Hello, this is Kim Tak from TakTube. I'm filming the video a bit late today. To be honest, I’ve been feeling unwell since last night, which has made it a bit difficult to shoot today’s video. However, I took some medicine and rested a lot. Earlier today, I recorded a few short videos sharing the market situation from inside my car, and the response has been very positive, so I want to thank everyone for that. Today, a subscriber commented that the market is very tough, and they requested a driving video. At that time, I was on my way to the hospital, and my throat wasn’t in good condition, so I couldn’t film. But after taking some medicine and resting, I’m feeling much better now. So, I quickly decided to shoot a video. Why now?

Today, while observing the market, I noticed that the usual level of adjustment is not easily followed by a rebound. The market has been quite challenging today. However, the main factor affecting the market today is the fear of recession. For stock investors, the word recession is the most unpleasant to hear, followed closely by uncertainty. Currently, the uncertainty caused by the recession has intersected, leading to a market panic. 

To conclude, I believe that there is an excessive level of pessimism dominating the market. As you can see in this Confluence notice, I do not provide specific investment recommendations or advice on investment decisions. Nevertheless, I think the market may experience a correction this time. A few days ago, I mentioned some aspects regarding technology...

This is a somewhat concerning area, and I have mentioned these aspects before. Last week, when we were overly positioned in tech stocks, I suggested that we expand our horizons and take this opportunity to study various sectors. The reason for this is that there seems to be a blind faith in tech, particularly in Philadelphia semiconductor stocks and big tech. Of course, I also like Nvidia, and big tech has shown significant growth. What are the characteristics of big tech? The defining feature of big tech is its very high operating profit margin, right? Nvidia's operating profit margin is around 60%, isn't it? At the same time, there is also high growth. Big tech possesses both of these traits.

I agree that the long-term outlook is upward. However, my concern lies in the fact that the short-term performance has been exceptionally good. But let me put it this way: I'm not suggesting that you should buy more or hold on at this level. What I want to convey is to move away from excessive pessimism. At this level, it's important to understand why we have struggled so much and why the market has undergone such a significant correction. I want to briefly share my thoughts on this. The introduction is getting a bit lengthy, but I feel it's necessary to address the excessive pessimism. Some might say that we are currently in a period of high volatility, and it would be wise to hold some cash. In fact, that is standard advice. From my experience in investing, I...

It’s true that many people have been in the industry for a long time. From the perspective of investing together, the most comfortable thing to talk about today is that many people have been asking me how to handle stocks. They say things like, It's really tough to hold onto what I have. What should I sell and what should I buy? I get these questions a lot. So, I say this: right now, since there is a lot of volatility, it’s not very helpful to just hold onto cash. It’s already been established. At this point, I think it’s okay to hold onto certain stocks or to consider entering new sectors. If you can use the corrections to your advantage, then when there’s a rebound, it would be good to sell at that time. I believe that having realistic considerations like this is helpful. I provide advice in that manner, and ultimately, I’m not trying to give you advice as if I know everything. What do I know to give advice?

The disclosure is very important, so the information I can share with you will be quite limited. Despite this limitation, I want to express that I feel it's a bit excessive right now. I hope we can move away from this extreme perspective. I will keep my remarks brief and aim to finish within five minutes. Many have mentioned that I tend to rush when filming, so today I will deliberately speak more slowly. If you find it too slow, you can watch it at 1.5 times speed. I usually speak quickly, so I understand that people don't often adjust the speed. However, I will do my best to speak slowly. 

Now, regarding the KOSPI, it has adjusted by 3.6% today. This is a significant adjustment, and the current level is where we are now.

This February, right? In January of this year, there was a time when our market was very bad. As soon as the market opened, foreign selling poured in, which was not good. After that, when the first rebound occurred, the level was 270. From this point, the market began to stabilize, and the semiconductor and AI boom started. At the same time, there were expectations for a rate cut in the U.S. Then, the market fluctuated, moving back and forth. This was because there were discussions about when interest rates would be raised or lowered. Although the rate cut was delayed, we have some events coming up in March and April, right? It's the first quarter earnings season. The earnings season starts in April, and since things were looking good at that time, it seems promising.

