Everyone is talking about the imminent 2021 stock market crash.
Every chart out there is saying that a market crash is coming in 2021 and this is the basis for most of the arguments explaining why we're in for a big economic collapse.
And on the surface those arguments sound reasonable but if you dig deeper into the numbers, things begin looking very different.
2021 is unlike any of the market crashes we have had before and despite some of the warning indicators, the situation might actually be the exact opposite.
Instead of a giant stock market crash in 2021 we might actually be seeing the start of a huge growth cycle and there are plenty of clues that indicate this might be the case.
Whether or not a market crash will happen in 2021 is something nobody can tell you, but we're definitely sailing in uncharted waters.
And so whatever happens, we are not following the path of something we've seen before so buckle up for the ride.
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Hey guys, it's sasha, everybody is talking about the upcoming 2021 stock market crash. Everyone on youtube is predicting that the market is going to collapse, and famous investors from robert kiyosaki to kathy wood are all lining up to tell you that the crash is coming and when it does it's going to be bad. This one is going to be the biggest in world history and it always happens just after the peak when we're peaking right now, every chart that you can look at out. There is saying that we're in the middle of a huge bubble - and this is the basis for most of the arguments, saying that the 2021 stock market crash is imminent.

But if you dig deeper into the numbers, things actually begin, looking very, very different. If you go a little bit further below the surface, so let me show you why we are not about to repeat the dot-com crash or the 2008 financial crisis why this time things are going to be a little bit different. First, let's talk about the buffer indicator because that's usually the first chart that everyone whips out in this argument. It shows the value of the market relative to gdp, and the argument here is that the two are correlated.

So if the chart goes too high, it will then inevitably crash back down, as we saw with the dot-com bubble in 2000, but there are some massive massive issues with this child. The first one is this: if money is going to exit the stock market, where is it going to go because money doesn't tend to sit around as cash, it will typically move between asset classes in the stock market, crash demand will drop sharply compared to supply, which Creates an imbalance and that vortex pulls money out of the stock market. Now, when money is pulled out of the stock markets, it often goes to one of two places i mean it does go into other places well, but it typically will often go into bonds or commodities, at least in part, when the stock market crashed in 2000 bond Yields were relatively high. You could, at that point, get seven percent on a 10-year treasury bond compared to a long-term market average performance of about nine percent.

So, as the market overheated, you could naturally move your money into those treasuries to avoid the overheating and, as things began, looking pretty bad. That was the natural place for money to go, and although the rates have increased relatively this year, the yield on those treasuries at the moment is just 1.3 percent. That is an incredibly incredibly low rate. If you look back at history and with it running so far below inflation, it is hard to see money moving into long-term bonds out of the market.

In fact, bond yields have an inverse relationship with demand, so when the bond market is running really hard like it is at the moment that causes the rates to actually drop. So any incremental surge in demand will actually send those yields even further down and that doesn't sound, highly probable given where we are today, so maybe, instead, the money can actually move into something robust. Maybe some commodities like let's take gold as an example. Now gold is itself at an all-time high at the moment and as an investor, you may be somewhat skeptical as to whether the price is already overvalued.
The price of gold rose substantially in the aftermath of the dot-com bubble, as money moved out, and there was an even bigger rise after the 2008 financial crash, but the start of the pandemic and the onset of the uncertainty that came with it have already set those Gold prices soaring to levels we haven't seen before and on top of that, the buffett indicator has one major flaw: it compares the us stock market to u.s gdp, which sounds kind of reasonable when you think about it. But the fact is, the world has changed. U.S companies now don't just work in the us markets; they don't just dominate us uh product spaces, but they actually work across the globe. Even looking back just 20 years to 2000, the global gdp was 34 trillion dollars with the us gdp.

At the same time, being 10.2 trillion, which was 30 of the total looking at today, the global gdp is 85 trillion dollars, with the us being about 21 trillion, that's less than 25. That is quite a substantial drop. That means the rest of the world collectively is growing higher than the us on its own, and if you apply the reduction to the buffett indicator, we actually see that the current level drops from the ridiculous levels. It is at the moment to more like 195 percent, which looks a little bit more reasonable, although it's still very high.

