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Felix Prehn - Breaking: FED Flips Market with Crisis Rate Cut 📈 + Stock Market News 19 September 2024 · Felix Nikolas Prehn's Podcast

• 0:00
  Speaker 1: Felix, the Fed has delivered a whopping massive rate cut, the biggest one we've seen since 2007.
• 0:08
  Speaker 1: I want you to understand exactly what this means for now.
• 0:12
  Speaker 1: What stocks to buy, what's going to happen here?
• 0:14
  Speaker 1: So let me walk you through it.
• 0:16
  Speaker 1: We'll jump into it straight away.
• 0:17
  Speaker 1: This is the quote of all quotes here from the Fed president, and he says the US economy is in a good place and our decision today is designed to keep it.
• 0:30
  Speaker 1: So he's basically trying to make sure his soft landing remains a soft landing.
• 0:36
  Speaker 1: Now I want to walk you through one the reaction from yesterday, the likely reaction today and the next couple of days.
• 0:46
  Speaker 1: So you understand what's happening next, what I'm actually buying.
• 0:50
  Speaker 1: I'm going to give you the actual stocks and tickers.
• 0:52
  Speaker 1: I'm going to walk you through it, and I also want to play you about a one-minute clip from the SoFi CEO, who's not only a smart guy, but he's in fintech.
• 1:02
  Speaker 1: He's in tech.
• 1:02
  Speaker 1: He's trying to become the Amazon Web Services of banking.
• 1:07
  Speaker 1: So he's got some pretty insightful ideas of what this is doing to the economy and where we should put our money and invest and so on.
• 1:13
  Speaker 1: So let's take you straight into it.
• 1:16
  Speaker 1: The first thing to note is that the bond market jumped on the news, generally speaking, lower rates, higher bond prices, sort of the slightly counterintuitive way it moves.
• 1:29
  Speaker 1: So we are moving from the bottom end of our downward path here, which we've been on nicely up and very, very similar to what our portfolio is doing.
• 1:43
  Speaker 1: You see, we have a teaching portfolio that's literally up 93%.
• 1:47
  Speaker 1: So far this year We've literally made $28,000 on a $30,000 teaching portfolio, and I'll show you what we're going to do next just towards the end of this video.
• 2:00
  Speaker 1: Now, if you want to learn how we do that, I'm running our first ever two-day beginner trading challenge.
• 2:09
  Speaker 1: You don't need to know a thing, it's completely free of charge.
• 2:11
  Speaker 1: It's part of our mission to make a million people financially free.
• 2:14
  Speaker 1: So come and join me on Tuesday and Wednesday for about an hour each evening at phoenixfriendsorg challenge.
• 2:20
  Speaker 1: Grab yourself a seat and learn exactly the three-step system that we employ, week after week after week after week.
• 2:30
  Speaker 1: Now you might think lower interest rates would harm the dollar and your next vacation will get more expensive.
• 2:39
  Speaker 1: Well, not necessarily.
• 2:41
  Speaker 1: You see, we've been trading inside this zone here, drawn in by this little box, and, yes, we dropped out of it yesterday.
• 2:51
  Speaker 1: We dropped below it, but then we recovered to near the high of the day, and a candle that looks like this is known as a hammer candle, and while we went down a little bit, it's generally perceived as quite a bullish candle.
• 3:09
  Speaker 1: Why?
• 3:10
  Speaker 1: Because we dropped really, really, really, really low and then we recovered almost all the way, which means the dollar might well be holding on to its support levels here, so the dollar might not weaken as much as you think.
• 3:28
  Speaker 1: Why?
• 3:28
  Speaker 1: Well, everywhere else in the world is also cutting interest rates.
• 3:31
  Speaker 1: Plus, we've already been expecting interest rate cuts on a large scale, so this one cut doesn't necessarily move the dollar all that much.
• 3:41
  Speaker 1: Now, weirdly, you might think, why didn't we have this is the S&P here, this is SPY or SPX, for that matter, same sort of thing.
