[0:01]Okay, today, I wanted to talk about a general topic about investing. And over the past year, I've produced some contents which are focused around the ways to invest and how to be successful when investing. And a lot of the contents which I produced in the past were kind of spread across different topics, so I wanted to kind of bridge that gap and come up with a very simplified version of how to actually make money in the stock market. Now, before I begin, I just want to let you guys know that there are three contents in my library which I believe you should really watch. Now, I think those three contents combined would give you generally a good idea about investing, and even for those of you who are not that familiar with the technical side of things, like how to value companies and how to do DCFs or how to come up with valuation metrics or how to monitor the trend of the market. I think those three videos combined should give you a pretty good idea of how to successfully invest in the stock market. And those three videos are, number one, the stock investing strategy for everyone video, and number two, macro investing 101 for beginners, and number three, you'll certainly fail without the right mindset video. So, for each of the video, for example, for the stock investing strategy for everyone video, I talked about how the Federal Reserve framework impacts the overall market, and within the Federal Reserve framework, which time you should invest your money, and how much, and in which stocks as well. And the macro investing 101 for beginners video, I go further in depth into the macro indicators and what we should monitor and how we should interpret those data. And number three, in the most important, you'll certainly fell without the right mindset video, I talked about the kind of mindset that you should have in order to be successful in investing. And I also emphasized that, you know, I worked in investment banking and private equity for almost 15 years, and even among my peers, there are plenty of people who are very well equipped with the technical knowledge about investing and about the market. But at the same time, when it comes to their own investment, a lot of them fail because they don't have the right mindset. So, before you watch this video, I really suggest that you go back and watch those three videos multiple times to get a sense of, you know, what a successful investor should be equipped with in terms of, uh, the knowledge of the market. Okay, and um, I also want to let you know that in April 2025, I gave you guys the first buying call for my video, and in March 2026, uh, which is about a month ago, I also gave you the second buying call, which I thought, uh, was a good timing to buy into the market. And for the investments which I made, uh, for the April 2025 investments, I I've I've told you guys that I'm already up about 75 to 80%. And for the investment which I made about a month ago, which I allocated between the Max 7 stocks and the semiconductor stocks, I'm up by about 20 to 25%, 40 to 45% respectively. And in my previous videos, I talked about the concerns I have about the market, the fact that it's rising too fast, and despite all the red signals which are still lingering in the market, including the inflation, the oil price, the the new Fed chair, the earnings growth trajectory and everything, and the valuation as well. But the market is still going up. So, um, you know, we we would need to monitor what happens in the future very carefully. Now, that aside, I just wanted to kind of give you a very simplified version of how to time the market correctly and how to actually make money in the stock market without going into too much details of the technical side of things. So, you know, even if I give you this kind of guidance, a very simplified one, make sure you go back and watch my previous videos as well, because that's going into the more in depth sides of the things I'm about to say today. But for those of you who have a hard time understanding everything which I said in my previous videos, I think this video may be helpful for some of you who are just kind of getting started and who want to monitor metrics one by one. Okay, so, let's begin. Okay, so, to simplify all the investment strategies which I laid out during the course of the past year, um, I want to talk about the investments and the buying calls which I gave you within the past year. So, one was in April 2025 and the other one was in March 2026. Now, when I told you guys that I'll now buy into the market, obviously, I monitored everything which I could, including the Federal Reserve sentiment, as well as the geopolitical uh developments, as well as the political situation, which was involving Donald Trump, um, Scott Bassett, and potentially the new Fed chair coming in as well. So, I've been monitoring trends and hundreds of metrics before I actually came up with that decision. But if you compare the April 2025 decision which I made and the March 2026 decision which I made, there are common aspects and elements which kind of ties in between the two decisions I made. And I think there are about five things which were happening during the both periods, and I just want to give you a sense of what those five indicators are and how you can use it to your advantage. Okay, so, the first one is VIX, which is VIX. Now, if