Talk about something that happened 91 years ago. Today today is October 29th and October 29th. 1929 was uh, the the Great Stock Market Crash. Now Uh, you know.

Interestingly, as we talk about 1929, I'll also talk a little bit about what happened in Uh. 2008 and what happened even this year in 2020. Uh, you know was something that we had never really seen before. this year If we pull up the overall market the S P 500, you will see that the S P 500, uh had a dramatic drop here.

a 35 market drop. I mean really historic and within, uh, you know, a couple months was back to all-time highs. and in a lot of ways it does feel that the market is teetering here way up at this high level and it may not be totally, um, different from what we did see. Uh, what? What you could see as a you know economist or a historian looking at 19, Um, uh, 29 or even looking back at Uh 2008.

So in 1929, Uh, that was a Uh, 91 years ago. Today we had the the Great Stock Market Crash And what's interesting about that crash is that in through the Roaring 20s, there was this incredible exuberance in the market. Everyone was in the market. I mean you know your your barbers were in the market, your farmers were in the market.

I mean everyone was in the market. In the market. Getting into the market was the thing to do and everyone in those days was They're always talking about how was the market today, how was the market today? and it seemed that anyone in the market could make money. And so through the Roaring 20s, there was this prosperity in America, some of the the big titans.

Uh, but certainly in the banking sector. You had some of these really big bankers. You had Charles Mitchell, and then you had of course Thomas Edison and Durant, and a lot of these very, very successful businessmen. the Roosevelts and um, you know, Jp.

um, uh, you know the whole Jp Morgan, all that kind of stuff. So one of the things that's very interesting about the Roaring 20s was, um, there was there was a a push to make the market extremely accessible, and so one of the things that was very common in those days was trading on margin and so you could basically buy. And this is the way they they kind of spun it. You could buy a thousand shares of General Electric uh, and only put down ten percent.

In other words, you were buying on ten times margin. You're buying on leverage, so you were allowed to have ten times leverage. so you know your average. Um, you know, whatever.

Barber, postal worker, restaurant owner, farmer. they could buy a thousand shares of, uh, all these different companies if they want to, and only put down 10. And so that created a very delicate situation where the market was essentially propped up by leverage, right? And so it made it so. the Federal Reserve, And at the time, while acknowledging probably internally and some early Um economists were saying that this is very risky that the entire markets propped up by leverage.

But we can't take away the leverage because you take away the leverage. The market's gonna crash. So what do you do? How do you? How do you start to regulate this market? and uh, sort of start to pull the the air out of this balloon without popping it. And so one of the things ended up happening on Uh, March 25th, Uh 1929.

So the spring before the Stock Market Crash, there was a, Um, a rush, a big cell in the blue chip sector and what happened was overnight stocks dropped. Uh, some dropped more than 10 percent. So if you were in a stock with ten to 1 leverage, then when the stock dropped 10 percent, all of a sudden millions of investors were getting phone calls from their broker saying hey, you need to put up more money in order to hold your position, Otherwise, we have to sell your position and obviously we're going to be selling it at a substantial loss. And so that all of a sudden the shakiness in the market in in March led to this initial drop.

which then continued in March because all of a sudden there was this credit crunch, lots of people wanting to borrow money, and all of a sudden interest rates overnight went up to 20. All right. So now with really high interest rates, people couldn't afford to borrow the money to maintain those positions that they were holding. Or if they did, it was at a high risk that they were going to default on those loans.

So one of the big one of the big sort of I guess you could probably say flaws in the early stock market was the the ability for investors with really no qualifications to be gambling essentially in the market on 10 times leverage. And so the Federal Reserve resistant to send a cash infusion into the market and to allow people to borrow tremendous amounts of money to maintain their positions. they held back. And it was, Um, the bank.

Uh, national? Uh, was a national National Citibank? Uh, Charles E. Mitchell? I believe the President of the Bank he stepped in. The thing is, his entire career, his entire livelihood was uh, in the market. And so he stepped in and what he did was, uh, he put up 25 million dollars.

