November 20, 2025 • 35 mins
In today’s episode, Jon Sanchez and Cory Edge review a volatile trading session marked by an early surge in the major indexes followed by an abrupt intraday reversal. They discuss the day’s sharp swings, the concerns raised by recent Federal Reserve commentary around asset valuations and private credit, and why many investors felt the impact across both the stock and real estate markets.
Jon then outlines how an unexpected unwind in crypto leverage contributed to the broader sell-off, examining how automatic liquidations, dealer balance-sheet pressure, and short-selling activity in major tech names accelerated the downturn. The conversation also highlights how these dynamics can influence investor sentiment, retirement planning decisions, and wealth management Reno conversations.
👉 Watch this episode on YouTube: www.youtube.com/@thejonsanchezshow
👉 To learn more about retirement planning and wealth management in Reno, visit: sanchezgaunt.com
Compliance Disclosure: This program is for informational purposes only and should not be considered investment, tax, or legal advice. The views expressed are those of the participants and may not reflect the views of Sanchez Gaunt Capital Management. Investing involves risk, including the possible loss of principal. Past performance is not indicative of future results. Always consult with a qualified financial professional regarding your individual situation before making financial decisions.
Jon then outlines how an unexpected unwind in crypto leverage contributed to the broader sell-off, examining how automatic liquidations, dealer balance-sheet pressure, and short-selling activity in major tech names accelerated the downturn. The conversation also highlights how these dynamics can influence investor sentiment, retirement planning decisions, and wealth management Reno conversations.
👉 Watch this episode on YouTube: www.youtube.com/@thejonsanchezshow
👉 To learn more about retirement planning and wealth management in Reno, visit: sanchezgaunt.com
Compliance Disclosure: This program is for informational purposes only and should not be considered investment, tax, or legal advice. The views expressed are those of the participants and may not reflect the views of Sanchez Gaunt Capital Management. Investing involves risk, including the possible loss of principal. Past performance is not indicative of future results. Always consult with a qualified financial professional regarding your individual situation before making financial decisions.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:03):
Good Thursday afternoon to you. Welcome to the John Sanchez Show,
one News Talk seven eighty. Can't wait. It's a pleasure
to be with you this Thursday. Volatile crazy walked out
stock market Thursday. I don't know any other way to
describe this day. I can't use the words I really
wanted to describe it. My goodness, What a time to
be behind a microphone with you. But first, I'm not
alone behind the microphone, joined by one of our two
(00:26):
co hosts, mister Mallaen has the afternoon off, mister Corey
Edge of Adrility, Big C. You and I were chatting
prior to the show. It was a wild ride today.
You watched it, you know, from the outside d I
was on the inside out and man, oh man, what
a day it was.
Speaker 2 (00:41):
Yeah, I mean pretty When you texted me this morning like, hey,
what do you want to talk about, I'm like, all
the actions in your world? Man, we got nothing over here.
Speaker 1 (00:49):
So yeah, well that's what things that's where things were
going great. You know. It's when we had a you know,
nearly an over a seven hundred point gain on the
Dow Jones Industrial Average, and you know, everything was just
clicking right along and it's like it should have been
and then all of a sudden we hit a wall,
and boy what a wall that we hit?
Speaker 2 (01:08):
Well, and it's some I'm sure we'll get into it.
But we talk about real estate on Tuesdays and Thursdays.
But we've mentioned on the show when the stock market
goes down, people in real estate feel poor. They feel panicked,
like it's ever verberates through everything.
Speaker 1 (01:23):
I'm curious, do you do you hear that or see
that with fellow realatters.
Speaker 2 (01:30):
I don't know if I consumer side, a lot on
the consumer side, probably some realtors. The commercial guys, I
know they feel it. And again it's how do you
put it. You can't really pinpoint the panic other than
you know, sometimes you'll wake up. I'm sure you do
the same thing, like, man, everything's going good, something's gonna break,
(01:52):
like something's got to go. And so you get rolling
in this business and yours and it's like everything's going
good and that there's a worry spot in this Yeah,
on these days it's a big worry spot because you're like, oh, great,
well how do you get ready for this? And people,
you know, you know way better than I do. You
got a four oh one k. Even if you're not
going to touch some money for twenty years, you feel wealthy.
(02:13):
So when it goes down, you feel less wealthy and
it causes a little bit of angst.
Speaker 1 (02:19):
Yeah, boy does it ever? Yeah? We we we all,
we all base our feelings on yah how the how
the market did. As cruel as that sounds, we shouldn't,
but it's it's absolute human nature. Well, folks, you are
in for an absolute treat today because what you're going
to learn as to why this stock market sold off
now when it wasn't all it wasn't all that bad.
(02:39):
If you just looked at the closing numbers, if you
weren't sitting, you know, in my seat and watching the
swing today, you go, okay, let's see we lost three
eighty seven on the down, down four eighty six on
the Nasdaq, one oh three loss on the nas deck.
You know, Okay, around the S and P it's like,
oh okay, another volatile day. But what we experienced during
(03:00):
day and what you're gonna learn why we experienced the
sell off that we did today, you're gonna be shaking
your head, I promise you. By the time this show's over,
we're gonna tell you why this market sold off like
it did. And I promised that probably ninety nine percent
of you don't know, not because you're you know, don't
know what you're talking about, or not thinking, or you
don't stay in tune. It was the most bizarre thing
(03:23):
that happened today, and it's not the first time that
had happened. So this morning, as Corey was just talking
about he and I were, you know, chatting back and
forth this morning. Okay, what do you want to talk
about on the real estate side, and we decided, you
know what, let's talk about leverage. How we can unlock
the value the equity and our real estate and leverage
(03:47):
that into other things in a smart fashion. And again
we're talking about making sure that we can afford when
we take money out and leverage it into another piece
of real estate or into a business or something along
those lines. So Corey and I put together this great
show about unlocking real estate equity and again teaching you
about the leverage side of things. Well, again, that's when
(04:10):
the market was doing great. I mean, things were phenomenal.
Nasdaq was soaring, s and P was soaring, Dow was soaring,
Russell two thousand was soaring. Everything was this going great,
and then you know, Corey, I'm going to bring something
to light that I it's only my my best guesstimate
that this had any influence in the market correction today,
(04:32):
but I'm going to go back to It was eight
oh three hour time. The Dow just hit its peak,
and I assume probably the NASDAK you know, was right
there too, just hit its peak about maybe five minutes before,
and what had happened was coming to It came across
(04:54):
the news wires, and I did not hear CNBC talk
about it. I didn't hear anybody bring it up. Now.
I did have my TV muted, so I'm not gonna
sit here and promise you that CNBC didn't mention this.
But I brought it up on my stock up date
with Ross this morning and I said, you know, Russ,
this is really bizarre that we just peaked on this
(05:15):
market about five minutes ago before we got this comment.
And he said, okay, well, what is this comment. Well
the comment was from let me. I want to bring
it up here. I didn't have it prepared. There we go, Okay,
I'm gonna because I want to read it to you exactly. So, uh,
this was again at five o three excuse me, eight
(05:37):
oh three our time. So, Corey, you know, being in
real estate, you remember the name the FED governor Lisa Cook, right,
Lisa Cook, right, the one that Trump came after. It
was in the news, big time in the news where
he went after her, started with with mister Poulte accord
to the head of the f HFA, you know, with
the direction of Trump saying go after this woman. You
(05:58):
know she's a member of the FED. You know, we
know Trump doesn't like the FED. And she was the
one that they caught having more than one primary residence.
She took out at that time it was two mortgages.
Now they're saying three mortgages, and she said they were
all primary residents, so bad blood between all of them.
She didn't resign. She is still a voting member of
(06:19):
the FOMC, and you know, to my knowledge, they're still
fighting this thing out in court. Well, Corey, you watched
the FED as much as I do, and I don't
recall any time I was thinking back on this that
Lisa Cook has ever really come out and made any
public commentary in regards to the path of interest rate increases, decreases,
or really anything along those lines. Do you agree with
(06:40):
me on that?
