This Week’s Market Crash — 1 Stock to Buy Now
Today, I’m going to shed light on this week’s market crash. I’ll tell you exactly what happened and why.
Watch my video now for:
- How the media misled the public on this week’s interest rate decision.
- What Jerome Powell’s Fed announcement actually means.
- How the Fed’s actions now compare to those leading up to the 2008 crash.
- Plus, the incredible growth story you may not be seeing and the one ticker to make investors a TON of money.
August 2, 2019
Hey everyone. This is Ian for Bold Profits and welcome to your weekly video. It’s been a crazy past couple of days in the market. On Wednesday we had the interest rate decision to lower. There were sanctions put on Iran. Then Thursday we had the trade war reignited. There was an announcement that we’d be putting more tariffs on China on September 1.We’ll see how that goes. This news doesn’t really mean much at this point. It’s still a month away and we might see negotiations before then as we’ve seen in the past. All this news combined brought the market down the past couple days. I really want to focus on the interest rate decision.First of all, a lot of people are probably confused about why the market went down after they did something good like lower interest rates. Even though this is something that’s going to help the economy, people had already anticipated this for months. People were buying in and pushing the market higher.
By the time the news actually got there, they sold. There was nobody left to buy. They all got out because the event was done and they were looking for the next thing to invest in. This is called “buy the rumor, sell the news.”
It happens all the time in the market. On a market-wide sale like we saw this week or it can happen with a single stock on some big event that’s supposed to happen with a company. I just wanted to clear up any confusion about that. That’s why the market dropped on Wednesday. Thursday was most likely because of the trade war getting reignited.
I want to focus on some of the headlines that were misleading surrounding this interest rate decision. The first one was that people were making a big deal about how Jerome Powell, the chairman of the Fed, said this is not going to be something that’s going to start some big movement of interest rates going forward.
Just to make it clear, this was not was expected. It’s not like people thought rates were going to go back down to zero or 1%. This was something that was going to start maybe one or two more after this one. That got overblown. They thought because he said there wasn’t going to be a long string of cuts that there aren’t going to be any.
I think greed played a factor in that. Once you get one, you want more. Investors have been spoiled with this and anticipation was so high that maybe they thought he was going to cut and it was going to be a lot. Maybe they got ahead of themselves and thought too far ahead of the market. Maybe they got confused as to why he said there wasn’t going to be a long string of cuts in interest rates.
Another reason is inflation. Without going into too much detail, when you raise interest rates, inflation goes down. When you lower interest rates, inflation goes up. They have an inverse relationship. That’s because when interest rates are lowered, more people and more businesses are inclined to take out loans because they don’t have to pay back as much.
That makes complete sense. Inflation is way lower than people thought it was going to be. Back in 2018 when the market dropped, people were freaking out that inflation was going to go out of control. That never happened. It barely even got up to 2%, which was the Federal Reserve’s target.
In June of this year it was down to 1.6%. They need inflation to go back up, so they lowered rates. That’s one of the main reasons, other than the fact they didn’t want to overstimulate the economy. If you raise rates really fast it can do some damage later on that you don’t see yet.
The example I used before that is if you have a mortgage and your rate goes up eight times in two and a half years, you’re not going to be happy. You’re going to have a toll on your financial position. This is kind of what happened with the economy.
On an economy-wide scale, that could do some damage. That’s one of the things that lead to the Great Recession in 2008. They raised rates twice as fast as we have in the past two and a half years. It’s good they are lowering it.
Another headline that leads into that is that Powell said it was a “mid-cycle adjustment.” The word adjustment threw people off because this was construed as negative. People thought that just because he said adjustment that this would be the only time they are going to lower. They even asked him if this was a one-and-done deal. He said absolutely not.
They used the words one and done in headlines so many times. They even said it on CNBC yesterday morning. It got thrown way out of proportion. They said it’s not going to be a one-and-done deal. He’s hinting at cutting a couple times in the future. People got scared about this for seemingly no reason.
An adjustment doesn’t necessarily mean one. Even though the economy is strong, this is the middle of the business cycle. It’s a mid-cycle adjustment and adjustment can mean that we are in a period where we are going to lower interest rates two or three times. We believe that the market drop was not deserved, although we understand why it happened.
It was mostly buy the rumor, sell the news. Some of these negative headlines definitely had an effect on that as well. We just wanted to remind you that this is definitely good for the economy. There most likely be more interest rate cuts ahead.
