Let's face it, a lot of people are looking at the day-to-day trading of the market, and it seems that bad catalysts just keep coming out of the woodworks. One day we have rising interest rates. We have hyperinflation warriors. We have too fast of a recovery worries.

Then we have chip shortages hurting Evs. Then all of a sudden we have a random ship blocking a major canal, halting a good chunk of international trade and causing a market freak out. Then all of a sudden we have big banks making large block trades and warning of significant losses as they panic sell positions a prominent fund. It seems like every single day something crawls out of the woodworks and slaps us across the face like a dog.

So this may leave you wondering. Well, why is this all happening at once And we have gone into depth about many big factors such as sector rotations, fears of huge interest rate hikes, and overall market broadening out. But why is this all happening so fast and all at once? I mean, realistically, we had bad catalysts throughout all of 2020. It was actually awful.

literally. During the beginning days of the pandemic, we had no idea what this thing was. A lot of people were extremely scared for months during the beginning of the pandemic, yet the market just kept going up and up and up and up. Then, as restrictions got eased across most of the United States, we saw unemployment skyrocket.

We had riots in the street. We had oil going to below zero. We had huge election fears. We had companies that were once huge leaders declaring bankruptcy week after week after week, we had government coming in and stopping evictions from taking place, putting a ton of pressure on the real estate industry.

And while all these things were taking place, the market kept going up and up and up, just washing away all of those catalysts. And you could say, hey, well, that's obviously the Easy Money policies, Charlie. So don't forget that the Fed was doing these Easy Money policies under the idea that they were softening the blow that the Pandemic would have on the economy. It was never going to be as good as actual growth during the year.

In fact, the market started really, really taking when they announced that they were going to start the Easy Money policies and we covered that. Back then, they were experimenting. It was never a guarantee. Yet the market continued to bounce and bounce and bounce.

And then what happened? Well, a lot of these bad catalysts from 2020 went behind us, a vaccine came out, people started looking more optimistic. Projections for 2021 and 2022 looked a lot brighter, the market took off, and then all of a sudden wham? Why is it that when everything is looking brighter than ever that we're dealing with such a huge crisis, and why the heck have all these events hit tech so bad? Well, the reason folks is one word In that one word is margin. A lot of people are blaming the Fed in interest rates and inflation for the brunt of this huge instability, and they are at the crux of the issue. But the real culprit for why this has been so bad is because of margin, and why it's so disproportionately affected.

A lot of the high-tech high growth stocks. Hear me out. Throughout most of 2020, we had recoveries day after day, But that's just in hindsight. For those who are watching the channel and the market with us during that recovery, you know that day after day we were hit with these media experts.

They're like the market will never recover. We are headed for a flatline recovery. We are headed for a cow recovery moo. And we saw headlines of hedge funds staying out of the market.

Big prominent people saying nope, I'm not getting in this market. There are a lot of big funds that just said, you know what? This is too risky, I'm not getting in the market Skepticism kept a lot of participants out of the market throughout most of 2020, and then by the time skepticism had largely subsided. What happened? Well, prices were already at really strong highs. Some way above all-time highs meant a lot of funds said okay, they're already up a lot.

We don't have a vaccine. Economic activity looks bad as cases go up into the fall, so let's close out of some of our positions. Let's take profits. And then the funds that weren't already in them said okay.

Well, we're not going to add it. Right now, it looks bleak. What happened? The market stagnated for a couple of months, then what happened after the election, and after we got the vaccine. All of a sudden it was open season for the stock market.

Let the gates be open. All of these funds that didn't have good returns through 2020, and as well as the ones that did have good returns through 2020, wanted to end the year on a really, really strong note. They saw a vaccine and a picture of recovery over the next couple of years as go time. They piled tons of capital into the market, took out margin on that capital, and that ended the year at a record high for margin.

And this was not just the hedge funds either. this was individuals. This was large institutions that a lot of individuals invest into, and it was hedge funds that a lot of the big money piled their money into. Why did they do this? Well, Because in 2020, a lot of funds were set to report bad numbers.

Funds that were conservative during 2020 had really, really bad returns. So towards the end of the year they said, okay, we have to make up for that lost time. We want to report some good numbers and please our clients. so they start pouring money in, but that's not enough.

in order to really catch up. they're going to have to use some margin. The more margin they use, the more return they have. The more funds they do this, the faster the stock market moves up.

