This is REALLY BAD for Stocks & Housing | The True Great Reset

the stock market has felt like it's been

in utter Free Fall since July 19th and

the question now is why is this

happening when will it end and what does

it mean not just for the stock market

but also the real estate market well in

this video I have found one potential

reason that is causing the movements

we're seeing in markets

that's going to contribute to what to

expect going forward for stocks and real

estate quick note we're thinking about

bringing back the seminars we did back

in 2019 where we teach you how to invest

in real estate in person how to get

started from xero an actual Financial

advice click the link down below let me

know which city you'd be interested in

it would help us out a lot all right

with that said take a look at this Wall

Street Journal front page today where

are investors finding returns in a world

of yield what's most important out of

this article is the flow of money and

this is going to help us understand

what's going on in treasury stocks and

real estate when we look at the exact

flows we can see that 11.6 billion

dollars have been pulled out of stock

funds like ETFs and mutual funds over

the past five weeks basically since July

19th and a little bit before that while

at the same time putting nearly nine

times as much money into money market

funds that's

91.1 billion dollars you could see that

exemplified here via the chart basically

starting July 19th you see this

explosion of 30 billion dollars going

into money markets stable ish the next

week seven to eight Bill followed by

almost 20 followed by almost 40 billion

dollars flying into money market funds

that's where the money is going right

now now why is this interesting well

it's interesting because money market

funds today are offering in some cases

more yield than treasury bonds I just

got a phone call from JP Morgan that

they're offering me a money market fund

for house hack at four and a half

percent

or they have a six-month CD at five and

I think it was five point one five

percent whatever point is what's the

point of playing the treasury market if

you could have 100 liquidity with zero

Market risk in a money market fund

consider this for a moment because it's

important to know the difference here

because once we clarify the difference

then we're really going to understand

what is this going to mean for stocks

and real estate going forward it's

actually pretty remarkable so consider

this we'll jump over here and we want to

evaluate if you have the choice let's

say you have cash and you decide you

know what stocks are going up what are

you going to do with your cash you buy

stocks great but you tell yourself which

I suspect a lot of people are doing

exactly this and based on flows this is

what we're seeing you say as soon as

stocks start falling I'll dump those and

go back into a money market fund stocks

are going down by yield basically okay

fine that sounds absolutely reasonable

this sounds like something a normal

person should be considering so what

choices do I have for yield well I have

a money market and then I have a second

choice of yield and the second choice of

yield would be treasuries obviously you

could do corporate bonds and some other

things as well but we're just going to

ignore that for a moment so what are the

pros and cons of these well the pro on

the money market no Market risk in

addition

liquidity it is 100

liquid you could go in there trade it

out in a day stocks start going up you

can move it bonds fall you don't have a

market risk because it doesn't matter

you're in a money market what do you

have with treasuries Market risk this is

where basically stocks could fall and

treasury bonds could fall ruining your

portfolio right so I've been thinking

about about it if you're like oh I have

a diversified portfolio and I'm in

treasuries and I'm in stocks but then

all of a sudden treasury yields are

going up bonds are falling and stocks

are falling all of your portfolio is

just falling whereas with the money

market you have no Market risk in

addition to that you have limit or I

should and I shouldn't call it limited I

should call it less liquidity because

obviously if you're in a six month or a

one year or a two year you have less

liquidity because of the market risk now

that might be double counting here but

most people feel like they're less

liquid because they're like I'll just

wait for it to mature so I get rid of

the market risk right so in order in

order to have no Market risk you must

hold to term maturity that creates time

risk right if stocks are starting to go

up and you want to jump into the stocks

but you can because you want to hold to

maturity because you don't want to take

losses on the treasuries you're kind of

like all right well crap I don't want

treasuries now this made a lot of sense

last last year last year this was great

why because money markets were low they

were offering you know two percent or

something like that and you could get

double that in the treasuries today

guess what you're getting on money

markets well I already mentioned it to

you 4.5 to 5.15 well why would you

bother going into you know this is

versus a treasury right here uh why

