Latest / Money Grows on Trees / #225 - Stock Market History Is Repeating Itself

Transcript

#225 - Stock Market History Is Repeating Itself · Money Grows on Trees

0:00
History doesn't repeat, but it rhymes. The longer the bull market goes for,
0:03
the worse the crash is. If you're not totally leveraged and
0:07
you've got multiple income streams, you're prepared for the worst. Worst thing you can do
0:10
is panic to the point where you sell at the bottom. I'm Lloyd James Ross, seven-figure
0:14
investor and entrepreneur, and I've helped thousands of business owners and
0:17
professionals turn financial stress into success. If
0:20
you're stuck in old money habits, overwhelmed by investing, or unsure where
0:23
to start, This is for you. I'll give you the mindset and
0:27
strategies to take control, grow your wealth, and achieve financial
0:31
freedom. It's time to make your money work for you. Stock
0:34
markets are crashing! Again, headlines are screaming, panic's rising!
0:38
Or is it? What you may not realize is we didn't go through a stock market crash
0:42
in the last few weeks of March 2025. We've actually just
0:45
gone through a correction. Either which way, most people are making the
0:48
same mistake they always do. They react emotionally. But
0:52
here's the truth, this isn't new. So in this episode, I'm
0:56
gonna show you what most people are missing and why history might
0:59
just be repeating itself in the worst or best way
1:03
possible. So let's get into it. This is all about stock
1:07
market crashes. And so what people don't realize is
1:10
that it does happen quite a bit. But before we
1:13
jump into the episode, I want to explain a couple of things to you. There are three types
1:17
of market collapses that happen. The very first one is called
1:20
a correction. And that's when the market falls by about 10%. The next
1:24
one where the market falls by 20% is called a bear market. Why
1:29
do they call it a bear market? Because the bear swipes his hand downwards as
1:33
he attacks. And that's why they call it a bear market. The reason they call it a
1:36
bull market when the market goes up by 20% is because as the
1:39
bull attacks, its horns go upwards. That's why there's a bull on
1:42
Wall Street. So that's where you get bear market and bull market from.
1:46
So it's got to move 20% to be a bear market down, 20% up to
1:49
be a bull market. But then of course, there is a crash. And
1:53
a crash is when the market falls by 30% or
1:57
more. And believe it or not, that has happened quite a bit. So in
2:00
this episode, I'm going to go through a market history and
2:03
show you and explain to you when the market has collapsed by
2:06
30% or more and the reasons behind it so that you
2:10
can see it coming maybe in the future. But most importantly, you
2:14
can actually leverage it and use
2:17
it to your advantage. Let's go back to the most
2:20
recent one. Before we dive into the big, big, big ones, let's go back
2:24
to the most recent. In fact, let's go right back in
2:27
time to 1987. In 1987, there
2:31
was a flash crash and they called it Black Monday. And
2:35
it's where the stock market collapsed by, geez, I think the
2:38
Dow fell by about 20% in a single day. And it's where all the stockbrokers
2:42
were actually jumping off buildings, because there was a lot of leverage in the market, and
2:46
there was a flash crash. Now, it wasn't a long, drawn-out crash,
2:49
but the market fell by a lot in 1987, and
2:52
more than it had before. And it really came after a big, long
2:56
bull market. And so it took everyone by surprise. And so
2:59
that was a fairly famous crash in the stock market,
3:03
but it was nothing compared to what was going to happen in the year 2000 because
3:07
after the crash of 1987 The world entered one
3:10
of the greatest bull markets in history, and
3:14
it was the roaring 90s. And in this period of time, the
3:17
likes of the Wolf of Wall Street was in full flight, okay? So
3:20
this is where everyone was making money, hand over fist, and
3:24
yeah, greatest bull market run ever. In fact, I don't think they had a stock market correction
3:28
or any backwards movement for a year for like almost 10 straight
3:31
years. So it was like, make money, make money, make money.
3:35
And the longer the bull market goes for, the worse the
3:38
crash is. So in the year 2000, 1999, 2000, one
3:43
of the greatest crashes ever happened. And it's been coined
3:47
the dot-com bubble. And here's how it happened. So
3:51
on the back of the 90s bull run, a lot of tech companies were
3:54
starting to come into fruition. And tech companies were developed
3:58
because this new incredible technology was invented called
4:01
the internet. And so it took the world by storm, right? flipping
4:06
the way that we communicate is a little bit like what AI is doing right now. It's
4:09
completely transforming the world. It's like it moved us from the industrial age
4:13
into the information age. And so all these new companies were popping up.