But the big question is how accurate is the historical growth trend line on that indicator that everybody uses? Is that one that everyone uses the best fit or could it be this? Well, it's impossible to say, but it certainly makes that indicator not as reliable. Some people would maybe say next up: let's look at the schiller ratio, and this is the one that's probably a bit more interesting. The chart takes the last 10 years of earnings for the s p 500. Then it adjusts them for inflation and then it takes that average and then there's a sort of pe ratio.

Calculation, using that average number that calculation is meant to show when the market is overvalued relative to how much the companies are actually earning on a consistent basis, and at the moment that figure is almost 38, and that is a huge spike. Second, only to the dot-com crash - and we all know what happened after that - it's actually higher than the famous 1929 black tuesday. So the argument is that we're all paying far too much for the companies that we're invested in on average. But the sheller ratio has massive blind spots and i think it's something that a lot of people are missing.

The ratio historically relies on companies having a steady rate of growth over time before they end up anywhere near the top of the s p. 500. It uses the last 10 years earnings as an indicator of that value and historically this will probably make a lot of sense, but we live at a time when technology works differently. Companies work differently.
Companies no longer need three or four decades to establish themselves. They can become big in just a few years and if we look at the s p 500 at the moment, if we look at the biggest companies that are in that s p 500 index, let's go and look at their earnings. Last 10 years, amazon has made 26.9 billion dollars over the last 12 months, but was making only 1 billion 10 years ago. Facebook has a net income of 1 billion 10 years ago, compared to 29 billion and 2020.

tesla has been losing money until the middle of last year and is only now rapidly growing its profits. This is very different to when the largest companies in the index were banks or oil companies, who would have very consistent, very steady revenues and incomes every single year year after year, and so sure, when you have a mix of companies that are the largest companies. In that index, who have those sorts of metrics, then, naturally, that index will look really really bad. It will malfunction as a result, that's not much of a surprise, but let's look at the numbers even deeper.

First, let's take a step back and consider the schiller ratio in light of the philosophy of investing in general, just bear with me. This is actually quite important over time. The world we live in is changing. We don't have all our global or major regional wars.

Every few years sure there is conflict, but not on the level, not on the same scale as we've had in the past. There is a completely different level of available information, knowledge, life expectancy and the time frames over which people make their financial planning and financial decisions. These are very, very important factors, because, when you plan to pay off your house over several decades, you also plan to get rich over several decades, rather than considerably more quickly. People are happy to invest in assets today that will take time to deliver wealth, something that wasn't really an option when life was considerably more volatile.

So now investing in a company which we would expect to get a return in 5-10 years. Time is seen as reasonable. 100 years ago, or even 50 years ago, it wasn't, you would want your fat dividend payments to start the quarter after you bought those shares and naturally early stage, companies that have the potential to earn money in a longer time horizon are beginning to attract more interest. That's not surprising the fact that the company is not profitable or maybe barely profitable right now would be a killer for its valuation in the past, but people are happy to look further into the future to assess what their potential gains are.

Next, let's look at some fiscal policy and money market details. Inflation has been relatively stable for now, so that's not a factor when you're trying to assess what the difference in economic performance was say in the 2008 or the 2000 financial crashes. It's been largely bouncing between two and five percent over this period. Now, let's look at the excess cape yield chart.
This one is really interesting. This shows the difference between the schiller index style, measure of cape and the 10-year interest yield. The situation today looks really different to the big crashes in 2019-29, which is what everyone references in fact, xscape collapsed to zero and even dipped below zero in the years leading up to those major crashes. This is because company valuations began being higher and higher the multiples on the earnings of those companies grew progressively, and that sounds very similar to what people are saying about the market today, as those multiples increased the effective return on your investment actually reduced.

So imagine if you buy a company that produces x dollars in return to you and you buy it at 15 times multiple. If the valuation the company grows and suddenly you have to buy them at a 30 times, multiple, then for the same money that you put into the company you're only going to get half the shares, and so the return on your money is going to be half As well, but despite everyone saying that the stock market is very hot right now, the excess cape measure looks very different, and if you try to compare it to past data, it looks a lot more like post-world war, one sort of time than the scenarios preceding the Market crashes, in some ways the next few years could have a very positive impact on the stock market. Over the last two years, we've had the biggest bull run in history, but that was despite many industries being hit very very hard over the past year. You could argue that this particular unprecedented time stimulated some of the industries so much that they brought the average up or you could, alternatively, argue that the bull run could have been more ridiculous.

