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Buy STOCKS or WAIT? [Buffett invests $20 BN....] | Economic Analysis of 2022 Markets - YouTube
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hi everyone welcome to today's video so
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let me start today's video by showing
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you a chart and asking you a very
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important question if you answer this
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question correctly then you will
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automatically get the clarity whether or
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not you should be selling your portfolio
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in this market or you should be buying
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more so here is the important chart what
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you would notice is that in the 2000.com
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crash the market crashed a lot then it
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took three more years to recover so the
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total recovery time was seven years then
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look at crash number two which lasted
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from 2008 that the market crashed and
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then it took markets roughly four years
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to recover then in 2020 market crashed
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and it recovered almost immediately and
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now the markets are going down and two
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camps have been created on one camp we
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have investors like mr ray dalio he's
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saying that you know what there is more
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crash to come because similar crashes
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have happened in 2000 similar crashes
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have happened in 2008 and it took market
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a lot of time for recovery on the flip
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side we have another cam slightly more
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optimistic camp this is mr warren
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buffett so mr warren buffet he has not
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purchased a lot of stuff from 2020
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onwards he was sitting on massive amount
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of cash and very recently he made an
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investment of 20 billion dollars where
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did he make that investment i will
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disclose these share names as well and
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if you want i will do further analysis
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of those shares but the point is that
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the world is right now divided saying
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that right now in 2022 we are witnessing
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something called as super bubble there
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is more crash to come the stock markets
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might crash by 50 60 percent more you
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might lose your savings recession is
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coming stagflation is coming everything
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is going to dust this and that okay so
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from that viewpoint which narrative
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should you be believing in i will
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present an economic analysis of this
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entire situation you will learn very
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important concepts around macroeconomics
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so please watch this video till the very
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end and also press the like button it
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indicates to me that you would want me
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to make these type of videos also along
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the way on the video i will give you
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rational explanation as to what was the
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difference between 2000 2008 2020 and
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2022 bubbles so to say so let us get the
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discussion started and first and
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foremost let us systematically try to
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understand the point that is the current
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crash of 2022 is it going to get bigger
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and is there more pain to come in the
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stock market so for that let us very
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quickly touch upon the commentary by mr
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ray dalio and here is what he says and
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so they will not be able to raise
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interest rates to a high enough
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level
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to adequately provide a real return so
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he uses a very interesting statement
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where he said that hey real returns are
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not there now what is meant by real
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returns very very important concept for
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you to understand so please bear with me
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here so real return simply means that
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for example that if you are going and
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depositing your money in a fixed deposit
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right now the rate of interest that you
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will get is between five to six percent
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but what is the inflation in the economy
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it is close to eight percent so are you
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making any real returns the answer is no
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in fact you are losing money you are
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losing roughly between two to three
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percent if you are doing fixed deposits
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as of now now what are fixed deposit
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fixed deposits are in asset class they
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are a part of the bond market so there
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are different different asset classes
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that you could consider for example you
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could consider u.s equity you could
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consider indian equities you could
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consider corporate bonds you could
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consider government bonds you could
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consider something that starts with c
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and ends with o you could consider
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something like real estate so mr ray
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dalio believes that you are not going to
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make real returns from majority of these
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asset classes and he is correct so can i
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prove that to you the answer is
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absolutely yes if you consider major u.s
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stocks which is apple tesla netflix
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google amazon and look at the last six
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month performance you will quickly
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realize that majority of these stocks
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have fallen between 20 percent to
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something like netflix which has fallen
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by 70 percent so there is a major crash
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that has happened in equity asset class
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already both in india and the us now
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this is a very important table that will
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help you understand that where these
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bubbles have already crashed or have
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already corrected for example if you
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consider equities as an asset class to
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be a bubble where corrections have
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already happened quite aggressively so i
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would say that u.s growth or technology
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oriented stocks have already been
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crushed there is massive correction that
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has already happened if you consider
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indian banking stocks technology stocks
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startup stocks they have also been
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crushed quite aggressively so the point
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is that if you go back six months back
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this bubble might have been this size
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but over the last few months it has
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slightly shrunk in size now can it fall
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further the answer would be very stock
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specific but let me pick the example of
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microsoft there is a video that i had
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done on microsoft you can go and check
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it out that will help you understand
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more about microsoft and why did i
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purchase it but let me show you some key
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data around microsoft if you take the
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last six month performance microsoft
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stock has corrected by roughly 18
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now it is trading at a pe of less than
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30 so now i do not think that microsoft
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or a stock like microsoft is going to
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fall further now let me go back to that
