Banned From Investing

What's up, Graham? It's guys here. So I had another video that was scheduled to post today, but that could wait because we gotta talk about what's happening throughout the entire stock and cryptocurrency market, and the likelihood of seeing some pretty big gains and losses over these next few weeks as everything goes absolutely bonkers.

For instance, analysts now believe that Bitcoin could surge to a high of a hundred and seventy thousand dollars by the end of the year. Zillow shuts down their home buying operation, signaling that some believe marks the peak of the market. A new privacy change is wreaking havoc throughout my favorite tech stocks, and oh yeah, the topic of getting banned from trading that happened, so let's address what's going on.

The biggest factor that could soon push Bitcoin above 150,000 is whether or not Zillow has identified the peak of the market and the reason behind the trading ban, of which I promise has nothing to do with me starting an OnlyFans account to post all of the tantalizing details in my portfolio. Yeah, I did that, but it's meant to be a joke, kind of. Anyway, there's a lot we have to cover, and as usual, if you guys appreciate all of this information being condensed down into just the facts, it has helped me out tremendously if you hit the like button.

Also, if you're brand new here, feel free to subscribe because I post new videos every Monday, Wednesday, and Friday that have to do with personal finance, investing, and everything related to your money and making more of it. So thank you guys so much, and now with that said, let's begin.

All right, so first we should really talk about what's happening with Bitcoin and the fact that throughout the last week, it's been unstoppable. After the immense popularity of the brand new futures-traded Bitcoin ETF, a brand new all-time high was reached at a whopping 66,974. Although it doesn't stop there because now it's in danger of being too popular for its own good and being closed off if nothing is done. Yes, seriously. See, the Bitcoin ETF is a really, really big deal. It marks the mainstream acceptance of being Boomer approved on the open market, and in a way, some regulation is a sign that lawmakers take it seriously.

They intend for it to stay, and they want to find every way possible to turn it into a money-making machine. And so the ETF was born. However, this wasn't just any normal ETF where you buy into a holding company that then owns an equal proportion of Bitcoin as collateral. Instead, for this to gain acceptance from the SEC, this ETF operates as a futures contract, meaning you're buying into a holding company that buys contracts that promise to purchase Bitcoin at a specified date and price in the future.

Because of that, they were able to gain acceptance from Wall Street. But as Bloomberg says, that is also part of the problem; as a futures-traded ETF, there's a limit to how many contracts you're able to hold every single month, and in this case, it's 2,000, which you're about to see might not be enough. That's because, in two days of trading, the futures-traded ETF hit almost 1,900 contracts for October, and they could soon reach the very maximum with still another 10 days to go.

Now, to get around this limit, they've started adding another 2,000 contracts for November, although almost immediately, they amassed another 1,400 contracts for that month too, leaving them with very little room to move forward without either being oversubscribed or reaching the cap on how much they could do. So even though this is a quite unique situation that JP Morgan warns could distort the market, the good news is that this means there's substantial demand for Bitcoin on the open market, and it's way more popular than current regulation can handle.

It should also spark a lot more competition between other futures-traded ETFs which are scheduled to launch in the next few weeks. Although when it comes to Bitcoin, it doesn't quite stop there, because with all of this excess demand could come an even higher price. At 168 thousand dollars, the founder of Fundstrat, Tom Lee, says that he believes Bitcoin could surge to 168 thousand dollars by the end of the year for two reasons.

Number one, a futures-traded ETF is very likely to pave the way for a traditional ETF that buys and tracks the price of Bitcoin, allowing individual investors to buy into it without having to store it themselves. That would lead to a significant inflow of money into Bitcoin that otherwise would be sitting on the sidelines because most people have no idea how to buy it. Second, as of right now, only a fraction of investors currently own cryptocurrency.