It could have grown even further if the pandemic didn't actually happen. Now, in the last two major crashes, the u.s interest rate climbed before those crashes happened as the economy was going really well, as it was overheating and those rates were then cut in the aftermath of those crashes. At the moment that interest rate is not 0.25 percent. Now the government has been printing money like absolutely no tomorrow, and we have seen an incredible rise in the m2 money supply.

It has completely skyrocketed. This is a measure of the total amount of cash and the assets that are sort of similar to cash that are in general circulation, as fiscal policy had to take a u-turn beginning of 2020. The digital money printers went nuts and although the rate of increase has slowed down slightly in the last quarter, there's been an absolute flood of cash, essentially hitting the street we've seen stimulus checks, we've seen bears we've seen a whole load of money that is turned up Out of nowhere - and this is a tool that is usually almost always used after a major crash to bail out industries to stimulate growth. But although we did have a technical crash in the march of 2020, we haven't had any sort of sustained market collapse, which is what usually follows.
One of these major crashes. Now this tool, this money printing tool, was employed after a different kind of collapse. You know all the lockdowns industries getting hit potential job losses, all of that kind of stuff - and this is interesting because usually these types of activities are the medicine that are prescribed after a market crash happens. But here we are having taken a large gulp of that medicine before that giant market crash is supposedly going to arrive.

The million dollar question is whether that medicine works just as well at preventing or maybe delaying that crash as it does at treating the symptoms. We don't actually know, because we haven't really been in this sort of situation before the closest would probably have come to this position is after the second world war, when the government were throwing every rule book out of the window, the government was investing in massive infrastructure Projects creating unprecedented numbers of new jobs, entire industries coming out of long-term hiatus and lots of new companies starting up in exciting brand new industries. Money was being printed very very fast, and interest rates were at record lows. Does that sound familiar to you? Well? In 1949? Harry truman pushed down with uh some parts of his fair deal that he could pass through a republican-dominated congress and over the next 20 years, the stock market went up by 415 percent with the first 10 years growing at an average of 13 per year.

We're certainly in uncharted waters with our economy in 2021, but are we headed for a crash? Well, if we are it most certainly will look very, very different to maybe what some people expect. I hope you guys found this useful if you have don't forget to smash the like button for the youtube algorithm. Thank you so much for watching. I really appreciate it.

As always i'll see you guys later, you.

By Stock Chat

where the coffee is hot and so is the chat

33 thoughts on “The 2021 stock market crash will be very different”
  1. Avataaar/Circle Created with python_avatars m. hassan says:

    Would you recommend holding on to stock right now or sell them to prepare for the crash ?

  2. Avataaar/Circle Created with python_avatars Alan Levitt says:

    What utter bullshit. The output capacity has reduced, only the money supply has gone up.

    It's not manifesting itself as some new age super growth cycle, we're in the brink of dealing with the consequences of a super debt cycle.

    We'll see a crash when the Fed Funds rate and upcoming fiscal cliff happens. It might take an entire year or two after starting it before the market implodes.

    Money printing is not a solution to economic woes, it is simply a dilution of existing resources to steal from future resources.

  3. Avataaar/Circle Created with python_avatars Dave Cattell says:

    AMC entertainment holdings stock going to the moon. Mother of all squeeze’s incoming 💎🙌🚀 still time to get in.

  4. Avataaar/Circle Created with python_avatars Yash Tendulkar says:

    Yes most of the companies are overpriced but there are some like jp morgan, Facebook and Berkshire Hathaway which are not overpriced currently. What happens to them if this so called great market crash takes place ?

  5. Avataaar/Circle Created with python_avatars Tom says:

    Or these people are greedy and keep trying to promote fear in people to sell everything to cause a big crash.
    And why? Because they probably have sold most of all there stocks and want a discount for the rebound lol

  6. Avataaar/Circle Created with python_avatars Film Probe says:

    Please explain y the markets in japan crashed in 1980.
    The money literally didnt move to any asset class after 1980s nikkei crash.

  7. Avataaar/Circle Created with python_avatars Ken Beaumont says:

    The reason the stock market went up after WWII was all the European and British manufacturing capabilities were in a shambles from all the bombs dropped. We made a killing supplying them with goods. Our manufacturing was intact and now had women working to increase the capacity of the workforce. It is nothing like right now.