He said that they were going to offer credit, they were going to put up that 25 million dollars to help essentially prop up the market. And when he stepped in and propped up the market, all of a sudden investors said hey, wait a second, this guy's coming on the floor and he's propping up the market. And that flipped the switch And on the flip of a dime, the market shifted from fear back to greed people buying the dip. And into the summer of 29, there was an incredible, uh, continuation of momentum.

essentially. And there were traders. Uh, Jesse Livermore, who was, um, you know, one of the the great stock traders of the day who was an active trader who made, uh, tremendous amounts of money through this period of time. In fact, uh, his net worth in 1929, I believe was around a hundred million dollars, which would equate to over a billion dollars today.

It's kind of remarkable to think about becoming a billionaire as a Uh as a trader. And and he was sort of maybe one of the early day traders. but uh, in those days, the market was just very, very different. and a day trade may end up being a couple days long, or a few days long.

and stocks were just going up like kind of left and right. Not totally different from what we've even seen with stocks like Tesla. And so what was happening was the market was trading on speculation. The market became somewhat disconnected from the actual value of the the company of the shares.

And so you were getting these inflated valuations which were just based on speculation and spectators. That's not different from what you saw during the dot-com bubble. It's not especially different from what we've seen in some of these electric car companies. I mean, again, I just, I'm not saying anything really bad about Tesla.

Maybe Tesla really is worth this much, but maybe it's not. It's It's still this kind of question of speculation of, um, and look at the stock, like Amazon or the P E ratio of Tesla and Amazon, these are trading at such high P E ratios. Let's check the P E ratio of Amazon. So the P E ratio is the price to earnings ratio.

So if you bought, um, the entire company, let's see, does anyone have the P E ratio of of Amazon right off the top of their head? I just don't have it right in front of me. Just give me a ballpark of what it is. Um, let's see. I'm just trying to do a quick Google search and it's not even pulling it up.

Um, Amazon third quarter Pe ratio? So 123 123. So their price earnings ratio right now is 123.. So that means if you bought the entire company today based on today's earnings, it would take you 123 years to pay off the company. If you bought it today.

now, a lot of people will buy a house with a 30 year mortgage. You figure? Okay, it takes 30 years to pay off the the value of the house to buy a company. And it take 123 years to pay off the value of the company. That's an outrageous price earnings ratio.

What's Tesla at right now? T Tesla to you? Um, Tsla price earnings ratio. So our P E ratio is 812. I have it 812.. it would take you if that's correct, and that's on.

Um, that's on Google. But uh, it would take based on that. um, 800 years, 800, 800 years to pay off. So that doesn't even make sense, right? It makes no sense.

No one would buy an entire company with an 812 year payoff period. No one would do that. And so these P E ratios are not totally dissimilar to what maybe you were seeing in the late 1920s. One of the big differences though, is that in the late 1920s, you could be an investor and millions of investors average people were invested in the market on 10 times leverage.

And it wasn't just them, the actual um, you know the actual banks were fully vested in the market because of course they were lending the money that was going into the market. And so in 1925, in 1929, in March when you had this first credit crunch, Um, Charles E. Mitchell stepped in and in some ways single-handedly propped up the entire market. He was.

He was that wealthy. He put in that much money into the market. Uh, so the summer went on and it was a good summer now. Uh, in those days, the market was so accessible that um, even on um, transatlantic, um, ocean liners, they had kind of like they have today.

Once you're in international waters, you know how they have like a casino on a lot of the um, you know, the the international, um uh boats? Well they had a stock broker. They had a stockbroker's office where you could go in and you could start playing the market and it was playing the market and they would radio in your order down to the exchange. You know, oh so-and-so wants to buy 10 000 shares of G 10 000 shares going through 10 000 shares and you know they'd send the order out and you'd go to the market. You'd get filled and so you know you had these people that were just everyone was in the market and people had those ticker tape machines like you probably saw in the movie.

uh what was it? um uh, all the money in the world? Uh Getty. um Paul Paul Getty where you know he's got the ticker tape machine to printing out the tape because in those days you didn't have advanced charge. Jesse Livermore didn't trade off advanced charts, he traded more off the tape and taking notes about what was the high, what was the low. So that was a very different way of of trading the market.