Speaker 2 (06:41):
No, I've never heard her speak.
Speaker 1 (06:43):
Okay, So was it absolutely ironic today that Lisa Cook
comes out right when this market peaked and said the
following She's concerned about elevated asset valuations, private credit growth,
and headge fun treasury risks, but said overall, systems remain resilient.
(07:08):
Never ever have I heard any comments from her much
less this shot across the valve. Now, let's break this down,
and this isn't the reason the market sold off. This
is one of the This is a small reason we
still have the ten thousand pound gorilla to share with you.
So elevated asset valuations. We've talked about this day in
and day out on this program for months. This market
(07:29):
is concerned about market valuations. Yesterday, of course, that's why Navidia.
While Jason I spent the entire show yesterday talking about
Navidia and the earnings that came out after the close,
because Navidia kind of broke that trend. It's like, Okay,
we don't have to worry about valuations. Look at Navidia's
earnings numbers. Look at Jensen Wong's forecast is to where
(07:49):
the company is going. The backlog of sales and everything
was positive and the shocks. Stocks shot up over ten
dollars yesterday. Well, by the way, Navidia today finishing this
is a little after hours seven dollars. Right now it's
down seven dollars and fifty one cents. So you know
you're talking over a fifteen dollars swing from the highs
in the after hours pre market to where it is now. Okay, now,
(08:13):
so Navidio releases our numbers yesterday, everything's great, Futures shoot up,
futures look phenomenal. This morning, opening bell rings at six thirty.
Things are going right along. We're just chugging higher. I mean,
just again, all the major averages, all the tech names
and the video and Microsoft and Meta and all these
names that have been beaten up because of valuation concerns,
nobody seemed to care. It's like, okay, we don't need
(08:33):
to worry about this because Jensen Wong, the CEO of Navidia,
said things are good. He's not worried about valuations or
an Internet bubble or anything along those lines. So we're
off to the races, Okay, So now back to Lisa Cook.
So let's break this down. So she's concerned about elevated
asset valuations again a bubble for me, private credit growth. Now,
(08:54):
this is a show that we're going to have to
do at a later time because there's a lot that
we watch that most of you don't have privy to
the information. But there's a lot. There's a lot going
on in the world or private credit. Okay, private credit.
The reason it's getting the attention at this point is
(09:15):
very simple. The Trump administration recently passed and it's still
I don't think it's one hundred percent complete. I think
they're still working out some details whereby you will soon
I think it probably be the beginning of next year,
is my guess. You will soon be able to buy
private credit in your four oh one K. Now, remember
(09:35):
private credit quarry has only been available to what we
call the accredited investor right. Credited investor is defined under
SEC regulations as someone that has at least a million
dollars liquid networth exclusive of their home. If they're single,
they make two hundred thousand dollars a year. If they're married,
they have to make three hundred thousand. That is an
accredited investor. But in my opinion, because of the pressure
(09:57):
from the private credit industry under the tr Trump administration
and his ties with them, he's told all the regulators
let this stuff come into the four to one k market.
Now there is an argument, matter of fact, CNBC covered
it this morning. They did a great job on this
story that with the right private credit mixture and adding
(10:18):
to your stock, bond, you know, portfolio from a diversification standpoint,
there is data to show that owning private credit can
diminish your risk what we call the beta of your
portfolio and enhance returns over the long term. That's again
up for debate, right, but that's that's what they tell you.
The downside of private credit, corry is lack of liquidity. Again,
(10:39):
it was designed as a investment vehicle for the rich,
a piece of their portfolio. They don't care that they
can't get their money out in three, four, five, seven years.
Sometimes does the average person care about that, corey that
they can get their money out? You better believe it.
So this is the tuggle war that's going on. Wall
Street wants all of you to start putting in your
(11:00):
four o one K and other investments they've lowered the minimums,
they got rid of the accredited investors requirement, on and
on and on again from the pressure of the private
credit industry. And if you don't know what private credit is,
let's give you a real layman's example. You know, Corey
owns edge reality, right. Corey's like John, I want to
expand and you know, no longer just Aaron. And I
want to go hire ten agents, and I want to
(11:21):
put my office in a big high rise. And I
need you know, I don't know ten million dollars working
capital to do it. If I was a private credit
manager or private credit fund, I'd go to Corey would
come to me. We do all of our due diligence.
Corey looks like a great guy. He's got the financials,
good credit, blah blah blah blah. Corey, here's your ten
million dollar loan. So it's private, right, it's not fortune
five hundred companies, But it's also not mom and pop operations.
(11:44):
This can be companies literally up to five hundred, five
hundred employees and more. But it's a sweet spot when
it comes to the world of lending, because this is
the size Corey that most banks do not want to
mess with. They don't want the ten, fifteen to twenty million,
even fifty million dollar loan a private credit. They love it,
high interest rate, They cross collateralize you in more ways
(12:06):
than you have any idea. They're very very well positioned.
In the event in our example that you know edgrility defaults,
they're going to be able to get their hands on
a lot of assets and things. So with that example,
that's what private credit's about. So Lisa Cook is concerned
with that, she should be. Thank god she mentioned this
because no one else besides my explanation, no one else
is talking to you about this. All I can tell
(12:28):
you is please, unless you have an advisor that is
helping you manage your four oh one k like we
do with our clients, do not do not. Do not
If and when private credit becomes available to do in
your four oh one K, do not get into it
unless you are advised professionally, because there are so many
nuances and so many risks that you have no idea
(12:48):
that lurk unless you want to spend you know, good
portion of a week. I'm reading the perspectives and really
understand it. The third thing, the hedge fund treasury risk.
This is the big one. Hedge funds, of course can short.
They can go a long the treasury market right, the
safest markets out there. But their hedge funds, they can
do whatever they want. They can invest in anything, go long,
go short, like I said, And if they're playing around,
(13:11):
which is not making the news yet, Corey, if they're
playing around in the treasury market, that could be a
disaster for interest rates. And you know, again, I could
do an entire show on the risk of playing around
in the treasury market or what hedge funds could do
to the treasury market. You need affecting interest rates and
back to loans and so on and so forth. So
those are three very serious issues that Lisa Cook brought
(13:32):
to the attention. Private credit risk, elevated asset allocation, asset valuations,
and hedge fund treasury risk. That spooked the market. Like
I said, it took the market about three or four
minutes after she made that for the sell off to begin. Now,
when we come back from this break, you're gonna find
out the real reason I'll say, probably ninety eight percent
of the reason why we sold off today. And I
promise you probably have no idea that this is the reason,
(13:55):
but you will here in a moment only on The
John Sanchez Show with Corey Edge turn it over to
Kristin Snow Now Traffic Center, Hillo Christen, Welcome back to
the John Sanchez Show on News Talk seven eighty koh
so Cory's vigeraility again. Dwight has the day off all
right once again, it was a tough session across the board.
I had tremendous strength in the morning and then things
(14:17):
began to roll over right around that eight o'clock hours
I'd mentioned earlier. But now it's time for you to
learn the real reason that probably your your own advisor
is not even telling you because most people are not
aware of this, but you will be hearing about five minutes.
Once again, the damage didn't look all that bad at
the close, three eighty seven loss on the Dow point
eight four percent, NASDAC down four eighty six, two point
one six percent, SMP one hundred and three point loss,
(14:40):
But it was where we were and where we ended
up one thousand, one hundred and seven point loss. Corey,
from the high of the doubt of the day to
where we closed one thousand, one hundred and nine points
think about that for a second, and let me tell you.
If you were sitting here in front of your computer
(15:01):
and you went and you said, ah, you know what,
Dow's up seven hundred points. I'm gonna go get a
cup of coffee. You literally could have come back and
you could have seen the dow uh maybe two hundred
points and then maybe step out for lunch, and that's
when you have seen it down, you know, four or
five hundred points. Upon where you were. It happened that fast.