• 3:48
  Speaker 1: Why didn't we have a massive rally?
• 3:50
  Speaker 1: Well, we tried, and then we came down the other way, and that's I call that a hammer, upside down, which is what it does when you drop it, and you know it hits your foot.
• 4:02
  Speaker 1: You know how much that hurts.
• 4:03
  Speaker 1: Have you done that before?
• 4:04
  Speaker 1: Yeah, the heavy bit falls first, and that's generally a fairly bearish candle.
• 4:08
  Speaker 1: So it's sort of implying that the highs that we've had here we might well be forming another one.
• 4:14
  Speaker 1: But the first day reaction of pretty much every Fed decision is usually irrational, erratic and usually wrong.
• 4:23
  Speaker 1: Why?
• 4:24
  Speaker 1: Well, us bankers are not usually that smart and we need a grown-up to explain it to us, or maybe a five-year-old to explain it to us.
• 4:32
  Speaker 1: And we kind of think well, if you get a big rate cut, doesn't that mean we're in a recession, doesn't that mean everything is bad?
• 4:38
  Speaker 1: And then you kind of realize but hang on, it's actually good for investment, it's good for consumption because your car loan bills are going down and all that kind of stuff.
• 4:49
  Speaker 1: Companies invest more.
• 4:50
  Speaker 1: So actually this could be a good thing.
• 4:52
  Speaker 1: So I think we're going to see today or maybe tomorrow, a nice recovery from yesterday's mild panic.
• 4:59
  Speaker 1: We're also starting to see that in the future, as I'm making this little recording here.
• 5:05
  Speaker 1: But we need Nvidia.
• 5:07
  Speaker 1: You see, you go up on the chart here in purple, if I can find a purple pen.
• 5:13
  Speaker 1: Yep, in purple here you've got the S&P, basically.
• 5:17
  Speaker 1: And then in orange I think green would have been better, but in orange we've got NVIDIA.
• 5:23
  Speaker 1: And what do you see?
• 5:25
  Speaker 1: Well, you see that there is a schism between the two, a massive gap NVIDIA trading down while the S&P is trading up.
• 5:33
  Speaker 1: Usually that doesn't really work very well.
• 5:36
  Speaker 1: So we kind of need to close that gap, as in NVIDIA needs to catch up.
• 5:40
  Speaker 1: If it doesn't, I think the market rally is in grave mortal danger.
• 5:45
  Speaker 1: So watch out for the Nvidia stock price.
• 5:47
  Speaker 1: But there is good news and I want to walk you through that before I walk you through what I'm going to actually buy here and then also round you off with some Anthony Noto advice.
• 6:01
  Speaker 1: The active money managers have been underweight for quite some time here.
• 6:08
  Speaker 1: They're basically largely underweight in pretty much everything, and that means there is cash on the sidelines.
• 6:18
  Speaker 1: It's like having another 10 star players you can pull up and you can add to your team, because you're only playing with half the team.
• 6:25
  Speaker 1: So all we need is a little bit of momentum up and then these guys are going to start to chase the market.
• 6:31
  Speaker 1: So we might well go much higher towards the end of the year.
• 6:35
  Speaker 1: And retail that's you and me.
• 6:37
  Speaker 1: By the way, they've also been selling.
• 6:39
  Speaker 1: We've been seeing a lot of selling here over the last few days.
• 6:44
  Speaker 1: Why?
• 6:44
  Speaker 1: Probably because I've been telling everybody about the September effect and how September is not a very good month, especially in presidential election years.
• 6:53
  Speaker 1: We would expect October to not be much better usually, although the rate cuts here might help somewhat.
• 6:59
  Speaker 1: So again, that means there is money the green stuff sitting on the sidelines from retail investors who might just think I don't want to miss out on the rally, I'm going to buy the latest thing.
• 7:12
  Speaker 1: You see what I mean, so that could also help us.
