Recession is coming....

Closely watched yield curve inverts, flashing recession signal! This is what was reported by Bloomberg.

The U.S. two-year yield briefly exceeded the 10-year Tuesday for the first time since 2019, inverting yet another segment of the Treasury curve and reinforcing the view that Federal Reserve rate increases may cause a recession.

The inversion occurred as two-year yields rose while 10-year yields declined, crossing at a level of about 2.39%. Prior to 2019, when the curve inverted in August during a U.S. trade spat with China, the last persistent inversion of the Treasury curve occurred in 2006-2007.

Short-term yields that are higher than long-term yields are abnormal, and they signal that high levels of short-term yields are unlikely to be sustained as growth slows. The inversion of the two- to 10-year segment of the Treasury curve is the latest in a series beginning in October, when 20-year yields topped 30-year yields. The widely watched gap between five years and 30 years also turned upside down this week, something that hasn't happened since 2006. 

 

 

"Historically, a recession has not happened without an inversion," said Ben Emons, global macro strategist with Medley Global Advisors LLC. "So likely, it will be a predictor of a future recession. Timing, however, is unknown. It could take up to two years."

Great news!

拜登给人的的正常印象似乎不如川普那么讨喜，无论是美国还是中国的舆论，都喜欢给拜登贴上很多无趣的标签。

比如很多观点认为，拜登作为高龄总统，可能有老年痴呆的症状，被川普称为"睡王"。再加上拜登经常口吃，很多人觉得他是一个很昏聩的人，将带领美国走向衰落。

也有观点认为拜登是个好色之徒，动不动占女性便宜，甚至有恋童癖倾向，因为拜登经常对女童做出一些看似猥亵的动作。

甚至有观点认为拜登不仅能力有限，身体也可能有问题，登个飞机都能摔倒三次，可能都活不过总统任期，并传言副总统哈里斯随时准备接拜登的班。

随着俄乌战争的持续，NBC新闻的一项最新民调显示，70%的美国人对总统拜登处理俄罗斯入侵乌克兰问题的能力缺乏信心，80%的人表示担心这场战争可能会涉及到核武器，并将继续推高油价。

在美国40年来最严重的通胀飙升期间，绝大多数人表示，他们认为国家正走向错误的方向，不赞成拜登对经济的处理。

该民调发现，拜登的总体支持率下降到40%，是他担任总统以来的最低水平。55%的受访者不满意他作为总统的表现。NBC新闻1月份进行的一项民意调查显示，对拜登工作表现的支持率为43%，54%的人不满意他的表现。

调查还发现，在11月的中期选举前，对于哪个政党应该控制国会的问题，共和党人的支持率领先2个百分点。

"民意策略"的共和党民意调查专家比尔·麦金塔夫说："这项民调显示，拜登总统和民主党人将面临一场灾难性的选举。"麦金塔夫和哈特研究协会的民主党民意调查专家杰夫·霍威特共同进行了这项调查。

该调查是在3月18日至22日进行的，在拜登出访欧洲之前。

Is the market setting up a trapped long?

There are two schools of thoughts regarding the current market status:

Several things currently suggest a follow-through rally is possible, encouraging the "bulls" to declare the "bottom is in."

1. Extremely negative investor sentiment.
2. High cash levels
3. Low equity positioning by fund managers.
4. Equity fund flows are strong.
5. Stock buybacks remain strong

But other issues suggest this rally may be limited to the upside, keeping this a more tradeable rally.

1. Liquidity that drove the rally from the 2020 lows is reversing.
2. The Fed is hiking interest rates
3. Inflation is hot
4. Earnings will slow along with economic growth.
5. There are a lot of "trapped longs" that need an exit.

No one knows for sure of course which way the market is going. I'm inclined to believe the latter that the market may be setting up a big trapped long, enticing as many people into it as possible before making another major strike! 🙄

Technically, S&P has bounced above its multi-month downtrend line as well as several major resistance lines, a quite bullish achievement. But it has also been quite overbought and quite likely it will come down to test its downtrend line around $4250ish in the next week or two. I definitely won't chase the market at the moment but trading more to the downside. 😜

Will high mortgage rate kill the housing bull?