4:17
Like, where are the internet? Where are the toy store on the internet? Where are
4:20
pets.com on the internet? Like, all these businesses were moving to
4:23
the internet. And of course, some wonderful companies were created back
4:26
then, like Amazon and some other awesome online businesses at
4:30
the time. that were legitimate businesses. But the reality
4:33
is a lot of them were illegitimate businesses, meaning they were businesses
4:37
that weren't actually earning any money. So back then,
4:40
what you could do is you could get a URL, you could call yourself this business, you
4:43
say you're a tech company, and boom, you have all this backing, all this capital would
4:47
go to you, you could go and list on the stock exchange, and all of a sudden, everyone will
4:50
pour their money into your business. But unfortunately, It wasn't making any money.
4:54
So eventually after this hype, right, zero
4:57
fundamentals, zero reasons to own these businesses, but they were doing
5:01
it because they didn't want to miss out. And he was even pulling in some of the pros, right? So
5:04
almost no one escaped this except for the likes of my hero Warren
5:08
Buffett that told everyone at a Sun Valley event that this
5:11
was very much like cars back in the year 1920. It's
5:16
new technology, like the railroads, like Chula Bolt, like he'd
5:20
seen this before. This wasn't new. So he said to everyone, we're
5:23
sitting out of this one. And of course, everyone thought he'd lost his mind because if
5:27
you don't get in, you miss out, you don't know what you're doing. And all the headlines would say, Warren Buffett's
5:31
lost the plot. And so then eventually what happened was
5:34
this, people discovered that they weren't earning any money. And
5:38
eventually, everyone started to sell. And they sold them.
5:42
And no one wanted to hold the hot potato. So everyone was like, I don't want to, I don't want to. And the whole
5:45
market in the year 2000 absolutely collapsed, falling
5:49
more than 30% very quickly. It was one of the sharpest,
5:53
worst declines in stock market history. In fact, it was so bad
5:57
that a lot of those, the stock market and the NASDAQ, where all those
6:00
tech companies live on the stock exchange, the NASDAQ, It
6:04
didn't recover its peak dot-com
6:08
bubble hype for like 14 years. So
6:11
if you had a board at the peak of the market, you had to wait 14 years to get back
6:15
to where you were. So it was very bad. It
6:18
was a massive crash. A lot of people lost a lot of money. In fact, in those
6:21
days, you could buy Amazon for $6 a share. So some of
6:24
the best businesses got thrown out with the baby got thrown out with the bathwater. But
6:28
without a doubt, it taught us so many financial lessons, like just because there's a
6:32
new technology in town, doesn't mean that those things are
6:35
worth anything. And it's very similar to what's happening in crypto. It's
6:38
very similar to what's happening in AI. Just because the technology is
6:42
cool, does not make the thing that you're buying cool or
6:45
effective. So there's a word of warning. And this has happened before. All
6:49
right. So again, happened with railroads, happened with cars, happened
6:53
with Internet, happening with crypto, happening with AI,
6:56
it's gonna happen forever, right? So just be careful of that. Now, what
7:00
is the crash that came after the dot-com bubble and after the 1987 crash?
7:04
Well, if we look forward, what happened from that point on was the market
7:08
corrected and things were going fairly well again. So in the early 2000s,
7:12
the dot-com bubble had collapsed. A lot of the tech companies got hammered, but
7:15
a lot of other businesses like banks and traditional businesses kept doing
7:18
well. But what happened was this. everyone
7:23
thought that the property market could never
7:26
go backwards. And so a simple idea is
7:29
that land over time appreciates and property grows steadily
7:33
over time. And that was a wonderful, simple concept that didn't
7:37
get taken for granted, didn't get pushed to the didn't
7:40
push the envelope on it. It was just the steady flow of things. But
7:44
then what happened was someone realized, oh, probably doesn't go
7:48
backwards. Why don't we just leverage up and start buying more
7:51
properties than we could possibly afford because we're going to get loans from
7:54
the banks and they're going to lend us the money to buy all these properties.
7:58
Now, here's the thing. At the same time, The
8:02
banks were actually lending money to
8:06
these people to buy property because they also thought the property didn't go backwards
8:10
or down. And they were lending them to people with no jobs and
8:13
no income. They called them ninja loans. And if you ever watched the
8:16
movie The Big Short, they talk about these things called the ninja loans. And
8:20
so these brokers from the banks, in fact, the Wolf of Wall Street was also doing it at
8:23
the same time. He was selling mortgages then as well. They
8:26
were selling these mortgages to people that really couldn't afford it. And if
8:29
you watch the movie, they were actually selling like five properties to strippers
8:33
who actually didn't have the cash flow to fund any of those property
8:36
investments if interest rates went back up. So there was a couple of things
8:40
happening at once. One, people thought property never went backwards. Two, banks
8:43
were lending to people that shouldn't have been borrowing money. And three, they
8:47
were borrowing the money on these things called teaser rates, like low interest rates.