would you bother going into a two-year

at say five percent or a ten year at 4.3

percent or heck even a six month we'll

pull up what a six month is doing right

now but why why bother if you could just

be in a money market and basically get

the same thing six month right now a

little bit higher okay

to be fair 5.49 a little bit of a

premium but if you could get a 5.15 on a

money market why bother now this has

important implications for the market

very important implications uh first

though it's worth noting like where can

you get some of these money markets

quite frankly a lot of banks are

offering them and I'm not affiliated

with any of these right here sofa is

offering four and a half percent 4.7

sit Bank 4.05 uh you've got Basque Banks

sitting at five percent uh Laurel Road

five percent you're probably going to

start seeing some of these smaller

credit unions start offering more of

these uh these yields now usually to get

a higher yield on a money market you do

have to end up putting in a certain

amount of money so it makes sense but

still why why is this happening well

again Market risk timing risk you could

instantly hop back on over to your

stocks if you wanted to how do we know

that this is potentially happening and

where are the money markets getting

yield from because if there's no Market

risk then they're not getting them from

treasuries right correct they're not

getting money uh these yields from

treasuries they're actually getting them

directly from the Federal Reserve you

see as the fomc target rate this is the

lower Bound by the way don't worry if

you don't know what that means basically

the fomc rate the feds rate is like five

and a quarter percent right now well

that's basically in the middle of a

two-year bond yield and a six-month bond

yield

so you could you have a choice can you

get the FED funds right

or the treasury well why why would you

want the FED funds rate well because it

has instant liquidity it's an overnight

lending tool for banks so you have

liquidity and guess what money market

funds use

the FED reverse repo facility which pays

out roughly the same as the FED funds

rate currently that can change the FED

can manipulate that but you don't have

to worry about that right now they're

the same point is if you could get and

this is what I want you to think of if

you can get 5.25 or even five percent on

a money market and that money is being

deposited into the fed's repo facility

again you don't have to know about how

the repurchase facility Works you're

getting liquidity without Market risk

why would you bother with treasuries now

how do we know that's happening well

there are three ways we know this is

potentially happening or should I say

likely happening number one is the Wall

Street Journal article I talked about

but that's a duh okay that's not so

useful another way that we know this is

happening is by actually looking at what

yields are doing 30-year mortgage yields

are going up what are ten and two-year

treasury Bonds doing as well they're

also Rising the 10-year treasury yield

is at the highest level that it has been

this entire tightening cycle and people

are like how does this make sense why is

the 10-year treasure yield so high the

reason it's so high here's the last five

years by the way the reason it's so high

creating its double Peak is because why

would you buy the 10-year treasury if

you have Market risk associated with it

you're better off sitting in a money

market so when stocks rally again you

could move over if you want you get a

deal in real estate you could move over

if you want

so why take the risk it doesn't really

make sense unless you're speculating

that well you know yields are going to

fall and then bonds are going to go up

but then you're making a BET right

making a bet is different from Max

liquidity and no risk like you get in

the money market okay so reason one

Wall Street Journal piece on flows

reason number two we know this is

happening treasure yields okay there's

actually a third reason remember how I

said money markets put their money into

the reverse repo facility the reverse

repo facility has been getting drawn

down because of quantitative tightening

now if money is starting to flow back

into the repo facility we would expect

to see some kind of slowdown in how

quickly it's being drawn down so if the

reverse Reaper facility is falling and

then all of a sudden people are using

money markets again you would either

expect it to flatten or maybe start

going up but there's a lot of

quantitative tightening going on so

probably some kind of flattening maybe

just even a slower fall right well let's

see what's actually happening holy crap

it's not only flattened it's slightly

started trending up again this is

exactly what's going on but wait a

minute let's corroborate it one more way

the stock market started falling July

19th right where's the inflection point

right here

well let's see

boom what's right there July 19th July

19th is when the fall of repos the repo

balances paused and all of a sudden repo

balances actually slowly started going

up despite the fact that the Federal

Reserve is conducting 80 billion dollars

a month of quantitative tightening which