I'm quite different because you didn't have the the charts, but uh, trading. the tape was very simple. So anyways, come fall, uh in September some economists began to express concern uh about the the state of the market. And on Thursday before the Great Stock Market Crash of Uh Tuesday, Black Tuesday? Uh, October 29th.

That Thursday, there was a, um, a skepticism and fear in the market. and the market dropped. I believe it was something like 10, 10, or 12 or something like that. So you had this drop on that Thursday on that Friday.

Again, Uh, I believe Charles E. Mitchell and several other bankers stepped in and put their money in the market. They propped it up. And so the market surged on Friday, going into the weekend.

By Monday morning, people over the weekend, uh, changed their their thinking and decided on Monday I better, I better get out. And so people started to unwind positions. On Monday and Tuesday was when the the drop culminated. And on uh, stocks, there were people walking around on the exchange on the floor of the exchange.

Everyone's trying to sell. There's no buyers. So for some stocks, um, there aren't even bids. There aren't bids because there's no buying.

There's no one there that actually wants in in those moments to buy the stock. And so you've got a situation where you just have full out panic, full out panic. Supposedly, Uh, Jesse Livermore. uh, claimed that that was one of the best days of his career.

I guess. I think he was shorting the market. So you had this, um, this final culmination. And and the result, of course, which is really tragic, is that millions and millions of investors who were invested on Leverage lost everything.

They lost everything. Everything they lost in the market was gone. Plus now they owed that times nine to the banks and they were done. They were gone.

That was the end and that you know opened up to, um, what became the Great Depression. It was really a catastrophic economic failure. and if you look back, this is why Regulators stepped in. Regulators stepped in, said it's not, it's It's neither appropriate nor safe for us to continue to allow novice investors to gamble on 10 times Leverage.

Now you know you can. You have the right if you want to go into a casino and gamble. You can go into a casino and gamble. You put up your money and you gamble as much as you want.

Uh, and I'm not an expert on the rules in the gambling industry, but my understanding is that you can't gamble on on Leverage and you know the stock market. You know initially wasn't thought of as a place really of gambling. Stocks go up. These are great American companies.

They're going to go up. They're going to keep going up. But the ability to buy and buy and buy on borrowed money created this this what essentially was a bubble that was unsustainable. Prices were unsustainable.

They had gone up in in a unsustainable way, and they couldn't hold. They couldn't hold those levels. And when it burst, it came back down and and and that was the drop. So uh, so now imagine a market without leverage.

Imagine a market where you actually don't have leverage. So as of right now today, as an investor, if you have at least twenty five thousand dollars in your account, you would be considered eligible to trade on up to four times leverage. But that's only during the day, not at night time. At night time, you can only hold stocks up to two times leverage.

So if you have ten thousand, well, let's say a hundred thousand dollars an account overnight, you could hold two hundred thousand dollars of stock. Now, obviously, if the stock dropped 50 percent, you've lost your entire capital, You've lost your hundred thousand dollars is gone because you lose your money first and the bank gets its money back. Um, you know. So they they have systems now where they will market you out of positions, which is the same as what they did in 1929.

They tried to, um, you know, of course banks tried to market their Uh positions out, the brokers tried to market the positions out to recoup as much as they could, but even the banks got got smoked. Now some of the big bankers I believe Charles E. Mitchell ended up filing for bankruptcy going from you know, a multi-multi-multi-millionaire to bankrupt. And that happened with many, uh, you know of these big bankers in the 1929 crash.

Some of them were able to recover through the 30s and through the 40s and some of them never recovered. Uh, Jesse Livermore committed suicide in I think 1940 or something like that in 1945. I'm not sure what the year was. Um, you know.

And so for some of those individuals, the, uh, the regulation that came in changed their ability to trade the market in the way that they had traded it previously. They were no longer able to, um, trade on leverage in the same way. Or you know it just there. There were changes due to regulation and that affected their ability.

