Peak Capitulation and Fear | Stock Market Crash.

oh man you're gonna want some anti-venom

for this one now folks I need you to

understand this particular chart right

here this is a very very very important

one okay look Global Equity positioning

in English stock market is at a relative

low going all the way back to

2011. when you consider volatility and

standard deviation measured by a z-score

okay the last like 10 words I said just

ignore them basically things bad okay so

this chart in very very simple terms

tries to look at how much Movement we

get up or down from a baseline so this

isn't relative it doesn't mean that

right now because the line is at the

same place as it was in 2011. prices are

the same it's just a relative stretch

how far down have we gone relative to

sort of a normal trajectory and when you

look at this we've deviated about two

standard deviations which is like a 95

deviation for those Mathies from the

norm level now what's remarkable about

this is if you actually chart it across

other deviations to the upside or the

downside take a look at where we land

right now this summer and where we sit

right now these two points over here are

essentially the lows that we experienced

uh during the Q4 2018 sell-off the covet

pandemic although that one went and

stretched a little bit further you could

see actually that one went almost

halfway to a third standard deviation

which is crazy that'd be like 97 and a

half or more percent but anyway uh then

you've got the summer of 16 pre-election

sell-off over here and then the

bearishness in September of 2011. and so

this really shows you that we are

seriously at a painful level now when

you compare it to sort of The Upside in

terms of when we get two standard

deviations to the up you could see the

more euphoric periods like uh q1 2021

even though we had a November boom over

here we actually didn't deviate that

much in a standard deviation term uh you

know growth in other Cycles over here

like 2017 boom anyway the point of this

is to say that the level of drawdown

that we are seeing in the NASDAQ or the

S P 500 right now is relatively severe

it brings us back to Prior years that uh

you know more also pretty painful and if

you go over here and look at the NASDAQ

on Weeble and you use the monthly chart

okay this is a nominal chart so it's

kind of you know obviously numbers on

the right are going to look a lot more

dramatic than over here you'd have to

change this to exponential to kind of

smooth this out a little bit but the

point of this is to say that if you go

back to the covet crisis uh you really

you're really sitting at the red bars

here and you go back to the Q4 2018 self

you're looking at over here now again

exponentially these are going to look

like a lot bigger of drops but the

reason I'm using this chart is because I

want to show you that this here was four

months of red on average if we sort of

use the uh average candlesticks over

here the average was about two months of

red look at the months of red that we're

experiencing here with the average

candlesticks January all through

essentially now at the exception of

August it shows you just how long this

has been going on this pain the last

time we had that length of pain was

really over here in 2009 where you had

uh you know if you if you include some

of these over here including this one

green shoot here one two three four five

six seven eight nine that's really the

last time you experience this much pain

and then of course if you go all the way

back to the.com era I mean this is when

you experience twice as long a pain as

what we are experiencing now that's

pretty darn devastating but anyway

looking at this particular chart here it

does suggest that on a standard

deviation metric we should be

should be no guarantees pretty close to

the stretchiest point that we could get

in terms of pain to where we should be

rebounding back and the the bottom can't

be far off from here but then again you

know we can't make any guarantees

because if these levels become normal

and this is where this kind of chart

could be misleading right if these

sell-off levels where we are now become

normal then they're no longer a standard

deviation from the norm if the trend

drags down so you could Trend lower it's

just in the recent period of Time how

much pain we've had suggests that we

should be relatively near a bottom but

unless that Trend if that Trend changes

to the dark side

all bets are off and so this is actually

leading now to an increase in the

chances of retail capitulating I thought

this was a really interesting chart

there's a Vander track puts together

this capitulation index and they believe

that retail investors have recently had

a spike in the likelihood of their

willingness to capitulate when this

sell-off started back in January and

