Is an “Economic Hurricane” Coming?
The market is trading in a narrow range, waiting for the next move down or up. Currently, the financial market is being driven by the short-term sentiment of traders, but there are still so many trading opportunities for scalpers and day traders. This morning, MSFT and CHWY, along with the usual suspect QQQ, were giving us some trading opportunities. I had a heavy loss at the Open, but struggled my way back to a small green. You can watch the recap that Brian, Thor, and I posted here.
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Today’s Global News and Financial Recap
President Joe Biden is likely to visit Saudi Arabia later this month as record-high US gas prices weigh on his party’s political prospects. He most likely will meet Saudi’s effective ruler, Crown Prince Mohammed bin Salman. President Biden currently does not have a good relationship with him, as he blames him for the 2018 murder of a US-based columnist in Turkey. However, the geopolitical situation requires some forgiveness. There have been reports that Saudi Arabia may increase oil production. This comes just ahead of the OPEC+ meeting today. I have no doubt that the US is trying to repair its relationship with the Saudi Prince in order to keep production high. This will help western economies overcome the challenge of high energy prices resulting from the war in Ukraine. Putin knows that western economies will go into a recession, if not a depression, with such high energy prices, and so far he is betting on that. A big energy producer such as Saudi Arabia or Iran can come to the rescue of the West. Iran is in a unique position if they can repair their relationship with the West. They could then ramp up production, get the sanctions lifted, and fill the gap the West is suffering from, but only if their leaders seize the opportunity.
Jamie Dimon, CEO of JPMorgan, warned investors to prepare for an economic “hurricane” as the economy struggles against an unprecedented combination of challenges, including tightening monetary policy and Russia’s invasion of Ukraine. “We don’t know if it’s a minor one or Superstorm Sandy. You better brace yourself,” Dimon cautioned. With the majority of stocks in bear territory, I’m not sure what else we can expect.
At Bear Bull Traders…
At last night’s Wednesday Psychology webinar, Dr. Reid surprised everyone with his offer of free coaching. You can benefit from talking to him in private by upgrading your account here.
For Thursday Mentorship, John has already wrapped up his regular weekly mentorship session that starts at 11am ET. Ed’s mentorship session begins at 4:30pm ET (with 30 minutes of after-hours trading commencing at 4pm ET) and Thor is up at 8pm ET.
Do you know what a “zombie company” is? According to analysis conducted by Bloomberg, there are 620 companies in the Russell 3000 that haven’t earned enough income over the last 12 months to even pay their interest expenses. These companies often get referred to as “zombie companies” because they’re basically only half alive, started up by easy liquidity and cheap debt. There’s always a lot of concern about the number of these so-called zombies. During this current period of financial tightening, if a company can’t even pay the interest on its debt, then it’s not going to be viable as a real business without cheap money (aka low interest rate loans). In the coming months and well into next year, I think many of these companies are going to be out of business and delisted from the Exchanges. I used to work in one of these companies myself. That in fact is where I met Brian for the first time. The company went under after 2 years of burning through the resources they had. They eventually got delisted from the public market.
That company was a cleantech venture, but many of these zombie companies have recently been tech, and even more recently “crypto bro” startups. Employees in these companies have often made a fortune through stock compensation despite working for companies that weren’t able to turn a profit or even generate surplus value for the public. But, as bubbles burst, many of these talents are being forced to leave for more productive businesses.
This burst bubble of “crypto bro” companies are releasing a good pool of talent who are destined for other industries. The best and brightest will eventually be working on some of the biggest challenges of our lifetime, such as climate change and clean tech, instead of trying to get an algorithmic stablecoin to work, and that will be a very nice development. We all can look forward to that day.
To your success,
PS: If you have not already, I urge you to try out our free web-based trading simulator at stocktradingsimulator.com. It’s conveniently available 24/7, whenever you have time to practice honing your trading skills.