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table and try to explain you more points
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so when it comes to equities i feel that
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u.s growth stocks have already corrected
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quite aggressively can they fall further
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the answer is yes but at least the good
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ones have already corrected quite a lot
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and they are trading at a reasonable
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enough valuations this is the first key
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point second if you consider some of the
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indian stocks the same story plays out
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because indian equities and u.s equities
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work in conjunction then comes the
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second asset class which are cryptos
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have they corrected quite a lot the
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answer is absolutely yes and when i say
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cryptos i am only talking about bitcoin
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and ethereum the two cryptocurrencies
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that i consider to be the best
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cryptocurrencies so cryptos also have
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corrected quite aggressively why because
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they function exactly like u.s tech
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stocks so here also the bubble has
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somewhat deflated now comes bonds now
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bonds are a very interesting instrument
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and they are one of the most
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misunderstood instruments out there some
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key points that you need to understand
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about bond market is that here if you
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assume that the size of bond market
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bubble is this much and if there is
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enough scope for correction left then
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what is going to happen
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what is going to happen is that the
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entire other asset classes will also get
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beaten down why because when stocks get
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beaten down cryptos also get beaten down
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when cryptos get beaten down stocks also
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get beaten down so this type of beating
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constantly happens if the bubble is
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bursting in any of these sub categories
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so i hope this point is clear now let me
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try to analyze what is going to happen
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in the bond market in the next few
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months because if the bond market gets
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corrected then it might lead to stock
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market fall also so we might witness
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certain bit of correction so let us very
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quickly look at the data from the bond
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market now if you look at the bond
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yields yields means returns what you
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will notice is that over the last few
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months the bond yields have been going
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up they have went up from roughly 0.6 or
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0.7 percent all the way to 3 percent
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now here is a very important concept
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that you need to know about bonds that
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there is an inverse relationship between
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yield or interest rate and prices
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what this means is that if yield or
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interest rates are going up then prices
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are going to come down so the simple
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point that i am trying to explain is
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that the bond market right now is
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undergoing correction why because the
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prices of bonds are falling
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that is a simple message that i am
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trying to communicate so again if we
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summarize the entire video up until this
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point what do we learn number one we
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learn that equities have corrected quite
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aggressively in the u.s some really good
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stocks like amazon apple microsoft they
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have come down at reasonable p e
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valuations number two indian equities
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have corrected quite a lot cryptos have
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corrected quite a lot bond market
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correction is already underway now as
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feds keep on increasing the interest
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rate there will be more bond selling
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that will happen now can the bond market
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fall further the answer is yes it can
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fall further that will impact the stock
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market also but to cut the long story
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short here is the key message that you
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need to understand the key message is
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that a large part of correction is
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already over at this stage do i see the
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stock markets correcting quite
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significantly from this time the answer
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is no now let me tie together two
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macroeconomic concepts that will help
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you understand what is likely to happen
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going forward in 2022 so i would want
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you to revisit this chart of s p 500 and
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notice a couple of things
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2000 it took almost 7 years for recovery
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2008 it took almost four years for
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recovery in 2020 it took a few months
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for recovery now we are going sideways
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there has been a little bit of
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correction now going forward how much
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time do you think the recovery will take
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so this is my analysis and i will back
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it up by giving you macro data also that
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if you consider point number one point
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number two point number three and point
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number four there has been a fundamental
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shift in macro economics that has
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happened and there is huge difference
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between these two points and these two
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points here what is that difference it
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is called as the velocity of money
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concept now what is velocity of money
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let me pick an example and try to
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explain you that viewpoint so basically
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consider this box to be us india japan
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etc right and imagine that there is a
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lot of money that is flowing through
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this economy right so whatever this the
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amount of money flowing through this
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economy can be termed as the velocity
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of money now if you go to 2000.com crash
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or if you go to 2008 banking crash what
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used to happen here here the
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quantitative easing was very less
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quantitative easing simply means that
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the rate at which the governments were
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printing money that was very less
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compared to 2020 crisis in fact 2008
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crisis became a model where the
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government realized the power of
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printing excess amount of money and
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pushing it into the economy and every
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time government printed more and more
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and more money it increased the velocity
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of money whenever more money was printed
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almost every single asset class on earth
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went up in value now the important point
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that you need to understand through this
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discussion is fairly simple that in 2020
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and in 2022 we have that same
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quantitative easing model at play
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yes it is correct that the government in
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2020 has printed insane amount of money
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but please don't make the mistake of
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betting against the fed what is going to