December we were really only here maybe

about 43 percent likely to see retail

capitulation but now we're actually

somewhere here closer to about 55

percent likely to see retail

capitulation which isn't like the peak

we saw in June when we last revisit

these numbers but it's rising so the

odds that retail ends up folding are

going up once again and that's creating

some more fear that uh-oh if we see

retail capitulate first of all it's

probably a big buying signal but it also

means that people have finally had it

and they've reached that Peak pain point

and there are a lot of Market

strategists that say the only way we

actually end up getting out of a bad

market is when retail capitulates so

some people are like please retail just

sell already because that's the perfect

time for us to acknowledge okay we've

hit the bottom since retail usually

sells at the bottom uh you know at least

that's what they say about retail okay

so you as much as any individual

investor is retail like you're watching

this I'm watching this we are retail

right an institution would be something

like an exchange traded fund or a hedge

fund right those are institutions anyone

who's an individual is retail even if

you work for an institution if you're

trading personally you want to retail so

it's just worth noting that we're all

part of that retail bucket so uh now

what's also interesting is I don't know

what it is with with retail but they

they have this thing people have this

thing of buying stuff when it skyrockets

and so here for example is purple stock

okay I bought purple at like 18 bucks

which I know sounds crazy but I sold it

at like 24 after it ran to like 30. it

was crazy they their sales were amazing

during the pandemic and like many other

things totally evaporated I'm glad I

sold told everyone I sold uh

unfortunately since then it's gone down

to like two dollars and sixty cents

which is absolutely insane right but

take a look at this it had a 40 update

followed by a half percent update

followed by a four percent update

followed by a negative two and a

negative two percent a yet with this

kind of performance

all of a sudden this stock shows up as

of course

a hot retail stock with not only the

price change the higher you are on this

the higher the price is moved not only

the price going up we just saw that on

the chart but also retail dip buying up

so the more to the right you are the

more retail is buying and so of course

if a stock goes up retail just swarms in

it's pretty remarkable you know there's

even this evil thesis that evil

institutions which is possible

purposefully write narratives on like

Reddit on like low liquidity stocks

potentially like purple trying to get

threads to go viral and they use Bots to

kind of like vote them up and pay for

awards and stuff you ever see on Reddit

how they're all these like Awards and

stuff for posts well there's this thesis

that hedge funds are paying to do that

on purpose to get more attention these

threads then people start piling into a

stock like uh you know retail or sorry

like purple because all of a sudden

institutions have written a piece that

actually sounds logical when in reality

what they're trying to do is get the

stock to go up short it because they

actually don't think it's a good stock

and then and when that momentum goes

away and it falls because it eventually

always does and then they cover their

shorts and profit off of retail by

manipulating uh basically areas like

Reddit with with a lot of money and

awards for posts and stuff like that so

it's kind of interesting but anyway if

you go back over here to this retail

chart you can really see that retail

right now is interested in not only

purple but also Netflix which is

fascinating because they've always been

sort of the canary in the coal mine for

bad earnings

Google's over here Tesla Shopify Redfin

I have no idea why you would be buying

at Redfin right now and face love that

one but it's going to hurt in the

housing market Costco Apple Amazon kind

of interesting you've got some selling

over here actually uh sunron Uber and so

on arrivals over there

um sun power as well so uh anyway okay

so uh then we've got so we've talked

about this these standard deviation

moves we've talked about retail

capitulation what retail's buying

there's another really important thing

that we have to talk about and no it's

not that this 30th which is this Friday

the courses on building your wealth have

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a Google fundamental analysis this

morning we're probably going to go a

little bit deeper into Google once their

next earnings come out or even deeper

but we've already set up the stage for

what to look for and what kind of

weakness we're expecting for Google so

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September 30th so that update's coming