you compare April 2025 and March 2026, one common thing that was happening between the two periods was that the VIX was at over 30. Now, for those of you who are not familiar with the VIX, it's basically the CBOE volatility index that tracks the implied volatility. Now, to speak in plain English, it basically means that it measures the volatility of S&P 500 options over the next 30 days. And it mathematically prices the fear. So, basically, just think of it as, if the VIX is high, there are a lot of fear in the market. Now, generally, on average, when the market is very calm and it's generally on an upward trend, the VIX would be in the range of 15 to 20. And if the market is really optimistic and it's been on a very great trajectory, it could go down as low as 10 or even below 10, and the band of the VIX could be between single digits, high single digits, and 20. So, the VIX on a daily basis would make its movements, but generally, it would move within the band. However, when I made my investments and I, when I gave you the buy calls back in April 2025, and March 2026, the VIX was at over 30 for both periods. Basically, it means that the market was trapped in a very fearful emotion, and that kind of represents what the public was thinking about the market. Now, the second metric I wanted to lay out is that for both periods, the Federal Reserve's outlook on the interest rate was that the Federal Reserve interest rate is not on an upward trajectory. So, basically, what I mean is, the Federal Reserve, by any means, was not indicating that the interest rate was going to go up in the near term. Now, as I've mentioned to you guys multiple times, the Federal Funds Rate is basically the most important metric when it comes to the valuation of stocks. Given that the Federal Reserve rate acts as the basis of the discount rate of the future cash flow of the companies, if the rate goes higher, there will be a higher discount rate that is applied on the future cash flow of the company. So, when you discount the cash flow back to the current moment, it would basically mean that the cash flow would be smaller when you discount it back to the present day, i.e., the valuation of the stocks and the potential market cap of the stocks would also go down. Now, on the flip side, if the interest rate goes lower, that would mean that the discount rate of the future cash flow of the companies would also be bumped up in accordance with the decrease in the interest rate. So, you can just think of it as, if the interest rate goes down, it's positive for the valuation of the stocks, and when it goes up, it's negative towards the valuation of the stocks. So, that's the second metric that you should monitor. And for both of the periods, it was the case that the Fed was not indicating in any way that the interest rate would go up. Now, in March 2026, based on the dot plot that was suggested by the Fed, it was indicating that the interest rate may stay constant throughout the year. However, by that, it doesn't mean that the interest rate would go up. And also, we had the new Fed chair, Kevin Warsh, who was coming into the market saying that the interest rate could be brought down very quickly. So, that was also reflected in the sentiment of the market. Now, the third metric which I want to mention is the debt margin, i.e., the FINRA margin statistics. Now, in both of the periods, the FINRA margin statistics, which is, which basically represents the total debt balances in customer securities margin accounts, i.e., the money borrowed from brokers to buy stocks, was on a decreasing trend. Now, what that means is that basically, there were a lot of leverage in the market, which generally goes up when the stock market also goes up, has been on a decreasing trend because the stock has been going down for at least a certain period of time. So, when the stock goes down, there are people who are deleveraged, given that they get margin calls by the brokers. So, I'd like to say that when you are looking at the market, the market may go down, but in order to give you a more concrete rationale in buying into the market, what helps is that if the leverage in the market is also going down, it gives you a more concrete basis to buy into the market because the deleveraging in the stock means that there are more room for people to leverage in the future. Now, what I will say is that FINRA's margin statistics are generally posted on a delayed basis. So, for example, the April 2026 margin data would be released about three to four weeks after the end of April. So, when I gave you the buy calls back in April 2025, and this time, in March 2026, the margin statistics which I was able to monitor was about a month before from the time when I actually gave you guys the buying call. So, in April 2025, I was probably looking at February 2025 data because it was in early April, and in March 2026, given it was late March, I was also looking at about February 2026 margin data. For both of the periods, I was able to see one month of deleveraging on the data. What it means is that in April 2025, I was probably monitoring the February 2025 data, because I gave you guys the buying call in early April, so the data which I was able to see was in, was as of February 2025. And I saw that from January 2025, moving into February 2025, there was a decrease in the margin