Minority Mindset: navigating the stock market & housing market: is greed taking over?

There's a famous investing phrase that goes, be fearful when others are greedy and be greedy when others are fearful. We're starting to see more people become fearful in the markets. However, others are saying this is not the time to be greedy because you're seeing home flippers get burned by the changing housing market. Then we have our Treasury Secretary Janet Yellen, who just gave a speech where she said that she is keeping a close eye on our financial markets because of the recent volatility that we've been seeing. Although she did clarify that statement to say that our economy is doing exceptionally well, although we're seeing all this volatility here and around the world. And then we have the global economy slowing down. Like the UK had a major bond market sell off, creating a panic, which then led to the Prime Minister resigning in just 45 days in office. And then you have the Chinese economic and stock markets slowed down. And then we're also seeing Canada's housing market fall pretty quickly. The whole idea of being fearful when others are greedy and being greedy when others are fearful is that when people are greedy, when everybody's buying, when nobody thinks that things could go down, that's when you want to take a step back and let the craziness simmer down. And the idea of being greedy when others are fearful is that when people are scared of the world ending, when people are scared of everything collapsing, when people are scared of everything going wrong, everything going down, nobody wants to buy, everybody's selling. And that creates an opportunity for you to think different than the majority of people and come in and buy. And what we're seeing right now is that more and more people are starting to get scared of things happening here domestically of things that are happening globally. And this is causing more asset prices to come down, which creates opportunity for you. If you are financially educated, meaning you know what to buy, you know how to research your investments and you're prepared. Meaning you have access to cash to actually purchase these investments. Let me start by talking about the housing market, because on October 5th, 2022, we got the latest housing market data, which shows that our housing market prices are falling pretty quickly. This latest housing market report showed us that between July of 2021 and July of 2022, we saw home prices grow by 15.6%. And then between August, 2021 and August, 2022 home prices grew by only 13%. Meaning between July and August of 2022, we saw this number fall by 2.6%, which to put it in perspective is the largest month over month drop since this home price recording started. This Case-Shiller index started in 1987, and this is the biggest monthly drop that we've seen since this recording started to happen. Now another thing you might want to know is that this data is also a little bit behind, like in the end of October, we got the data for August and in the end of November, we're going to get the data for September. Now the reason for this big drop is pretty obvious mortgage payments today are 75 to a hundred percent more today than they were one year ago. So people can't just afford to keep paying these higher prices for homes. So home prices are going to have to correct because of the higher mortgage rates, meaning home prices are going to have to come down. And this has already begun to hurt home flippers. As a little bit of backstory flippers and traders are typically the first to get burned when you see an economic slowdown, because now these are the people that own a lot of the assets, many times over leveraged, hoping to sell them for a quick profit. When things are booming, they're also the ones that are making all the money, but then when things slow down, they're the first to lose a lot of money. And so not what we're starting to see happen is that flippers in the housing market are starting to get burned because they've been buying up all this real estate over the last number of years. And especially those who started buying properties in the beginning part of 2022 with a lot of debt. Now we're facing a tough time trying to sell these properties at the same price, because in 2021, if you bought a property in the beginning part of 2021, you spent three to six months renovating it. You could sell the property for a big profit today. If you bought a property in the middle to beginning part of 2022, you spent three to six months renovating it. And now you're trying to sell it for a big profit. Well, what you're seeing is that the buyers aren't there like they were before. And on top of that interest rates keep going up, making it more and more expensive for somebody to actually go out and buy your home. In a recent video gave this formula where a crash is when you have a correction in an asset, plus a lot of debt. Like if home prices fall a little bit, no big deal. But if you have people that are completely over leveraged on these properties and they own a lot of these properties that they need to sell quickly because they have all this debt. Well, now, if you can't sell the properties, that's when the banks come in and they force you to sell the properties for a loss because they want their money back. Well, that's what can turn this little correction into a bigger crash. And the more debt there is, the bigger the crash will be. And what we're seeing right now is that home flippers are starting to struggle. We haven't seen this happen yet, but what we're seeing is a home flippers who bought a lot of properties in 2022 working to renovate them, working to sell them for big profits are struggling to do that because the buyers are not there. The homes are sitting on the market longer. And now the bankers are starting to say, well, we want our money. We haven't seen the banks come in and start forcing the flippers to sell yet, but that's something you're going to want to keep your eye on because the banks come in and start forcing people to sell properties. Well, then that would increase the supply of homes, which would then further push the prices of homes down. Now, one of the easiest ways to stay up to date on what is happening is just to join something like market briefs, which is my free financial newsletter for every day. My team is breaking down what's happening in things like the housing market, the stock market to the economy. It's a completely free resource that breaks down the things