So Jason and I were strategizing all day long, and I,
(15:23):
you know, will always give you full disclosure. I wish
we would have been the ones that we could have
figured this out. But you have to have real, real,
true Wall Street insight, meaning you've got to be one
of the major players for what I'm about to tell you. Well,
thank goodness, this gentleman was on CNBC today and highlighted
what exactly happened. And again we're gonna talk real estate
(15:45):
leverage later in the program. Now let's talk crypto leverage
and how it impacted the stock market sell off today.
You're gonna hear audio. It's about a five minute clip,
So Jake, bear with me or Jack, excuse me, bear
with me. We're gonna probably run a few minutes late
before we go to break, and I want to get
this out and then we'll come back and discuss it.
This gentleman, I'm talking about many of you. If you
(16:07):
watch CNBC, you see him on there all the time.
And he came out today and he even blew away
the CNBC host when he enlightened us as to what happened.
His name is Tom Lee. He is the chief strategist
for Funstrat. Funstrat is a kind of a boutique research firm,
but he also got involved and I'm not even gonna
(16:28):
try to describe what in the world of crypto he
is now. I think he's one of the founding founders
of one of these crypto companies, and I don't know
exactly what they do, but the bottom line is, as
you're gonna hear in the interview, he actually is in
contact day by day with these companies that are trading crypto.
(16:50):
And what you're gonna find, folks, actually, what we're gonna do, Jack,
I'm gonna retrace this. I wanna. I don't want to
be rushed. I wanna we'll play this audio when we
come back. So let me at the stage for just
a moment. What you're going to find out, folks, is
there was a major, major unwind in the crypto world
(17:11):
among the dealers of crypto, not anyone individual, but what
we call the market makers of crypto. Now, what's a
market maker? Just like we have in the stock market,
the market maker is the one that decides what the
price is going to be of the underlying asset. So
in this case, the underlying asset is crypto. Well, these
(17:31):
market makers also need capital. Well, as we all know,
crypto is what one hundred and twenty three thousand just
a few weeks ago, and for various reasons. Crypto bitcoin
I'm talking specifically right now, it's at eighty seven and
thirty six dollars. Well, guess what many people that buy
(17:53):
crypto i e. Bitcoin, they borrow money to buy bitcoin.
And so with the price starts to fall, many of
these firms automatically liquidate their bitcoin positions. Wasn't the client selling,
it was the computer selling. Those are the rules that
these firms have for some of these clients. A lot
(18:16):
of these clients that have bitcoin. And what's so bizarre,
Corey is last night, I was reading a story about,
of all things, a MMA fighter who was crying the
blues yesterday because he lost I think the number was
like five hundred thousand dollars, lost every dime that he
had in crypto and he couldn't figure out why. And
it was because the firm that he held the crypto
(18:37):
with automatically sold, and one sell leads to the second,
to the third, to the fourth, and you can't do
anything about it as the as the owner of that account.
It's all done by the computers automatically. Well, that tied
in perfectly with what Tom Lee had to say today,
how these market makers are in a world are hurt
because their capital, their person, their balance sheet for their
(18:58):
business as a broker dealer in the world of crypto
started to weaken with the price of this, and the
selling began to accelerate, and one thing led to the other,
and that selling pressure then impacted the stock market. Today.
We'll give you all the details with Tom Lee's interview.
When we come back, let's turn it over to Jack
Saban News Traffick at Weather. Jack. Welcome back to the
(19:20):
John Sanchez Show on News Talk seven eighty koh with
Corey inge evidrility to wiight Lard again has the afternoon
off Once again, we lost three eighty six on the
daw down, a four eighty six on the Nasdaq, and
a one three decline on the S and P five hundred.
All right, now it's time for you to sit back
and learn what the heck happened today, Because it wasn't
(19:41):
all of a sudden people were concerned about AI valuations.
It wasn't this, or wasn't that. It was our dear
friends over in the crypto market. And so, without further ado,
I want to play for you an interview It's a
little over a five minute interview with Tom Lee, Funstrat
senior strategists, extremely respected on Wall Street. But not only
(20:02):
is he an equity guy, but he also is owner
in one of the crypto companies. And mister Lee is
going to explain to all of you what happened today
and then Core and I will digest it. So sit
back and become educated, folks. You're going in for a treat.
Here we go go ahead, all.
Speaker 3 (20:18):
Right, Joining us now is fun Strats head of Research,
CNBC contributor Tom Lee, also the chairman of Bitmind Immersion
Technologies an ether treasury company. All right, so Tom, you've
heard what Steve had to say. This is, by the way,
not unusual for Invidia, is it?
Speaker 1 (20:33):
In video?
Speaker 3 (20:34):
The good folks that bespoke your team, you've recognized that
in Nvidia will often have these kind of wild swings
following earnings. But what is your take right now on
these markets?
Speaker 4 (20:47):
Well, I think I'm going to kind of add to
what Steve said. You know, I think the crypto market
has been limping along since October tenth because on that
date was a negative shock. I mean, today's stock market
looks a lot like an echo of what happened October tenth.
But on October tenth, that liquidation was so big, Brian,
(21:07):
it really crippled market makers. And our market makers are
critical in crypto because they provide liquidity. I mean, they
act almost as the central bank in crypto, and if
they've got a hole in their balance sheet that they
need to raise capital for, they need to reflexively reduce
their balance sheet, reduce trading, and if prices fall, they've
(21:30):
got to then do more selling. So I think that
this drip that's been taking place for the last few
weeks in crypto reflects this market maker crippling, and so
in twenty twenty two it took eight weeks for that
to really get flushed out. We're only six weeks into it,
so I kind of concur I think crypto, bitcoin and
(21:51):
ethereum are in some ways a leading indicator for equities
because of that unlined and now this sort of limping
and weakened liquidity.
Speaker 3 (22:00):
Well, and that was the that was the point that
my very very smart team behind me we put together
for the top of the show, which is showing that
that bitcoin turned down today before the market did. All right,
take us back. So October sixth I think it was
October six or seventh, bit twenty hit one hundred and
(22:20):
twenty five thousand. Yeah, a couple days later it was
still around one hundred and twenty thousand. Now obviously bitcoins
at eighty six and change. So what specifically occurred on
or around October tenth that would lead us to where
we are now? On what November twentieth?
Speaker 4 (22:38):
Yeah, Well, Steve actually pointed us out there's a lot
of what they call automated processes in crypto. One of
them is called adl okay, and that's an automatic liquidation
feature that would take place if someone's account or their
collateral drops in price. It's essentially like a margin column
(22:58):
on a specific change. A stable coin's price varied from
other exchanges. It actually stable coins should stay at a dollar.
It dropped to sixty five cents, but that only happened
within the exchange quotes within this exchange. Because of liquidity,
that trickered an ADL and automatic liquidation across many accounts,
it wiped out as that spread across other exchanges. Right
(23:21):
because liquidation's cascade, almost two many crypto accounts got wiped out,
even though minutes before they were actually profitable accounts.
Speaker 1 (23:30):
So who is behind this?
Speaker 3 (23:32):
Like, who's the they? In the market makers and they
got hit? Who's the they?
Speaker 4 (23:39):
Well, you know, Brian, I am. I am aware of names,
but because you know, I'm not someone who wants to
name names, I think what you should keep mind is
that this error is actually essentially a bug, you know,
a code error, because they I think in retrospect, they
would have pulled pricing from across exchanges to set the
(24:00):
price for that stable point rather than rely on internal quotes. So,
but this has resulted in a lot of market makers
and traders having less capital, and as you know, as
crypto prices drift lower because trading volumes drop, they need
to then have more capital available, which means they strength
their balance sheet further. So this is then that reflectses Okay, weakening.
Speaker 1 (24:24):
I hate talk to Tim.
Speaker 3 (24:25):
I mean, I want to go back to this point, Tom.