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happen as i have said on several of my
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videos that if the governments feel that
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the growth is slowing down or a
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recession is very likely what are they
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going to do they are going to print more
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money every time they print more money
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the velocity of money through the
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economy will go up every time they cut
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interest rate the velocity of money
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through the economy will go down and
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that is literally the single thing that
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is moving the stock market as of now you
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can keep on applying macd rsi and
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different technical parameters it will
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not help the only thing that is moving
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the market right now is the flow or the
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control of the velocity of money the
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money is drying up right now because the
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interest rates are being charged up to
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control inflation going forward if the
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growth slows down the government is
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going to apply this quantitative easing
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model and will accelerate the velocity
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of money and that will get reflected in
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the asset prices now comes the most
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important question that what is it that
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we should be doing right now in the
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market
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for this you need to understand the
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second concept and let mr ray dalio
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explain that concept to you
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so i remember when you would tell us
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that cash is trash yeah is cash still
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trash of course cash is still trash cash
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i'm asking you is your interest you know
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how fast you're losing buying power in
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cash i feel that in terms of inflation
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every day however i'm also for those who
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own equities out there they're feeling
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it even worse well it depends what
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what depends what cash is equities are
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trashier so mr dalio has been saying
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that cash is trash and he's 100 right
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about that because if you are putting
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your money in bank account if the
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inflation is eight percent your savings
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rate deposit is two percent then in real
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terms you are losing six percent money
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so therefore cash is trash because you
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are 100 losing money second key thing he
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said that equities are trashier and we
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agree but here we need to bring in mr
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warren buffett because mr warren buffet
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recently put in 20 billion dollars which
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is not a small amount and he put that
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money in today's market so a more
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qualified statement would be that
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majority of the equities are trashier
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now what are these trash area equities
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so i can draw it on a spectrum so if you
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consider this to be an entire spectrum
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you can see some companies which are
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startup oriented companies for example
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they have no cash flows they have no
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revenues they were only surviving on
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funding their funding has also stopped
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they have started firing employees so
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these are probably the worst type of
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investments that you can make now these
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are companies that have no cash flows
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and they have no revenues no profits and
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even unproven business model a classic
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case in point is paytm it has corrected
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by a lot by a lot why because it
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perfectly fits the definition here the
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second category of stocks that mr warren
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buffett is buying are these stocks for
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example they have consistent cash flows
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they are revenue generating they make
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profits and they give out some kind of
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dividends here are two major investments
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that berkshire hathaway the firm that is
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run by mr warren buffet they have made
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20 billion dollar investments in two
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stocks right now so let me explain you
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the nature of their work also and if you
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want to purchase these stocks you can
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use vested in order to make investments
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the first stock is called as allegheny
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and its sticker is termed as y just y
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that's the stock that mr warren buffett
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has purchased it's an insurance based
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firm it's mostly a reinsurance and 50
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percent of its business come from
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reinsurance in reinsurance what happens
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is that if you have purchased your
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insurance from a certain company you
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will continue or most likely continue
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with that same company itself so there
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is a very high likelihood of revenue
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stickiness so therefore he has purchased
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this business second key business that
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he has purchased is occidental petroleum
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so this is a fortune 500 company that is
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into hydrocarbon exploration across
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different geographies of the world and
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it is ranked 183rd company in form of
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revenues now i will double check this
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fact but mr warren buffett is also
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making tech based investments especially
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in apple right now and in hp so these
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are some of the prominent cash flow
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oriented revenue driven profit making
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companies that mr warren buffet is
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purchasing even in this market so yes
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while mr ray dalio is right that cash is
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trash equities are trashier majority of
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the equities are trashed but there are
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good pockets of buying opportunities
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that you should keep in mind please do
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not worry going forward there is a very
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high likelihood that the markets are
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going to correct because there is
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correction that is happening in the bond
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market and it will get reflected in the
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equity market because of the flow of
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money but there are excellent pockets of
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opportunities that are out there if you
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want i'll make a detailed video of all
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the stocks that mr warren buffett is
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buying and i will do a detailed analysis
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in fact i am buying some of these stocks
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right now so let's keep the like target
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to this video as 20 000 so if i get 20
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000 likes on this video i will release
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the video that day but i hope you
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understand the opportunity here and
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continue to believe in fed because this
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dance is going to continue to happen
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till the time mad money printing ability
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is intact with the government and i
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don't see that ability being changed
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over a short term so i hope you enjoyed
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the video please press the like button
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and i will see you tomorrow
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you
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