  8. Avataaar/Circle Created with python_avatars eWorkNOW says:

    Can't know how I bumped onto this. Anyway Damn good content 🥇😎. I also have been watching those rather similar from MStarTutorials and kinda wonder how you guys create these clips. MStar Tutorials also had cool information about similiar make money online things on his channel.

  9. Avataaar/Circle Created with python_avatars Andrei Kaz says:

    Money does not come out of the stock market 1:1. Generally, it comes out a whole lot worse. Remember, money is related to the supply of that currency, which while often manipulated by the state, is linked to the GDP. Without a robust GDP, money is only going down in actual value. Facebook, Tesla, even Amazon, generally produce nothing, so they don't contribute to GDP. They are a result of narcissism and futurism, which are the essence of non-productive speculation. They rely on immaterial production of increasing "self worth", i.e. validation via social approval. How long can something which produces nothing be invested in with money which, by definition, must be backed by production of exchangeable goods? .

    Rome, towards the end, was all non-productive citizens relying on the armies of the empire providing them with products. Over a third of rome was slaves. As the increase of non-productive citizens in a country rises, and a portion fall to essentially slave labour, the power will shift to those with resources and production.

    However, it is also evident that market manipulation is at an all time high. Never have so many invested in essentially worthless companies for so long. So, it is apparent that the "cult" of narcissism lead by such as Musk, Bezos, and Zuckerberg, will defy what we may expect from 'pure' market forces. No doubt, they all have shell companies holding short positions against the market they have over-inflated by their presence in it. Assuming they haven't drunk their own kool-aid.

  10. Avataaar/Circle Created with python_avatars Paul K says:

    What if bond market in the past decades became complacent and prices in expectations of what Fed will do instead of economic reality? Fed had already proven again and again that they will buy as many bonds and treasuries as necessary to keep those interest rates low.

  11. Avataaar/Circle Created with python_avatars pagenotfound says:

    Interesting content- great delivery.

    When you have a big casino and pay others with your chips for real assets… Bretton Woods was the biggest scam ever, but even though some of the chip owners have already figured out what had been done to them, they will still need to figure out some other means of exchange. So it should be the stocks, however, if the casino keeps insisting- the dollar will go down altogether without affecting the nominal US stock values in relation to the US dollar. Just like it is showing through the data in the video. Once FED stops feeding inefficient companies cheap credit via QE, it will reach the stock market sooner than later.

  12. Avataaar/Circle Created with python_avatars Nelson Amaya says:

    very interesting points. 1) if investors take money out of stocks where does it flow to? 2) old people don't want to die, so they are sticking around much longer, and they keep investing 3) The FED is doing QE which is done during a financial crisis, if the market goes down right now, what will they do? more QE?

    Thanks for the video..

  13. Avataaar/Circle Created with python_avatars Renata says:

    It's too bad that Robert Kawasaki himself predicts a market crash this year. It is not possible to time the market . Even Warren Buffet himself says it is impossible. The market crashes from time to time and yes, we are in all time high and the different indicators like the PE ratio indicate that, but nobody can tell for sure how long the market continue to go up, can be a decate or a day.

  14. Avataaar/Circle Created with python_avatars nemoxx96 xx says:

    The stock market crash will happen next year February. Look at the ten year yield.

  15. Avataaar/Circle Created with python_avatars Dallas Sukerkin says:

    One of the most interesting and thought provoking pieces I've seen on this. Given that I only got into the 'game' in April this year, all the doom-saying about an oncoming market collapse has been very unsettling. So to hear a thoughtful dissection of what actually be going on was actually reassuring.

  16. Avataaar/Circle Created with python_avatars Eric Murphy says:

    Did you give any thoughts to the RRP and the leverage crisis with large institutional investors and the potential for massive defaults, and the protective measures the DTCC and SEC have been putting in place

  17. Avataaar/Circle Created with python_avatars Lisha Raghani says:

    scrolling through the comments, trying to find legitimate arguments and criticisms to the very logical points you've put in the video… but all I see are empty vessels firing blanks lol. does anyone have a genuine reason why what Sasha says could be wrong?

  18. Avataaar/Circle Created with python_avatars Dan says:

    You forget money does not get transferred only it can be destroyed also, the mechanism for destroying money is default or paying off a debt.

