Your Money is in Danger Here's Why The Stock Market Feels Like 2008

Right now, whether you know it or not, the stock market is taking the biggest risk with your money since 2008 because a lot of investors have been piling in to some of the riskiest investments that have ever been invented using things like margin loans, leveraged ETFs, and options in order to amplify their gains as the stock market continues its seemingly never-ending bull run. However, those same tactics that are used to amplify gains can also amplify losses on the way down. The better the stock market does, then the more bullish investors get and the more risk they're willing to take. So essentially, every time you turn on the news and you see the stock market at a new all-time high and things continue to go up, it's basically a green light for investors to start taking on more risk. Now, of course, if you're in control of all of your own individual investments, you don't have to worry about this so much. But if you're somebody who just puts money into a 401k or other type of retirement account and you have no idea what's sitting in those accounts, now would be a good time to start getting involved and start looking at this, guys. A week ago, I talked about how these private credit companies like BlackRock and Blackstone, Blue Owl Capital, all of these big ones are pausing all the redemptions for their companies because so many investors want out at the same time and they're freezing people so they can't get their money out. A lot of those funds actually come from mom and pop investors, people who have their retirement savings wrapped up into these things or 401ks, pensions, et cetera. Now, the reason why this is risky is because margin debt just hit an all-time record high. Investors borrowed a record $1.4 trillion against their brokerage accounts in May, according to FINRA. And that's a 54% increase from just one year ago, making it the highest level ever recorded. And the reason why that's interesting is because just one year ago, I remember talking about the same exact thing. There was a similar story in the news just one year ago about this margin debt becoming dangerously high. And here we are again, and it's 54% higher than just one year ago. And then at the same time, the same investors are pouring money into leveraged ETFs that are designed to produce two to three times the daily gains or losses, depending on what actually happens. And today, I'm hiking down to Phoenix Lake here in Larkspur, California. At least that's where I'm attempting to get to. We'll see if I actually make it in the video. I may have taken a wrong turn. Now, here's the other thing, guys. Even if you are not partaking in this risky behavior, if you have a stock portfolio, then you are still exposed to all this risk, whether you want to be or not. Because of all the other bad actors, if you own a lot of the same stocks that they do, well, you're just as vulnerable when the market inevitably corrects. And so, Wall Street investors are taking on so much risk now that they're essentially combining a lot of these risky behaviors all rolled into one. They're using leveraged ETFs and margin calls for the same investments. And a lot of these leveraged ETFs focus on the hottest parts of the market, like AI, the semiconductor companies, Tesla, NVIDIA, SpaceX, things like that. But there's a lot of talk about how this AI bubble is quickly bursting right now, especially now that a lot of investors want to see a return on their AI investment. So that's a big problem. At the same time, we saw the SpaceX IPO happen, and now the shares are trading for half or less than half of what they were when the IPO came out. Just crazy, crazy volatility. And I'm no stock market expert, guys. I never claimed to be. But I just look at the numbers and look at these percentages, and it's pretty shocking when you do. And here's how these losses can actually look in real life. Say a stock goes down by 30%, which we've seen happen thousands or millions of times before. When you have it wrapped up into these leveraged ETFs, then the losses can be roughly a 90% loss. So like a 3X loss. You get 3X gains, we get 3X losses. I wasn't expecting to have to go up so many stairs, but I'll get to the top of them and resume. And so a lot of the analysts are saying the biggest risk isn't just individual investors losing money with this, but when the leveraged funds lose money, it increases market volatility by a good amount. And this is the reason I brought you guys out here to have a view of Phoenix Lake. How pretty is that? In fact, all these leveraged stock products present such a problem that South Korea just issued a warning on this, because they actually saw what can happen when things get too far out of control over there. Because there was such heavy speculation into the semiconductor stocks over there, and it forced the market into emergency mode over there in order to prevent any further panic selling. And South Korea's top financial regulator later admitted that he regretted allowing leveraged single stock ETFs to launch in the first place. So this was a bad idea. Not a huge surprise. And if you think this doesn't affect everyday investors, guys, you're wrong. Because 92% of people hanging onto these risky leveraged investments are retail investors, meaning everyday people. And like I said earlier, you can own some of this in your retirement accounts and not even know it. And the brokerage firms are paying attention because some of them are already tightening up the rules in preparation for a potential sharp decline. Charles Schwab, for example, they recently tightened its margin requirements and warned advisors that clients exceeding the new limits could receive margin calls requiring them to either deposit additional money or sell investments. And this is a major sign that these brokerages are becoming less comfortable with the amount of leverage that's building up inside their accounts. And it doesn't necessarily mean that a stock market crash is imminent, that it's going to happen tomorrow or anything like that. But it means that the bubble is getting bigger and bigger. And when it inevitably does pop, it's going to be just as bad on the way down compared to how good it was on the way up. And we already see some warning signs of the bubble starting to deflate, guys. Like the Magnificent Seven stocks are having an awful year right now. Back in the middle of May, the Magnificent Seven stocks kind of had a peak, but ever since then, they're down about 13%. Stocks like Amazon is down 11% on the year. Apple's down 11.7% on the year. Alphabet's down 12.3% on the year. Meta's down 14.4%. Nvidia's down 18.5%. Tesla's down a whopping 32.6%. And Microsoft is down a whopping 32.9%. And a lot of the reasons for this is all because of the AI companies, guys. All of the building of these AI data centers. Basically, all of the money is flowing into this highly speculative investment because everybody's so bullish on the fact that AI is going to be the end all, be all for everything with the future. And so far, it's been kind of a disaster and a lot of people are sick of it. And then you have the Fed talking about a potential rate hike or a couple of rate hikes coming later this year. Whether they'll actually do it's a whole nother thing, but they're at least talking about it. And this also causes a lot of fear and makes these stocks go down.