I hate the term glitch. I can't stand the term
glitch because you know, things go down to the airport
and they say, well, a glitch clause your flight to
not take off. Guess that's not a glitch. That's more
than a glitch. It's a word that is used to
describe pretty serious automation issues, software problems, crashes for some
reason that they try to minimize. Is this some kind
(24:47):
of a software bug that's causing part of this? I'm
trying to follow exactly what you're hinting around about.
Speaker 4 (24:57):
Yeah, I mean, Brian, it is. I mean, for instance,
teen eighty seven, portfolio insurance was the quote glitch, and
that triggered the cascade in nineteen eighty seven, and so
the industry learned and then never offered that again. You know,
in two thousand and nine it was really the collateral
(25:19):
wasn't secure in real estate in these packaged subprime mortgages.
Now the industry learned and they recoded that. I'm talking
about Wall Street. But then regulators came in and like overregulated.
That was the negative effect of that. In crypto. This
code of ADL and the way they pull prices never
going to happen again. The good news is we're not
(25:40):
going to have overregulation in crypto. But now we have
to deal with that liquidation effect. Twenty twenty two was
a big liquidation and it took eight weeks. But that
is not kind of You're right. It is the nature
of DeFi where there is going to be code and
there's going to be an error found. And you said it,
leverage is what's dangerous, and so investors should not be
(26:03):
using excess leverage in crypto.
Speaker 1 (26:14):
All right, all right, let's break this down into plain English.
What the heck he's talking about here? So, first of all,
and I did not know this. I'm gonna give the
whole credit to Corey. We were chatting during the break
and Corey was much more aware of leveraging crypto than
(26:36):
I was. Now, according to the research, I did very briefly,
and I don't have exact sources. It's not well octually
I do uh well, marg cks, so on and so forth.
You can leverage dependent upon which brokerage firm you're with,
you can leverage your crypto two times to one hundred times.
(27:02):
So think about that for a second. You put in
one hundred dollars, they let you trade two hundred dollars
or buy two hundred dollars of crypto. You put in
one hundred dollars, they allow you to buy one thousand
dollars of crypto. That, Folks, is leverage unlike anything I've
ever seen in the stock market. You hear us talk
(27:23):
about margin loans, Well, that's fifty percent of your account
value roughly that you can leverage. But you're not leveraging it.
You're just borrowing against it. When we talk about leveraging
the stock market, you get into things like derivatives meaning options,
put calls, different strategies, but very few things equate to
the amount of leverage Corey that crypto. These crypto platforms
(27:45):
allow these people to do as you heard Tom Lee
just mentioned a moment ago. Within a matter of minutes today,
two million crypto accounts were wiped out because if Corey
sitting there, and let's say he put in one hundred
dollars and he leveraged it to one hundred percent, and
now he's got one thousand dollars of crypto. But you
(28:07):
only put in one hundred dollars and crypto starts to fall.
And now these automatic cells kick in. Corey can't do
anything about it. His one hundred dollars is gone, as
Tom Lee just said, in a blink of an eye.
So now, how does that relate to what happened in
the stock market today? Okay, we're going to tell you
(28:31):
about a company when we come back called micro Strategy,
one of the largest crypto platforms out there. And this
is one of the companies I think that Tom Lee
was saying. I'm not going to share names, but this
company owns billions of dollars of crypto. Their stock has
been under severe pressure these last few days. Today had
(28:54):
lost five point zero two percent, nine dollars and thirty
seven cent loss to win seventy seven thirteen, fifty two
week low on the stock one seventy one forty eight
the fifty two week high on the stock, which happened
almost a year ago. What do you know about that?
November twenty first of twenty twenty four, and at that
(29:17):
point the stock was at five hundred and forty three dollars.
This year, the rumor on the street is they got
hit with this leverage that they allowed their clients to possess.
They got hit. They went, oh, our balance sheet is
getting crushed. We're going to do the automatic liquidations. Forget
(29:37):
about everybody out there, meaning the customer, they're wiped out.
But Micro Strategy, and again I'm picking them out of
probably many names that did this in the and the
bitcoin platform. They all liquidated. And now when we come
back now I'll share with you what they did that
we think and why it impacted the stock market in
(29:59):
the have sense. Let's wrap it up with Kristen Snow
right now traffic center. Kristen, welcome back to the John
Sanchez Show on News Talk seven eighty k oh it's
mister Edge your phone.
Speaker 2 (30:11):
Number six seven three six sevens ers A.
Speaker 1 (30:15):
Very good all right, once again, folks, wild ride today.
Please go back and listen to the show on your
favorite podcast company. We covered a lot today. This would
be an ideal day, Corey to do an entire podcast
on this because we've only scratched the surface. But anyways,
all right, so you heard the interview with Tom Lee saying,
(30:36):
look at today's sell off was attributed to the unwinding
of bitcoin. Once again, Hi, I was wrong hitting the
high a few weeks ago of one twenty three. I said,
it's actually about one twenty six. Right now, it's trading
at eighty six thousand and five sixty seven down two
thy six and twenty three dollars a two point ninety
four percent. So now let me summarize once again what
(30:57):
happened according to Tom Lee and many others. So all
these people, of course, every everybody you know is involved
in crypto, right, the easiest thing in the world to
make money, and people think they go in, they put
their money one of these platforms, like a micro Strategy
or somebody similar to that. They let you leverage that
up two times to one hundred times. I guarantee people
(31:19):
do not understand leverage. Otherwise two million accounts wouldn't have
been wiped out today. So now let's just once again
use micro strategy as an example, because this goes as
you heard Tom Lee say, with other market makers. Again,
a market maker, they're like the auctioneer right. They're the
intermediary between a buyer and a seller. So the minute
they start to see this problem unwinding and these automatic
(31:41):
sales happening, they're going, uh oh, all these people that Oh,
by the way, we're the ones that lent money to them,
so they don't tell you, Corey, these broker firms, they
are the ones that lent the money. So when micro
strategy or excuse me, when bitcoin starts tumbling, it's not
only affecting the account holder, but it's affecting the broke
or the broker dealer because their balance sheet is deteriorating
(32:03):
faster than you can you know, shake a stick ap
So now before they start getting calls from regulators, because
regulators are watching them, going your capital is getting very weak,
you better do something about it. And hence that's why
they have this automatic selling so they don't get caught Otherwise,
can you imagine if they lent all this money, you know,
two to one hundred times, their clients have their portfolios
(32:26):
and guess what if they just let them fall and
deteriorate to nothing, you know, the broker dealer would not
be in business very long. So that's why the automatic
selling occurred. Now final how did this affect the stock market.
So if I'm one of these broker dealers, what my
strategy is going to be is this, I am going
to short technology names, Navidia's, Microsoft's, Oracles, you name it.
(32:53):
I'm going to short those because I think they're going
to go lower because of what's going on in crypto.
You're shorting the stock you don't own, so you're shorting
I was picking Navidia. You're shorting Navidia hoping that it's
going to go down. So now you're putting pressure on
Navidia and all the other tech names because all these
bitcoin broker dealers are shorting the technology names hoping they're
(33:14):
going to go down. That is their hedge against Bitcoin
going down. So you had the first leg of the
sell off occurring with bitcoin. The second leg is they
start shorting the technology names. That's what drives the NASDAC down.
When the NASDAK drops, we know what happens. The SMP
gets affected, the Dow gets affected, obviously the NASDAC. That's
(33:37):
this whole crazy web that we call Wall Street folks.
And that's why again I cannot express enough. Do not
take margin on your account and if you are a
bitcoin investor, look at your account tonight. Are you in
one of these broker dealer accounts where you've leveraged. If
you are, please be careful and watch what you're doing.
Speaker 2 (33:58):
Corey final comments, kind of like we were talking off air,
it'll be that this may have a few more days
before it clears out, or it may be done tonight.
Speaker 1 (34:06):
That's right.
Speaker 2 (34:08):
It was better than Yeah, it was better like we
talked about. It was better than the Fed coming out
and saying we're raising rates whatever, because then you have
no way to get out of it.
Speaker 1 (34:18):
Exactly.
Speaker 2 (34:18):
This may just be a glitch.