makes sense because as we just saw what

were the flows into money markets 91

billion dollars more money went into the

money market repo facility

and blurring those together I realized

that but the point is more money went in

than the FED tightened

this is insane where did some of that

money come from well some of it came

straight up from stocks people just

selling stocks

but it is also coming from people

selling treasury bonds and moving them

to money markets well if you dump

treasury bonds that means you're selling

them which means the price goes down as

price goes down yield goes up so it

totally makes sense stocks down treasure

yields up because people are ripping

that money out throwing it into money

markets instant liquidity risk free it's

actually exactly what househack is now

doing we're moving our money to money

market funds and I'm like of course

that's what the broader Market is doing

as well so what does this mean like as

an investor what does this mean to us

for stocks and real estate going forward

that's the big question okay but we can

analyze this first we have to think

about the fact that by the end of 2024

we expect the Federal Reserve to cut

rates by one to one and a half percent

when that will happen nobody freaking

knows and quite frankly we don't even

know that it will it could happen in

March it could happen in May it could

happen in November it could happen over

that whole time probably start before

the election right it's all going to

depend on unemployment

but let's say rates go down one and a

half percent so bringing us closer to

about four percent well what's Real

Estate going to look like well what we

could honestly do is just go back when

the lower bound was about 3.75 percent

over here and what were mortgage rates

then oh wow they were just as high as

they are now this is not great if you're

thinking about getting a lower rate on a

mortgage anytime soon it's honestly also

probably not great if you're expecting

stocks like n phase or Tesla to do

fantastic in the near term because

really it might be a while before those

rates come down that is a problem now it

is a big opportunity if you can get to

the other side but you have to make it

to that other side right and the market

will start pricing in those rate Cuts in

the future but we don't know how close

that future is yet so consider this from

a real estate point of view we're

probably going to deal with mortgage

rates that are similar to levels where

they are now for another year and

mortgage rates are seven and a half to

eight percent right now so sitting here

for another year is really going to

start putting pressure on the amount of

buyers that we have the people who will

buy are going to be cash buyers and

that's virtually it but even cash buyers

aren't as interested right now in doing

renovations I'm finding less competition

and I'm getting better deals as a cash

buyer in real estate right now because

there's less competition but you have to

be patient because you could also start

seeing prices slowly start trending down

I don't expect the 2008 here but you get

more and more aggressive as the market

gets more aggressive and you actually

hedge by just getting better and better

deals instead of an 80 000 wedge you're

at a hundred thousand dollar wedge

instead of 100K wedge you're at 120k

wedge or 140k wedge that way no matter

what the market does you're insulated by

the way how to do that is exactly what I

was thinking about teaching and

in-person seminars if you want just

click that link down below and let me

know where you would like to see those

so that's really State when we can

obviously speculate on what will happen

to real estate prices we know they came

down 10 to 20 percent we know that they

since recovered about half of that we

know that rents came down after that we

know that they've stopped going down so

we've seen some stability but is it

possible that that stability was

supported by people who are willing to

pay higher rates over the last year and

now those people are gone your new

entrant of buyers are like yeah no

thanks

absolutely possible so you have to be

careful for both directions you have to

be prepared for hey we don't want to

miss up a good deal but we have to make

sure we protect ourselves with a solid

wedge going into it and the more the

market moves the bigger the wedge goes

in case you don't know what the wedge is

the wedge is basically buying a 500 000

property in a 700 000 neighborhood that

needs say fifty thousand dollars worth

of work that's basically exactly the

first deal that house hack bought in a

fantastic neighborhood I mean Primo

neighborhood I would live there in a

heartbeat super close to skiing too by

the way anyway it'll be a long-term

rental but I mean it's only going to

take about 50k to fix it up so we have

about 150k wedge on the first deal that

house hack is doing house hack is

getting ready to raise money by the way

we'll probably start raising money uh

we're aiming for September 1st but you

know between you know me it's probably

going to be like more like mid-sept

we'll say TBD uh in maybe for course

members only though so stay tuned we

haven't quite figured out that yet uh

