Is a May 2020 Stock Market Crash Coming!? Probably
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Today we talk about the state of the stock market and if a stock market crash is coming in May 2020 or the summer in general… The stock market keeps going up for the past 6-7 weeks. A stock crash is due to happen again as valuations have gotten way stretched. The economic numbers are likely to be bad for a while. We need another stock market crash to be quite frank. This is a recession that will take years to get over fully.
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Well here we are recording this on April 30. It’s a Thursday here at about four or 5pm in my humble abode here in Las Vegas. Some people call this most neat city in the world, man, but not when the strip is closed. Okay, so recording this video and what we’re going to talk about here today is well, the stock market crash in May of 2020. are we setting up for a stock market crash in May? And what about through the summer?
Okay, I want to give you my perspective. I’m going to give you the facts first, then we’ll get into my opinion and we’ll go from there. Okay, so hope you guys enjoy this video. As always, make sure you smash the thumbs up button, leave me a comment and what’s your opinion is on the state of the stock market.
I would love to hear from you guys as well down there in that comment section. Okay, now, if you’ve been in the stock market for any amount of time, you’ve probably heard this expression before it’s sell in May and go away. Okay. And it’s expression. I don’t know when it got popular.
But you know, I’ve been in the stock market for the last I don’t know 12 years. And they always talk about this every time when you kind of go into may they talk about selling may go away and it basically means sell your stocks come back after the summer rebuy stocks, okay.
I don’t believe in this. I’ve never done this okay. But it’s a famous expression and you know, it is what it is okay. But we’re really going to talk about the stock market crashing that’s our focus for this video. So let’s start with the facts.
Okay, that facts, NASDAQ is down less than 1% year to date. Okay. Keep in mind the ronnie Rona once in 100 year event, and the NASDAQ is down less than 1%. The s&p 500 is down less than 10% once in 100 year event has hit the world economy and the s&p 500 is down less than 10%.
Okay, let’s go through some more facts. Another 3.8 million people lost their jobs in the US last week as a Roni Rona continued to batter the economy, the pace of layoffs appear to be slowing. But in just six weeks in unprecedented 30 million Americans have now saw unemployment benefits. And the numbers are still growing.
The latest figures from the Labor Department released on Thursday showed a fourth consecutive week of declining claims. While the trend is encouraging the rate of losses means us unemployment is still on course to reach the greatest, the highest levels unseen since the Great Depression of the 1930s.
Okay, let’s go ahead and look at this chart here. So this shows you December unemployment, the actual number right around 3.5% January number around 3.6%, February 3.5%, we had a very healthy economy, things were looking pretty dang good. Let’s put it that way.
Okay, strong, strong, strong, it was a year to be excited for. And then things started to falter. As rhony took off, the economy started to close March, unemployment hits 4.4%, which is quite a substantial, you know, move up from February, but it’s nothing, okay, we’re looking at April unemployment likely to come in at 20% Plus, okay, real unemployment rate of 20%.
Plus, me May, and this is assuming this is assuming that at some point may whether it be in the middle of May, or the end of May, some companies get, you know, back up and running, the economy starts talking back up. Even if that happens, likely, the real unemployment rate will be somewhere around 25%, if not more than 25% in May.
Okay. And assuming the economy restarts at some point in May of 2020, then likely June in July could decline, it could see some sort of declines in unemployment rate. But the key word is it does have to restart in the month of May at one point and we still don’t know how that’s going to shake out.
And the other key thing is we don’t know you know how fast things come down. if let’s say the unemployment rates at 25%. When the economy starts back up, what does it start to fall to like 22%? Is it like does it fall to 20%? Does it fall under 20%?
How does all that shakeout Okay, so that’s just what we know. And what we also know is, hey, if this happened, the United States of America, people are losing jobs massively, right. Businesses are seeing declines, obviously, because of Roni, Rona, then this is happening likely worldwide.