Speaker 1 (34:20):
Yeah, let's hope. Let's hope. All right, folks, you have
any questions, please reach out to us. God bless, have
a great afternoon. See tomorrow on The John Sanchi Show.
Dwight Millard n MLSID number two four one two five
nine a license mortgage Loan Officer with Highlands Residential Mortgage
Limited and Equal Housing Lender and MLSID number one three
four eight seven one. The information shared on this live
broadcast is for general information purposes only and does not
(34:43):
constitute financial or mortgage advice. Listeners should consult directly with
a license mortgage professional for guidance tailored to their specific situation.
All loans are subject to credit approval and program guidelines.
Not all applicants will qualify. Loan terms and availability may
vary by state and are subject to change without notice.
Highlands Residential Mortgage Limited is licensed in multiple states. For
(35:05):
a full list of state licenses and disclosures, please visit
https slash slash www dot highlandsmortgage dot com backslash licenses backslash.
The views expressed during this program are their own and
do not necessarily reflect those of Highlands Residential Mortgage Limited.
Good Thursday afternoon to you. Welcome to the John Sanchez Show,
one News Talk seven eighty. Can't wait. It's a pleasure
to be with you this Thursday. Volatile crazy walked out
stock market Thursday. I don't know any other way to
describe this day. I can't use the words I really
wanted to describe it. My goodness, What a time to
be behind a microphone with you. But first, I'm not
alone behind the microphone, joined by one of our two
(00:26):
co hosts, mister Mallaen has the afternoon off, mister Corey
Edge of Adrility, Big C. You and I were chatting
prior to the show. It was a wild ride today.
You watched it, you know, from the outside d I
was on the inside out and man, oh man, what
a day it was.
Speaker 2 (00:41):
Yeah, I mean pretty When you texted me this morning like, hey,
what do you want to talk about, I'm like, all
the actions in your world? Man, we got nothing over here.
Speaker 1 (00:49):
So yeah, well that's what things that's where things were
going great. You know. It's when we had a you know,
nearly an over a seven hundred point gain on the
Dow Jones Industrial Average, and you know, everything was just
clicking right along and it's like it should have been
and then all of a sudden we hit a wall,
and boy what a wall that we hit?
Speaker 2 (01:08):
Well, and it's some I'm sure we'll get into it.
But we talk about real estate on Tuesdays and Thursdays.
But we've mentioned on the show when the stock market
goes down, people in real estate feel poor. They feel panicked,
like it's ever verberates through everything.
Speaker 1 (01:23):
I'm curious, do you do you hear that or see
that with fellow realatters.
Speaker 2 (01:30):
I don't know if I consumer side, a lot on
the consumer side, probably some realtors. The commercial guys, I
know they feel it. And again it's how do you
put it. You can't really pinpoint the panic other than
you know, sometimes you'll wake up. I'm sure you do
the same thing, like, man, everything's going good, something's gonna break,
(01:52):
like something's got to go. And so you get rolling
in this business and yours and it's like everything's going
good and that there's a worry spot in this Yeah,
on these days it's a big worry spot because you're like, oh, great,
well how do you get ready for this? And people,
you know, you know way better than I do. You
got a four oh one k. Even if you're not
going to touch some money for twenty years, you feel wealthy.
(02:13):
So when it goes down, you feel less wealthy and
it causes a little bit of angst.
Speaker 1 (02:19):
Yeah, boy does it ever? Yeah? We we we all,
we all base our feelings on yah how the how
the market did. As cruel as that sounds, we shouldn't,
but it's it's absolute human nature. Well, folks, you are
in for an absolute treat today because what you're going
to learn as to why this stock market sold off
now when it wasn't all it wasn't all that bad.
(02:39):
If you just looked at the closing numbers, if you
weren't sitting, you know, in my seat and watching the
swing today, you go, okay, let's see we lost three
eighty seven on the down, down four eighty six on
the Nasdaq, one oh three loss on the nas deck.
You know, Okay, around the S and P it's like,
oh okay, another volatile day. But what we experienced during
(03:00):
day and what you're gonna learn why we experienced the
sell off that we did today, you're gonna be shaking
your head, I promise you. By the time this show's over,
we're gonna tell you why this market sold off like
it did. And I promised that probably ninety nine percent
of you don't know, not because you're you know, don't
know what you're talking about, or not thinking, or you
don't stay in tune. It was the most bizarre thing
(03:23):
that happened today, and it's not the first time that
had happened. So this morning, as Corey was just talking
about he and I were, you know, chatting back and
forth this morning. Okay, what do you want to talk
about on the real estate side, and we decided, you
know what, let's talk about leverage. How we can unlock
the value the equity and our real estate and leverage
(03:47):
that into other things in a smart fashion. And again
we're talking about making sure that we can afford when
we take money out and leverage it into another piece
of real estate or into a business or something along
those lines. So Corey and I put together this great
show about unlocking real estate equity and again teaching you
about the leverage side of things. Well, again, that's when
(04:10):
the market was doing great. I mean, things were phenomenal.
Nasdaq was soaring, s and P was soaring, Dow was soaring,
Russell two thousand was soaring. Everything was this going great,
and then you know, Corey, I'm going to bring something
to light that I it's only my my best guesstimate
that this had any influence in the market correction today,
(04:32):
but I'm going to go back to It was eight
oh three hour time. The Dow just hit its peak,
and I assume probably the NASDAK you know, was right
there too, just hit its peak about maybe five minutes before,
and what had happened was coming to It came across
(04:54):
the news wires, and I did not hear CNBC talk
about it. I didn't hear anybody bring it up. Now.
I did have my TV muted, so I'm not gonna
sit here and promise you that CNBC didn't mention this.
But I brought it up on my stock up date
with Ross this morning and I said, you know, Russ,
this is really bizarre that we just peaked on this
(05:15):
market about five minutes ago before we got this comment.
And he said, okay, well, what is this comment. Well
the comment was from let me. I want to bring
it up here. I didn't have it prepared. There we go, Okay,
I'm gonna because I want to read it to you exactly. So, uh,
this was again at five o three excuse me, eight
(05:37):
oh three our time. So, Corey, you know, being in
real estate, you remember the name the FED governor Lisa Cook, right,
Lisa Cook, right, the one that Trump came after. It
was in the news, big time in the news where
he went after her, started with with mister Poulte accord
to the head of the f HFA, you know, with
the direction of Trump saying go after this woman. You
(05:58):
know she's a member of the FED. You know, we
know Trump doesn't like the FED. And she was the
one that they caught having more than one primary residence.
She took out at that time it was two mortgages.
Now they're saying three mortgages, and she said they were
all primary residents, so bad blood between all of them.
She didn't resign. She is still a voting member of
(06:19):
the FOMC, and you know, to my knowledge, they're still
fighting this thing out in court. Well, Corey, you watched
the FED as much as I do, and I don't
recall any time I was thinking back on this that
Lisa Cook has ever really come out and made any
public commentary in regards to the path of interest rate increases, decreases,
or really anything along those lines. Do you agree with
(06:40):
me on that?
Speaker 2 (06:41):
No, I've never heard her speak.
Speaker 1 (06:43):
Okay, So was it absolutely ironic today that Lisa Cook
comes out right when this market peaked and said the
following She's concerned about elevated asset valuations, private credit growth,
and headge fun treasury risks, but said overall, systems remain resilient.
(07:08):
Never ever have I heard any comments from her much
less this shot across the valve. Now, let's break this down,
and this isn't the reason the market sold off. This
is one of the This is a small reason we
still have the ten thousand pound gorilla to share with you.
So elevated asset valuations. We've talked about this day in
and day out on this program for months. This market
(07:29):
is concerned about market valuations. Yesterday, of course, that's why Navidia.