However, the earnings are coming out very well. So, at this time, it becomes a performance market, reaching 2780. Then, in May, there is a slight period of adjustment. Earnings come out in May, and after a break, from May to early July, it goes up to 2900. From this point, semiconductor stocks, including Samsung Electronics, rise significantly, and other companies with good second-quarter earnings expectations also perform very well. So, until June, the tech sector was very strong. Of course, tech stocks showed different trends, but starting in July, the cosmetics and tech sectors, which had been doing well, all started to decline. Semiconductor stocks, including Hynix, have also adjusted from a peak of 250,000 won to around 170,000 won. This is the current situation, and the level is as such. The KOSDAQ is in an even worse state.

The KOSDAQ has dropped significantly up to this point. It might find support around 730, but I'm not entirely sure. The components of the KOSDAQ are a bit challenging; the volatility is high. It consists mainly of secondary batteries and biotech. Therefore, if the secondary batteries fluctuate, it can't hold up. Biotech is on the rise, and it has increased a lot recently. Looking at the KOSDAQ index itself, it is in a very difficult phase. I plan to create a separate video about the KOSDAQ index, so you can refer to that later. As I mentioned earlier, on July 11, it was around 2,890 points, and now on August 2, it has dropped to 2,670, which is almost an 8% decline. It has experienced a vertical drop, and as you can see, semiconductors have also dropped significantly, with a correction of about 20%.

The machinery sector is at 16%. This means there are power machinery stocks, right? The stock prices have been quite good. The power machinery sector's performance in the second quarter was outstanding. However, Hyundai Electric faced some pressure due to profit-taking afterward, and it was also linked to AI stocks. As AI stocks declined, it became difficult to hold on. Additionally, there are steel and secondary battery sectors, and the automotive industry is also facing challenges. Looking at Hyundai Motor's recent monthly sales figures, the sales volume is not impressive. In August, Hyundai will announce its shareholder return policy. The market is likely very troubled right now. Some may want to bet that the stock price will rise when shareholder returns are strong, while others might be concerned that this could be the last event. There are worries about what will happen if the sentiment shifts. As a result, automotive stocks have also declined. Now, let's get to the main point.

Returning to today's adjustments, what is it ultimately? Yesterday, the US ISM manufacturing index came out at around 46%. The number 46 is significant here; it was similar around October and November of last year. At that time, the stock market was not doing well, but it started to rebound from there. As the ISM manufacturing index rose, the market reacted positively due to various expectations of interest rate cuts and so on. So, as it has come down to this level, isn't there a bit of concern? Basically, an ISM manufacturing index below 50 raises worries about the economy, and 46 is a very concerning number. Compared to the recent year, it is quite alarming. At that time, when the index was low, there were significant concerns. In conclusion, I believe the worries are valid, and I will discuss that more in the latter part of the video. What I want to share with you today about the market is this.

This is a gift. Everyone, on a day like today when there is a significant adjustment, I hope you take a look at the futures market. Today, futures have dropped nearly 4%. Who led this? Most of the time, when futures plummet like this, it is driven by foreign investors. Aside from foreigners, there are no other entities that can determine the direction of futures. Individuals are almost completely out of the market now. In the past, there were many players like front-running minnows and whales. Those whales could really make a big impact, executing contracts in the thousands. So, they could compete with foreigners. Typically, foreign CTA funds, which mainly deal in derivatives, usually have a capacity of around 10,000 contracts and dominate our market. Today, a specific CTA fund likely made a decisive move. Before the market opened, they probably utilized the ISM manufacturing index, as the Nasdaq had a significant movement yesterday.

It has fallen, and let's try to make a proper show of betting while adjusting the fear. Why is the program market in Korea so active? As a result, there is a lot of selling of futures. This leads to a significant amount of program selling. Who does a lot of program selling? Securities companies do. So, securities companies just look at the basis of futures. Right now, the theoretical basis is around 1.5, and today it fluctuated between 1.0 and 1.1. What did I say about that? It's called backwardation. What is backwardation? It means buying futures and selling stocks. Securities companies are diligently selling stocks, and since foreigners are selling futures, securities companies are saying, Thank you, while selling stocks and buying futures. I want to say this to you all: there are many issues regarding short selling.