Uh, it impacted their strategy, so you know. Fast forward up to 1999. 1999. You've got the Dot-com bubble.

Everyone, you know, every everyone barbers and you know, I mean, I'm not trying to make fun of barbers, but it's just. you know, every average uh person out there was talking about, hey, are you making money on these dot-com stocks and I was at in those days. I was in my teens and I heard about people talking about day trading. And when I talk about my friend in high school who made sixteen thousand dollars day trading, guess what guys, Dot Com? it was the dot-com bubble.

Everyone was making money, even a 16-year-old with, you know, um, a couple thousand dollars in in his account from his you know, grandparents or whatever. I don't know where he got it. So everyone was making money. and then of course, what ended up happening.

Uh was the bubble the bubble burst. and I mean if you look at the bubble bursting on on Nasdaq, the tech stocks in 1999 and I mean it was. It was A, it was a bloodbath. It was just very very bad.

And so what ended up happening of course was a lot of uh, retail traders who would come into the market did get posed and they lost their money because they were still allowed to trade on on margin, not 10 times margin. but they were still allowed to trade on margin. Uh so a lot of investors in the 1999 bubble. well the tech bubble that burst, um at the sort of turn there, lost, uh, money and then he got shaken out.

But uh, what ended up happening was there was this, Um, there was this shift that had begun to take place which occurred prior to 1999 which was deregulation. So the deregulation in the market and it is very interesting because it very directly led into the stock market crash of uh, 2008, 2009. So let's go back here. I don't have um stock charts on the S P Uh, I think my charts here only go back to like 1990 so they don't really go back that far.

But let's um let's look this was this was 2000 Guys, this was the 1999 bubble here breaking in 2001. so this was just absolutely insane and the market literally dropped 50 off the highs 50 percent from the S P 160 all the way back down, but coming out 2003, 2004, 2005, and 2007. You know baby, we're back. And so what was going on during this period of time? This is when we had the um, uh, of course the the real estate boom.

And so the real estate boom was a little bit different. Uh, one of the things that happened during deregulation initially in order to get a a mortgage in order to buy a more or to buy a house and to get a mortgage, you would go to your local Savings and loan bank. So you know I'm here in the Berkshires. So you know, go down to Berkshire Savings and Loan and I'd say hey, I'm thinking about buying a house and they'd say okay, well we've got of course a lot of savings from the people in the Berkshires that's sitting in our bank and we lend out that money.

So they earn a little bit of interest on their savings and we earn a little interest on the bank. We lend out that money to qualified home buyers that are living here in the Berkshires. And so the Berkshire Savings and Loan lends out money right here in Berkshire County. And because they're lending to people right in the county and they're holding that loan for 30 years, they want to make sure that you're good for it.

And so of course they're very careful about who they lend their money to. How they can only you know, issue so many loans, they can only give out so much money. and uh, you know. The result was that it, uh, at that time, uh, could be more difficult to own your own home.

And so the process of deregulation began with the ability for your local savings and loan to sell your loan out to an investment banker out to a banker like, um, you know, bear starts out to a banker like Jp Morgan, right? And so they would take these loans and they would sell them to the investment banker and that frees up their capital because then they get the capital from the bank and they can go and loan that out to the next home buyer. And uh, at the same time what was happening was the investment banks who at one time faced regulation about investing on on margin were allowed to invest on margin, but only uh, when they were investing. I guess in like Aaa rated securities. So Aaa rated securities which basically is like as good as a you know Us dollar high quality investments.

And so there was, um, this sort of chain reaction that began where the investment banks wanted to buy more mortgages and what they did with those mortgages is they bundled a whole bunch of them together, got them rated by the rating firms Aaa, and then sold those um collateralized debt obligations Cdo. The collateral is the home, so it's it's debt, but it's it's a Cdo. So it's a collateralized debt obligation and they sold those out to you know, your pension funds and you know, all all these different funds and allowed uh, investors to to buy up those, um, investment those um collateralized debt obligations. And of course, with the deregulation that was, uh, happening during that time, they were allowed to start buying those at a Um on Leverage.