It’s not like this is just United States. And this is only one hit. Now this is likely happening worldwide, every country in the world. And keep in mind, a lot of these corporate earnings. The lot of the you know a lot of these companies that are global companies can get 10%, two, sometimes even 30% of their epcs in the revenue from countries outside of the United States outside of Europe and outside of China.
So which means some of these other countries didn’t have as good as systems in place to kind of handle a situation like this. So those countries, those job losses and the possibility of those kinds are struggling a lot of the next few years could absolutely hurt corporate earnings for several years out.
Okay, so some more facts here, US GDP shrank 4.8% in the first quarter amid the biggest contraction since the financial crisis, okay. And keep in mind, you know what, it’s almost a guarantee that the number we’re going to see next quarter is going to make that number of 4.8% look like just a small insignificant number, like almost every economist out there has has the GDP going down between 20% and 40%.
Next quarter, you know, negative GDP numbers, like we’ve never seen in modern history. Okay. Google McDougal to cut marketing budgets by as much as half directors warned of hiring freezes, man. Oh, man. I mean, when you see Google pulling back yet, gotta get a little bit scared.
Okay. When you see a headline like that, you know, there weren’t that many headlines that could really strike some fear in Yeah. But goodness, when you see Google McDougal saying we got to pull back a little bit here. We got to cut our marketing budgets by as much as half.
And we’re going to think about, you know, hiring freezes. You see stuff like that from Google McDougal, you should be a little a little worried. Okay, a little work. That’s Google, we’re talking about, you know, what are the arguably the best balance sheet company in the entire world?
One of the strongest companies in the entire world, one of the most profitable companies in the entire world? Okay. What about Jeff Bezos, the richest man in the world? What did he just tell his shareholders, Jeff Bezos tell shareholders to take a seat, okay to take a seat.
He says don’t even worry about profits here. And here, you know it over the next year or two. Don’t even worry about them. Okay? Don’t because we’re not gonna, we’re not gonna focus on profits for a while. Okay. And when you see Amazon going into invest every dime, we have an inch back into the business.
That basically means there’s opportunity that Amazon sees out there because of a lot of weakness and a lot of markets. And they say we got to go ahead and take advantage of this. Okay. And Amazon did this for years until really, really, like past few years, Amazon started to focus more and more on profits.
But now, here we are in a really tough situation. And what is Amazon doing? They’re gonna invest every dime that comes in on this business right now. They’re gonna worry about growth and growing during some tough times, Jeff Bezos, like shareholders, you know, take a back seat for now. Okay.
Don’t think about profits, we’re not going to be having the profits coming in anytime soon. Okay, nine out of 10 companies in s&p 500 are being hurt by this. Let’s be very clear. Maybe for every one out of the 10 companies in s&p 500 that is somehow benefiting from the Roni Rona situation.
There’s nine companies that are like that, they’re going through some struggles, some of these companies are seeing revenue declines of 1020 30%, some of these companies have had their businesses completely shut off, where they’re going to actually see revenue declines of 5080 or 100%.
The You know, this is massive mill, if it wasn’t bad enough that most of the stocks in the stock market are likely going to see the earnings or revenue, everything declined massively. On top of that, you got to add on to the fact that most of these companies out there, mostly public companies that you and I are invested in, right, or we could invest in if we wanted to, right, their debt loads have gone were up massively.
Almost every single one of these sp 500 companies has added massive amounts of debt to their balance sheets, okay, they’ve either issued more shares out there, they’ve taken out bonds, they’ve taken out, you know, bank debt, they’ve basically drawn down on their credit facilities, because they’re just trying to make it through to the other side when their business can actually open back up.
Okay. So Meanwhile, all these companies you’re buying into, they’ve all got worse balance sheets than they did before. Unless there’s some special situation where some company that just, you know, didn’t like like an FB like maybe a Google McDougal like an apple, something like that, where it doesn’t matter, they just.