And this on a wide scale is why we had record levels of margin debt by the end of 2020.. If you're a large fund and you need to show very good returns and you want to take 2021 with a running start to make up for bad 2020 or to just break ahead of the pack, What do you do? Well, you pile into stocks that are very high beta. They move very quickly, but they tend to move up overall. and then you use margin to amplify the movements upward.

What are some of the sectors that are very, very high beta, but have a very, very clear upward direction? Well, Innovative Tech Tech as a whole, but especially Innovative Tech And as more and more people piled into it, it got better and better and better people started calling their fund managers saying, why are we not in tech? Get us in Tech The fund manager said, okay, we're gonna go buy and detect And as with most things in the stock market, you tend to get the worst crashes right after the best runs. Now just going back a little bit. What do we know about Margin margin is really, really great for speeding up your returns in bull markets because it amplifies it. You have A dollar in the market.

You can amplify it to two dollars or three dollars or four dollars if you use margin. Some hedge funds could amplify it even more than that, but we're not going to get into that in this video. So it's great in a bull market. But the other side is that during a bear market, what happens.

Well, Margin amplifies your losses. Let me put some concrete data to this. Here is the S P 500. Overall, the red line is margin debt.

The blue line is the price of the S P 500. there are two different scales, but this is an important graph to really comprehend what's happening. When did margin debt really break out for the first time? Well, right at the beginning of 2021. Throughout most of 2020, it was fairly tame.

It had sold off massively and it picked up slowly. People were scared to take out margin. They were scared, they were skeptical of the market. Then all of a sudden we got the vaccine and people were like, hey, it's open season But I think that what you don't see when you look at a chart like this is where the margin is going.

Origin had a much bigger effect in the tech sector and in the tech innovative sector. Stocks that have extremely fast runs and stocks that would really increase the probability of funds making fast money. And that's exactly what they did Ones knew that they were buying stocks that were on an overall upward trajectory anyway, so they figured, hey, we're going to pile into them, it's going to keep rallying up. And this is great while the party's going.

But all of a sudden the party stops, the music stops, and you got to find a chair. Sad thing is that margin made it so that a lot of chairs are missing. With rising interest rate concerns, or really any sort of bad catalyst some funds are gonna say, okay, you know what? I don't wanna hold this margin anymore, I'm gonna start selling off and buying back my margin happens when you do that. Well, there's less money in a lot of these plays.

That means they go down and then more hedge funds are like, okay, you know what I want to close out of that margin and then all of a sudden you get all the selling pressure and you combine that with all the other concerns in the market. People start getting worried, they start closing out their margin, they start dumping positions because they simply have no choice. They get margin calls, it's just too risky. They're going to get amplified losses, and just within the last 72 hours, we saw a huge case of this happening.

Even today, when you have a lot of margin in any sector that amplifies your runs, but it also amplifies your losses. What does the presence of a lot of margin do in any sort of market? Well, margin is short term in nature. You have to pay a lot of money for margin, so margin makes it so that the market is more short-term thinking. And if you have the threat of rising interest rates, it makes it really, really short-term thinking.

That's why you saw the market thinking very far ahead during most of 2020, and now you see it only thinking in the next couple of months. In totality, though, the trend is still clear. just because the funds had a little shite show doesn't mean that there's anything different for a lot of these plays. But Charlie, are you just talking? In hindsight, why didn't you tell us about this before the margin crisis happened? Well, I think that being clear with yourself during both bold conditions, slow conditions, and bear conditions is of utmost importance if you watch our videos from January and February.

One of the keys that we stressed was, if you're not going to be willing to hold through future volatility, you got to make sure that you have a clear price target you have a trailing stop loss for if you're wrong, or you have a very, very conservative exit point at validation Whenever we're in a market that keeps going up and up and up, what do we say We say? hey, lock in profits during the uptrend if you aren't going to be willing to hold through the downtrend. If you have a stomach and you want to hold something for long-term play, the only key is find it at a good price and then just riding out the storm. When you talk about high beta stocks, you're always going to have slaps in the face. It's just the reality, but the key is being clear with your intentions in all positions.