All right. So now we're starting to get back into what happened in 1929 of investing on Leverage. But this is different from your average, um, you know, regular traders, retail traders like you and me investing. Now we're talking about the actual banks Bear Stearns.

Uh, you know these Goldman, Jp Morgan, these really big banks investing and selling out these, these these securities to people that are buying on leverage and so the banks. You know you go back down the line and the investment bankers are saying sell, We want more mortgages, We want more mortgages and so some of these very large mortgage companies out in California and in different parts of the country. They had these relationships with the and layman brothers. Yes, they had these uh, relationships with the investment bankers where the investment bankers were saying get us more, get us more, get us more And so all of a sudden the um the bar to get a mortgage was going lower and lower and lower.

Which meant more and more people could buy. Which meant of course there was more and more demand for houses. And so the price of houses started to go up More and more and more. And because of the amount of money being made both by the mortgage banks, then by the investment bankers and then going out to the people that are ultimately holding these uh, Cdos, there was just this spiral of value going up.

Now um, one of the things that's interesting. Uh, and where this kind of ties in the insurance companies is that, uh, these uh, Aaa backed rated securities were actually they. They were insured. So there was insurance on them.

Which meant God forbid something happens to them. They're actually insured. So it's like what's the risk And this is where um, Agi the the big, the big failure in the insurance company, uh, ties in So well. let's back up for one second.

So where did things start to turn? Um, or the Aig, Where did things start to turn in 2008? So 2007 you can see the market's going strong and then 2008. all of a sudden right in here you know again you have this this big dramatic drop and so what happened was All of a sudden you're starting to get some panic in the market and all of a sudden you're and this is. this is the overall market. but it's a decent enough reflection of what was happening.

So all of a sudden you're starting to get a sell-off. And one of the things that um, that economists and some of the people working at these banks noticed was that, wait a second guys, these Ceos that are triple A backed, um, these actually have it's it was called. you know, subprime. Uh, the subprime lending crisis.

Subprime mortgages are mortgages issued to uh, lenders who don't have really great credit scores. So there's they're subprime. And they actually had these, um, mortgages that they issued. I can't remember what they called them, but they issued them to people.

Um, it was like it was. I can't remember what they call it, but it was no proof. no proof loans. So you didn't have to prove your income.

You didn't have to prove anything. Ninja Loans. Yeah, yeah, it was the ninja loans. It was the no income.

no, uh what was the J? Um, no income, no job uh stated income loans. So you stated your income, you wrote down hey, I'm I make 10 million dollars a year and they said okay, fair enough. Here's the loan and they uh issued them as adjustable interest rate loans and so the interest rates could change. which is of course very very risky.

So what initially for that homeowner Might have been a 1300 a month payment. Uh, once they adjust the interest rate, next thing you know it's a 2600 a month payment 3 000 a month payment. And now these are people that probably couldn't even have paid 1300 a month and definitely can't pay 2 000 3 000 a month. It's just not going to happen.

And so when you had these subprime in order to get the best interest rate of a Cdo you would have, they would stack them so they would have, um, tranches. so you would layer the high quality Aaa prime lenders and then you'd have to throw in some subprime loans because those would increase the interest rate. If the whole Cdo was all prime, your interest rate's going to be lower because you give of course really high qualified lenders lower interest rates because they're going to pay it back. You don't.

You can't bend them. you know, over with a high interest rate because they've got the good credit score. And so the Cdos. They were Aaa rated.

Of course they had a lot of prime mortgages in them, but then more and more. So they were layering in these subprime subprimes, some prime. and you had people who were buying multiple houses as investment opportunities because they believed that the values of the houses would keep going up, keep going up. And so they were buying a house and then they were paying the the loan on it and they were renting out the house.

So let's say they got the loan, the interest rate, or the mortgage payment was 1300 a month. They're renting the house for 1800 a month, they're clearing 500 a month and that tenant is paying off their their mortgage. It's awesome. All well and good.