balance. Also, this time, in March 2026, when I was giving you guys the buying call, I was able to see that the February data, which was already released, suggested that moving in from January to February, there was a decrease in the margin balance. Okay, when you see that the margin has been on a downward trajectory, it suggests two things. Number one, the market is deleveraging, which means that the market has been falling for at least one month or almost a month. And number two, if you've been seeing the real time market also falling within that respective month, i.e., April 2025 and March 2026, it also suggests that there's a pretty high chance that there has been further deleveraging in the market. So, you could monitor that on FINRA website, if you search FINRA margin statistics on Google. Now, the fourth area which I wanted to mention is that both of the times, there were clear leading sector in both of the cases. So, basically, what I mean is that in order for the market to go up, and in order for the market to have the power and the energy to go up in the future, it generally requires a thematic engine to attract institutional capital. Now, in both of the cases, it was more so in April 2025, that it was more of the Max 7 stocks, and in March 2026, it was more towards the semiconductor stocks. And that's the reason why I decided to invest in those two themes, back in April 2025 and this time as well. Now, the fifth area which I wanted to mention is that, now, for those leading sectors, that leading sector's earnings profile needs to be on an upward trajectory. Now, the leading companies must provide their dominance via the actual audited financials. And if they beat the EPS and the revenue estimates during a macro panic, it confirms that the underlying business model is insulated from the broader economic fear, which means that if the fear goes away, there's a very high chance for these leading sectors to be on an opera trajectory again. Okay, so, those are the five metrics which I suggest that you monitor, um, every day in order to gauge the timing of buying into the market, and I do the same as well. Obviously, there are hundreds and millions of other data which I monitor on a regular basis, but that aside, if you monitor these five metrics and and try to gauge the timing when all these five metrics actually checks the box, you'll almost certainly not lose money in the market. Okay, so, that's that. Now, one thing I'll say, though, is if there's a specific time within your investment horizon where all those five boxes are checked out, I would say that the probability of you making money is about 80 to 85%. Now, why is it not 100%? Now, for example, 80 to 85% chances is a really high probability, and generally, if those five boxes are checked out, especially after 2008 when the Fed adopted the quantitative easing, you should be able to make money most of the times when those five conditions are met. For example, let's think about some times when all those five metrics were actually satisfied. If you go back to 1997 during the Asian financial crisis era, all those five conditions were met, and after a pretty big correction in the market, the market rebounded. So, that's one of the times when when you're able to make money monitoring those five metrics. And also, in 2011, when there was a Euro crisis and US downgrade, the VIX went up to almost 50, and the Fed maintained the zero interest rate policy. That time as well, if you bought into the market at the right time, you would have made a lot of money. It also happened in 2018 as well when Powell suddenly decided to raise the rates, which panicked the market. However, after some time, market also recovered after VIX spiking to almost 35 or over 35 to almost 40. It also happened in 2020 during the COVID crash. So, during 2020, the VIX went up to almost as high as 83, but then, when the Fed decided to pivot, the market recovered very quickly. And also, there were leading industries which were mainly focused towards the tech industry. It also happened during the two periods, which I just mentioned, which is April 2025 and March 2026. For both of the periods, the VIX was at over 30. The Fed was not increasing the interest rate. There were deleveraging happening in the market, and there were leading industries which were predominantly leading the market upwards, and also, those leading industries were recording healthy EPS and revenue beats versus the consensus. So, 80 to 85% of the times, I would say that the strategy would work. Now, what about the other 15 to 20%? Yeah, the reason I give 15 to 20% of room, um, is because of the fact that there are certain times when there is systemic imbalances in the market. Now, these are the times when there's so much fear in the market, and there are leading industries, and the industries are recording a healthy growth. And also, the Fed is pausing the interest rate hike, or even aggressively decreasing the interest rate, but there is so much panic in the market that the systemic imbalance is causing the market to go down and down and down, even further from the previous highs. Let me give you some examples. For example, in 2000 to 2001, during the dot-com bust, the model basically failed because of the fundamentals of the leading sector were completely broken. Now, when there is a situation where the market has been driving upwards due to one or two very nationed sectors, it could cause a significant crash if the fundamental trust in the industry goes away.