Get this: it was recently found that only six percent of U.S. investors say they own Bitcoin. That's it! But even throughout investors between the ages of 18 and 49, only 13 to 18 percent of them own Bitcoin. That's really not that much when you compare that with the sea of other investments available for people to buy. Cryptocurrency still makes up an extremely small portion of liquid investments dwarfed by the size of both gold and art.

Tom Lee's analysis believes that the more mainstream it gets and the more people adopt it, demand will far outstrip supply, and the price will reach 168 thousand dollars before finding an equilibrium. On top of that, JP Morgan says that the price of Bitcoin could also be driven by something else, and that would be inflation.

As they say, we believe the perception of Bitcoin as a better inflation hedge than gold is the main reason for the current upswing, triggering a shift away from gold ETFs into Bitcoin funds since September. But they also warned that the initial hype with Bitcoin futures could fade after a week. Although then again, JP Morgan has always been pretty salty over Bitcoin, so take that for what it's worth.

As for myself, both Bitcoin and Ethereum currently make up a little bit less than eight percent of my total portfolio, and I'm buying into it on a regular basis just like I would with any other stock. Anyway, throughout the last year, I've taken cryptocurrency very seriously, and I see it as a great way to diversify your investments and hopefully not lose money like Zillow.

Listen, at first I was not going to talk about this, but given the sheer amount of comments asking me to talk about what's going on and whether or not this could be cause for concern, I'll give my take on things. After all, real estate is where I got my start, and I have a feeling there's a lot more going on than meets the eye.

Now, this all started when Zillow launched what's called their iBuyer program that allows homeowners to get instant cash offers if they want to sell their home. In fact, they believed this would be such a big market that they were about to lock in 450 million dollars worth of funding to buy even more homes. But, uh, something changed. Some people might want to reference a viral TikTok which theorized that websites like Zillow were snatching up homes in an effort to control the market.

But the reality is, flipping homes is just not as profitable as they expected. When I started looking into this, I was actually very surprised to see that these iBuyer programs were actively losing money at an average loss of forty thousand dollars for each home bought and sold. Why, you might ask? Well, the problem stems from how much they were paying for these homes in question, which I gotta say up front is a lot more than what you would expect for a totally virtual service.

Now, even though Zillow claimed that homeowners would turn down their iBuyer offers only to receive an average of 0.09 more on the sale by going the traditional route, more recently it was not only found that iBuyers were paying an average of 104 percent of the home's market value, but they were also expanding the areas in which they purchased, leading them to even greater losses by the time the home is eventually sold on the market.

However, in this case, money was not the issue. Zillow was a very big company that could raise as much money as they want and burn capital for many, many years before even becoming an issue. But their biggest blockage was not that they thought the real estate market had peaked, but instead they claimed that it was labor and supply shortages that made it impossible for them to fix and re-list homes as quickly as they would want.

After all, if Zillow buys a home and that home needs a light remodel, Zillow can't afford to wait an extra 12 weeks for flooring to arrive while the home sits empty collecting dust and accruing interest, property taxes, and insurance along the way. In real estate, every single day a home sits empty, the more money is being lost. When Zillow can't efficiently remodel and flip homes as quickly as they want, then the entire business model stops working.

Now, as a real estate investor myself, I never understood why they would want to get into the remodeling business to begin with. It's an extremely time-intensive, localized market. It's very difficult to profit from on a large scale. These are not like widgets on Amazon, where you could buy in bulk at a discount and then sell for a profit. Every property is different; every remodel is different, and managing renovations is just a logistical nightmare.

I figured they would just be doing this to harvest more data from active sellers, but given how much they're losing and the difficulty in sourcing materials, it makes sense why they would cease operations. Otherwise, no, I don't think this signals the top of the real estate market, but I do think it indicates just how severe the supply chain shortages are and how real estate is a lot more nuanced than most people think.

But speaking of nuances, here's the biggest story of the day, and that would be getting banned from trading. That's right! For the first time ever, the Federal Reserve has banned officials from buying and selling individual stocks after a recent controversy involving some potentially maybe insider trading conflicts of interest having to deal with preferential treatment of printing a lot of money.