Until the interest rates start to go up, Or until some of them just you know, because they were subprime mortgages start to default. And so as um, some of these economists and investors were looking at the rate of default going up, they were realizing, well, wait a second guys. Uh, if more than x percent of these loans start to fall, what's going to happen? All of a sudden, you've got all of these Cdos which are going to start declining in volume in value. And you have these big banks like Lehman Brothers and like Bear Stearns who are invested in these Cdos on leverage.

and now this is a failure in the banks. Anytime you're talking about the banks failing, you're talking about a serious catastrophic event in the economy. You know it's one thing for the dot-com bubble to burst. And who gets who gets smoked? It's mostly retail traders, retail investors.

Yeah, there's some banks that get hurt as well, but it's a it's a crisis really in the not as much, in the institutional, um, banking sector. And same with, um, you know, the crash in 87. But what you're talking about here in 2008 is the failure of the banks. and that is what causes real panic.

and so that's when Um. Paulson and Ben Bernanke they came together and said we need to save this. Uh, we need to save this country and we need to step up just the way Charles E. Mitchell did.

and we need to infuse capital into the market. We can't just let this market crash and burn. It would be catastrophic. You think this is bad Now think about how bad it's going to be when more banks are failing, or when the insurance company that is insured these securities fails.

And so the and so very interesting periods of regulation in the market to help prevent catastrophic failure. But then of course limits the upside profitability for investment bankers. and then periods of um, you know, political maneuvering to deregulate allows more money to be made by investment bankers. And there's a lot of people that carry a lot of anger and frustration that wait a second.

you're telling me the Us government or the Federal Reserve is bailing out these big banks to the tune of 700 plus billion dollars. They were greedy, they made crazy amounts of money, and now they're They're paying the price. But the problem is, it's not just them who are paying the price. Uh, it's also all of the investors out there who you know own these.

um, you know these these very now devalued uh properties and who still have loans that they're paying, who are now upside down on their houses. And then of course you know you have the rippling impact across the entire market. So the subprime um, housing crisis and the uh, Cdos, and of course the then there's a lot of documentaries about this. the um, the the, the sort of you know handshakes between the investment bankers and the rating industries that they were actually triple A rating? These investments that, uh, that weren't Aaa, they weren't super super safe and you know what happened.

So coming out of that, we had obviously a period of, um, serious decline as you can see here, 2008 to 2009 and this is where you know, just sort of. It was spread over a longer period of time than in 1929, but it was as sort of initial panic set in. and then it started to get worse and worse and worse as you started getting these margin calls. And when you're talking about a Um, a company like Layman Brothers or Bear Stearns getting a margin call and they're calling Jp Morgan and they're saying hey, if you don't give us 20 billion dollars by Monday, we are literally we're we're gone.

That's when you have a that's when you have a really serious situation and you're talking about tremendous amounts of money disappearing and and being lost. And so coming out 2008 in 2009, there was, of course a push for more regulation, more regulation in uh lending practices. There was a big change in the way. uh, the the mortgage banks would lend to people.

getting a mortgage now is much more difficult than it was in 2005 or 2006. there's been increased regulation uh, in the investment sector, in the bank sector to not allow the big banks to be invested on leverage. Uh, you know, But leverage still continues to exist to this day in varying degrees. and the investment bankers and hedge funds are able to invest on leverage if they wish.

and and that does continue to pose a risk to the market. It's a hard thing to fully unwind because once you've gone down the road of allowing people to invest on leverage when you take it away. Inherently, that means people have to unwind positions, they have to sell positions, and that's when you're going to start to see, you know, decline in the market. So it's a very delicate.

The market is in that way, very delicate and it does feel in many ways today. like well, you know we look at the market. Are you kidding me? I mean this is this is. look at that.