[17:33]Also, if there were significant leverage that were adopted into the market in order to buy into those stocks, the power of the deleveraging and the speed of the deleveraging may not be able to be caught up with the Fed, which is also decreasing the interest rate at the same time. So, basically, what I mean is, if there's too much leverage, which is concentrated in a few sectors, which is not generating meaningful earnings, which basically breaks the trust within everybody's mind, the deleveraging may take place in a manner which the Fed cannot intervene to stop the market psychology from fundamentally breaking. So, from 2000 to 2001, was a representative period when the VIX was obviously spiking high, and the Fed was aggressively cutting the rates from January 2021, and the Fed was cutting the interest rate from almost 6.5% to 1.75%. The margin debt plunged from almost 300 billion dollars to 140 billion. So, basically, what happened was, the clear leaders posted catastrophic earnings misses, which fundamentally broke the trust in everybody's mind. So, the deleveraging happened so fast that the Fed decreasing the interest rate was not playing any role in the market. The Fed just had to watch the market crash, and there was nothing they could do. Now, the fundamental reason this happens is, as I explained in my, is AI a bubble video, companies like Cisco, Sun Microsystems, and Yahoo saw revenue growth evaporate. Rate cuts couldn't save the company's trading at 150 times price to earnings with deteriorating cash flows. So, if there was a huge bubble in the market, which is, which has gone out of the Fed's control, this may cause a systemic imbalance, which, even when the five conditions are met, the market would still be on a free fall. Now, the second example I want to give you is the accounting scandals in 2002. So, this is when the trust collapses. So, basically, so, during that period, all the five boxes were checked out. For example, the VIX was at over 40, the Fed was at 1.75%, so they were not on an upward trajectory with the interest rate, and the margin was dissipating. And there were clear sector leaders, including the financials and telecoms, which were reporting strong earnings. However, when the market found out that the earnings were literally fabricated, the system, the market panicked to the extent where no one could save the market. The systemic fraud of Enron, WorldCom, and Tyco basically broke investors trust in SEC filings. So, if you cannot trust the fifth metric, which is the strong earnings growth, the model is void. So, basically, the market sank to lower lows until October 2002, which, which means that the market was on a freefall for almost half a year. Now, the other example I want to give you is the Great Financial Crisis in 2008. So, basically, this was an ultimate systemic liquidity failure. So, all five boxes were checked out in March 2008, but that also created a massive bull trap. So, if you break down the metrics, the VIX basically skyrocketed, the Fed was aggressively cutting the rates, the margin debt was unwinding. Energy and basic materials were the undisputed market leaders, and Xcel Mobile was printing record expectation beating profits. However, this also caused a systemic failure because the commercial banking system's toxic MBS hadn't fully detonated. Even though the Fed cut rates, banks stopped lending to each other. If the interbanking lending system fails, there's going to be a huge liquidity as as well as a credit crunch in the market, which could basically freeze everything. And when everything is frozen, and there's no credit in the market, even if the Fed continuously injects money and gives message to the whole world that everything's going to be okay, nothing works because no one is willing to lend the money to each other. So, when there's a credit crunch, and a significant failure of derivatives or off the book securities, which nobody knew about, or not everybody knew about, this could cause a huge systemic failure, which could ultimately impact the market to a near irrecoverable level. Now, the other example I want to give you is 2022. So, back in 2022, this was a trap which the Fed set themselves. So, basically, the inflation was skyrocketing, but the Fed has been telling the market that this is a transitory inflation for almost a year. Which basically gave a very limited time for the Fed to react to the inflation itself, which ended up lingering in the market for such a long time. So, when the Fed gives a wrong message to the market on a very significantly important data, this could lead to a long-lasting fall in the market, just like what happened in 2022. So, in order to avoid the 15 to 20% chance of falling into the bull trap, we also need to monitor a few more things. Number one, the ultimate thing that we need to monitor is the credit in the market. What I mean by credit is measured through a thing called a credit spread, i.e., the Bank of America US high yield index spread. Now, what this is, is the extra premium of the yield which the smaller companies or junk rated corporations must pay over the US Treasuries, risk-free yield to borrow money. For example, if there's a huge company which is