Oh, my goodness, the federal reserve crashed the markets again, this is becoming a meme. So what happened yesterday was actually fascinating and i'm gon na explain everything that happened yesterday beyond the headline. What really happened behind the scenes what's coming next and how i'm going to prepare myself for the whole story because it ain't over yet the only thing i ask of you is: don't click? Nothing, don't smash, nothing don't buy nothing. There's! No courses, no sponsorships.

Just give me your attention, because this is quite complicated, but insanely interesting, so check this out. Yesterday we saw the minutes of the federal reserve. Essentially, we got a glimpse into what's going on inside the fed, and we found out that the fed is way more inclined right now to basically reduce asset purchases and that led the market into a spiral. Now.

Obviously that was an overreaction of a process which i'm going to explain right now, it's kind of a self-fulfilling prophecy in the way. So, basically what happens is in a time of crisis. The federal reserve can actually help the markets and it did like a pandemic. For example, so the federal reserve can come in and put a lot of money into the system.

It can do it with the stimulus it can do it through cash. It gave away a lot of cash, it can give it through infrastructure bills and they can do it through asset purchases. Now the first two are actually being done by the government, not by the fed directly. Obviously, but the third is actually directly done by the fed.

The fed actually can go ahead and buy bonds on the stock market and what happens when they buy bonds. They create demand for these bonds when they create a demand for these bonds. The yield goes down. Why doesn't make any sense? Well i'll, explain! Imagine buying a car, the more you pay for the car, the worst deal you get, the less you pay for the car.

The better deal you have in this example. Imagine that the car is the bond and the yield is the quality of your deal. So the more expensive the bond is meaning the more demand, the lesser the quality of the deal you're getting and vice versa. The less demand is for a bond, the more yield you're getting because the deal is getting better.

That's the whole thing here: it's not rocket. Science, it's quite simple! So when you have less demand for bonds yields go up and actually it creates one phenomena chasing the yield. A lot of people are coming from the stock market back into the mod market, trying to get their hands on these bonds because the yield is now way more attractive. So the fed says well, by the end of the year, we're probably going to reduce asset purchases, meaning bond purchases.

That means the yield in the bond market is going to get a hell of a lot better by the end of this year, which sends a lot of people from the stock market to the bond market. And that's why you're seeing futures go down. Dow goes down stocks go down. Everything goes down because as always wall street overreacts and creates this crazy meta self-fulfilling prophecy, where the actual result is happening before the actual act has been done.

I think it's phenomenal, but it is what it is now. The real question is what the hell is going on. Why would the fed give us the signal? Why would they say? Well, here's some minutes, and in these minutes we casually, you know sprinkle a few clues that we're about to basically bring up the yields and the reason is quite simple, because they're trying to give you bad news when you're trying to give a guy or a girl Or a dog or a human being or an alien, some bad news. You want to be very specific about it.

You start off with some basic stuff: hey, listen! So um! I had a little incident with the car. What happened drove into a little thing? What thing? A tree and what happened to the car took a little hit. What do you mean by a little hit? Well, it's total! So if you tell it like this, you're bracing, the other person for the news that his car is total. But if you just started hey dude, i just totaled your car you're gon na get punched in the face.

So that's the proper way to do it. That's exactly what the fed is doing here. They're bracing, the public for the actual inevitable result of reducing asset purchases. Sending money from the stock market to the bond market and increasing the interest rates, because, unlike what they're saying on tv, you have all these experts saying well interest rates, have nothing to do with this.

Well, of course, they do dummy. They have everything to do with this, because if anything else, just the increase in the yields will drive interest rates up, but there's other factors as well. But trust me if you think that this process won't lead to any increase in interest rates. You might as well believe in the easter, bunny or santa claus or diet moroz, the same thing now.

The real question is: how do you deal with this, because, obviously this process is going to lead to a lot of whining there's half of the population, basically whining that the fed is too much in basically getting involved in asset purchases too much money in the system, Too much money in the system and the other half is whining that there's not enough money in the system. So, no matter what the fed does they're pretty much screwed, but that's their problem, that's their pr nightmare. We don't actually care. The only thing we care is how we play to the best of our abilities, so we can optimize our results, because one thing will happen here.

Tech stocks will suffer from this. The first thing that people will sell off is the speculative tech stocks. Not google, not amazon, not facebook, not stuff that actually have cash flow. Positiveness.

Today, they're going to be selling off things that are speculative in the future take place because trust me there's going to be a lot of them lying around in a few months. At a way, better price. That is why i have a clear strategy on how to handle this. So the fed just told you, hey by the end of this year, we're going to push the yields of the bonds up, which essentially will send a lot of money from the stock market into the bond market.

Now it's not gon na happen right. It's happening right now. This is an overreaction and it's gon na correct itself within the next few days, but on the longer term like two to three to four months. This is exactly what's going to happen.

In my opinion - and everything i say here is just my opinion might be, accurate might be wrong, might be the remedies of a madman. You got to do in research, allegedly blah blah blah, but here's what i think will happen. Obviously, the interest rates will go up, yields will go up and there's going to be a sell-off in the speculative tech sector. So the first thing i would do is, i would start slowly checking myself out out of speculative tech place the ones with high pe no revenues, no money, a lot of leverage, basically stuff that are way in the future, because trust me, if you still like them In six months to a year, they're probably going to be cheaper at that point than they are right now, so there's no point in holding on to it.

Also. The other thing i would do is basically, i would load up on stuff that are pure value plays stuff with low pe no debt. A lot of cash flow today, a lot of revenues, great fundamentals, stuff that are cheap and provide cash flow right now, not in the future and honestly, there's a lot of options in this category. You can go the walmart way, the home depot way.

The lowe's way best buy a lot of different options in that sector. You can go banking, you can even go and get intel or even facebook, google and amazon, because the cash flow positive today there's a lot of different options. Even within tech, you don't have to stay out of tech. You just have to worry about value more than growth at this point now, the third thing i would do is, i would basically say well, i'm consolidating into my top three place these top three companies, which i absolutely believe in like for me.

It would be volunteer for you, it would be other companies these top three companies are the companies which absolutely don't give a damn about the price. So, even if the price goes to zero, i'm not selling, because i'm confident about what the stock will do in the future and those stocks you will ride out the storm with and trust me. They will also see a reduction in price if they're in speculative tech, but because they're, your high conviction stocks, you wouldn't care, and you would ride out the storm with these stocks. You can't do it with a stock that you're not 100 on board with.

It is what it is now. I hope i help you in understanding what the hell is going on, what the fed is signaling and how i'm gon na brace for this, and even if you didn't understand the word, they were saying or you didn't. Like my jokes comment below, let me know what you thought about this video as always a huge shout out to our channel members and our patreon. We just got done with the zoom call for patrons and channel members.

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