• 7:15
  Speaker 1: Now let me show you what I'm looking at buying, and this is of course, not financial advice.
• 7:19
  Speaker 1: I'm not telling you to buy these stocks, but I like to be transparent with you, so I show you the charts.
• 7:25
  Speaker 1: I'll explain to you my rationale rather than just giving you a list, and I hope that'll be a little bit more useful.
• 7:30
  Speaker 1: I've got here a chart of SoFi, sofi, and SoFi is well, it's looking quite good, so let me grab a pen here and sort of scribble all over it.
• 7:46
  Speaker 1: So we basically broke out here over the 50-day moving average line, which is the yellow line there, which is an important metric, and we've had a very, very nice run up.
• 7:53
  Speaker 1: We yesterday managed to exceed the previous high, which was good, but then we closed near the bottom as the market sort of took a bit of a panic.
• 8:03
  Speaker 1: Oh my God, it must be terrible that those bankers bastards are cutting rates.
• 8:08
  Speaker 1: So much Sorry those esteemed protectors of our wealth, and I can't do it.
• 8:17
  Speaker 1: Anyway, you know the Fed lot that racket over there.
• 8:21
  Speaker 1: So, free market as you can see here by this little dotted blue line, we're trading above the previous highs again, which is rather glorious.
• 8:30
  Speaker 1: So I am likely to use options to do this, because right now, options are quite cheap when IV percent don't mix up IV and IV percent, but IV percent is pretty low, then typically options are very cheap and therefore it might be an interesting thing to do and I'll likely do that.
• 8:47
  Speaker 1: So that's one thing I'm looking at.
• 8:50
  Speaker 1: Another fintech play I'm looking at is PayPal, for similar reasons.
• 8:54
  Speaker 1: Well, we've actually had a buy signal on this here since the 13th of August and we've beaten the market by 60%.
• 9:03
  Speaker 1: So, yeah, the indicator hasn't actually made money, but if buy and hold would have lost you 64%, so it's done a heck of a lot better Indicators like our AI indicator here.
• 9:14
  Speaker 1: I think they're tremendously useful to give you buy signals, but you still need risk.
• 9:17
  Speaker 1: Useful to give you buy signals, but you still need risk management If you just follow the exit signal as we give it to you.
• 9:22
  Speaker 1: Like, buy here was good right, but you should have gotten out here or there rather than waiting all the way till down here.
• 9:29
  Speaker 1: So for that you still need some manual risk management which you can automate, and I'll teach you that next week if you come and join me at the challenge we're running.
• 9:37
  Speaker 1: So why am I optimistic?
• 9:39
  Speaker 1: Because, similarly to the previous stock, we had these highs here.
• 9:43
  Speaker 1: You see, here and here, and yesterday we didn't quite break through it, but pre-market we're trading above the previous highs and that's a nice bit of momentum there to potentially get us much, much, much, much higher.
• 10:00
  Speaker 1: So again, paypal, I'm looking at that again.
• 10:02
  Speaker 1: I'll probably use options for that.
• 10:04
  Speaker 1: Now I'm also watching very closely the crypto space because I think, typically falling interest rates, the crypto space does very, very well.
• 10:12
  Speaker 1: Now we have here MSTR MicroStrategy, which is one way of doing it.
• 10:18
  Speaker 1: Obviously, individual crypto coins can do it.
• 10:21
  Speaker 1: There is Coinbase, there's a bunch of other things CLSK and so on.
• 10:24
  Speaker 1: You could look up.
• 10:25
  Speaker 1: But let's just look at this one here and we're kind of breaking out.
• 10:29
  Speaker 1: Depending on where you put that, we're kind of sort of on the cusp of breaking out of our long-term downtrend here.
• 10:38
  Speaker 1: Now we're still below the yellow line, which is the 50-day MA, and that isn't brilliant.
• 10:43
  Speaker 1: So I'm waiting for a little bit more of a pop here to sort of 143 or so, to kind of get confirmation that we're out and above that.