8:51
And at a certain time, the teaser rates would go up and interest rates would go up.
8:54
Because they had no jobs, no income, they were going to default on all these mortgages. But
8:58
to make matters worse is where it got really bad. The
9:01
banks took those mortgages, bundled them together into what's
9:05
called a mortgage bond. And
9:08
they then packaged the crappy mortgages with the good mortgages. Then
9:13
the ratings agencies like Moody's and S&P they
9:17
rated these crappy mortgage bonds with like good ones and crappy
9:20
ones in it, right? They've rated them triple-a. So
9:24
everyone in the financial industry thought that these things were actually
9:28
good Right, and so they basically as the old
9:32
saying goes they polish deterred and then they saw then what happened was they
9:35
actually took these mortgage bonds that everyone thought were great and And
9:38
they then sold them in big portions to countries
9:42
like Iceland. So these countries are buying these massive mortgage
9:45
bonds and are leveraging up to buy more of them because they
9:49
knew that property wouldn't go backwards and mortgages are the safest things ever. And these were rated as
9:52
AAA. And of course, eventually, the world found
9:55
out that there was a massive fraud going on. The banks were lending to the wrong
9:58
people. The rating agencies were rating them wrong. And people were buying
10:02
on leverage at the same time, these crappy mortgages. And of course, when
10:05
that was found out, The whole world pretty much collapsed. The
10:11
banks created the greatest financial catastrophe since the
10:15
1929 stock market collapse and the Great Depression. We were, in fact, on the
10:18
verge of a Great Depression. It was so bad that large banks
10:22
like Lehman Brothers were going bankrupt. Bear Stearns almost went
10:25
bankrupt. JPMorgan bought Bear Stearns, Lim
10:29
Brothers was gone, collapsed, bankrupt. Can you imagine this? The United
10:32
States banks were going broke. So the bank run started to
10:35
happen. People started to freak out and panic. So they should have, because this
10:39
is really bad. And there was all this leverage in the market. And
10:43
until Hank Paulson stepped in and changed that,
10:47
he was the head of the US Federal Reserve at the
10:50
time, and he had to come in and say, hey, we need to loosen up the money and
10:53
provide credit to the marketplace. And if he hadn't done that, we
10:57
would literally have gone through a Great Depression. The world doesn't even understand how bad it
11:00
was. But it was really bad. It was actually one of the greatest crashes ever.
11:03
And what happened was it affected property prices. And this is why even today, people
11:06
are like, property only goes up. Yeah, right. Go back. You weren't even born.
11:10
If you were like 35 and younger, you have no idea what you're talking about
11:14
unless you've read financial history. You just don't. I was
11:19
23 when the 2008 financial collapse happened. I actually watched the TV as
11:23
all these banks collapsed before our very eyes. And my dad said to me, we'll be lucky
11:26
to keep our house. And he was right. Everyone's houses went back by
11:29
50%. They were buying off-the-plan mortgages here, our homes
11:33
here, fell by 50%. I saw people walk away from their deposits. I
11:37
saw builders, developers in business for 40 years go
11:41
broke here, let alone all around the world. So
11:44
property doesn't always go up, just so you know. Banks
11:49
got greedy back then. It was bad. But thankfully, there
11:53
was enough credit supply by the US government to
11:56
maintain a level of order in the banking and financial industry. So
12:00
sadly, the taxpayer bowed out the banks. That sucks. There's a
12:03
lot of regulation. But at the end of the day, it was a massive crash. It
12:07
collapsed by up to 40%. But what was really cool about
12:10
that is that there was incredible deals at the time. Like Warren Buffett
12:13
took $5 billion of Berkshire Hathaway's money
12:17
and he actually lent it to Bank of America to give them liquidity and
12:20
he got a 9% return on that and then he turned it into, they're called convertible notes,
12:24
he turned it into shares in the bank and he 7X'd
12:28
it. He 7X'd 5 billion. There
12:31
was so many cool deals. You could have picked up like cents
12:35
on the dollar back then and the only thing
12:39
that I hate was I had no money because I was just starting my career. And
12:42
I made this promise to myself, I'm like, Oh my God, I wish I had like
12:45
a million bucks, I could have seven x that million like it was crazy. The
12:49
deals around were just mental. Like I remember one person, a
12:53
real estate agent called me up and said, Lloyd, do you want to buy this apartment in service paradise
12:56
for $49,000? I was like, nah. And
13:00
looking back, I'm like, idiot. But because I've
13:03
seen that happen, and I know that this happens, like, A