We all know housing is in a great bull market and is still going strong.  The big question is whether this bull run can last in a world with surging mortgage rates and "hyperinflation", both of which are directly impacting the housing market. Here is some good information that can answer the question whether high mortgage rates can kill the booming real estate market. Enjoy it!

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Many must be wondering if the recent surge in mortgage rates will put the brakes on rising real estate prices. After all, conventional wisdom often cites that rising rates means falling real estate prices.

But it also cites that rising inflation is good for real estate prices…

Now, we have both forces at work.

So which affects real estate more, inflation or rising rates?

History tells us it's inflation, and that when it comes to real estate prices, rate fluctuations are simply market noise.

Take a look at this chart of median home prices (blue line) and mortgage rates (red line) from 1971 to 2021…

The last time we saw this level of inflation and rates rising this fast was in the 1970s. Back then, home prices were undeterred.

From 1971-1981, when rates more than doubled from around 7% to 16.5%, real estate prices rose 175%.

Over this 50-year period, there were 19 years where mortgage rates went up, yet home prices still rose 8% on average.

Based on this, one would think that during the years where mortgage rates dropped, we would see real estate rise even more.

After all, it's more attractive to buy real estate when your interest expenses are lower – but it's the opposite.  

A rare sell signal is triggered

The market is in an euphoric mood at the moment and all the sudden it seems everyone is more bullish than bearish, a change of the mood from extremely depressed to euphoric within just a week or two. However, we have just see a rare sell signal triggered. See below an analysis forwarded by my friend. 

I'm certainly not chasing this market right now. Using special option setups, I'm betting on the downside with a small risk for a potential 3-5 times return. Granted, in this headlines-driven market, it is not easy to trade when the market direction can change within hours or even minutes. But still betting against the extremes of sentiment is generally a winning strategy. So I'm risking a little for a big reward!😜🤗

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VIX sell signals are rare. And, they're not all that bad… at first.

The two previous sell signals led to immediate (but shallow) declines. In each case, the S&P 500 lost about 2% over the next week or so. That's about 100 points on the S&P 500 in today's environment.

Following those brief declines in late November 2019 and August of 2018, the S&P 500 bounced back and rallied to even higher levels. So, if we follow that road map, traders ought to be looking to buy if the S&P 500 dips back down into the 4350-4400 range.

But (and this is a big but) …

Both of those previous VIX sell signals occurred about three months before the stock market was hit with a far more significant decline. Traders might remember December 2018 – when the S&P 500 dropped 16%… and the start of the COVID pandemic, which inspired a 29% collapse in the stock market in March 2020.

Granted… we only have these two examples. And, it's probably unwise to draw conclusions from such a small sample size.

Enjoy the rally for now....

As expected, Powell officially announced on Wednesday that the central bank is hiking its benchmark interest rate from near zero to a range of 0.25% to 0.5%... raising rates for the first time since 2018. With inflation high and unemployment low, the Fed also indicated that it wants to raise rates at each of its six remaining meetings this year, getting near 2% by the end of the year in order to "cool" the economy... That trimming of the balance sheet could count as another rate hike. Then, in 2023, Powell and company see three more rate hikes... and that's it.

Do you really believe Powell will be able to raise interest so many times? I DON'T BELIEVE SO AT ALL! Powell and the Fed is in a cannot-win position and there is no chance they can afford to raise interest as they'd like to. Yes, logically they need to with high flying inflation but don't forget another side of the equation: the unbearable government debt load. Any meaningful increase of interest will easily bankrupt the US government many times. This is just like a nuclear time-bomb. I even doubt they can further raise interest after the next one. 

Let's see if I'm right on this.

For the time being, as I expected, just enjoy the market reflexive rally that may last for a couple of weeks with volatility of course. But don't think  we are totally out of the woods just yet. This is still likely just a dead cat bounce. After it runs its course, it will back down again, probably more hardly. We will talk more about this next leg down when the time comes. For now, enjoy the happy music😇

 

Can FED control inflation?