See, as it is right now, if you're an elected official, you're free to buy and sell whatever you want as long as you do not use private information to profit. On top of that, all of your trades must be disclosed within 30 days of purchase, even though technically the penalty is only two hundred dollars if you don't do that, which is really not that bad. But here's where this begins to raise some eyebrows: two Federal Reserve presidents have recently retired early after some controversy about their recent purchases.

Under past disclosure, it was revealed that one of them purchased 27 individual stocks valued at over a million dollars in companies that stood to benefit from the programs the Federal Reserve was planning to inject a lot of money into. In response to this, on September 9th, they announced they would be selling off their holdings as a show of good faith, even though when you look at it, it appears as though they've sold near the all-time high, and did they both retire early? Nice!

But now, new regulations were put in place to ban Federal officials from buying and selling individual stocks, and instead they would limit their investments to both mutual and index funds that ride the entire market without any preferential treatment that could be a conflict of interest. Now, on special occasions, there can be exceptions to this, as long as the person gets 45 days' advance notice to any purchases or sales and gets approval. They're also going to be required to hold those investments for at least a year, and no purchases or sales will be allowed during periods of heightened financial market stress.

As far as what I think of this, I'm all for it. Now, even though them buying stocks prior to a vote didn't violate any rules at the time, it did look suspicious. When you're in the public eye, perception is important, and you have to be especially careful with everything you do. Even though their worst-case scenario right now seems to be selling stocks at all-time highs and then retiring early, I do think it's a step in the right direction.

By removing their ability to purchase and sell individual stocks, they might better ensure that our entire economy does well without picking any favorites. Lastly, since my tech portfolio looks like the Red Sea today, that's primarily driven by a new tracking feature on Apple that does not track you. See, as of right now, Apple controls a significant portion of the market in terms of your data that companies used to benefit from.

Previously, if you were to download an app or go through one of their affiliates, that data would be visible for advertisers to see. It allowed them to monitor their campaigns, use your information for retargeting, and otherwise follow you everywhere until eventually, you bought their product. With a new update, users must voluntarily opt-in to allow their data to be tracked, with a single switch; 96 percent of users chose to opt-out.

The result is that advertisers have to spend a lot more money to reach the same person. They can't effectively target the right demographic, and now those stocks are plunging with the expectation that they're not going to make as much money as a result. Now, it's really important to mention that this change doesn't just impact big businesses like Google, Facebook, and Amazon, but also small mom-and-pop businesses who want to track who visits their websites so that they might be able to retarget them in the future with other offers.

And since advertisers have to spend more money now to reach the same person, the result is that they are spending less because it's too expensive now. Facebook responded by saying Apple's policy is benefiting their bottom line at the expense of businesses who rely on personalized ads to reach customers and grow their operations. I am a lizard person. Even though Apple says that this policy applies to everybody, including themselves, that didn't stop the market from selling off with the expectation that data is invisible.

As far as my thoughts on this, I'm kind of split right down the middle because on the one hand, you should have a right to consumer privacy, but there's also an economy that relies on tracking data from one platform to another in what I believe to be pretty harmless. When you can't properly track data, you have no idea how effective your message is. Even Facebook says that they're undercounting how often campaigns are driving conversions by approximately 15 percent.

But I can't help but feel that if Apple clamps down, then advertising will ultimately find a new strategy that will work. Personally, I don't care if advertisers have access to my data because most of the time, it's just me getting retargeted with things that I've just purchased. But I also wouldn't be surprised if Apple had a very good reason for this in the future, and hopefully that involves smashing the like button for the YouTube algorithm.

So with that said, you guys, thank you so much for watching. I really appreciate it. As always, make sure to subscribe and hit the notification bell. Feel free to add me on Instagram and on my second channel, The Graham Stephan Show. I post there every single day I'm not posting here, so if you want to see a brand new video from me every single day, make sure to add yourself to that.

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