Welcome back to the channel everyone today i want to talk about how the market crash is coming sooner than you might think. Today i want to talk about what causes an amplifier market crash and also talk about how the current market crash is already upon us. So stay tuned and let's make some money and now we'll dive straight in with the key information. So this tweet is an extract directly from the federal reserve report on the 1987 market crash.

This report talks about a number of factors that contributed to the severity of the market crash aka. What caused the crash and also what amplified the impacts? The report is broken down into a few key sections. Number one margin calls number two program trading, which is the equivalent of credit default swaps and put options number three, the fed's response and number four, the trading and lending of securities. So it says market calls as they were implemented during this period, was one factor that reduced available market liquidity, especially in the futures markets, and likely contributed to the severity of the decline.

Now. Obviously, margin calls is something i've spoken about on the channel quite heavily over the last year, we know of a number of large short hedge funds that are very over leveraged on risky long tech positions that have lost substantial available liquidity and are likely to be margin Called in the coming days, weeks and months, these hedge funds, like melvin capital, have been long on stocks like snapchat, affirm, facebook, snow and many others which are down significantly from their all-time highs, some over 70, 80 or 90 percent from their all-time highs. Now, obviously, when these hedge funds end up being margin called, they will be forced to sell off their long positions crashing the wider market, but also, interestingly enough forced to cover their short positions, such as their amc and gamestop shorts. Right now there could be a number of large hedge funds or short hedge funds that are currently in need of additional margin to meet their margin requirements and therefore have been pumping the cryptocurrency markets over the last week, or so.

Over. The last few weeks, bitcoin has risen from its recent lows of around 34 000 per coin to well over forty seven thousand dollars per coin this morning now we know that ken griffin and citadel have recently entered the cryptocurrency markets, as have a number of other large Hedge funds and short hedge funds as well, this pumping and the crypto market could be to create additional liquidity to meet their margin requirements to avoid a margin. Call today, now number two is program trading. It says there has been some debate about the extent to which program trading, especially portfolio insurance, aka credit default, swap insurance contributed to the crash.

It says portfolio insurance was designed to protect individual investors from losses. Obviously, credit default swaps pay out when the underlying bond or security ends up going bankrupt or decline substantially, and it says, but when used by many investors simultaneously, it may have helped make the falling prices a systemic event, with a feedback loop. Obviously, as the prices of stocks start to crash, these insurers would have had to pay out massive sums on the credit default swaps and the portfolio insurance. Obviously, to do that, these insurers would have had to sell off a number of their assets aka their stock positions, which would have obviously caused stocks to crash more causing them to pay out more on their portfolio insurance.

You may say tom, surely portfolio insurers don't actually hold any stocks, do they well? The report says that roughly 40 of the non-market maker sales in the futures market was conducted by portfolio insurers and therefore, interestingly enough, not only do these insurers hold a massive amount of stocks, bonds and futures, but they also actively trade them as well. It says the downward pressure exerted on futures markets from sales by portfolio insurers may have contributed to the discount that formed in the futures market relative to the cash market. Now you may say again: okay tom credit default swaps and portfolio insurance were a big deal back in 1987 and 2008, but surely those institutions don't sell portfolio insurance or credit default swaps anymore, due to all the risk? Well, interestingly enough, as of the 29th of january 2022, it says record cds and etf volumes, suggest nervousness and credit trading volumes across major credit default swap indices and the exchange-traded funds have broken records. In january 2022, a sign of a significant reshuffling of investor exposure to corporate credit about 800 billion dollars in volume has changed hands across the four main us and european cds indices.

This year, in january 2022 alone, a third higher than the previous january record, set in 2020, even higher than the march 2020 pandemic, highs as well, and believe it or not, even higher than the 2008 highs as well, and therefore not only was portfolio insurance. A big deal back in 1987 helping to amplify the crash, but it's also a big deal right now in 2022 and will help amplify this crash guys. Many of you may not have a lot of confidence in the stock market at the moment. There's all this market manipulation and market fraud that seems to be going entirely unpunished, and that's why i personally also invest in cryptocurrency, especially now that bitcoin is starting to break out.