The Wall Street Journal's write-up on the Fed's decision and Powell's presser: "Mr. Powell pointed to strong household balance sheets and consumer demand in deflecting concerns about the possibility of a recession within the next year." 

Powell must be kidding. Here's the reality…

• Only 41% of American adults say they have enough savings to cover an unexpected expense of $500 or more, per a recent Bankrate survey

• Fully 64% of American families are living paycheck to paycheck, per a recent LendingClub survey. Even among those earning six figures, it's 48%

• February retail sales as measured by the Census Bureau fell way short of expectations once one factors out vehicles and gasoline.

With a Fed so out of touch with reality, do you really think they can control hyperinflation? 

DON'T BE FOOLED!

2022 Pump-Savings Tips

With the high flying gas prices, here are some good tips on how to save some money at the pump.

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Gasoline is a necessity… We hit gas stations on an as-needed basis. And even in today's remote-work environment, we still need our cars to pick up groceries or run errands.

Rising gas prices hit even harder for people like my neighbor, who's on a fixed income. And like many of us, he wants actual solutions… not a political blame game or speculative market plays.

So if you're willing to be open-minded and disciplined, here are 11 tips for saving gas money:

• Buy gas early in the week. A GasBuddy study reports Monday is the best day of the week to buy gas. Since there's variation across states, you can view GasBuddy's Best and Worst Days to Buy Gas, By State.

• Download a free gas-price finder app. GasBuddy, Gas Guru, and Gas Prices by MapQuest are all top-rated apps. They are easy-to-use ways to find the cheapest gas station(s) in your area.

• Pay in cash. Some gas stations offer lower prices if you pay by cash. They usually advertise it on their price boards, and the difference can be as much as 10 cents or more.

• Use a credit card with max gas rewards. See NerdWallet's Best Gas Credit Cards of March 2022. Make sure to pay off the charges each month to avoid paying interest.

• Purchase discounted gas gift cards online. Sites like Gift Card Granny, CardCash, and Gift Card Place offer discounted gas gift cards.

• Sign up for a gas station reward program. Most gas stations (ExxonMobil, Shell, Speedway, etc.) have them.

• Take advantage of warehouse clubs. BJ's, Costco, and Sam's Club price gas cheaper as an extra membership incentive.

• Keep your car in good shape. Maintain a clean air filter… keep tires properly inflated and aligned… stay on top of oil changes and use the recommended grade. Basically, stick to a regular maintenance schedule.

• Drive sensibly. Speeding and jackrabbit starts and stops hurt fuel economy. Use cruise control when possible.

• Use GPS. A navigation app, like Waze, Google Maps, or Apple Maps, will provide the most efficient route to a destination.

• Consider alternative transportation. Carpool. Ride a bike. Or use public transportation.

Of course, similar to using coupons at the grocery store, these tips will only save you a few cents here and there on your gas prices. But over time, they'll add up to a bundle.

And when gas prices eventually come down, you'll continue to save at the pump if you follow these tips. So it's a great way to turn spare change into a bigger bankroll.

A rally is coming?

As a contrarian, I'm always looking for extreme indicators that go against the herd's behaviour.  Here are a few most notable ones we are seeing currently:

• Extreme negative sentiment
• Bearish portfolio positioning
• Higher levels of cash holdings by fund managers
• Dumb money is bearish
• Put/Call ratios are offsides
• Number of stocks trading at 52-week lows.

This kind of extreme sentiment is at levels usually seen near market bottoms, especially when seen with a cluster. As such, I'd like to bet we are going to see a somewhat strong relief rally soon, probably as soon as tomorrow following the FOMC interest rate hike. 

Another clue that supports this view is the TA setup for the Junk Bonds. See below the positive divergences for HYG

HYG has been crushed this year but its momentum is strengthening up lately, implying a turnaround is probably in the corner. HYG typically leads the market by a few days to two weeks. So a turnaround junk bond fund will be a bullish indicator for the general market. 🤗 

Recession is coming?