They’re gonna make a lot of profits from it, or what they just won’t make as much, unless it’s one of those special situations or Costco, maybe a Kroger or Walmart, something like that. One of those special situations outside of that all these other companies are increasing debt massively in most of these companies in the stock market are seeing their credit ratings go down.
Which means it’s going to become more and more expensive for them to take out debt, then keep in mind, this is another thing not just that a lot of these companies have taken out debt a lot of these companies have been desperate to take out debt.
So which essentially means the interest rates they’re going to have to pay on the money just to get through the other side is substantial. Right? I saw that you know, the biggest example of this was you know, a company unfortunately I was involved with and it’s still involved with CCL right?
They had to take out debt just to make to side and 11 and a half percent that’s ridiculous k before they could have probably taken out debt four or five movies 6% would have been high for them. Then also you have to pay 11 and a half percent you have to do it because you’re desperate.
So all the almost all the stocks in the stock market are you know, have worse balance sheets in the head literally two or three months. ago, and that makes them What? not as attractive. Okay, growth of the Fed’s balance sheet slows hitting new record of 6.7 trillion and latest week.
Okay, the Fed’s balance sheet is now at a record of 6.7 trillion. We know the feds trying to backstop everything we know, you know, the feds gun is trying to do everything in the feds power to basically try to help the situation, the only thing is.
You know, at the end of the day, what’s going to have to happen is economy’s gonna have to open back up, and everybody’s gonna have to go spend money and all these businesses and corporations again, to get things back on the right track, the Fed can’t make somebody go and want to go to the baseball game and go spend money and do that the Fed can’t make somebody want to buy a new, you know, $1,000, flat screen TV or something like that the Fed can’t do that.
They’re trying to do as much as possible to help. And they’re added to the balance sheet ridiculous. And I know a lot of you guys have probably seen this meme, let’s put this meme up. Okay, the J pal. You know, this is popular in the stock market community right now, as you know, they’re trying to do everything possible to help out with the markets and to help out with this situation.
But the fact is, the Fed’s balance sheet is just getting to ridiculous levels. And it’s probably going to continue to climb as Lord taught that it could go to 10 trillion with a tea. It’s unbelievable. Okay, so that’s let me put them in the shoe. A little scenario here. Okay. Let’s say I fell asleep for two months.
I don’t know, I went into a coma just while I went to bed. And I just couldn’t stop sleeping. And I was asleep for two like the last two months. And here it is. It’s April 30. You wake me up. And you just tell me everything that I just went through on those slides.
You tell me about the unemployment. You tell me about GDP. Tell me about all the debt that companies have taken out how the fact that corporate earnings are down massively, you just run through all those slides we just ran through, okay. And the first thing I’m gonna do as I say, I’m never sleeping again.
Okay, what the heck, I go to sleep for two months and just the world falls apart can never sleep again. Okay. And then you go ahead and you ask me, you say, Jeremy, how much do you think the stock market is down? You know, I just gave you all the information.
And so I’m like, dang, I’ve been asleep for two months. Let me start. Probably 50% Plus, yeah, yeah. based upon what you just told me, I would say the market is down. 50% Plus, the Dow was at 927 28,000. When I went to sleep, so I don’t know, it’s probably at 14,000. Now, maybe 15,000. somewhere around there. Roughly.
That sounds about right. Okay. And then you say Jeremy here? No, here’s the situation. The Nasdaq is down 1%. The s&p 500 is down 10%. I would have laughed at you and say quit playing me that there’s no way based upon what you just told me. There’s no way possible that NASDAQ is down 1% and sp 500. Down 10%.
Like Jerry, let me pull it up on my tablet here. Okay, NASDAQ down point nine 3%. Year to date. s&p 500 down 9.85%. Okay, that’s it and go back to sleep because nothing makes sense anymore. That nothing makes sense. I must go back to sleep at this point. Cuz that’s just ridiculous.