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So you can continue to accumulate more and more there's, also no annual fee and no foreign transaction fee, and the card is currently available in the us. So guys be sure to send it to block file using the link in the description below to get up to 250 dollars in free bitcoin. Now number three on the list is the response from the federal reserve, which is, interestingly enough different this time round to 1987. In all the wrong ways, the report says in an effort to restrain the declines in financial markets and to prevent any spillovers into the real economy.

The federal reserve acted to provide liquidity to the financial system. So then the fed issued a statement suggesting they would be supporting market liquidity, and that statement was referred to by one market participant as the most calming thing. That was said. The fed followed up by cutting federal funds rates down to around seven percent from over seven and a half percent, and also cut other short-term interest rates as well, but obviously, right now in 2022 the fed isn't talking about cutting interest rates.

It's talking about rising them. Six or seven times over the next few years now, obviously, if cutting interest rates was the most calming thing that was said, i can't imagine rising interest rates can be all too good for the market and in terms of securities lending john s, reed, the chairman of City corp have been quoted as saying that his bank's lending to securities firms soared to 1.4 billion dollars on october 20th, from a more normal level of 200 million to 400 million dollars. Now again, we know that securities lending and short selling is at an all-time high right now in 2022, compared to any previous year, and it says, government and in particular, u.s treasury securities are often used as collateral in repurchase agreements and other financial contracts and can also Be pledged to satisfy margin, calls trading and lending of these securities is an important source of market liquidity. After the stock market crash, there was reportedly some reluctance by holders of government securities to lend them as freely as they typically did now.

Interestingly enough, the spread or the yield curve between the five year and the 30-year u.s treasuries has inverted for the first time since 2006.. So a normal yield curve is supposed to look like this with the further maturity dates generating a larger yield. Investopedia says the above chart shows a normal yield curve exhibiting an upward slope. This means the 30 treasury securities are offering the highest returns, while one month maturity, treasury securities are offering the lowest returns.

This scenario is considered normal because investors are compensated for holding longer term securities which possess greater investment risk now, obviously, an inverted yield term is where the shortest maturities paid the highest yield and carry the largest risk. This has a yield curve inverts when long-term interest rates drop below the short-term interest rates, because investors expect short-term rates to decline in the future, typically as a result of impaired economic performance, such an inversion has served as a relatively reliable recession indicator in the modern era And that's exactly what's just happened over the weekend, we can now see the five-year treasuries are paying a greater yield rate than both the 10-year and also the 30-year treasuries as well. This is the gap between five and 30-year yields on u.s. Government bonds fell into negative territory on monday for the first time since early 2006 as a sell-off in the market resumed, while parts of the yield curve, namely five to ten and three to ten years, had already inverted.

Last week, the slide of the gap between five and thirty immaturities of the biggest bond market in the world into negative territory raised concerns the u.s central bank's hawkish approach to stamping inflation, might hurt growth and therefore, bonds are currently indicating that a massive market recession is Coming very very shortly, and this coming recession is going to be amplified by margin, calls program, lending or securities insurance, and also the fed response and securities lending, and also the geopolitical climate of what's happening between ukraine and russia is only going to amplify. The current market crash, even further david morpar, said what's currently going on in ukraine, comes at a bad time for the world, because inflation was already rising. We know that inflation is already at a 40 year high, and this is only going to be amplified over the next few months. This is already causing an increase in food prices and also energy prices, and this is only going to add to the increase, increasing inflation and also compound the current economic crisis.

Guys be sure to. Let me know down in the comments below what you think about a market crash coming sooner than you even thought, and as always guys, if you enjoyed this video, be sure to check out some of my others. Alternatively, subscribe to the channel and ding that notification bell, because that way, you'll be alerted when i upload a new video cheers.