Hi guys it's mark, so the stock market is making people lots of money, but our current economy paints a very different picture and some experts warn us we're on the verge of a crash. This situation seems completely absurd. It's safe to say: the stock market is unpredictable during the best of times, but things have really heated up recently with huge profits, as well as huge losses becoming more and more common. It can be scary, especially for the new investors, when they witness one of their stocks, crashed by 50 or even on the flip side, go all the way to the moon as they may fumble the bag and miss their opportunity to sell that's.

Why today, i thought it was important to break down the reasons behind the stock market somewhat absurd. Behavior, being aware of the information we're going to be discussing today, will put you in a much better position to make smart investments and hopefully a lot more money. If that sounds good to you, make sure to smash that thumbs up button for the ltube, euger rhythm and we'll get started straight away and to all those people to ask if i say that on purpose, of course, i do first, we need to address momentum. Investing imagine putting a hundred dollars into a stock and watching it multiply by thousands in a matter of a few days.

Well, that's what momentum investing is all about. The rise of momentum. Stocks has most certainly made a lot of people rich over the past year or so, but it's also broken the bank for many others. This usually happens when a bunch of retail investors get behind a stock and collectively agree to buy and hold.

I think of a bit like when you start to push a small snowball down a hill. This is most effective when the hedge funds are betting against the stock, as it forces them to cover their losses, which in turn causes the stock to rise in price. This is like when the snowball picks up all the snow. That's been laid in its path and starts growing at an astonishing rate.

This is all due to the power of momentum, and in order for a situation like this to get started, it does require that initial push from investors and the right market conditions. After all, you can't make a snowball if there's no snow momentum. Investing is becoming more popular in part because of how easy it is to invest these days. When i started investing, i had to call up my stock broker and ask him to place a trade.

It was so inconvenient he never even used to get my name right now, it's as simple as logging onto an app like public.com in the usa, and also getting a free stock worth up to a thousand dollars to help you get started. The free trade app also makes things simple in the uk and gives you a free stock worth all the way up to 200 pounds i'll leave those links down below if you're interested. I honestly wish i had access to these investing platforms when i was younger, as they give the normal person the power to grow their money over time. Previously, this luxury was only awarded to the rich, so the ability to invest with these has definitely contributed to the absurdness of the stock market.

However, i don't think this is the only cause. I've definitely noticed a shift in how people approach investing after experiencing the cryptocurrency market, people have been so exposed to huge returns that making an average of eight to ten percent yearly from the stock market is almost laughable. However, most crypto coins are driven by hype and not real world value like stocks and now people are even starting to invest in this way. When it comes to the stock market.

I wish i had been invested in shiburinu before the one-month pump of 950. I guess i'm more of a cat person a wizard. A great example of this is the company digital world acquisition. At one point, it saw its stock skyrocket.

A thousand percent due to investors excitement over its links with former president donald trump, but this was driven by momentum and was highly unstable, resulting in a stock crashing in value. Personally, i feel like too many people piled into this stock with very little understanding as to what they were investing in just because it was going to the moon. It's very important, you're able to tell the difference between a serious investment and a momentum stock. But if you make a mistake, it can lead to huge losses.

I don't have anything against momentum investing, however, personally, if i'm having a dabble in anything like this, i only use the money i'm prepared to lose. I'm primarily focused on long-term, investing and wealth building, and that's why i'm a self-proclaimed index fund champion back in my day. I would never have bought a stock without doing my research, but now it definitely seems to be the norm by the way, if you're interested in growing your wealth then make sure to subscribe to the channel, as, judging by my analytics a lot of you who watch This channel aren't actually subscribed yet and it's completely free. Now we have to talk about the tech boom.

Big tech giants are dominating our world, which could be masking the true state of the stock market. Maybe it's more fragile than it looks on the surface. Let's be honest, it's clear that some sectors have done a lot better than others and if you're, a tech investor, then you're most likely doing very well fang stocks, which is an acronym for facebook, amazon, netflix and google have a clear advantage over traditional businesses. They have an extremely expendable workforce, which means they can keep their wages really low and they control one of the most valuable assets in the world, which is data.

My fellow geeks have well and truly taken over the planet. Go get them boys, so tech stocks have had a great run over 2020 and 2021. However, the stocks that investors thought were going to bounce back just didn't meet expectations. I'm talking about the stocks that were hit hard during the pandemic, as even now lots of them haven't recovered.

I'm talking about things like cruise ships and airlines. They just haven't bounced back in reality, you would probably have just been better off buying and holding a simple s. P 500 index fund. The s p 500 keeps hitting all-time highs, but this is mostly due to the high percentage of tech stocks, boosting it up.

This. Just goes to show that, even if the stock market looks like it's doing absurdly well, it can be very misleading. Certain sectors could be dominating. The number of public companies in the usa is also nearly half since 1996, when there were 8090 with there just being 4 397 public companies in 2018.