Okay, absolutely ridiculous. Okay. So that’s the facts. Let me give you my opinion. Okay. The market needs a rough summer, we need to see the market go down. I’m gonna be quite frank with you. We need a rough summer, we need volatility to come back. We need worries, we need the doom loop to get going.
Again, the the negativity out there. It’s what’s actually needed in the market. Usually I say that’s, you know, we don’t need that stuff in the market. But right now, I’m 100% on the on the train that we need negativity in the market, we need the market to go down the stock market, not just because I want to buy stocks for cheaper but just because these valuations don’t make any sense on a lot of these companies right now.
And the fact that, you know, the market starting to price in best case scenarios is a little scary, here’s my opinion on this, unemployment is probably going to stay up, you know, up above 10%. For one to three years, I think one year from now would be best case scenario that unemployment gets under 10%.
Again, I think it’s gonna be really hard to see, when Keep in mind, when economy starts back up. It’s not like everybody’s gonna run out and spend all this money all sudden, it’s like, oh, everything’s back to normal. That’s not the way this is going to work.
A lot of people, especially if they have any type of, you know, negative health condition, or they’re just worried in general, about getting running, run it, they’re not going to go out, especially if we start to see cases go up and up and up. Then when people can say no, no, no.
So unemployment in my personal opinion, the best case scenario is it gets under 10%. And a year from now, in my opinion is gonna is more like two to three years out, and we could see unemployment under 10%. It’s gonna be a while and when you’re talking about double digit unemployment for one to three years, you’re talking about a really weak economic situation.
Okay. That’s going to be you know, keep in mind during the great financial crisis, unemployment was above 10% for only us You know, like a few months, like, it wasn’t like it was an extended period of time. In this situation, I’m looking at at least 123 years, my personal opinion, I would be shocked.
If magically, you know, the economy opens back up and all of a sudden unemployment back to, you know, 564 percent again, like that would just be ridiculous and it just doesn’t make doesn’t make anything sense. Okay. corporate earnings, I think they’re gonna take at least one to three years to come back at least.
Okay. And keep in mind, this is just coming back to where they’re at. I think it’s super unrealistic if people think all these companies and the s&p 500 are going to have amazing earnings when the economy does open back up, okay. You know, I own some stocks that are hit severely by us Wynn resorts would be a great example, right?
Macau ggR is awful right now, Las Vegas strip is still closed, Wynn resorts is not going to see earnings, in my opinion back to 2019 levels for least two to three years. And I’m fine with that. I’m willing to hold that stock. But do I want to go buy the stock here today?
Heck, no, I don’t, I’ll hold it. But I need the stock a lot lower based upon the fact that it’s going to take, you know, probably several years, if not longer than that, for the company get back to where it was. So, you know, it’s I think the stock market thinking corporate earnings is coming back here overnight.
It’s unrealistic. It’s not going to happen. Okay, dividend payments. We know, a huge portion of the market loves their dividend payments, and they invest for those dividends, okay? And what do they go ahead and do usually with a lot of these individuals and funds that that get the dividend money, they go ahead, take that dividend money, reinvest it for more more dividends, right.
But here’s the facts, dividend payments are going to be limited for the next two to five years in a major way by most of these companies. Yes, you’re going to have the special situations like an apple stock, that will continue to up their dividends, because it’s Apple, okay.
And you’ll have other companies as well, that have really low payout ratios, and are still going to be very profitable. Even if we have a recession that last, you know, few years, you’ll have definitely some companies that meant they’re paying out dividends, but most of these stocks, they’re gonna have limited dividends, a lot of these stocks have suspended their dividends, and probably won’t bring them back for at least one to two years from now.
Okay, at least one to two years. And when they do bring them back, they’re probably not going to fully bring them back. Meaning that if they were paying, let’s say 50 cents a share, when they bring that back, they’re probably not gonna pay 50 cents a share the play pay 25 cents, or something like that. So dividend payments limited for the next two to five years.