making so much money, which, which doesn't even need to borrow any money, if this company goes to the bank and tries to borrow the money, this company should be able to borrow at a very low rate. However, if there's a small corporation, which wants to borrow money, if this company, which is not performing that well, goes to the bank, this company will have to pay a huge interest rate. Now, the gap between the huge company's interest rate and the small corporation's interest rate, which, which both of them pay, is the gap which we need to monitor, and that is measured through a thing called a credit spread. Now, generally, this credit spread can go up to almost 8 to 10%. Basically, the small corporations with junk ratings can pay almost 8 to 10% premium versus the risk-free rate. However, when there's a credit crunch, what happens is, these junk companies has to pay 15% or 20% premium versus the risk-free rate. Which basically means that all these smaller companies are on the verge of going bankrupt because they've been squeezed with the high interest rate. Now, when there is less credit in the market, and when the market is suffering from a credit freeze, these companies will not be able to borrow money, and all these companies will go bankrupt, which means that there will be a lot more unemployment, which would lead to a less active economic activity, which could lead to a unfavorable macroeconomic data, which could lead to a further drop in the market. So, this is a metric that we need to monitor. Now, to give you an example, back in 2020 after the COVID era, when the Fed acted very fast to decrease the interest rate to almost zero, and started pouring liquidity into the market, this spread, despite the economic challenge which the whole world was facing, because of so much liquidity in the market, even these junk rated companies were able to borrow money at a very low rate. So, basically, how the Fed acts in response to certain economic challenges that they face could impact the market's liquidity, which could in turn also impact the credit situation in the market. But there are certain circumstances, as I said, in my previous examples, where even if the Fed is injecting liquidity and lowering the interest rate, there could be cases where the systemic imbalance is so huge that even the Fed's actions cannot save the market. So, those are the situations where we need to look out for by monitoring the credit spreads. And also, the second thing that we need to monitor is the inflation. Now, one thing I'll say is that the five metric strategy works when the Fed is actively involved in the market. Basically, the Fed is trying to decrease the interest rate, and they're trying to inject as much liquidity as they can into the market. That is the fundamental basis of the market rebounding. If the Fed doesn't do anything, we could go back to the Great Depression era, when there was so much deleveraging happening in the market. But if the Fed does nothing, the market will just continue to go down and down and down, leading to a decades of economic depression. So, the fundamental assumption here is that Fed is going to be actively involved in the market to save the market's credits. However, when the inflation is high, there is nothing the Fed can do. One example is back in 1973, when the Fed had to just watch the stock market crash almost 50% because of the OPEC oil embargo, forced them to prioritize fighting inflation over saving asset prices. Now, under those situations, we need to monitor what the Fed's primary mandate is, is number one, lowering the unemployment rate, and number two, keeping the inflation low. So, under a situation when the inflation rate is so high that there's no actions which the Fed can take, this whole model just becomes broken. Now, if we apply that to the current world, basically, the CPI on a YOY basis is currently at about 3.3%, which is extremely high. Now, that's why I've been telling you that this inflation needs to come down very quickly to below 2.5%, in order for the Fed to have a lot more room to take actions, when there is a systemic or credit crunch. Now, the third thing that we need to monitor is, obviously, as I mentioned in my previous example, whether there are any fraud in relation to the accounting standards. Now, when there is a distrust of the accounting, which is basically the language of finance, in the accounting from the investors, everything breaks. Now, the contagion of fabricated financial reporting among top tier publicly traded companies may lead to a catastrophic disposal of all the assets in the stock market, which nobody can stop. Even the Fed, even if they inject liquidity into the market, people may think that the Fed's action of injecting liquidity is also a fraud. So, this fine balance of trust between the market and the institutions and the corporates needs to be maintained very clean at all times. Okay, so, today, I gave you some very simplified version of how to succeed in the market. So, those five metrics are the primary metrics, which I would like you to monitor in order to succeed in investing. But obviously, as I said at the start of the video, please go back and watch my three other videos as well, very carefully in order to get a better understanding about investing. I hope you enjoyed the video, and I'll be back with more videos very soon.