It's pretty crazy. It really is pretty crazy and what's propping it up? What's holding it up? Well, you do have the Federal Reserve who's stepped in in 2008 with cash infusion into the market, you had quantitative Easing that continued for a long period of time where they continued to invest in the market. Now that investment had did pay off for them as the overall market came back up. But when you have Federal Reserve actually investing in the market to prop it up, it's It is a little scary.

It starts to make you wonder how safe the market is, So you know we're now at a period where the market dropped 35 percent. Of course, many companies through uh you know, covet and everything else reporting that they expect substantial losses. The airlines. I mean, these companies the airlines are getting have gotten Cruise Lines, airlines and Cruise Lines.

Let's look at Delta. Let's look at Delta over the last year. Let's look at that drop. That's a 50 drop Jblu, Jetblue, Uav.

So we'll get a couple. Um, what is? Um, Ual. You look at a couple of these airlines and they have just gotten smoked. Let's look at the Cruise lines.

Uh, Carnival Cruise Lines. Let's look at Norwegian Cruise Lines Norwegian Cruise Line. Uh, Cruise Line holdings. I mean, these have just gotten absolutely destroyed.

And they're not. I mean, you think they're going to go back to their all-time highs any time soon? I don't think so. but some stocks have really thrived during this, um, kind of new economy. Amazon certainly is one of them.

Uh, Zoom is certainly another. So they're uh, the tech stocks have been the ones that have, uh, you know, probably done the best in this these last six eight months. And it's some of the, um, the more traditional businesses that have suffered. And I think that this, uh, what what the com what the country is going through right now is going to force, uh, some changes in the economy.

There's no question about it, we are coming into a new economy and that's also going to translate to a new stock Market economy. The stock market is changing as a result of, uh, of everything that's happening. But I you know, can't help be but be a little bit concerned about some of the P E ratios that we're seeing because they're just absolutely outrageous. The P E ratio of Tesla.

I mean, I, I can't wrap my head around how that makes sense, Um, you know, but investors keep buying Tesla and so you know, even when it's even when it's had these drops, it's come right back up. It's had a couple big drops here from you know, 200 and then dropping back to 75 and then it goes right back up. But you know we have. It's not like we haven't seen things like this in the market before.

where stocks go to, you know, outrageously high levels and some of them continue. continue, continue, and some of them, you know, end up having dramatic crashing burns and I don't know. I'm not sure what's going to happen with Tesla, but Tesla's just one example of a company that has a P E ratio that just is quite outrageous. I think that one of the things that would probably ultimately bring stability into the market would be continuing to unwind through a period of time the amount of leverage that is allowed in trading.

And it's not to my advantage to say that because I trade on leverage and when I day trade I I also um, you know in my with my small account challenges I day trade on leverage. Now this account that I'm up 17 000 in today, I didn't trade on leverage for it. This is my retirement account and one of the rules with retirement accounts is no leverage. You don't get leverage and you're not allowed to short stocks in retirement account.

but uh, you know again it would take it's It's not a shock that you know the the people out there that benefit the most from leverage are the is the financial sector. It's a sector that's very powerful, They have tremendous amounts of money, tremendous amounts of leverage, and they're going to want to continue to to have that leverage that allows them to be as profitable as they are. So I don't think that we're going to see a decrease in the amount of leverage they're allowed to use anytime soon. But it does.

You know it does create. I think at least for me as a trader. a little bit of concern that you know the the margin call risk. Maybe there's other ways that that can be mitigated.

Um, but you know when it was mitigated through leverage on triple A backed securities, then you kind of had the loophole where some securities were getting that Aaa stamp, but they weren't really triple A. so it allowed you to invest in these really juicy high return um, securities. um, the Ceos. and and that they weren't They weren't as secure and safe as they they should have been, you know, so I don't know what the answer is.