Why is this? Well, earnings for most, these companies are going to be down for a significant amount of time. And I just don’t see any way around that there’s no way these companies earnings just for all them just fly back. It’s not happening.
For most of them, it’s not happening, okay. And debt loads have gone way up, which means interest payments on the debt have gone way up. And if a company wants to pay off that debt, especially if they take it they have taken out any you know, high interest debt, they have to go ahead and do so with the profit money that will be coming in rather than pay out dividends, okay, earnings down debt up, that’s just a bad thing for corporations.
And that’s going to limit dividends. And keep in mind some of these industries that have taken some actual government bailouts, some of them are going to have limits on how much they can pay on dividends, just like the banks do, right? You know, a bank can just pay out anything, JP Morgan just can’t pay any dividend they want.
They have to get government approval to do that. Goldman Sachs just can’t pay out any dividend they want. They have to get government approval to do that. Okay. And, and, you know, the airline industry and some of these other industries that are getting bailed out from the government.
You know, if you’re expecting huge dividends in the next year or two, don’t bank on it. Maybe five years from now you can maybe 10 years now you can, but but not today. Not tomorrow, not next month, not next year. That’s just facts. Okay, money, velocity has never been turned off like this in modern history, money velocity.
What I’m talking about essentially is, you know, you spending money at the local restaurant, and you know, the restaurant makes money off that they can hire more employees, they can expand to another location, right? The busboy makes money off that right, the server makes money off them, the producer that sells food to the restaurant, they make money off that right?
Maybe they got somebody that that sings at the restaurant, they make money off that. And so there’s all these people that make money just based upon the fact that you and other people go to this restaurant, right? And then all sudden, they’re shut down.
And you’re just you’re just turning off the money velocity. We’ve never had this happen in modern history, where you just turn off money velocity for an extended period of time. It’s just dominoes rolling the wrong way in a massive way. And at first when the ronnie Ronnie started, it was like, okay, maybe if we shut down the economy for a few weeks, it things will be okay.
And then it went for a month. And now we’re we’re approaching, you know, we’re going to be approaching two months and talk that we could have a third month before the economy reopens. And so money velocity is never been shut down like this guys.
And this is something you really should worry about. And it should be something that we all are thinking about. Like who knows how this starts back up. Doesn’t matter. You can you can do projections. You can hope you can Hope it all comes back fine.
That’s just hope. Okay, that’s unrealistic. Now we’re also starting to get some early signs that the stock market might be ready for a big fall very soon. Okay, we’re starting to get some early signs here. It was on stock. So Amazon reports earnings, which actually were pretty amazing on my personal opinion, revenue beat big time.
And, you know, people had pretty high expectations for Amazon. The earnings were strong from Amazon, they really were the stocks down $118 after hours, apple, you know, I thought Apple did a lot better than I thought, I’ll be completely honest. Considering the situation Apple’s in right now.
It’s, it’s, you know, it’s a tough market out there. And so for Apple to report, the numbers reported, I actually thought they were pretty dang good. You know, for what, for the circumstances, pretty dang good. Apples down 2.6%. After hours, when you see moves like that, and Amazon, you know, report some amazing numbers and the stock falls in Apple actually reports some pretty amazing numbers in themselves.
Considering the circumstances and as false as well, it could be a little sign that maybe some of those big tech names have gotten overextended and maybe overextended quite, quite substantially. And, and they’re honestly ready for a big fall, because there’s just, you know, there’s not that much more more momentum in those names.
It’s just it’s been played out. It’s been played out, okay, look at Tesla, you know, Tesla, it went from a situation the stock opens at 70, you know, it was looking great in it after hours yesterday was up like 10%, it opens up big, and stock slowly starts to fall, and then it just continues to fall for the rest of the day.
It just completely keeps falling for the rest of day. And it goes from situation where Tesla stock was up huge to being down. And we know Tesla stock is, you know, I don’t want to call it one of the faces of the stock market. But honestly, it is one of the faces of stock market.