that you need to know as an investor, that way you can make better decisions with their money. So if you haven't joined market briefs yet, I'll put the link to how you can join down in the description below. I mean, you have nothing to lose. And then we have everything going on in the global economy from Canada to the UK, to China, to the war in Ukraine. When you hear of a major global economy like Canada or the UK or China facing a recession or economic slowdown that does impact us here in the United States, not because we rely on their economy, but because many of them are big trading partners with us here in the United States. They buy products from us, just like we buy products from them. If the people and the economy in China is struggling, that means they have less money to buy stuff from us here in the United States, which can hurt the profits of some companies here. For example, Tesla sells cars in China. And because of the economic slowdown, Tesla has been forced to cut the prices of the cars. That way they can keep selling them. What does that mean? Tesla's margins are falling in China, which means that they're going to see smaller profit margins here in the United States, because well, the things that they sell in China is a part of their overall corporation. And if they're making smaller margins in some of their cars, that's not good for the overall corporation, which then hurts some of the investors here in the United States. Remember, we live in a globalized economy. And so you have many companies here in the United States that sell products to people here in the United States and to people around the world. And what we're seeing is that you have major countries around the world that are facing a bigger economic slowdown than we're facing here in the United States right now. And that means they're going to be able to buy less products from us here. It also indicates that we could potentially see more economic pain because if all these countries are seeing a severe economic slowdown happening right now, well, that could kind of be a foreshadow of things that could happen here in the United States. This is where I want you to understand that it's okay to be worried about an economic slowdown, but it's not okay to be scared of an economic slowdown, because the reality of these types of slowdowns or asset prices, slowdowns, these create opportunities for you to come in and buy, because what you have to remember is what's going to happen in 10 years. Well, in 10 years, the United States economy is still probably going to be very, very, very strong. And so if we see a slowdown between now and then, because we're seeing all this inflation, we're seeing the slowdown in the economy, we're seeing the impact of interest rates, all these things can impact the economy over the short term, meaning in the next few years. And in the next few years, if we go through more economic pain because of these issues that are happening, well, that creates opportunities because people get scared. They panic. They sell. Asset prices fall. People who are overloaded on debt get hurt and they're forced to sell that can create a bigger supply. And these things can then impact the prices of good assets, stocks, real estate, maybe cryptocurrency, maybe businesses, and then then creates opportunity for people who think different people with that minority mindset who then come in and buy these assets at a discounted price. And this is where a couple of things happen. One, people expect it to happen instantaneously. Why is the crash not happening? Why did it not happen last week? Can't it just happen tomorrow? Well, it's feels much slower when you're watching it happen. But in hindsight, you can see it play out pretty quickly. And this is where you're seeing a whole economy kind of shifting in real time. And so you have to be patient on that end. And second, you have to be patient to let the economy recover because in previous economic slowdowns from 2020 to 2008 to 2001, when the dot-com bubble burst every single one of those times, when we saw an economic slowdown, we saw the Federal Reserve Bank step in and stimulate the economy, meaning create more inflation. And they were able to do that in 2020 and 2008 and 2001. Because when we saw the economic slowdown, we had no worries of inflation. Inflation was low in every one of those economic slowdowns. So the Federal Reserve Bank could print money, cut interest rates and stimulate pretty freely because there was worries of inflation, but it wasn't that big of a deal because inflation was still low. But today is a little bit different because inflation is a worry. It's actually one of the leading causes of our economic slowdown. So we don't have that same power to stimulate and inflate the economy like we did before. So this is where you have to be patient on two fronts. You have to be patient as things progress in our economy, because it takes time for the higher interest rates to get absorbed in our economy. Higher interest rates impact the prices of real estate, stocks, businesses. It hurts people. It hurts the ability to spend because things become more expensive. So it takes time to absorb the pain of higher interest rates. At the same time, it also takes time to recover. And this is where you have to be patient with their investments, where now you can now ride up the economy and let things get better and understand that there's going to be a lot of volatility in between. You're going to see a lot of craziness, ups and downs, but this is where you want to ignore the headlines. You want to actually be paying attention to what's actually happening. The real data, that's the stuff that we talked about in market briefs, the free newsletter, but this is where you have to ignore just the headlines, pay attention to what's actually happening and be patient because like Warren Buffett says, the stock market is a device that transfers money from the impatient to the patient and the people that will make the most money are the people who are financially educated. It's the people who are prepared. And especially this time is the people who are patient. Now when people are talking about or worried about a potential housing market crash because home prices and mortgage rates have gone up, that's only the first piece of the puzzle. So let's start by talking about that. In 2020, the median home in America was selling for around $329,000 and if you put down 10% that would mean that you're borrowing $296,000 and back then you could get a