 Good day fellow investors, yesterday while I was filming the video I said that the market is flat and that I hope it will remain like that. It didn't. It was a terrible day yesterday, 2% down for the week, 6% down and the SAP500 is in negative territory for the year, 3.19%. This shows how fast things change in the market. In every stock market this has been the case forever. And in line with that we're going to discuss the fund of flows, how much money went out of the market. We're going to discuss tech stocks, even if we touched on that yesterday, we're going to discuss the Fed, extremely important news overshadowed by what's going on. We're going to discuss tariffs, how that might impact earnings and stocks. I'm going to give you the basics of what to do now, which is I think what you all want to know. Then we're going to touch a little bit on whether the stock market crash will lead to into a recession and on gold. Let's start. ETFs suffered a net outflow of 11.2 billion for the week. Total outflows from ETFs, funds, stocks were around 30 billion. So we have a stock market of 25-30 trillion market capitalization. 30 billion, just 30 billion, 0.1% gets out. The stock market crashes 6%. And that's what I have been discussing, always the risk and the exit door. The importance is there is so much money, paper money in the stock market. The key is the exit door. How big is that exit door? When people rush to sell and we know that we can check how much funds, how much ETFs are buying or selling and you know how much people are selling, the bid disappears and the ask goes down like a rock and that's why stocks crashed. The more sellers there are, the more panic there is, the faster stock markets crash. It was a slow, slow, slow climb up for years, years and years, but that crashes and turns extremely fast because nobody wants to buy in a negative panic trend market as everybody wanted in on the upside on the market. And that's simply stock market fluctuations. Back on the week, the week started with reports on Facebook, data misuse. Then Facebook tried to calm advertisers, but it didn't help much. The stock is significantly down over the week, 14%, which is a big hit for Facebook. But let me put it again into perspective. Over five years, the last five years, Facebook is still up 519%, which is a huge performance. Why is Facebook up 500% over the last five years? Because nobody was thinking during the last five years as stocks and everything went up and everybody was piling money into the market, nobody was thinking about the risks. And I know I might have sounded boring during the last 10 months constantly discussing the risk, risk reward, risk, risk, risks when, oh my God, you're so boring Sven. But investing is all about risk, reward and people often forget, especially when the market goes up, forget about that. But this week was an excellent reminder of the stock market of the business risks even for big companies like Facebook. And we're going to discuss that more in future videos. So please subscribe to get more of those videos and support the channel back to the risk. Look how the VIX index, the volatility index was flat and around 10. For most of the time prior to February this year and then it exploded and volatility has hugely increased. Higher VIX index means that the market is looking for direction, much more volatility, much more risk. So the risk now is bigger and people are looking at those risks and everything is now telling you sell, sell, sell, sell. Before that everybody was telling bye, bye, bye. And now what to do will come just after we discuss what the Fed has been saying which is extremely important but often overshadowed by the tariffs and the Facebook tech disaster. Let's see what Jerome Powell said in his speech, first speech for the Fed. So the Fed raises rates and signals faster pace in coming years. This is very important. Higher rates mean putting the brakes on the economy, which means slower growth or preventing an overheating economy. And there are two risks that always emerge when the Fed raises rates. If the Fed raises rates too fast then it dampens economic growth, which is not good. If it doesn't raise rates too fast then the economy might overheat because there is too much credit, everything is doing too much and then it crashes too much later. So you don't see a small recession, you see depression. So we will see if the Fed will manage to balance out and make a soft landing. No, but the market didn't react on Wednesday because everybody okay, the economy is doing better, higher interest rates will be balanced out by better economy, so those things are good. But then first they came and tariff news came in. Trump said it's out of control, US to apply tariffs on Chinese imports restrict tech deals. So the White House is putting together a package of 25% tariffs on some Chinese import, 1,300 product categories and so it would affect about 60 billion or about 10% of the 500 billion the US imported from China. Next news, boom, China retaliation and then we have a trade war. Is there really going to be a trade war? Is there going to be a lower global economic trade which wouldn't do good for stocks? There might be some political benefits in different countries, but on the aggregate lower trade wouldn't do good for stocks. If we look at earnings, the most hit earnings by a 10% tariff on all US exports and imports would be hit is the energy sector, the industrial sector and the consumer discretionary sector. Earnings would be hit for the SAP 500 between 4% and 6% depending on US response and other partner's retaliation. It isn't a big trade war yet, but what Wall Street doesn't like is uncertainty. Uncertainty increases the risks because you don't know what will happen, how it will happen, how far will this trade war go and this lowers of course prices, lowers projections, lowers investments, lowers earnings and at the whole spiral just turns. And the Fed might even not raise interest rates in order to protect for the downside from an increased trade war. We'll see how that will work out, but for now the risk is much higher. Now what to do? Well there is the simplest solution to everything and I'll quote Buffett for that. Your investment returns are correlated to the underlying earnings of the assets you own, with potential boom periods due to euphoria and lower interest rates and potential bust periods due to panic and higher interest rates. So check your portfolio, see what are the earnings in relation to your portfolio, see if you are happy with that yield or with how much of your portfolio, how much risk are you willing to take for that yield. The SAP 500 can crash 50% in the next year without a problem because it is at such a high level. So you have to see okay, for that risk what is the yield? The yield of the SAP 500 is what 4% now? So you have to see okay, 4% per year over the long term. Am I willing to take that risk? Can I take that volatility, those drops which will eventually come as they always do? What am I willing to sacrifice? How much will I be exposed to stocks? When you find investments, when you look at investments from a business perspective, not from a stock market perspective, you know okay, these are the earnings, this will be my returns. So looking at the fundamentals, looking at what you own. Are you happy owning it forever? If the stock market would close for the next 10 years, would you be happy owning that? That's the attitude that will help you make decisions in this market. If you're too afraid for owning that, you bought it because it will go up, the market is still so high you have a chance to get out. If you bought it because of the business, you will weather whatever happens because you are happy with what you own. Back on the interest rates, higher interest rates, lower asset prices and this is the Fed's projection. So somewhere around 3, 3. something percent, which means that bonds will yield 5% stocks might yield 7%. That's a 50% stock market crash ahead. We'll see how it works out by 2020. Look at your earnings, look at your assets. Now will this stock market crash lead to a recession? Let me quote Sam Wilson on that. The stock market has predicted 9 out of the past 5 recessions. And if we look at the chart we can see the red bear is a recession that actually started after a stock market decline and the white is when it didn't happen. On the chart here we have 7 actual recessions and 6 times it didn't happen. So simply there is a 50-50 chance that the stock market is predicting a recession. There is a 50 chance it will happen. There is a 50% chance it will not happen in the next year, 2 years. That's something you have to implement in your decision making. Whoever tells you this, this, this will happen is a liar. In the stock market, in finances you never know. You can just adjust to probabilities. If there is a 50% chance of a recession, then okay, how am I going to play that out? How am I going to position my portfolio to what can happen? Nobody knows what will happen. And if you invest with conviction, oh this will happen, that's the fastest road to go broke. Unfortunately it is like that. Probabilities, risk assessment, portfolio positioning. That's how you have to invest for the long term. Just a quick take on gold. As I have been saying, gold is a hedge. And in this short negative week it was the positive part of people's portfolio. I don't think gold is a stock market crash hedge. It's more a monetary policy hedge. But nevertheless, if it works as a hedge even for the stock market I wouldn't matter. So very interesting how that works out will make a video update on gold. I'll have mentioned a lot of things. I'll update more, make more in detail videos on the things I have mentioned. So please subscribe to support the channel. Thank you for watching. Looking forward to your comments and I'll see you in the next video.