Like it’s one of the most talked about stocks, it’s one of the most exciting stocks in the market. And for that, for a stock like that to show that type of weakness throughout the day and just consider just selling on selling and selling and selling throughout an entire trading day.
And for it to go from 870 bucks to 780 at the close. And by the way, after hours is down to 765. This market might be played out a little bit. Okay, this market might be played out a little bit. Keep in mind if we pull up a 2007 through 2009 stock market chart.
This was obviously during the Great Recession. What do you see there? You see the market had several bounce backs where it looked like okay, we’re coming back, it’s getting better. And then you’d have a big fall. And you’d be like, okay, that that was it.
Now we’re coming back, look it up and up and up. And then a big fall. And you had that happen, you know, 567 times from the basically when the when the recession broke out to where the stock market bottomed in March of 2009, you had to happen several times, there were a ton of rallies that lasted either a few days, or a few weeks, or even like up to a month or so.
And it looked like oh, everything’s good. And so that’s what I definitely think is possible. We’re in right now we’re in one of those situations where it’s like, oh, everything’s fine. And then also boom, the big the next big drop happens, you know, that happens many times.
The fact is, soon, the truth will come out soon, the truth will come out. And the truth can’t come out until once these economies open back up. That’s the biggest thing. Keep in mind, a lot of these analysts have not brought down the s&p 500 numbers that much because they have no clarity.
And what do we hear from mostly CEOs of these companies, most of these executives, they have no clue, they have no conception of what they’re going to have for revenue, epcs net income, anything right now, most of these guys don’t, because they don’t know when the economy’s open back up. When it opens back up.
They really have no clue how strong or weak their business will be. And it’s not their fault. They just there’s too many unknowns right now. It’s just facts. Okay, so soon The truth is gonna come out. And you know, unless the truth is amazing, which the stock market is pricing in, like an amazing situation, be ready for a big fall in this market?
Okay, I think that I think, you know, everybody thinks, whoa, when the economy opens back up, that’s when the market is really gonna start going up like crazy. We’ll see about that. Okay, we will see about that, you know, just like everybody thought the market was going to continue to go down, the market goes down 19 819, k, 18k, and the Dow, and everybody’s like, hold, you know, look at all this bad news that’s about to come out.
And what happens, the market goes up and up and up. And now we’re in a situation that obeys, like all economies about to open back up, knows when the markets going to really get good. And it’s like, Huh, okay, we’ll see. We’ll see. Okay, the truth. You know, the truth guys remember that?
A Few Good Men classic movie classic line, and the truth is gonna come out soon. And we’ll see if the stock market can handle the truth. No, in terms of me, you guys know that I am still holding most of my positions in the stock market. I still have a considerable amount of my money, invest in the stock market that you guys do know. And I got a lot on the sideline that I’m ready to deploy but I am not deploying today.
I won’t be deploying tomorrow and I probably won’t be putting money in the market for at least a few weeks. I need the market considerably lower from now. Considering the mass Have risks to corporate earnings for possibly the next few years like the the the stock market is just not pricing in the situation.
I think that’s really going on here. And until that happens, I’ll be happy just to hold the stocks I do have and just saying, you know what, unless there’s some type of special situation like an 80 stock oil tanker that’s making a ton of money, let’s there’s some type of really special situation. I’m like, right now, I’m just good. I’m just good.
And that’s where I’ve been for the last few weeks. And that’s where I’ll continue to be unless the economy bounces back super strong. I’m like, hey, everything’s great again, or unless we’re in a situation where the market falls dramatically. Outside of those two scenarios.
I’m not really interested in buying, you know, 99.9% of the stocks in the stock market right now. So hope you guys enjoyed as always, let me know your opinion in that comment section. As always, don’t forget to smash the thumbs up button before you leave. Thank you for watching and have a great day.