While Jason I spent the entire show yesterday talking about
Navidia and the earnings that came out after the close,
because Navidia kind of broke that trend. It's like, Okay,
we don't have to worry about valuations. Look at Navidia's
earnings numbers. Look at Jensen Wong's forecast is to where
(07:49):
the company is going. The backlog of sales and everything
was positive and the shocks. Stocks shot up over ten
dollars yesterday. Well, by the way, Navidia today finishing this
is a little after hours seven dollars. Right now it's
down seven dollars and fifty one cents. So you know
you're talking over a fifteen dollars swing from the highs
in the after hours pre market to where it is now. Okay, now,
(08:13):
so Navidio releases our numbers yesterday, everything's great, Futures shoot up,
futures look phenomenal. This morning, opening bell rings at six thirty.
Things are going right along. We're just chugging higher. I mean,
just again, all the major averages, all the tech names
and the video and Microsoft and Meta and all these
names that have been beaten up because of valuation concerns,
nobody seemed to care. It's like, okay, we don't need
(08:33):
to worry about this because Jensen Wong, the CEO of Navidia,
said things are good. He's not worried about valuations or
an Internet bubble or anything along those lines. So we're
off to the races, Okay, So now back to Lisa Cook.
So let's break this down. So she's concerned about elevated
asset valuations again a bubble for me, private credit growth. Now,
(08:54):
this is a show that we're going to have to
do at a later time because there's a lot that
we watch that most of you don't have privy to
the information. But there's a lot. There's a lot going
on in the world or private credit. Okay, private credit.
The reason it's getting the attention at this point is
(09:15):
very simple. The Trump administration recently passed and it's still
I don't think it's one hundred percent complete. I think
they're still working out some details whereby you will soon
I think it probably be the beginning of next year,
is my guess. You will soon be able to buy
private credit in your four oh one K. Now, remember
(09:35):
private credit quarry has only been available to what we
call the accredited investor right. Credited investor is defined under
SEC regulations as someone that has at least a million
dollars liquid networth exclusive of their home. If they're single,
they make two hundred thousand dollars a year. If they're married,
they have to make three hundred thousand. That is an
accredited investor. But in my opinion, because of the pressure
(09:57):
from the private credit industry under the tr Trump administration
and his ties with them, he's told all the regulators
let this stuff come into the four to one k market.
Now there is an argument, matter of fact, CNBC covered
it this morning. They did a great job on this
story that with the right private credit mixture and adding
(10:18):
to your stock, bond, you know, portfolio from a diversification standpoint,
there is data to show that owning private credit can
diminish your risk what we call the beta of your
portfolio and enhance returns over the long term. That's again
up for debate, right, but that's that's what they tell you.
The downside of private credit, corry is lack of liquidity. Again,
(10:39):
it was designed as a investment vehicle for the rich,
a piece of their portfolio. They don't care that they
can't get their money out in three, four, five, seven years.
Sometimes does the average person care about that, corey that
they can get their money out? You better believe it.
So this is the tuggle war that's going on. Wall
Street wants all of you to start putting in your
(11:00):
four o one K and other investments they've lowered the minimums,
they got rid of the accredited investors requirement, on and
on and on again from the pressure of the private
credit industry. And if you don't know what private credit is,
let's give you a real layman's example. You know, Corey
owns edge reality, right. Corey's like John, I want to
expand and you know, no longer just Aaron. And I
want to go hire ten agents, and I want to
(11:21):
put my office in a big high rise. And I
need you know, I don't know ten million dollars working
capital to do it. If I was a private credit
manager or private credit fund, I'd go to Corey would
come to me. We do all of our due diligence.
Corey looks like a great guy. He's got the financials,
good credit, blah blah blah blah. Corey, here's your ten
million dollar loan. So it's private, right, it's not fortune
five hundred companies, But it's also not mom and pop operations.
(11:44):
This can be companies literally up to five hundred, five
hundred employees and more. But it's a sweet spot when
it comes to the world of lending, because this is
the size Corey that most banks do not want to
mess with. They don't want the ten, fifteen to twenty million,
even fifty million dollar loan a private credit. They love it,
high interest rate, They cross collateralize you in more ways
(12:06):
than you have any idea. They're very very well positioned.
In the event in our example that you know edgrility defaults,
they're going to be able to get their hands on
a lot of assets and things. So with that example,
that's what private credit's about. So Lisa Cook is concerned
with that, she should be. Thank god she mentioned this
because no one else besides my explanation, no one else
is talking to you about this. All I can tell
(12:28):
you is please, unless you have an advisor that is
helping you manage your four oh one k like we
do with our clients, do not do not. Do not
If and when private credit becomes available to do in
your four oh one K, do not get into it
unless you are advised professionally, because there are so many
nuances and so many risks that you have no idea
(12:48):
that lurk unless you want to spend you know, good
portion of a week. I'm reading the perspectives and really
understand it. The third thing, the hedge fund treasury risk.
This is the big one. Hedge funds, of course can short.
They can go a long the treasury market right, the
safest markets out there. But their hedge funds, they can
do whatever they want. They can invest in anything, go long,
go short, like I said, And if they're playing around,
(13:11):
which is not making the news yet, Corey, if they're
playing around in the treasury market, that could be a
disaster for interest rates. And you know, again, I could
do an entire show on the risk of playing around
in the treasury market or what hedge funds could do
to the treasury market. You need affecting interest rates and
back to loans and so on and so forth. So
those are three very serious issues that Lisa Cook brought
(13:32):
to the attention. Private credit risk, elevated asset allocation, asset valuations,
and hedge fund treasury risk. That spooked the market. Like
I said, it took the market about three or four
minutes after she made that for the sell off to begin. Now,
when we come back from this break, you're gonna find
out the real reason I'll say, probably ninety eight percent
of the reason why we sold off today. And I
promise you probably have no idea that this is the reason,
(13:55):
but you will here in a moment only on The
John Sanchez Show with Corey Edge turn it over to
Kristin Snow Now Traffic Center, Hillo Christen, Welcome back to
the John Sanchez Show on News Talk seven eighty koh
so Cory's vigeraility again. Dwight has the day off all
right once again, it was a tough session across the board.
I had tremendous strength in the morning and then things
(14:17):
began to roll over right around that eight o'clock hours
I'd mentioned earlier. But now it's time for you to
learn the real reason that probably your your own advisor
is not even telling you because most people are not
aware of this, but you will be hearing about five minutes.
Once again, the damage didn't look all that bad at
the close, three eighty seven loss on the Dow point
eight four percent, NASDAC down four eighty six, two point
one six percent, SMP one hundred and three point loss,
(14:40):
But it was where we were and where we ended
up one thousand, one hundred and seven point loss. Corey,
from the high of the doubt of the day to
where we closed one thousand, one hundred and nine points
think about that for a second, and let me tell you.
If you were sitting here in front of your computer
(15:01):
and you went and you said, ah, you know what,
Dow's up seven hundred points. I'm gonna go get a
cup of coffee. You literally could have come back and
you could have seen the dow uh maybe two hundred
points and then maybe step out for lunch, and that's
when you have seen it down, you know, four or
five hundred points. Upon where you were. It happened that fast.
So Jason and I were strategizing all day long, and I,
(15:23):
you know, will always give you full disclosure. I wish
we would have been the ones that we could have
figured this out. But you have to have real, real,
true Wall Street insight, meaning you've got to be one
of the major players for what I'm about to tell you. Well,
thank goodness, this gentleman was on CNBC today and highlighted
what exactly happened. And again we're gonna talk real estate
(15:45):
leverage later in the program. Now let's talk crypto leverage
and how it impacted the stock market sell off today.
You're gonna hear audio. It's about a five minute clip,
So Jake, bear with me or Jack, excuse me, bear
with me. We're gonna probably run a few minutes late
before we go to break, and I want to get
this out and then we'll come back and discuss it.
This gentleman, I'm talking about many of you. If you
(16:07):
watch CNBC, you see him on there all the time.
And he came out today and he even blew away
the CNBC host when he enlightened us as to what happened.