13:07
correction of 10%, just so you know what we've experienced lately, it
13:11
happens like once or twice a year. Once
13:16
every year, once every 18 months, okay, let's say. A
13:20
20% correction or crash or a bear market, it'll actually happen
13:23
every three to four years. And then an absolute collapse,
13:27
like a stock market crash by 30% or more like the GFC, it'll
13:31
happen every say 12 to 15 years. So
13:34
I'm not even like, Guessing it's gonna happen again
13:38
It will you have to understand it will so the people at the moment that
13:41
are like clamoring up and getting all this Borrowings to buy property at the moment and
13:44
people that are like leveraged up and they think it's all gonna be roses like
13:48
it is I've got some news for you. It ain't like one day this
13:51
will happen again. So how do you prepare for it? Well, the first thing
13:54
is to educate yourself so you can dominate and and leverage it when it happens But
13:58
the other thing is don't overgear Like property can't, a
14:02
good idea becomes a bad idea when it's done to the nth degree. So
14:06
just be very careful if you're getting five, six, seven, eight, 10 properties and you
14:09
owe a lot of money. Interest rates can spike very quickly because in 1974, there
14:13
was a oil embargo and actually spiked oil massively and
14:16
interest rates went to 17%. Now, if all of you got interest rates of
14:20
17% because of an oil embargo, you're all cooked, promise you. So that's
14:23
gonna cause a massive collapse in real estate. Now that's a possibility. So
14:26
it doesn't mean be scared, it means be ready. And so that's why it's
14:30
nice to have a bit of cash always on the side. So when deals like this pop up, you
14:33
can leverage it, you can jump in and take advantage of
14:36
it. But also means if you're not totally leveraged, and you've
14:39
got multiple income streams, you're prepared for the worst because without a
14:42
doubt, this will happen again. In fact, we might be seeing the beginnings of it now
14:46
with AI, because AI is the new internet. So
14:49
you're going to see a lot of this hype happen like the dot com bubble, and all this investment
14:53
may pay back, you may see a bigger crash than what we just saw in the
14:56
last year. Just quickly, if you're ready to take control of your finances, but
14:59
feel stuck on where to start, I have a solution. My
15:02
book Money Buys Happiness simplifies investing and
15:06
wealth building with practical steps to help you achieve financial peace.
15:10
Get your copy via the link in the show notes and let's get your money working for
15:13
you. Now back to the episode. So that is the GFC. And
15:17
the latest one that has happened, the latest panic was of course
15:21
COVID. And this happened not very long ago. It was like five years ago. Can
15:24
you believe it's five years? Five years ago. And of course, what happened was this.
15:28
The whole world thought that this common cold, I don't know
15:32
if you know this, but the common cold is a coronavirus, just so you know.
15:35
All common colds are coronaviruses, without going into too much detail. They called that because
15:38
they got little coronas on them. I don't know, that's how they got a
15:42
pre-med degree. They're just cold. And I
15:45
got it, and I was like, that sucks, but it's fine, I didn't die. And what happened
15:48
was the whole world through social media thought everyone was gonna collapse and die. So
15:52
the whole world and the mainstream media put everyone in a little panic. And of course they closed
15:55
the world. No way they're going to close the world down. No way they're
15:59
going to close airports. No way. No one is this stupid. No
16:02
people are this stupid. I just spat on the mic there. No one is this stupid. I
16:07
was just cleaning it off. No one is this stupid that they're going to
16:10
close the world down. But
16:13
what I learned was never underestimate the stupidity of
16:17
governments and the public. I
16:20
mean, recently we had a cyclone and all the same stupid people went
16:23
in to buy toilet paper. What the hell are you going to do with toilet paper coming out of your wazoo? What
16:27
the heck are you doing? The same thing happened. I'm like, surely people are going
16:30
there. Surely the government's not that dumb. Yes, they are. So I'm like,
16:33
oh my God, I underestimated the stupidity of what happens in panics, okay? So
16:37
there's another lesson learned there that when the world gets to a panic, you
16:40
start to see massive stupidity, all right? So I'm like, oh my God, this
16:44
is actually happening. Now, thankfully I had saved up some money then because
16:47
I'd learned from the GFC. And when that happened, I
16:50
knew that it was a common cold. I knew that the survival rates
16:53
were very high. And I knew that in a
16:58
year or two, we'd come out of this very quickly when they discovered it. So