It will be a high probability if you believe history! As the following chart shows, many times we've seen a massive spike in oil prices, we've also seen a recession, even if for an exceptionally brief amount of time.

We will have to see if history is repeating itself now or this time is different!

Why Bear Market Phases Are Like “The Revenant” (by Lancet Roberts)

If you haven't seen the movie "The Revenant" with Leonardo DiCaprio, it is a 2015 American survival drama describing frontiersman Hugh Glass's experiences in 1823. Hugh, an expert hunter and tracker is mauled by a grizzly bear in the film. (Warning: the scene is very graphic)

In the scene, the attack comes in three distinct waves.

1. The bear attacks, and brutally mauls Hugh, who plays dead to survive. The attack subsides.
2. The bear comes back, and Hugh shoots it, provoking the bear to maul him some more.
3. Finally, Hugh pulls out his knife as the bear attacks for a final fight to the death. (Hugh wins if you don't want to watch the video.)

Interestingly, this is also how "bear market phases" work.

Bob Farrell, a legendary investor, is famous for his 10-Investment Rules to follow.

Rule #8 states:

Bear markets have three phases – sharp down, reflexive rebound and a drawn-out fundamental downtrend

1. Bear markets often START with a sharp and swift decline.
2. After this decline, there is an oversold bounce that retraces a portion of that decline.
3. The longer-term decline then continues, at a slower and more grinding pace, as the fundamentals deteriorate.

Dow Theory also suggests that bear market phases consist of three down legs with reflexive rebounds in between.

The chart above shows the last two primary cyclical bear market phases versus today (I adjusted the 2022 scale to match.)

Tech wreck' looks more like another dot-com bubble burstin

Financial Times article notes: 'Tech wreck' looks more like another dot-com bubble bursting. Excerpt:

At what point does the slump in U.S. technology stocks stop being dismissed as a mere "tech wreck" primarily centered on the most speculative companies and become considered a fully-fledged dot-com crash 2.0?

The combination of increasingly hawkish central banks and Russia's invasion of Ukraine has been toxic for equity markets this year. The MSCI All-Country World index is now down 12% in 2022. However, as is often the case, headline indices miss a more fascinating story underneath.

The pain has been primarily focused in U.S. technology stocks. Despite a tepid bounce over the past week, the Nasdaq Composite index has already fallen nearly 20% in 2022. In dollar terms, the tech-heavy market has now lost well over $5 trillion in value since its November peak – more than the Nasdaq's dollar losses through the entire dot-com bubble unwinding in 2000-02.

Yes, the index is vastly bigger these days, but the scale of wealth destruction – and how painful it has been for many investors – is real and arguably under-appreciated, as the relative resilience of Big Tech is obscuring the extent of the damage.

Almost two-thirds of the Nasdaq's 3,000 plus members have fallen by at least 25% from their 52-week highs, according to numbers from Société Générale's Andrew Lapthorne. Almost 43% have lost more than half their value, and nearly a fifth have tumbled over 75% – the worst such ratio since the financial crisis. The $5.15 trillion that has evaporated from the Nasdaq in recent weeks is like the entire U.K. stock market going "poof".

How to minimize the pain from the gas pump

Gas Prices Go Berzerk; Time to Bet on a Republican Blowout (in the Nov mid election)

This is the headline I have seen. I guess everyone has felt the pain at the gas station. Oh no, those who support the radical left like the idiot Joe and Harris should actually feel happy to see everything going up with hyperinflation. After all, that's what they know should be coming with radical policies. Congrats to them to have their dream coming true😜

For me, I'm both happy and sad. I definitely don't want to pay more for anything but sadly nothing we are consuming is not going up these days....quickly! On the other hand, I'm happy to see oil/gas prices going up because I'm one of those who benefit from the inflated oil and gas. How so? Well, you can see the blog below that I shared with my Family last July. Here is the thing. In general you want to buy something when it is cheap, right? While it was not super cheap last July for oil, technically speaking it was in a good sweet-spot that was poised to fly higher from a relatively low level. That's the time I shared the idea to buy oil/gas stocks. Sure enough, oil prices have gone to the roof steadily since then and are going parabolic at the moment.  This has greatly boosted my share price of AMLP of course with additional dividends that have been reinvested, which has further enhanced my gains. That's why I'm happy to see oil go up!