• 10:51
  Speaker 1: Now, if you're a particularly cautious individual, you could also wait till we exceed the previous high here, which would be around the 150 mark, which is also where market resistance sits, and then go bullish on the thing or not.
• 11:05
  Speaker 1: Obviously, do your own research.
• 11:08
  Speaker 1: The story that's probably talked about the most is IWM, the Russell small caps.
• 11:13
  Speaker 1: They should apparently do incredibly well when interest rates come down Now, as long as we don't get a recession, because otherwise the small guys suffer a great deal.
• 11:22
  Speaker 1: So what are we looking at here?
• 11:27
  Speaker 1: Well, our AI indicator gave us a buy signal here actually three days ago.
• 11:28
  Speaker 1: We did break through the 50-day moving average line here, which is good.
• 11:31
  Speaker 1: I have drawn in two lines here.
• 11:33
  Speaker 1: One was the high from 26th of August and the other was sort of the July highs over here.
• 11:39
  Speaker 1: You know there, there, there and here and there and lots of them.
• 11:43
  Speaker 1: So I'd like us to break out above 225.
• 11:46
  Speaker 1: Now yesterday we literally hit our head at 225.
• 11:49
  Speaker 1: We didn't quite make it, but I think there's a pretty decent chance that we might do it today or the day after.
• 11:54
  Speaker 1: So I might set up a buy order at that price point.
• 12:00
  Speaker 1: So I don't actually have to manually execute it to do it for me, and I think there's a fairly decent chance I'll do quite nicely with that.
• 12:07
  Speaker 1: But that's of course again just my perspective.
• 12:11
  Speaker 1: The other thing I'm looking at is industrials.
• 12:12
  Speaker 1: Industrials have a lot of capital expenditure machines, factories, robots, that kind of thing and they typically finance them with debt, with borrowing.
• 12:22
  Speaker 1: They go to the bank and they borrow.
• 12:24
  Speaker 1: Borrowing was very, very expensive in this recent couple of years.
• 12:29
  Speaker 1: So with that big half a percent cut and likely another half a percent cut at the least till year end, two more quarter point cuts would be my conservative estimate.
• 12:40
  Speaker 1: There these guys are going to be able to do what they do much more cheaply and therefore they're likely to do much more and therefore the guys who make the robots, say, will get more orders from the guys who build other stuff with it and becomes a self-fulfilling prophecy of an upcycle.
• 12:56
  Speaker 1: So this looks pretty optimistic and what we've seen here is that we are breaking out above the 30th of August high, but we are also just every high just goes higher and higher.
• 13:08
  Speaker 1: You see that sort of the upward trend.
• 13:10
  Speaker 1: So it looks pretty sweet.
• 13:13
  Speaker 1: Maybe we're a little bit late on that rally, but caution is often better than being early.
• 13:18
  Speaker 1: So I quite like the setup.
• 13:23
  Speaker 1: That's something I'm looking at.
• 13:24
  Speaker 1: And then into the finance world regional banks.
• 13:29
  Speaker 1: They've been hammered by their idiotic inability to understand what hedging is.
• 13:34
  Speaker 1: And it's okay, most people don't know what hedging is, but if you're running a bank you should understand what hedging is, so you should hire somebody who does so.
• 13:41
  Speaker 1: They bought all these long-term bonds at, say, $100, but they were only paying maybe 1% interest when interest rates were low.
• 13:51
  Speaker 1: And then, as interest rates shot up from 1% to 5%, those bonds lost a lot of value and they now went from $100 value to maybe just $60 value.
• 14:02
  Speaker 1: So suddenly these guys had a massive minus $40 loss on their books and most regional banks are therefore basically insolvent.
• 14:11
  Speaker 1: As rates come down, the problem gets solved for them, not their genius or anything, just the problem gets solved.
• 14:19
  Speaker 1: So we have this sort of hang on, not exactly a perfect trend, but you get the idea.