  19. Avataaar/Circle Created with python_avatars Ben RA says:

    As much as I've been hearing this shit, I don't think it's gonna happen that bad. The federal reserve has learned from the last 2 crashes.. It's gonna be a bad, but not significant. You really don't want that anyway.. Everybody will be out of a job pretty much. It's gonna really suck… So let them play the game of inflating shit and throwing more money.. The people who don't do anything other ones who will suffer.. I'm talking about the ones who just sit on their asses and don't work

  20. Avataaar/Circle Created with python_avatars jt says:

    Do you think the expanding gap between rich and poor is having an influence? Large companies are seemingly getting bigger at an exponential rate and they are not necessarily overpriced.

  21. Avataaar/Circle Created with python_avatars Ciprian Ghiţă says:

    Crash ? Mabe crush ! 🤣 they dump it 1/2% to buy it again, there is no intention to crush it, the market NOW must be 80% – of where it is today, PERIOD ! So If it would be a crush should be 110% drop !

  22. Avataaar/Circle Created with python_avatars Chard Gibson says:

    Hi Sasha, I have done well over the past year(+30%) and have decided to move some of my portfolio into commodities, however, I am not familiar with the financial instruments for the commodities market and I am wondering if you could do a video explaining the various options eg futures, mining stocks, indexes, commodity funds etc – Chard

  23. Avataaar/Circle Created with python_avatars Atlantis says:

    Some companys are over valued but there are a lot more companys that are way under valued and are just being ignored , in fact there are so
    many small cap stocks with good earnings great management and huge drowth potential that are just being hammered for no reason and if you
    want to take inflation into account it makes these stocks even more under valued , I am sick of people trying to predict the next market crash , It's
    as if they want the market to crash , they have predicted for years now that gold would go to 10.000 an ounce , silver would go to 1.000 an ounce
    well it hasn't done squat .

  24. Avataaar/Circle Created with python_avatars Will says:

    Hogwash, stop lying to yourself. Intrinsic value is intrinsic value. The market isn’t high because people have longer life expectancy. Piss off!

  25. Avataaar/Circle Created with python_avatars Darwin Mabazza says:

    It's going to crazy. He is laying. Good luck. Fcking layer. Give use more credit cards.

  26. Avataaar/Circle Created with python_avatars Jasper Jude says:

    The Rich are rich not because they look rich, but rather becAuse they possess the skills and strategies of the rich.The rich invest their money first into asset first before purchasing liabilities.the rich build multiple incOme streams to diversify thier income..

  27. Avataaar/Circle Created with python_avatars Sumit Paul says:

    RBI has also warns bubble in stock market……Soon stock market will crash in India.There is artificial hike of share price of small cap companies in India too.

  28. Avataaar/Circle Created with python_avatars Tryumph Kicks says:

    You gotta love how people switch so quick when they see red in their portfolio. Initially it was “diamond hands” and the minute they see red its sell sell. I know that even if my portfolio takes a 70 percent hit that Im not selling my high conviction plays. Ive been down 20K on a position and then in a month up 10K. If I was a pussy paper hand then Id be losing thousands left and right. Just hold because if all these scary ass ppl are wrong youre going to be even more upset when you see the market zoom.

  29. Avataaar/Circle Created with python_avatars Nuno Da Silva says:

    If this time is different go agead and throw all tiur savings on top…sit back and enjoy your ride

  30. Avataaar/Circle Created with python_avatars Alastair Munro says:

    The market in the UK at the moment is a strange situation. In theory we should be coming out of a pandemic and thus companies recovering and booming. However there seems to be alot of uncertainty and confidence is not there. Almost like we are in a no mans land between broke and boom. Thus it feels very strange to me and am not sure what to do tbh.

  31. Avataaar/Circle Created with python_avatars David Lim says:

    Crash very likely to be a straight line down to bottom that caught everyone off the guard.

  32. Avataaar/Circle Created with python_avatars radar0412 says:

    Remember there's a lot more retail investors than there ever has been before. A lot of retail investors will take the path of least resistance and move their gains or losses into a cash position.

  33. Avataaar/Circle Created with python_avatars Sasha Yanshin says:

    Make sure you watch all the way through – you might be surprised by the conclusion…

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