This means the stock market is becoming even more distance from the overall economy, as it doesn't account for thousands of smaller private businesses that have been hit hard over the past couple of years. I mean the local bakery i used to buy my donuts from has gone out of business, how the police gon na cope. The danger here is that you might be tempted to pile all your money into tech stocks due to the recent performance. However, if this sector gets hit hard, then so will your portfolio just imagine a huge security weakness was exploited in fang stocks by a group of hackers and their companies were crippled.

It's highly unlikely, but it's certainly something to consider. When investing. I have always maintained a diversified portfolio of stocks over a variety of sectors. Due to this concern now it's time to discuss something.

Everyone likes free money. The fed are doing everything in their power to avoid another market collapse like in 2008.. Their strategies seem to have been effective in the short term, but who knows if they're just kicking problems further into the future? This is kind of like when you drop something on the kitchen floor and instead of picking it up, you just sort of kick it under the fridge come on. I know we've all done that before.

As we're all aware. During the pandemic, governments all over the world were giving out free money in the form of stimulus checks and furlough payments. A recent study showed that 46 percent of people that received this stimulus invested at least some of it and 70 percent of the 46 invested at least half of it wow. That was quite a mouthful, but the figures are amazing, and this is all extra money being put into the markets that didn't previously exist.

These new investors are more likely to turn to momentum stocks as they want to make the most from their money. This led to 24 percent of investors admitting they didn't understand what happened with the gamestop situation, even though they took part in it. This new wave of inexperienced investors really does seem to have contributed to this absurd market. It's almost like once something starts going up.

Everyone jumps on it and it just drives the price to absurd levels. The fourth round of stimulus chests could be right round the corner and i'm extremely curious to see what happens next. On top of this interest rates are still very low. This means getting money at cheap prices easier than ever.

Of course, if you want a loan, you'll have to be accepted and deal with all the usual complications. But it's extremely appealing to borrow money at a low interest rate and invest it at an average return of 8 to ten percent and get free money and that eight to ten percent is just an average. As we mentioned earlier, some stocks are achieving far in excess of these traditionally expected returns with all this said, it's important to remember that we're living in very uncertain times and a stimulus starts to dry out. This could have an effect on the stock market.

The debt ceiling is the maximum amount of money the usa are allowed to borrow and, as you can see by this graph, the usa are rapidly approaching this ceiling, which is worrying news and has definitely left a lot of people feeling spooked taking out loans to invest. Is also a risky move, as when those interest rates increase, they can eat into your profits. Just imagine you're, making three percent on a stock and the interest rates rise to four percent you'd actually be losing more than you were making. So the big takeaway here is to avoid over leveraging yourself with too many loans and to appreciate that we're in unique situation at the moment which won't last forever.

This brings us perfectly on to the stock market bubble. Imagine waking up tomorrow and seeing your investments have halved in value or even completely gone to zero. Well, that's the harsh reality of being in a bubble when it bursts. The thinking behind this is that the market can only survive on hope and momentum for so long.

Eventually, the stock price has to fall back to the true value of the company. I was only slightly affected by the dot-com bubble, as i was able to recognize the signs and pull most of my money out before everything came crashing down even billionaire mark cuban sees the similarities between the recent run-up in stocks and surge in day trading and the Months before the dot-com crash, this caused him to sell his company broadcast.com to yahoo for 5.7 billion dollars just before the bubble burst. I think this is one of the best business moves ever as the site would have probably died along with businesses like pets.com. The truth is some experts believe stocks are in for a decade plus of abysmal returns, whereas others like kathy wood, think the polar opposite of this and believe that, due to the fear about being in a bubble, we're not actually in one the reason for the inflated Prices could be the increased demand caused by the pandemic.

What i mean by this is during the pandemic, the demand for certain products was massively inflated. I mean who thought we'd ever run out of toilet paper. The same goes for the investing at robin hood during the pandemic, demand was increased for investing as we have discussed. People wanted to put their stimulus money to work.

This created hyper demand, driving sign ups through the roof fast forward to late 2021, and the earnings report was extremely weak and because of this, the stock is suffering. That's why it's so important not to follow the herb mentality and pile into a stock, while ignoring other factors that could be contributing to the inflated stock price. The bottom line here is that some of us, like cuban, made it out of the last bubble like bandits, while 99.9 of others didn't so, i think it's safe to say the economy and the stock market aren't the same thing. One is driven by logic, while the other seems to be currently fueled by speculation.

It's always important to remember the stock market is a leading indicator and reflects where investors think our economy will be in the future. Anything that affects this hope for the future will have an impact on the stock market. Now, personally, i don't believe we're in a bubble. However, i do think certain stocks are absurdly overvalued.

Just the other day, i made the really hard decision to sell half of my tesla position at 1088., as i just couldn't justify holding all my stocks at that price. I know i always say never to try and time the market, but i'm hoping for the stock to drop in the future, so i can buy back more shares than before, but, as always, i won't be touching the majority of my portfolio as that money is invested Within index funds, i just consistently buy and hold these no matter what the market's doing so, i'm going to leave the next video right up there, but don't click on it just yet make sure to subscribe. If you want to grow your wealth and don't forget to pick up your free stocks and bitcoin with the links below okay i'll see you over there.