For the millennial portion of this, I want to talk about gaming, which is a big part of millennial culture. I know it’s a stigma, but it’s what we grew up with. We were the first generation to grow up alongside video games.
I remember playing my dad’s original PlayStation when I was four. When I was seven I had one of the best Christmases of my life because I got a Nintendo 64 and it was all mine. I played it way too much and it was great. Personally, I don’t play video games as much as I used to. I know that a lot of people in the millennial generation do play quite often.
There have been studies out there that show that more than two-thirds of millennials play video games at least once a month. That seems low in my opinion based on what I’ve seen from people I know and what I’ve seen online. The popularity is amazing. Seventy-one percent of millennials who do play video games watch video game reviews online or video game livestreaming on YouTube or Twitch.
It’s become a huge industry. Some of these livestreamers people watch make millions of dollars a year. There’s all these tournaments for games like World of Warcraft and League of Legends. These are huge online games where the prize money is insane. At the most recent League of Legends international championship in 2018, the top prize was $6.4 million.
For another video game that’s extremely popular — Fortnite — this 16-year-old kid just won $3 million for winning an international tournament. The money here is incredible. You can make a lot of money as a professional gamer these days. Twenty years ago you would have never thought that was ever going to be possible.
Another thing with online gaming, is subscriptions. Some of the games I mentioned like World of Warcraft and League of Legends are subscription games. More millennials subscribe to these games than they do for cable television.
That’s kind of surprising to me and it sounds really surprising, but I’m not too surprised by it because millennials don’t like cable. You don’t have any control over what you’re watching and when. We’d rather watch something like Netflix where you can watch a whole season at once or jump in at any point in the show we want to.
Personally, I think a big reason that cable is even around anymore is because there are all these restaurants and waiting rooms that always have the news on and no one is even watching. That’s still viewership and it pays their bills. That has to be at least part of the reason cable news is still around.
In my opinion, it’s in its last days and video gaming is something that’s really going to take that market away as millennials continue to grow this industry more and more. I think Gen Z is going to follow in our footsteps. There’s a lot of growth ahead.
From an investment standpoint, this is huge. This is a generational investment that you’d be making if you invested in the gaming industry. On a worldwide scale in 2018, $131 billion in sales were generated from the gaming industry. By 2025 that’s expected to grow to $300 billion. That’s huge.
It’s hundreds and hundreds of billions of dollars are going to be spent on games, game accessories, game subscriptions, in-game purchases and things like that over the next few years. It’s an incredible investment opportunity. The U.S. is number one with $37 billion in the gaming industry. China is right behind us.
China’s revenue is expected to more than double in 2023 to more than $80 billion, which is crazy. Then you have these other markets that are starting to emerge as possible leaders for the gaming industry. We have India, which is clearly a huge market. More than one billion people live in India and it’s a young population.
I believe the median age in India is late 20s. So there’s a lot of people who are just getting into this industry. Internet is becoming more widely available than it was even five or six years ago. I think it’s around 60% of people are connected to the internet now. A lot of those are millennials because they are tech savvy and they want to play these video games.
We have a recommendation in one of our newsletters, $10 Million Portfolio, that capitalizes on the gaming industry in India and Southeast Asia, which is a big emerging market for this industry. India is expected to triple their gaming revenue by 2023. This is a big thing that’s going on in a lot of the developing world.
This is a generational thing, not only here, but all over the world. We have billions and billions of millennials driving this market within the global economy higher. It’s a really interesting thing that’s starting to take place with gaming. There’s so many things included in it.
You can watch it live, subscribe to a game, pay a monthly fee to play World of Warcraft, make in-game purchases, buy phone games, buy games for Xbox, PlayStation or PC. Then there’s VR and all kinds of things driving this gigantic market even higher.
That’s what I wanted to cover as my millennial theme of the week. There’s a great way to get in on this trend today. Search for ETFMG Video Game Tech ETF (NYSE: GAMR). It’s an exchange-traded fund, which basically means you can buy an entire group of stocks for the price of one by investing in this single fund.
You can buy it on any exchange through any broker. It contains more than 60 different gaming-related companies. When you buy this one stock you are actually investing in the entire industry. It’s a great opportunity. I believe this is the best way to invest in as many opportunities as possible in this fast-growing market.
It’s being pushed up by not only millennials, but I think Gen Z is right on our heels with this and they are going to make it even bigger. That’s what I have for this week. This is Ian Dyer and happy Friday and have a great weekend.
Editor, Rapid Profit Trader