• 14:29
  Speaker 1: We've had this kind of even on the rally up here.
• 14:31
  Speaker 1: A bit of a downtrend here.
• 14:32
  Speaker 1: One, two, three.
• 14:35
  Speaker 1: We have the 50-day moving average line.
• 14:37
  Speaker 1: We took that out about four days ago and we're now at least pre-market trading above it.
• 14:42
  Speaker 1: We're trading above the previous high, so regional banks might well be the comeback kid for 2025.
• 14:50
  Speaker 1: So I quite like this story A bit broader would be just to look at financials overall.
• 14:57
  Speaker 1: Xlf it's another big etf out there.
• 14:59
  Speaker 1: That's mostly large banks, less the little ones, and that's also looking like it wants to take out the highs here from early september and it's generally on a very, very nice uptrend and, um, it looks like again something we can look into.
• 15:17
  Speaker 1: Now.
• 15:17
  Speaker 1: I might actually pick some individual finance stocks here rather than go for the ETF, but it gives you this is probably a safer way of looking at it and an easier thing to research and understand.
• 15:28
  Speaker 1: So have a look at this and that's basically what I'm looking at A bunch of stocks and sectors that I think will outperform on the basis of rate cuts.
• 15:37
  Speaker 1: And there's still a warning September is still a little bit dubious.
• 15:43
  Speaker 1: Usually, october is usually not great in presidential years, so I'd still be a little bit cautious.
• 15:47
  Speaker 1: I'm going to have stop losses on all of them and the whole thing will be set up automatically and everything like that.
• 15:52
  Speaker 1: And if you want to learn that, come and join me next week and let me play you a little clip from the SoFi CEO here.
• 16:00
  Speaker 1: So you are fantastically well informed about what he's saying, not just about SoFi, but about the economy at large.
• 16:10
  Speaker 2: We don't see Fed action of 25 to 50 basis point cuts, then the concerns on the macroeconomic front will become a reality and we will go into a recession.
• 16:18
  Speaker 2: But I think the Fed understands the importance of the cuts that are coming.
• 16:22
  Speaker 2: I hope they move with 50 basis points.
• 16:24
  Speaker 2: It gives them more optionality, it'll be more impactful to corporate America and it will definitely be more impactful for the consumer and I think waiting to move that amount could be taking more risk than is necessary, given where unemployment is trending and given where we're seeing things like Joel's report today.
• 16:40
  Speaker 2: The other thing I don't think gets talked about enough is what are corporations thinking right now?
• 16:45
  Speaker 2: What are they doing right now?
• 16:46
  Speaker 2: Well, they're doing 2025 planning.
• 16:49
  Speaker 2: They're thinking about their hiring plans for 25, their technology spending plans for 25.
• 16:53
  Speaker 2: If they could lower their interest expense by 75 basis points with that amount of rate cuts between here and next year, they're going to go in more optimistic on spending, which will help our economy and hopefully help unemployment as well.
• 17:05
  Speaker 1: There you have it, all the information in a short little clip that you need to know to be the best prepared investor out there.
• 17:12
  Speaker 1: Any questions you have put them in the comments down below.
• 17:14
  Speaker 1: Come and learn how we have made 93% so far this year in our trading portfolio.
• 17:20
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• 17:32
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• 17:34
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• 17:37
  Speaker 1: So come and join me, keep learning, keep enjoying it.
• 17:40
  Speaker 1: Bear in mind the market can take a little bit of time to absorb news like this.
• 17:45
  Speaker 1: As I say, not the smartest cookies on Wall Street always, and I wish you a glorious day and I wish you a glorious trading day.
• 17:55
  Speaker 1: If you wish Investing day, be a little bit cautious would be my advice, and I hope to see you live here tomorrow.
• 18:05
  Speaker 1: Same time, same place, all the best.
• 18:06
  Speaker 1: The market's in turmoil and some investors are starting to panic, but what if I told you that this chaos might actually be our greatest opportunity?