His name is Tom Lee. He is the chief strategist
for Funstrat. Funstrat is a kind of a boutique research firm,
but he also got involved and I'm not even gonna
(16:28):
try to describe what in the world of crypto he
is now. I think he's one of the founding founders
of one of these crypto companies, and I don't know
exactly what they do, but the bottom line is, as
you're gonna hear in the interview, he actually is in
contact day by day with these companies that are trading crypto.
(16:50):
And what you're gonna find, folks, actually, what we're gonna do, Jack,
I'm gonna retrace this. I wanna. I don't want to
be rushed. I wanna we'll play this audio when we
come back. So let me at the stage for just
a moment. What you're going to find out, folks, is
there was a major, major unwind in the crypto world
(17:11):
among the dealers of crypto, not anyone individual, but what
we call the market makers of crypto. Now, what's a
market maker? Just like we have in the stock market,
the market maker is the one that decides what the
price is going to be of the underlying asset. So
in this case, the underlying asset is crypto. Well, these
(17:31):
market makers also need capital. Well, as we all know,
crypto is what one hundred and twenty three thousand just
a few weeks ago, and for various reasons. Crypto bitcoin
I'm talking specifically right now, it's at eighty seven and
thirty six dollars. Well, guess what many people that buy
(17:53):
crypto i e. Bitcoin, they borrow money to buy bitcoin.
And so with the price starts to fall, many of
these firms automatically liquidate their bitcoin positions. Wasn't the client selling,
it was the computer selling. Those are the rules that
these firms have for some of these clients. A lot
(18:16):
of these clients that have bitcoin. And what's so bizarre,
Corey is last night, I was reading a story about,
of all things, a MMA fighter who was crying the
blues yesterday because he lost I think the number was
like five hundred thousand dollars, lost every dime that he
had in crypto and he couldn't figure out why. And
it was because the firm that he held the crypto
(18:37):
with automatically sold, and one sell leads to the second,
to the third, to the fourth, and you can't do
anything about it as the as the owner of that account.
It's all done by the computers automatically. Well, that tied
in perfectly with what Tom Lee had to say today,
how these market makers are in a world are hurt
because their capital, their person, their balance sheet for their
(18:58):
business as a broker dealer in the world of crypto
started to weaken with the price of this, and the
selling began to accelerate, and one thing led to the other,
and that selling pressure then impacted the stock market. Today.
We'll give you all the details with Tom Lee's interview.
When we come back, let's turn it over to Jack
Saban News Traffick at Weather. Jack. Welcome back to the
(19:20):
John Sanchez Show on News Talk seven eighty koh with
Corey inge evidrility to wiight Lard again has the afternoon
off Once again, we lost three eighty six on the
daw down, a four eighty six on the Nasdaq, and
a one three decline on the S and P five hundred.
All right, now it's time for you to sit back
and learn what the heck happened today, Because it wasn't
(19:41):
all of a sudden people were concerned about AI valuations.
It wasn't this, or wasn't that. It was our dear
friends over in the crypto market. And so, without further ado,
I want to play for you an interview It's a
little over a five minute interview with Tom Lee, Funstrat
senior strategists, extremely respected on Wall Street. But not only
(20:02):
is he an equity guy, but he also is owner
in one of the crypto companies. And mister Lee is
going to explain to all of you what happened today
and then Core and I will digest it. So sit
back and become educated, folks. You're going in for a treat.
Here we go go ahead, all.
Speaker 3 (20:18):
Right, Joining us now is fun Strats head of Research,
CNBC contributor Tom Lee, also the chairman of Bitmind Immersion
Technologies an ether treasury company. All right, so Tom, you've
heard what Steve had to say. This is, by the way,
not unusual for Invidia, is it?
Speaker 1 (20:33):
In video?
Speaker 3 (20:34):
The good folks that bespoke your team, you've recognized that
in Nvidia will often have these kind of wild swings
following earnings. But what is your take right now on
these markets?
Speaker 4 (20:47):
Well, I think I'm going to kind of add to
what Steve said. You know, I think the crypto market
has been limping along since October tenth because on that
date was a negative shock. I mean, today's stock market
looks a lot like an echo of what happened October tenth.
But on October tenth, that liquidation was so big, Brian,
(21:07):
it really crippled market makers. And our market makers are
critical in crypto because they provide liquidity. I mean, they
act almost as the central bank in crypto, and if
they've got a hole in their balance sheet that they
need to raise capital for, they need to reflexively reduce
their balance sheet, reduce trading, and if prices fall, they've
(21:30):
got to then do more selling. So I think that
this drip that's been taking place for the last few
weeks in crypto reflects this market maker crippling, and so
in twenty twenty two it took eight weeks for that
to really get flushed out. We're only six weeks into it,
so I kind of concur I think crypto, bitcoin and
(21:51):
ethereum are in some ways a leading indicator for equities
because of that unlined and now this sort of limping
and weakened liquidity.
Speaker 3 (22:00):
Well, and that was the that was the point that
my very very smart team behind me we put together
for the top of the show, which is showing that
that bitcoin turned down today before the market did. All right,
take us back. So October sixth I think it was
October six or seventh, bit twenty hit one hundred and
(22:20):
twenty five thousand. Yeah, a couple days later it was
still around one hundred and twenty thousand. Now obviously bitcoins
at eighty six and change. So what specifically occurred on
or around October tenth that would lead us to where
we are now? On what November twentieth?
Speaker 4 (22:38):
Yeah, Well, Steve actually pointed us out there's a lot
of what they call automated processes in crypto. One of
them is called adl okay, and that's an automatic liquidation
feature that would take place if someone's account or their
collateral drops in price. It's essentially like a margin column
(22:58):
on a specific change. A stable coin's price varied from
other exchanges. It actually stable coins should stay at a dollar.
It dropped to sixty five cents, but that only happened
within the exchange quotes within this exchange. Because of liquidity,
that trickered an ADL and automatic liquidation across many accounts,
it wiped out as that spread across other exchanges. Right
(23:21):
because liquidation's cascade, almost two many crypto accounts got wiped out,
even though minutes before they were actually profitable accounts.
Speaker 1 (23:30):
So who is behind this?
Speaker 3 (23:32):
Like, who's the they? In the market makers and they
got hit? Who's the they?
Speaker 4 (23:39):
Well, you know, Brian, I am. I am aware of names,
but because you know, I'm not someone who wants to
name names, I think what you should keep mind is
that this error is actually essentially a bug, you know,
a code error, because they I think in retrospect, they
would have pulled pricing from across exchanges to set the
(24:00):
price for that stable point rather than rely on internal quotes. So,
but this has resulted in a lot of market makers
and traders having less capital, and as you know, as
crypto prices drift lower because trading volumes drop, they need
to then have more capital available, which means they strength
their balance sheet further. So this is then that reflectses Okay, weakening.
Speaker 1 (24:24):
I hate talk to Tim.
Speaker 3 (24:25):
I mean, I want to go back to this point, Tom.
I hate the term glitch. I can't stand the term
glitch because you know, things go down to the airport
and they say, well, a glitch clause your flight to
not take off. Guess that's not a glitch. That's more
than a glitch. It's a word that is used to
describe pretty serious automation issues, software problems, crashes for some
reason that they try to minimize. Is this some kind
(24:47):
of a software bug that's causing part of this? I'm
trying to follow exactly what you're hinting around about.
Speaker 4 (24:57):
Yeah, I mean, Brian, it is. I mean, for instance,
teen eighty seven, portfolio insurance was the quote glitch, and
that triggered the cascade in nineteen eighty seven, and so
the industry learned and then never offered that again. You know,
in two thousand and nine it was really the collateral
(25:19):
wasn't secure in real estate in these packaged subprime mortgages.
Now the industry learned and they recoded that. I'm talking
about Wall Street. But then regulators came in and like overregulated.
That was the negative effect of that. In crypto. This
code of ADL and the way they pull prices never
going to happen again. The good news is we're not
(25:40):
going to have overregulation in crypto. But now we have
to deal with that liquidation effect. Twenty twenty two was
a big liquidation and it took eight weeks. But that
is not kind of You're right. It is the nature
of DeFi where there is going to be code and
there's going to be an error found. And you said it,
leverage is what's dangerous, and so investors should not be
(26:03):
using excess leverage in crypto.