I mean it's it's a very big economic and political question and uh, ultimately, you know it's not one that I have any say and I just watch from the sidelines. But the overall market feels that it's not accurately pricing in the current economic situation in the world and I think that that's something that feels concerning. And I was saying that during this big drop I was like this was this was April and May I was like i'm not ready to be. You know, going all into the market right now.

given the state of this pandemic, and you know, given the state right now that we're in, uh, with the the pandemic, it it doesn't feel like we're in a place where we're going to see really good earnings coming out of a lot of traditional companies for a while. I could be wrong. Certainly the tech companies I think will continue to do well, but I'm really not sure about some of the more traditional companies, so I don't know. But I think what happened in Um through all of these periods in the market of exuberance is that there's a Lot of spectators.

There's a lot of spectators out there who, um, you know, are, uh, just you know, buying into the market with the hope and the belief that it's going to go higher and higher and higher. And yeah, Alan Greenspan, the former Fed chair, he, um, he was A. He believed his philosophy was that the markets self-regulate that you don't need regulation. They self-regulate Um, and that may be true, but they self-regulate in very dramatic ways as we've seen, So I I don't know if that's Um, that consensus is is still the case.

I don't really think that it is given what we've seen in 2008 where deregulation led to um, you know, bankers being bankers doing what they could to make as much as they possibly could. Which was also their you know, fiduciary duty to their um, their their own investors, right? Traders are going to be aggressive. I mean, I, I'm aggressive. I capitalize on volatility.

This type of volatility created an opportunity for a lot of Um. profit. And so the two emotions that guide the market the most are fear and greed. Greed.

Wanting to make more and more and more and more. You know, the big bankers, all the way down to your regular day trader trying to make as much as possible. and then the fear shifting on a dime. And this was over the course of a couple weeks.

But we see a shift on the dime on on day trades. you know, Look at, uh, Triple U today on a dime. The momentum shifted right here within two minutes from people being bullish and thinking maybe it was to break to the up to all of a sudden this panic. so you know it's uh, I find it very interesting and I don't know how honestly useful all this information is other than just being somewhat interesting.

for people that are already in the market, it's I a reason that I hesitate to be fully invested in the market. It's certainly a reason that I don't take the risk of trading on margin you know, overnight and and just holding and and hoping that things go higher and higher. People definitely did that in the 1990s dot com bubble. Everything you bought over the course of weeks just kept going higher and higher and higher.

And you know, I probably could have done that quite a bit over the last few months and I just am a little too timid to do it. Um, I have enough fear in me that I don't want to hold these stocks overnight so I day trade them and that seems to work well for me. Just get in, get out, take my profit, and the market goes higher. Overnight goes lower overnight.

It Just does all that without me. So um, anyways, that's um, that's kind of my quick little history lesson here. How long we're at 45 minutes on the Stock Market Crash of 1929, which was definitely fueled by Leverage, and the Stock Stock Market Crash of 2008, which was also 2009, which was also fueled by Leverage. Both of which required, um, either big banks and or the Federal Reserve to step in and try to support the market.

And it does seem that if you're going to take the approach of deregulation, then you should say that the market doesn't need to be propped up by the Federal Reserve. But if it's really hands off, it's hands off. It's one of the other. You can't have both.

It's hands off until you know someone comes in to save the day. I don't know. but uh, each day that we continue to experience volatility is a great day for me as a day trader. And so I'm going to continue to be aggressive.

But you have to know that trading the markets is not without risk. A lot of people tried their hand in the markets in the 1920s. Many were very, very profitable, very successful, and then lost it all. And they lost it all because they continued continue to continue to invest on leveraged leverage leverage.

So even for your own trading, scaling back your use of leverage ultimately is a practice and risk management. And that's what I do here in this retirement account where I don't use leverage anymore. Did I use it during my first few weeks first few months of trading with a 500 account? Yes, I did it because that was the fastest way to grow a small account. I wanted to grow to 25 30 000 so I could start trading.

Uh, you know, a little bit more aggressively. and once I got over 40 50 000, I just didn't really need to use leverage anymore. But uh, you know, even today, occasionally in my main account I will use leverage on a big position. It's just not something that I do as often.

So uh, you know, trade smart. Be careful, don't forget about the risk and I will see you guys first thing tomorrow morning. Uh, for Friday and it'll be the last day of October. Alright, see you guys in the morning.