There are many studies showing that the actual direction of short selling has little correlation with the overall index. Of course, there are also cases of very misguided short selling that need to be addressed. However, I truly believe that the problem in the Korean market lies in the programs. The program trading causes a lot of volatility. Foreign investors take advantage of this; when they heavily engage in program futures trading, it leads to a continuous decline. Recently, foreign investors were net short by as much as 25,000 contracts, which is one of the largest negatives I've seen. When so many futures are sold, what happens? The futures face selling pressure. When there is selling pressure on the futures, what happens? The futures drop below the stock prices.

What happens when there is program trading in securities? Of course, foreigners also participate in this. Foreigners are heavily involved in securities trading. If you look at today, you can see how much program selling has occurred. Later, you will see that as futures decrease, you should buy stocks and sell this. This way, the program trading significantly weighs down the market. Today, foreigners sold nearly 2 trillion won, which is one of the largest sell-offs recently. The highest amount sold recently was around 1.34 trillion won, and with such a large sell-off today, it has impacted the market. Recently, in July, around the 8th or 9th, the KOSPI reached its peak, and at that time, there was a net purchase of nearly 2.3 trillion won.

The trends in the futures market are related to the direction of the index in the short term, so I think it would be good for you to take a look at this from time to time. I apologize as my throat is not in a normal state, so I might cough a bit. Earlier today, I was making a video and noticed that the employment figures were released. I was indeed worried about the employment data, and it turned out to be worse than I expected. It was a shock; the non-farm payrolls came in at 114,000, while the forecast was 170,000. This is a complete shock. The market was expecting an increase of 170,000 jobs in July, but only 114,000 were reported. Additionally, the unemployment rate was expected to be 4.1%, but it rose to 4.3%, which is quite high. Given this situation, what does it mean? It really instills fear; the numbers were good enough to create panic. In the stock market, what is the term that people dislike the most? Recession, right?

The current situation is a combination of stagnation and uncertainty. The uncertainty is amplified, and people want to sell their stocks. Many will advise that now is the time to wait and see, but I believe that this perspective is somewhat excessive. Let me mention this: let's take a look at employment. In July 2024, employment increased by 114,000 people. Where did this increase come from? If we look closely, 85% of the increase was in the private sector. There was significant job growth in the private sector. However, where did we see a decline in employment? Let's compare it to last July. In July of last year, the service sector and government contributed significantly to job growth, but in this July, it seems that the service sector and government are not contributing as much to job growth.

The width has decreased. Then, the most important thing is that the pad is what we consider important, right? The sticky service is crucial. The fact that employment has decreased means that our concerns about inflation may lessen. This could lead to a slight decrease in the CPI, which would connect to a rate cut. I mentioned in my last video while driving that the trend for rate cuts has already been established. This is not a short-term positive, but if the rate cut becomes larger than expected in the market, it can act as a significant positive factor. You should keep this in mind. Now, looking at the bad watch, as soon as the employment data came out, what are the possibilities? For September, regarding the September FOMC, the probability of a 50 basis point cut has risen to 62% from the current range of 5.2 to 5.5. Just the day before, it was different.

There is a 22% chance that the Fed Chair Powell mentioned a 50 basis point cut. He indicated that he is not yet considering a 50 basis point reduction. However, the market is betting on a 50 basis point cut given the current employment and manufacturing data. This could create a strong downward pressure on the indices. I want to emphasize that so far, there is a sense of expectation. But let's discuss the facts. The fear is palpable; I am also scared. As a fund manager, the term recession is the most frightening for me. I really want to sell stocks, but I want to protect my performance. I would like to caution against excessive pessimism. First, the returns on bonds and stocks will differ, but there is a trade-off relationship between bond and stock returns. This is why many institutions...

The previous statements were about investing in bonds and stocks. When looking at pensions, we see a portfolio structure. For example, a portfolio might consist of 60% bonds, 40% stocks, and 20% alternatives. This is how portfolios are structured. If the performance of bonds is good, we might reduce it to 50%, while increasing the stock allocation to 50% or raising alternatives to 30%. This is how portfolio rebalancing works. However, since the 1970s, the average yield on bonds has been around 6%, while stocks have averaged 9%. Because of these statistics, it is said that long-term investments in stocks outperform bonds. But this year, as of year-to-date, bonds are currently yielding less than 2%. This is because interest rates have not dropped significantly; they have been declining recently.

If interest rates drop, bond yields will rise. The performance of bonds is improving, while stocks have been over 10%. This means that stocks are slightly declining, and there is a rebalancing process occurring. It involves buying bonds and selling stocks, and this decision is made by large pension funds and asset management firms that handle significant amounts of capital. I believe this process is gradually narrowing. 