Speaker 1 (26:14):
All right, all right, let's break this down into plain English.
What the heck he's talking about here? So, first of all,
and I did not know this. I'm gonna give the
whole credit to Corey. We were chatting during the break
and Corey was much more aware of leveraging crypto than
(26:36):
I was. Now, according to the research, I did very briefly,
and I don't have exact sources. It's not well octually
I do uh well, marg cks, so on and so forth.
You can leverage dependent upon which brokerage firm you're with,
you can leverage your crypto two times to one hundred times.
(27:02):
So think about that for a second. You put in
one hundred dollars, they let you trade two hundred dollars
or buy two hundred dollars of crypto. You put in
one hundred dollars, they allow you to buy one thousand
dollars of crypto. That, Folks, is leverage unlike anything I've
ever seen in the stock market. You hear us talk
(27:23):
about margin loans, Well, that's fifty percent of your account
value roughly that you can leverage. But you're not leveraging it.
You're just borrowing against it. When we talk about leveraging
the stock market, you get into things like derivatives meaning options,
put calls, different strategies, but very few things equate to
the amount of leverage Corey that crypto. These crypto platforms
(27:45):
allow these people to do as you heard Tom Lee
just mentioned a moment ago. Within a matter of minutes today,
two million crypto accounts were wiped out because if Corey
sitting there, and let's say he put in one hundred
dollars and he leveraged it to one hundred percent, and
now he's got one thousand dollars of crypto. But you
(28:07):
only put in one hundred dollars and crypto starts to fall.
And now these automatic cells kick in. Corey can't do
anything about it. His one hundred dollars is gone, as
Tom Lee just said, in a blink of an eye.
So now, how does that relate to what happened in
the stock market today? Okay, we're going to tell you
(28:31):
about a company when we come back called micro Strategy,
one of the largest crypto platforms out there. And this
is one of the companies I think that Tom Lee
was saying. I'm not going to share names, but this
company owns billions of dollars of crypto. Their stock has
been under severe pressure these last few days. Today had
(28:54):
lost five point zero two percent, nine dollars and thirty
seven cent loss to win seventy seven thirteen, fifty two
week low on the stock one seventy one forty eight
the fifty two week high on the stock, which happened
almost a year ago. What do you know about that?
November twenty first of twenty twenty four, and at that
(29:17):
point the stock was at five hundred and forty three dollars.
This year, the rumor on the street is they got
hit with this leverage that they allowed their clients to possess.
They got hit. They went, oh, our balance sheet is
getting crushed. We're going to do the automatic liquidations. Forget
(29:37):
about everybody out there, meaning the customer, they're wiped out.
But Micro Strategy, and again I'm picking them out of
probably many names that did this in the and the
bitcoin platform. They all liquidated. And now when we come
back now I'll share with you what they did that
we think and why it impacted the stock market in
(29:59):
the have sense. Let's wrap it up with Kristen Snow
right now traffic center. Kristen, welcome back to the John
Sanchez Show on News Talk seven eighty k oh it's
mister Edge your phone.
Speaker 2 (30:11):
Number six seven three six sevens ers A.
Speaker 1 (30:15):
Very good all right, once again, folks, wild ride today.
Please go back and listen to the show on your
favorite podcast company. We covered a lot today. This would
be an ideal day, Corey to do an entire podcast
on this because we've only scratched the surface. But anyways,
all right, so you heard the interview with Tom Lee saying,
(30:36):
look at today's sell off was attributed to the unwinding
of bitcoin. Once again, Hi, I was wrong hitting the
high a few weeks ago of one twenty three. I said,
it's actually about one twenty six. Right now, it's trading
at eighty six thousand and five sixty seven down two
thy six and twenty three dollars a two point ninety
four percent. So now let me summarize once again what
(30:57):
happened according to Tom Lee and many others. So all
these people, of course, every everybody you know is involved
in crypto, right, the easiest thing in the world to
make money, and people think they go in, they put
their money one of these platforms, like a micro Strategy
or somebody similar to that. They let you leverage that
up two times to one hundred times. I guarantee people
(31:19):
do not understand leverage. Otherwise two million accounts wouldn't have
been wiped out today. So now let's just once again
use micro strategy as an example, because this goes as
you heard Tom Lee say, with other market makers. Again,
a market maker, they're like the auctioneer right. They're the
intermediary between a buyer and a seller. So the minute
they start to see this problem unwinding and these automatic
(31:41):
sales happening, they're going, uh oh, all these people that Oh,
by the way, we're the ones that lent money to them,
so they don't tell you, Corey, these broker firms, they
are the ones that lent the money. So when micro
strategy or excuse me, when bitcoin starts tumbling, it's not
only affecting the account holder, but it's affecting the broke
or the broker dealer because their balance sheet is deteriorating
(32:03):
faster than you can you know, shake a stick ap
So now before they start getting calls from regulators, because
regulators are watching them, going your capital is getting very weak,
you better do something about it. And hence that's why
they have this automatic selling so they don't get caught Otherwise,
can you imagine if they lent all this money, you know,
two to one hundred times, their clients have their portfolios
(32:26):
and guess what if they just let them fall and
deteriorate to nothing, you know, the broker dealer would not
be in business very long. So that's why the automatic
selling occurred. Now final how did this affect the stock market.
So if I'm one of these broker dealers, what my
strategy is going to be is this, I am going
to short technology names, Navidia's, Microsoft's, Oracles, you name it.
(32:53):
I'm going to short those because I think they're going
to go lower because of what's going on in crypto.
You're shorting the stock you don't own, so you're shorting
I was picking Navidia. You're shorting Navidia hoping that it's
going to go down. So now you're putting pressure on
Navidia and all the other tech names because all these
bitcoin broker dealers are shorting the technology names hoping they're
(33:14):
going to go down. That is their hedge against Bitcoin
going down. So you had the first leg of the
sell off occurring with bitcoin. The second leg is they
start shorting the technology names. That's what drives the NASDAC down.
When the NASDAK drops, we know what happens. The SMP
gets affected, the Dow gets affected, obviously the NASDAC. That's
(33:37):
this whole crazy web that we call Wall Street folks.
And that's why again I cannot express enough. Do not
take margin on your account and if you are a
bitcoin investor, look at your account tonight. Are you in
one of these broker dealer accounts where you've leveraged. If
you are, please be careful and watch what you're doing.
Speaker 2 (33:58):
Corey final comments, kind of like we were talking off air,
it'll be that this may have a few more days
before it clears out, or it may be done tonight.
Speaker 1 (34:06):
That's right.
Speaker 2 (34:08):
It was better than Yeah, it was better like we
talked about. It was better than the Fed coming out
and saying we're raising rates whatever, because then you have
no way to get out of it.
Speaker 1 (34:18):
Exactly.
Speaker 2 (34:18):
This may just be a glitch.
Speaker 1 (34:20):
Yeah, let's hope. Let's hope. All right, folks, you have
any questions, please reach out to us. God bless, have
a great afternoon. See tomorrow on The John Sanchi Show.
Dwight Millard n MLSID number two four one two five
nine a license mortgage Loan Officer with Highlands Residential Mortgage
Limited and Equal Housing Lender and MLSID number one three
four eight seven one. The information shared on this live
broadcast is for general information purposes only and does not
(34:43):
constitute financial or mortgage advice. Listeners should consult directly with
a license mortgage professional for guidance tailored to their specific situation.
All loans are subject to credit approval and program guidelines.
Not all applicants will qualify. Loan terms and availability may
vary by state and are subject to change without notice.
Highlands Residential Mortgage Limited is licensed in multiple states. For
(35:05):
a full list of state licenses and disclosures, please visit
https slash slash www dot highlandsmortgage dot com backslash licenses backslash.
The views expressed during this program are their own and
do not necessarily reflect those of Highlands Residential Mortgage Limited.
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