We've all been there, folks, but you really get yourself into trouble when you start buying stocks and you don't exactly have a clear plan for it. instead of just like it needs to go up, you have to make sure that you're very, very intentional. There's going to come a time probably in the next few months where the market starts flipping the script on us again and you see tech start taking off, People start realizing that hey, this isn't a huge crisis, it's time to start getting those returns again. The last thing I want to address is that I know that a lot of new traders, especially people that may have started a couple months ago, haven't seen a lot of market cycles.

They might feel that being optimistic about the stock market is naive and I mean this respectfully. We're all students in the stock market, but I think that thinking that market optimism is naive is not really understanding the full picture and not understanding the context of the market. I think that the more you're in the market, the more you realize that historically, if you have thought that the market was going to be crashing, or it's going to be slow for extended periods of time, almost always, you were wrong. If you thought sell-offs in any major market indices weren't going to rebound, you're also almost always wrong.

There's definitely been periods where you have extended slowness, usually not more than a couple months. Sometimes you get four months, sometimes you get a really big dip, and then it takes some time to recover. But generally speaking, if you look at all the indices more often than not, there's a very clear trend, and if you're betting that it's going to go up, you're going to be more right than you are wrong. It sounds stupid and obvious, but the market goes up more than it goes down.

The market goes up more than it's slow. and that's one of the reasons that so many traders are always optimistic about the market. The market doesn't give us that many reasons to be pessimistic. I mean, even in the context of Arc.

I saw people on forums in mid 2020 when Kathy's fund was really, really doing well. They're a roasting Arc. They said I never buy one of her funds because I got burnt on it back in 2015. that fund literally dropped like 30, 40 and basically delivered negative returns for investors right in the beginning.

Arc actually stagnated back and forth for a while. Much worse to have a sell-off like that after not having much performance to show for it beforehand that it is now after she had a record year. Even with the sell-off she's one of the biggest winners in the market adjusted for the last 12 months. When you buy high beta stocks and you put them together into a fund, you're gonna get high beta returns that massively goes down, goes up, massively, goes down.

The key is that you get the overall trend right and as traders, we have two different ways to play it. really. you could take short term positions and enjoy the uptrend, or you could take some long term positions, buy the dip, and then stomach the up trends and downtrends. I think that I'm going to be sitting here five years from now.

We're gonna be talking about the latest huge Arc dip or the latest huge tax sell-off. The only difference is that we're gonna be at 10x the valuation. Much like nobody talks about any of the other dips that were similar to this in Ark's past or the Nasdaq's past. or you know anybody, Any other past.

I think the key is making sure that you're understanding what you're buying, you have a clear plan with it, and you look at its history to actually determine what's likely to happen in the future. Sure, previous performance does not mean future returns, but you can look at the previous performance and say okay, well how does this tend to move? You'll notice a clear trend. Stocks that were very volatile in the past are almost always going to be very volatile in the future. I know that some circles make fun of people who do technical analysis and chart reading.

They make fun of traders. They're like, oh, the chart doesn't tell us nothing. that's just astrology. But if you looked at the chart on Arc or Tesla, or any big fund, any stock that performed poorly, you'll notice that they've done the same thing in the past.

My take is our role as traders during a market condition. Like this is saying. Okay, well, I'm going to take either very long-term trades that are going to be held through the volatility or I'm going to take very short-term trades that I'm in and out taking advantage of short-term fluctuation. That's what you've seen us talking about more and more.

in our videos, We were talking about Nft players that were fast runners. We were talking about some of the sketchy Chinese online education runners that went up really fast and down really fast, talking about plays that you're going to be holding for a while. pltr Neo, um, Julia. All of these plays that are clear value that are going to start rallying again when tech comes back.

So it is, folks. Those are my two cents on this issue and that caps off the video. Anyways, folks, if you have any questions, feel free to reach out to us below or join us on Ziptrader Circle if you'd like to learn how to trade. would like access to our daily morning briefings and of course our price targets list.

I'll go ahead and put the link to Ziptrader you below. If you're wondering what broker to trade these stocks on, Well Weeble! we'll give you some free stocks if you sign up and deposit with our link below as well. They are a fantastico broker for new and intermediate to advanced traders alike. There's tons of great scanning tools, great resources for doing your due diligence, and of course they are commission free, so lots of things to consider if you're looking to join a new broker.

Anyways, folks, have a great day and I'll see you in the next video.