Now, regarding employment and the ISM manufacturing index, since you mentioned research, let me share my thoughts. The Future Research Center has done an excellent job compiling data, and I would like to express my gratitude for their well-cited work. In the context of U.S. economic recessions, excluding the 1990s, there are no indicators available. During the 2000s bubble period...

Next, looking briefly at the Lehman Brothers crisis in 2008 and the pandemic, we can see that the U.S. has entered a recession during this time. Among the detailed indicators of the ISM manufacturing index, there are the delivery index and the customer inventory index. The delivery index indicates that the lower the index, the more delays there are in deliveries. This means that there are many people wanting to receive deliveries, but the supply is not meeting the demand due to issues with distribution networks or courier companies. At this time, we can observe that customer inventory was increasing. A high level of customer inventory is a very bad sign. Inventory, as you know, refers to stock.

The higher it is, the worse the economy is. Inventory has been increasing. Of course, during this time, the delivery index has also decreased. What does that mean? It means there are no delays, which indicates that people are not placing orders. There has been a stagnation in orders. If we look back at the Lehman crisis, customer inventory levels were rising, and the delivery index was also down. This means that orders are not being placed. Inventory is increasing, but orders are not coming in. During the pandemic, this was unprecedented. At that time, there were unavoidable delivery delays because the supply chain had collapsed. Now, look at the current situation: the delivery index is rising. What does it mean when the delivery index goes up? It means there are delays. There is a lot of delivery, but the supply chain is not supporting it properly.

The customer inventory index is declining, which indicates that this situation is different from a recession. Now, the second point, which is more important, is that when jobs are increasing, it is not a recession. In the 1980s, a recession occurred due to inflation, and during that time, jobs were decreasing. In the early 1990s, there was also inflation. At that time, it was probably a show, and then there were concerns about inflation. This refers to private non-farm jobs, which are decreasing, and the dot-com bubble was also declining. During the Lehman crisis, there was a complete crash. Now, what is the situation? Although the numbers have dropped, they are still in the positive, at 110,000 plus. The third point is that before past recessions, there were continuous concerns about inflation, which is why interest rates were raised late. Look at the 1980s; inflation was completely around 15%. So, with inflation at 15%, the Fed...

For a long time, the interest rate has been maintained at 15%. When the economy collapses, a recession follows. At that time, the inflation rate was also high, and the Fed's benchmark interest rate was around 5%. However, prices continued to rise, which meant that they couldn't lower the interest rates. During this period, inflation remained persistent. Eventually, they lowered the interest rates later on. During the Lehman crisis, prices also held steady, but the benchmark interest rate was lowered. This was necessary because, with Lehman Brothers' bankruptcy, they had no choice but to implement contractionary policies. Now, the benchmark interest rate is at 5%, but prices are decreasing. As I mentioned earlier, looking at the employment data from July, there is a possibility that inflation could decline. The G2 economic indicators are not very visible these days, but they are based on a very old-school historical perspective. Right now, we need to rely on the facts.

Currently, regarding the volatility in the market, I want to emphasize that if you only see it as being very dangerous, it won't help your accounts. That's why I brought this up. During the 1980s, there was a complete crash, and we saw a significant drop during the dot-com bubble as well. The same happened during the Lehman Brothers crisis. And now, what’s happening? The market is going up. When it goes down like this, we start to worry, right? 

Now, looking at the Fear and Greed Index, it’s already showing extreme fear. I believe that once we reach this level, selling becomes meaningless. On Monday, we might see some pressure in the early trading hours due to reverse trading. Starting from 9 AM, there will be some activity from Eugene and NH, and around 10 AM, we can expect some from Kiwoom as well. So, I want to advise you to be cautious about the sell-offs that might occur in these areas.

Today, I will conclude the video here. It has become a bit lengthy, but the reason I made it longer and more detailed is that this is an important time. Please make sure to protect your accounts well. I do not provide any investment advice or recommendations. Nevertheless, today I have emphasized a few points strongly. I encourage you to think carefully about them. Always strive for a happy and enjoyable investment experience. Even if things aren't going well, I hope you have a great weekend. I will see you again with another good video. If you liked the content, please give it a thumbs up. I will also be getting some rest soon. Good night!

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