soon where that deadline it should send

so what's the next big problem well the

next big problem here is the change in

forward earnings per share and what's

fascinating here is you can really see

that we are expecting now earnings per

share to finally plummet now the market

has not really been pricing in a plummet

in EPS for uh well uh all pretty much

all of the year it has felt like uh but

then again we did have periods of time

over here where we finally had a little

bit of pricing in but really what this

is telling us is we are now potentially

getting serious about having the second

half of what Michael burry calls the

stock market crash the first phase of

the crash is crushing multiples right

this is where you say instead of paying

10 times per stock I'm only going to pay

five times per times earnings for a

certain stock so for example if a

company is five dollars of earnings 10

times earnings means you pay fifty

dollars a stock if you're only willing

to pay five times earnings you pay

twenty five dollars but if those

earnings now go from five dollars to two

dollars and you're only willing to pay

five times now the Stock's ten dollars

so you kind of get this double earnings

compression and this is why like these

sorts of write Downs that we're

expecting this compression that we're

expecting in forward earnings per share

this is exactly why I want to as much as

possible be investing in what I believe

are going to be more recession-proof

stocks Now recession-proof Stocks are

not immune to to PE multiples coming

down so keep that in mind PE multiples

coming down they're not immune to that

they are going to have multiple

compression but what you don't want is

EPS declines plus multiple compression

because then you really have pain and

again that's where I think companies

like American Express and Tesla which

are much heavier and then uh Amex those

those are going to survive very well on

EPS as long as their margins don't

compress too badly but uh multiples

there's nothing we can do about that

that's just Market wide pain speaking of

Market wide pain you know I have to say

I cannot believe that we saw treasure

yields do what they did today treasure

yields oh my gosh treasure yields on the

10-year folks just cross 3.9 up 20 and a

half basis points today dude what this

is absolutely insane we're gonna start

seeing mortgage rates like it takes a

few days for the mortgage rate chart to

actually show it mortgage rates if I

just Google mortgage rates always put in

uh 740 740 744 there you go so right now

it says the 30-year fix is at seven

percent arm's only six and a half

fifteen's fit six and a half big deal

seven percent for the 30-year fixed this

is going to Skyrocket like I expect that

with the 10-year treasury now at 3.9

this is probably going to go to seven

and a quarter or seven and a half there

is no way you're not going to see a

crushing in the real estate market

that's why I'm creating the company

house hack that's why I'm inviting

accredited investors to join me and get

founder shares in it because we're going

to have the opportunity of a lifetime

here to go shopping for Real Estate this

is insane but in addition to that if you

want to just park cash I mean holy

smokes look at the six month treasury

right now let's get it oh man 3.9

let me see if that's uh that's accurate

here yep it appears to be ah CNBC

doesn't want to load so forget them

anyway it says there we go 3.9 for the

six month that's actually relatively

unchanged today and if you go to the two

year the two-year wow the two-year

jumped

4.31 so this is where you definitely had

some selling today the two-year treasury

is at 4.31 that's insane if you're

willing to lock up cash today for two

years and not be subject to Market risk

you could get a risk-free return of 4.31

that's insane absolutely insane so

anyway all this is more pressure on

pressure on the housing market uh of

course stock valuations uh definitely

hurt on this as well although the market

did not end too terribly today it looks

like the S P 500 ended up falling uh

about one percent well that's pretty

rough but uh the NASDAQ only went down

about point four one percent we still

have not crossed new lows for uh the QQQ

worth noting the QQQ has gotten over

here to a low of 3 or 272.

and we were at 268. so I mean we're

we're basically at all-time lows here uh

for recent history and uh we were at 360

this summer on the S P 500 we're at 364

right now got to 363 uh earlier today so

pretty wild we're we're pretty dang near

there to the bottom but again if uh that

volatility uh or not volatility the Z

score chart is any guide hopefully

hopefully hopefully we are close

to Peak pain here although it's all

going to depend on what the FED does to

us

get your anti-venom ready and uh after

that you're gonna want to cheers to a

super restore sorry RuneScape jokes I

don't even know if it's a joke it's

pretty much needed right now

hmm I let it sit too long it's it's not

warm anymore it's I mean it's kind of

like lukewarm it's not that good it's uh

anyway see you bye