The Pump and Dump Economy | How Money Works

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1:00Open for Weeks. Gemini and Chrome is here for it. Ready to make anything online makes sense? There's no place like Chrome. Check responses set up require compatibility and availability very 18+. So the stock market has lost more than $5 trillion since its all-time peak, which was achieved roughly a month ago to the day that this video was uploaded. Asset markets are a four-looking indication of investor's predictions of what the future will look like, and right now those predictions are bleak. We have been talking about the everything bubble for a long time now. Everything from stocks to real estate to precious metals and even really dumb shit like memecoins have experienced massive price increases fueled primarily by wealthy speculators that are running out of things to invest in. If you were looking for something that could potentially come along and pop this bubble, then take your pick. Creed Wars Actual Wars, Household debt, National debt, massive layoffs, government programs being cut, and the biggest problem of all, which is that nobody knows what the f*** is going on anymore. $4 trillion of market value since its all-time high less than a month ago.

2:01I'm talking on February the 19th. An additional 25% tariff to 50% on steel and aluminum coming into the US up to $400,000 each in every single day. Federal judge is allowing President Trump's mass layoffs to press forward while leading legal proceedings continue. To tariffs hit imports from Canada and Mexico, President Trump now reversing his decision. President Trump walks back tariffs on most products from Mexico and Canada again. Money loves certainty. Business leaders and investors need to make decisions based on reasonable assumptions about what the future is going to look like. Every decision a business makes from hiring or firing staff building a warehouse, launching a new product to paying a dividend inevitably involves someone making an educated guess about the next quarter, the next year, and for some optimistic CEOs, the next decade. Now sometimes those guesses are wrong. Sometimes they are right, and good business managers should have a backup plan. If nobody has any idea what the next week, let alone the next decade is going to look like the only responsible decision is to play it

3:05as safe as possible. For businesses, playing at safe means reducing expenses, halting new untested products and stockpiling as much cash as possible to keep the business solvent for any eventuality. For active investors, playing at safe means liquidating their positions, and moving into safe assets until they can properly analyze the market again. Right now in America, even hedge funds which typically do better during periods of increased market volatility are sitting out the craziness. Over a port by the financial times found that across the industry, these investors are pulling back on leverage and reducing their exposure to the markets even when, theoretically, these are the times when they are most likely to outperform and make huge bonuses. The reason for all these trends is the same. Nobody knows what to expect next. So yeah, we gotta talk about these tariffs. A brief recount of these measures so far is this. Before taking office, President Trump kicked things off by announcing 100% tariffs on any country that undermine the USD as a global medium of exchange. Six days after inauguration, the first wave of new tariffs were placed on Colombia for not accepting deportation flights. Three days later,

4:0925% tariffs were proposed on Canada and Mexico with an additional 10% tariff to be placed on Chinese goods on top of the tariffs already paid for those imports. Those were supposed to go in effect on the fourth, but then on the third, they were delayed by 30 days but only for Canada and Mexico. China's tariffs were put into effect and they hit back with a selection of their own tariffs. A week later, tariffs are announced on steel on aluminum by removing exemptions from tariffs set back in 2018. Three days later, reciprocal tariffs are announced for countries beyond China, Canada and Mexico, and warnings are issued that no country will be spared. Two weeks after that, the Commerce Department is direct to start looking into the viability of copper tariffs. Three days after that, the 25% tariffs on Canada and Mexico went into effect with some carvettes for things like energy which were taxed at 10%. The additional tariff on Chinese imports was also raised from 10% to 20%. All three countries were retaliated with tariffs of their own on select American goods. One day later, those tariffs are pulled back but only for US automakers. Then a day after, the tariffs are delayed for everyone once again for another 25 days,

