Volatility in the market continues, and the Putin-inflation bear market of 2022 continues to wipe out the wealth and fortunes of investors big and small. This bear market is hungry and it is looking for its next victim after Netflix, apparently has found it: Tesla. As I am writing this newsletter, Tesla is down another 5% after a collapse of over 12% these last few days. Both Meta Platforms (parent company of Facebook) and Tesla provided excellent trading opportunities for us in the chatroom this morning, and thanks to Brian, I made some amazing trades on them. You can watch our recap here.
Global Financial News
It’s the Zuck, Cook, Bezos, & Musk show today as tech earnings reach a crescendo, with Twitter, Amazon, and Apple reporting on the heels of yesterday’s report from Zuckerberg. Apple may report a 5% revenue gain to about $94 billion, with the iPhone accounting for more than half of its sales. Nevertheless, the focus is on the supply chain. Amazon watchers want to know if cloud computing and ad sales will offset a slowdown in e-commerce. Twitter’s revenue may come in near the midpoint of its 13%-23% growth guidance, but Elon Musk’s vision and product direction will inevitably be the main focus. Meta’s definitely back. Its shares surged as much as 19% premarket after the number of Facebook users grew more than projected. Zuckerberg has acknowledged though that the video-sharing app TikTok is providing serious competition for young users’ attention.
Ukraine said Russia is intensifying its offensive in the east of their country. The Biden administration will send a proposal to Congress for weapons and humanitarian aid to Kyiv that would last through September. The president is due to speak on US support today. In Russia, things are not going well. About 600,000 people working in Russia for companies that have exited the country may lose their jobs. The EU is struggling in the face of Russia’s demand for natural gas payments in rubles. That directive may send many of the countries dependent on Russian gas into a recession. And to be frank, that is precisely how you go about bullying an entire continent.
At Bear Bull Traders…
As I mentioned yesterday, Ardi and I are planning to go live on YouTube three times a week. Every Tuesday, Wednesday, and Thursday afternoon we’ll be discussing how the market is doing. Please join us and make sure you subscribe to our YouTube channel so that you will receive a notification when we are about to go live. We are also reviewing the market on our newly published (but still in the early stages) Trading Terminal. Do check it out!
It’s Thursday Mentorship and we are once again offering a series of valuable mentorship sessions, starting with John at 11am ET, right up until the evening session at 8pm ET with Thor (and for this week only) Carlos. In order to participate in our mentorship sessions, you must be an Elite member. If you have yet to make the plunge, I hope you will take the opportunity to join us at the heavily discounted price of $1,199. That’s 50% off the regular price. You will find all of the details here. As well, a full list of next week’s educational webinars – focused on technology, strategy and trading psychology – can be found here.
At Peak Capital Trading…
Our boot camp is sold out! I cannot wait to start this next round of boot camp with every single one of you on May 9th.
Who’s feeling the hardship from this market collapse? Americans are increasingly pessimistic about their finances as inflation takes a greater toll. Less than half of people rate their financial situation as “good” or “excellent”, the lowest share since 2015, a recent Gallup poll showed. Some 48% say their financial situation is worsening, similar to the levels seen in April 2020 and during the financial crisis of 2008. Since late March, the simultaneous declines in stocks and bonds have wiped about 6% off traditional investment portfolios through Monday, based on an assumed 60% equity allocation and the rest in fixed income. And you know what? This is exactly what the Federal Reserve is wanting to have unfold. They cannot control the supply chain disruptions so they come after demand by using their powers to make people a little bit poorer.
Let’s take housing for a moment. The near-record shortage of American homes for sale makes it unlikely that home equity will decline meaningfully, even with surging interest rates. Higher rates may make it temporarily less attractive to borrow against home equity, but homeowners still feel wealthier every time they glance at their estimate on Zillow. Household net worth has surged faster in the past five years than in the 1990s.
Therefore, the stock and bond market needs to be shaken up by the Feds. For much of the past two years, the run-ups in stocks and housing prices have made consumers feel rich, and that “wealth effect” has helped fan the highest inflation in 40 years. Even if you believe that supply chains are partially responsible for the surge in inflation, which I do, the Fed’s only viable option is to align demand with the more limited number of goods available in the economy.
The Administration is not planning to help the stock market either, with the Press Secretary explaining that the White House does not see the stock market as an effective method to judge the state of the economy. Although they say they’re not concerned, they really should be. Why? Because in so many ways the stock market is the economy. Everything from hiring to expansion and R&D is directly correlated to the financial markets.
Consumer demand needs to fall back in line with supply to cool the pace of price increases, and that simply cannot happen if a surfeit of Robinhood millionaires is buoying consumption.
Therefore, in short, we all should get ready to be a bit poorer in the coming days.
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