anyway all right so so uh that's house

hack which of course you could join the

course is relatively inexpensively link

down below uh okay so now what about

stocks okay

stocks

they will probably price in rates coming

down sooner than real estate will that

actually means you probably have longer

a longer period of buy time for Real

Estate like you don't have to rush and

that's fantastic okay but with stocks at

some point as rates start trending down

again we end up seeing movement back

into stocks one reason you could see a

movement into stocks is because as the

trend of rates going down starts people

get euphoric again they go back into

stocks and then the rate of return looks

higher on stocks than money markets you

don't want to miss out on a 30 stock

market gain because you're farming five

percent in money markets that's the

point of a money market though is you

could violently shift over to stocks you

could very quickly shift over now the

other thing to keep in mind is when and

if the event occurs that markets start

pricing in we've reached Peak rates and

prices or should I say yields start

coming down like the FED yield starts

coming down on repos

people are going to be tempted to start

buying treasuries again because think

about it if your money market yield is

falling and every six weeks it's going

down half a percent because the FED is

cutting by half a percent of the time

because unemployment is rising will your

money market yield to four and a half

percent is going to turn into two

percent really really quickly what's

that going to motivate you to do well

you either buy stocks or if you want the

yield with no risk and you're willing to

wait to maturity you buy treasuries

so treasuries get bought

a lot because then you could lock in

your 10 year your two year your five

year whatever 20-year yield as soon as

the FED starts really committing to the

idea of cutting

so putting all of that information

together let's write down a bottom line

to all of this okay you ready for this

all right so first the longer it takes

the FED to cut the more you should hedge

with a wedge your real estate all right

that's lesson number one the longer it

takes the more you wedge okay someone

explain the wedge in addition

be prepared for a violent movement in

treasury uh bonds up and stocks up

as money markets

uh hit fomo and uh and see their death

written on the wall okay their death is

falling this this starts this starts in

Earnest when the FED starts cutting not

when they pause and that's actually

something interesting not pause pause

doesn't matter because you could still

get your money market at such a high

yield right like who cares if the FED

pauses I'm still getting my 5.25 or

whatever on my money markets so who

cares if they pause

so that doesn't matter so pause doesn't

matter what you need is cut once the FED

starts cutting which is probably when

one unemployment Rises

so maybe mid 24 or by election that's

when you flip

now usually the stock market tries to

price this in six to nine ish months

early so say uh September 24 fed

uh aggressively cuts

you probably have to buckle up between

now and January uh for for that that

real Euphoria right for real Euphoria to

come back now that doesn't mean uh

stocks are going to keep falling but it

is a risk uh so like you should know

though the reason stocks are compressing

like this is because of people's ability

to just sit in money markets and I think

this is a really big deal so I think now

we've addressed real estate you have to

hedge more the longer this takes uh

that's very important and even when even

in September 2024 uh mortgage rates will

likely still be high so you have to be

really patient here I think patience is

key that's very very critical and that's

what we're going to do with house hack

very very patient very important okay uh

but we'll buy a good deals obviously as

they come up be prepared for violent

market movement in treasury bonds uh

that's that's potentially the this is

when you go TMF this is when you buy TMF

when this violence occurs uh that's you

know your your long treasuries and this

is expecting yields the fall prices of

bonds to go up in the stock market you

probably have to be patient uh for for

expecting real Euphoria yet I actually

don't think I don't believe what we had

over the last say six weeks uh or before

the last six weeks so had before the

last six weeks was true Euphoria I think

it was sheepism sheep ISM basically

sheepism is where your you see stocks

going up you're like uh you know they're

making more yields than I am let me go

flip and buy stocks and then people flip

out and go back to their money markets

uh that's really just following the

trend which is fine like there's nothing

wrong with that you avoid Pain by doing

that to some extent you do potentially

miss out on Lower entry prices but you

know six to one half dozen of the other

it doesn't matter anywho these are some

of my latest reads on what's going on on

the market I think this is very useful

if you found this helpful share the

video help the channel out subscribe let

me know which city you'd consider going

to a seminar and linked down below thank

you so much and we'll see you soon