5:12but they will go into effect on the second of April. For real this time. To start this week, tariffs were also placed on Australia, the UK and Europe with a threatened 200% tariff on widening champagne after the European Union threatened a 50% tariff on American whiskey in response to America putting 25% tariffs on steel in aluminum. By the time you actually watched this video, it's highly likely that these tariffs will either be delayed, escalated, renegotiated, or forgotten about. But that's the story so far. Now, hot take alert. But tariffs, if used correctly, can be useful instruments to encourage local business development, protect American jobs, and maintain strategic industries. But if we are going to get these benefits and minimize the side effects, there needs to be a clear plan implemented over a long enough time to give businesses time to adapt. Now, if you are watching this, you might be starting to think that maybe this is all just reactionary and that there isn't actually a plan behind all these on-again off-rigant tariffs. More trade policy changes have been announced in the last two months than in the decade that came before. Now, when businesses and investors don't know what

6:13to expect next, the only good option they have left is to play it as safe as possible, which is why we have seen such a large sell-off in the last month. Now, I know what you might be thinking. Who cares? You have probably heard the anecdote a hundred times. The stock market is not the economy, and these losses will overwhelmingly be felt by people who already have financial security because well, they own almost all the stocks. If anything, this crash might be a good opportunity to even the financial playing field between existing asset owners and people who work for their money. Right? Wrong. Unfortunately, the stock market is not the economy, until it's the stock market that's doing badly. So, it's time to learn how many works to find out what happens to a pump a dump economy when it's all out of pump to give. This week's video is sponsored by Storyblocks. We use a lot of footage in our videos, and if you've ever bought stock clips individually, you know how expensive that can get. That's where Storyblocks comes in. It gives us unlimited downloads of high- Propel Fitness Water with Gatorade Electrolites, Zero Sugar, and Vitamins. Propel hydrates

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8:20very 16-plus. Quality stock video, music, sound effects, and templates. All for one predictable subscription cost. Whether we need cinematic B-roll, motion graphics, or the perfect background track, Storyblocks has everything in one place, making our workflow faster and more affordable. Plus, everything is royalty free with clear cut licensing, so we never have to worry about copyright claims. If you ever want to start making videos like hours and build your own business, a Storyblocks subscription is a perfect place to start. To get started with unlimited stock media downloads at one set price, head over to storyblocks.com ford slash how many works or click the link in the description. I want to make it clear that included in the group of people that don't know what is going on right now is you, me, anybody you are going to watch online, corporate executives, and probably even most of the people making the actual decisions. This is a real problem for business, because here's the important thing. Even planning for a bad future is better than not being able to plan at all. If tariffs were

9:21implemented broadly amongst all of our large trading partners at a high rate of like 25%, that would be bad. It would slow down business, disrupt supply chains, and lead to retaliatory tariffs that make our exports less attractive to global customers. Sure, some of these costs can be passed along to consumers, but I don't know if you have noticed, but most consumers really can't bear any more costs right now. So yeah, this would be bad, but businesses could slowly adapt it by moving supply chains on shore, working out deals with domestic suppliers, and focusing more on selling to the American market. However, businesses don't want to make these massive investments if the rules are just going to change all over again, because then they will have effectively just wasted their money. Car companies are the perfect example of this. They produce very complex end products made of hundreds of components and factories that take years to get online. So once surprisingly, they aren't really changing anything until they really know what the trade landscape is going to be long term. There are, however, some companies that have ignored this trend, although not exactly for the best reasons. Big retailers like Walmart have significantly increased the amount of inventory

10:24they are keeping on hand so that they can keep their shelves stocked more consistently while these trade wars figure themselves out. This might help them outlast their competition by a few weeks, but holding this much inventory is generally bad for business, and there is a limit to how much they can actually keep. Even at their current elevated levels, and even if consumer behavior was totally predictable, their supplies would run out in a little over four weeks. The other businesses are mostly tech companies announcing major investments into data centers and energy infrastructure to develop artificial intelligence here in America, and there have been some truly ludicrous numbers being thrown around. Now, spending hundreds of billions of dollars to further accelerate the production of AI Slop might not sound like your idea of a great investment, but even if the end product is not ideal, these investments can do a lot of good. All of this infrastructure needs to be constructed by skilled technicians, and even though it feels at least a little bit dystopian that tech companies are onlineing their own nuclear power plants to feed their insatiable appetite for energy that's still going to give jobs to a lot of people in an area that really needs more funding. But, here is the thing about big public investment announcements. They're free.

