact that you had a massive amount of buyers of stocks just basically flooded out of the market by by you

Know these blackout periods it hurts the markets in general think about a company like apple org or you know all these companies that are doing these massive share buybacks right if they’re buying let’s say a billion dollars every week or maybe a few billion dollars worth of their own stock every single week when you take that buyout because they’re not allowed to

Buy in a certain period and also and it takes a massive buyer of those stocks out of the market and all sudden you you’re in a situation where now there might be a lot more you know people willing to sell their shares and a you know a lower and lower price then buy those shares up okay as a company’s willing to do there’s a lot of companies they don’t really care

Necessarily where that stocks had a given particular time they’re good buying it back regardless so let’s say a stock is that $35 and they announced that buyback regardless if that stock goes to 40 or 37 or 30 for 30 to most companies are gonna buy it back regardless they’re like an indiscriminate buyer i guess you we could say so the fact that we had this big

Blackout period just took major major buyers out of the market and when also in this volatility there were no companies that could we’re really allowed to even buy their shares back so now as we go into october or november also all these companies are freed up to start buying their shares back something to keep in mind there guys in the last point point number four

Is selling breeds more selling okay and by the way wall street loves this okay you might think wall street hates a market that’s going down and that could not be further from the truth all right so selling breeds more selling us talk about that and then we’ll get into the wall street part whenever there’s just how selling in the market what ends up happening is is

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Investors actual human investors start getting freaked out a lot of them’s you know some of them end up panicking selling their shares whatever okay but no no i’m just not just that and then you have the computer systems that also if a stock gets down to a certain level that computer system says oh we need to sell these shares it just hit thirty seven fifty we gotta

Sell our shares and all of a sudden you have another computer system says oh we gotta sell those shares now and also you have selling breeding more selling nuts because actual you know human investors are freaking out but because the machines are saying what just hit this level or and maybe investors have stopped losses in that the shares get automatically sold a

Certain level they get sold in selling breeds more and more selling okay so that’s something to keep in mind but wall street loves this guy’s wall street one they love this because wall street benefits in a huge way by volatility in the market when when big investment banks when there’s no volatility in the market is much harder for them to make money when there are

A lot of traders trading around money going all over the place there’s a lot more opportunity for investment banks to make much more money okay second reason is it kind of flushes out weak hands as we call it what flushes out we cans you know and you get to buy a lot of shares in great companies as so much cheaper at prices then you would have maybe a few months a

Few months ago when the market was much less volatile than it is now okay so investment banks are just wall street generally love these type of situations where the markets volatile and things are going down it allows them to buy cheaper and allows them to make a lot of commissions and you know advise their clients on trading and whatnot cuz their clients are like

Wait wait you should i be making moves oh yeah maybe you shouldn’t make a move what we see this and that it just allows wall street to make a lot more money guys so those are four reasons in my opinion why we saw this type of move in october it was a it bad bad month it’s one of the worst october’s i’ve seen in quite a while i can’t remember on an october this bad

In quite a while but you know it is what it is it from a long-term perspective someone like myself there’s a long-term buyer and companies i absolutely love this okay all it does is make a lot of great values out there i’ve bought a lot of shares in october in september and you know and when i look at a lot of these companies i’ve been buying if you’re looking

At it from a five year perspective a lot of these companies are trading at joke prices not all of them not all of them but there are a lot of them out there that are great corporations that you’re getting for a very cheap value on that on a five-year basis there kind of grow to be much much bigger than they are today so that’s the exciting thing out there for us

Longer-term investors that have a longer-term mindset out there and aren’t worried about tomorrow or next month and things like that guys so hope you enjoyed this as always hit a thumbs up if you do it make sure you follow me on instagram if you love keeping up with stock market news post a ton of stock market news and my instagram stories thank you for watching and have a great day

Transcribed from video
HOW $2,000,000,000,000 WAS LOST IN STOCKS IN OCTOBER By Financial Education

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