17:02
I knew that the market would correct very fast. So I thought that this drop
17:06
is a once in a lifetime opportunity. So where do we look to put
17:09
our money? We deployed it into travel companies. And we were buying travel
17:13
companies when they'd sunk by like 90%. And we were buying
17:16
stocks, you know, like across the market. And
17:19
so that we were able to grow a lot of wealth in that period of time quite quickly
17:23
because we knew it was going to correct again. Every storm
17:27
runs out of rain, like every big market collapse has
17:30
recovered. every single one so of course it'll recover again
17:34
just the worst thing you can do is panic to the point where you sell at the bottom all
17:37
right that's what you'd want to absolutely avoid that so that's
17:41
the latest one it was covid it was caused by panic the late the
17:44
the the correction lately has been a 10 one will we see a
17:47
big one in the future it's highly likely when No one
17:51
knows. So you just have to be prepared for it. So even
17:54
massive crashes, whilst they seem really bad, can create massive opportunities
17:58
for you. And of course, history doesn't repeat, but it rhymes. So
18:01
there will be this sort of pattern that happens where there's a boom, then
18:05
there's massive greed, then there's a massive bust, and then there's fear. And
18:08
that whole cycle will start again. But it does create opportunity. You
18:13
have to be ready to take advantage of those opportunities. But also, make
18:17
sure you understand that the media's job is to create panic and noise and
18:20
fear in you. Like it's his job, okay? So don't just jump
18:24
on the news and watch and think, oh my God, the world's crashing, we're all gonna die. No,
18:27
go and do your own research and look for the noise. and look
18:31
for then the signal beyond the noise, all right? Emotional investors lose,
18:35
disciplined, intelligent, educated investors win. So you've
18:38
got to choose, which one will you be? The panic-stricken, emotional one,
18:41
or the disciplined, educated one? Because it does make a
18:45
difference, all right? So here's what you want to do when it happens. The first thing
18:48
to do is just zoom out. step back and understand that the S&P 500, which
18:52
is the market, has grown massively in the last 100 years. It's
18:55
incredible. In fact, if you put $10,000 in 1942 before the war ended, you would now have $54 million. So it's bumpy, but
19:05
the world's going to progress. So don't bet on the end of the world, because even if
19:08
you're right, you don't make any money. So stop trying to time the
19:11
market. Time in the market is better than time in the
19:15
market. Use the downturns to accumulate more assets faster,
19:18
stocks, ETFs, and property, and automate your investing, which
19:21
means start to dollar cost average, which means buy the
19:25
same thing that you're wanting to invest in long term, but buy
19:28
it periodically at the same time. So every month, every quarter, same
19:32
amount, same time, same amount, same time, same amount, same
19:35
time. Because if you were to do that with your shopping, you
19:39
buy the same food, same time each week, sometimes there's gonna be some deals, sometimes
19:42
there's not. But over time, you're gonna average out your buying and you're gonna get it for better
19:46
prices, okay? So don't follow the hype, study history.
19:50
And here's a final thought for you. The market doesn't repeat perfectly.
19:54
But as I said earlier, it does rhyme. So if you understand the
19:57
patterns like I've explained in this episode, you'll see what it
20:01
is all about. And you'll kind of understand, well, it's going to come again. Will I be ready
20:04
or not? And it's going to run out of rain. The storm will actually disappear too.
20:09
So having this understanding is one of the great wealth building opportunities of
20:12
your life. Because if you're young enough, you haven't experienced it before. But I
20:15
promise you, at some point, it's coming. All right. So make
20:18
sure you take this information and absolutely apply it. All right. Because history shows
20:22
us those who stay calm, invested and smart come
20:25
out on top. All right. It's not the end of the world. It's just another chapter in
20:28
a very familiar story. So zoom out. Stay
20:32
the course. If you play it right, this could be the moment that changes your
20:35
financial future forever. So thanks for listening and go check
20:38
out the next episode and the next video on YouTube. Thanks for listening to
20:42
Money Grows on Trees. If you enjoyed the episode, leave a five-star review
20:45
on Apple Podcasts and Spotify and subscribe to
20:48
us on YouTube so you never miss an episode. And if you're serious about building
20:52
wealth, make sure to check out the links in the show notes and follow me on
20:55
all social media platforms at LloydJamesRoss for