11:29The companies making these announcements don't actually have to follow through on them, and in most cases, they don't. Apple recently announced a plan to invest $500 billion here in America, an investment that would also create 20,000 new jobs. This was widely celebrated and supported by politicians who wanted to talk about their business-friendly credentials. But, if you've been paying attention, it does sound awfully familiar. Back in 2018, Apple announced a $350 billion dollar investment into the American economy, which would also create 20,000 jobs. Three years later, after the inauguration of Joe Biden and the news about more regulations on tech monopolies, Apple made another announcement about investing $430 billion in a plan that would, you guessed it, create 20,000 American jobs. Now, Apple is not alone. Most companies do this. Apple is just particularly bad at not even pretending to change their homework a bit. Elon Musk has also built an infamous reputation for over-promising and under-delivering in his business. But, Love and Marhedom, he is basically doing the same thing that every other tech company in America is doing. He is just

12:32getting up and announcing it personally. But, why do they do this? Well, there are three reasons. The first is that it's a great way to get politicians on your side. Lawmakers on both sides of the aisle love a good headline that can post about their booming economy, and big investments that create lots of jobs are exciting to most people. It also lets them push back against any of those nasty regulations. If you are the CEO of a company about to catch the attention of the FTC, you can just call up the politician you have on a retainer and see that if a law goes through, or your company gets investigated for anti-competitive practices, you may not be able to commit to the big investments you had planned. And wouldn't that just be terrible? These announcements can also be used to secure co-investments from the government or relax regulations to let these businesses make their supposed investments without getting bogged down by pesky red tape. The second reason is that people just forget about it. Not many people are that interested in the budget planning of large companies over the next five years, apart from sophisticated investors who won't really care if the company doesn't blow half a trillion dollars in some PR project and just does stock buybacks with that money instead. The third reason is that it pumps up stock values.

13:36Regular investors will see a company making a big investment into a hot new industry that signals that A, the company has half a trillion dollars to invest, and B, the company is optimistic enough about its future to use that money. If companies can give the impression of making big investments without needing to put those investments in their financial statements, that's a big win. The expectation of unlimited future growth is why these companies have become so unbelievably valuable over just the last decade. Picking on Apple again, its profits have only increased by 80% over the past decade, but its valuation has increased by over 330%. We spoke about stretch valuations last week, but something I forgot to mention is that this only works if people expect even the biggest companies in the world to keep growing extremely quickly, which is getting harder and harder. So maybe this market crash is at worst correcting investor expectations, or at best a buying opportunity that will let new investors get access at more reasonable prices. But there are some problems with this idea. The first is that buying the dip is just timing the market,

14:37which for most investors is a really bad idea, and you don't want to make the plain bagel angry with bad personal financial decisions, do you? The wider problem though is buying the dip with what? Household savings are approaching record lows, and unfortunately as companies have to answer to their shareholders, they are likely to continue with layoffs to minimize their expenses during the period of uncertainty, and that's to say nothing of the employees that have been laid off from historically stable government jobs. It might be cathartic to watch the net worth of some of the richest people in the world tank with the down market, but even though they are technically more exposed to the market, they will almost certainly be able to survive economic turbulence better than most households. Some like Warren Buffett's Berkshire Hathaway have slowly been accumulating hundreds of billions of dollars in cash. So yeah, old man Buffett is going to have a great time buying the dip. Everybody else? Probably not so much. Now all right, even if the stock market gets more consolidated, maybe a market crash will be an opportunity for average people to get into something that's becoming an even bigger asset market. If real estate becomes a declining investment,

15:39maybe that will be good for people who just want to buy a home, right? Well even if prices do fall, go and watch this video to find out why unfortunately a real estate crash probably won't help you. And make sure to like and subscribe to keep on learning how money works. Roasted bacon Brussels-side, the season's most desirable menu has returned to sweet green. Featuring falls best dressed. Make your move. Order on the sweet green app. When you shop pickup at Fred Meyer, you can expect the savings you love and fresh groceries selected just for you. Our associates are committed to getting every detail right. Carefully hand picking your items, checking for quality and freshness and packing your order with

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