I'm not sure it is a good idea to chase oil stocks right now and I'm adding a covered call to protect my AMLP for now. I think it is a high chance that we will see a correction soon for oil.  

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Below is the sentiment tracking information, suggesting the oil sector will be doing great for the long term.

Today's sharp selloff has offered a great entry point for AMLP, which has broken out of a multi-year long term downtrend recently but is correcting right now. At today's price around $32, we will lock in a 8% dividend yield for DRIP. Don't miss it!

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Energy stocks are weak, and there has been a surge in them falling to their lowest prices in a month.

Last week, Dean shared a trading signal for the S&P 1500 Oil & Gas Exploration & Production sub-industry that suggested a cautious short-term outlook for the group. The energy sector weakened considerably on the day, enough so that 82% of energy stocks fell to at least a 1-month low, the most since last September.

As much as possible, we like to look at indicators in different contexts. Signals in healthy environments tend to act much differently than those in unhealthy ones.

So, Dean looked at future returns in the S&P 500 Energy sector after a surge in those stocks falling to 1-month lows, but only when it triggered within about a month of the sector being at a 1-year high.

The sector often wobbled in the short-term, but it had a consistent tendency to rebound over the next few months. By six months later, it was higher every time.

Watch Out for This Type of Crypto Scam (by Joel Litman)

Based on recent news articles, it looks like there is a new angle appearing in the dating app con game, with dating apps filling a dark purpose beyond finding a new partner. 

It's called cryptocurrency scamming. 

There have been reports of people meeting on dating apps, where scammers will convince unsuspecting users to give them money to get rich quickly. They'll fake months-long romantic relationships and use the allure of cryptocurrency to get people to hand over large sums of their savings. 

In one instance, one woman sent her entire life savings of $390,000 to a scam artist and was left with nothing. 

Last year, 56,000 Americans reported love-bait ploys to the Federal Trade Commission ("FTC"), totaling $547 million in losses. That's almost twice as many as the year before. 

Cryptocurrency is a hot topic these days. When combined with people being lonely from the pandemic, it makes sense that this type of scam is on the rise. 

According to the February FTC report on romance scams, $139 million of last year's scams were paid in cryptocurrency. The report found... 

In 2021, the median individual reported loss using cryptocurrency was a staggering $9,770. While cryptocurrency losses were the [costliest], it was not the most common payment method for romance scams. In 2021, more people reported paying romance scammers with gift cards than with any other payment method. 

Options traders are pricing in volatility spikes in everything (by SentimenTrader)

We saw last week that while investors are pessimistic (especially in stocks), they're not panicking. When true panic grips markets, it's usually reflected in credit, and it's just not happening to any great degree yet.

That's not to say there isn't volatility. There is, and it's everywhere.

Options traders price in rising volatility in stocks almost exclusively when they're declining. That's when investors panic. But in other markets, from bonds to FX to commodities, implied volatility just as often spikes when prices are rising quickly as when they're falling. When volatility across assets spikes at the same time, you know some crazy sh** is going down.

That's what's happening right now-for one of the few times in history, implied volatility in stocks, bonds, currencies, gold, and oil is spiking simultaneously.

The average volatility gauge across markets is in the top 2% of their yearly ranges. That's an incredible bout of cross-asset concern that we've rarely seen in the past 30 years. The assets in question showed stark differences in forward returns after the other 10 spikes since 1990.

Oil in on parabolic move

I have been betting on a mini crash of the oil/energy sector right now but it is not yet working. Actually oil is on fire and has gone vertically up nearly everyday. Well the more it goes up from here, the more bearish I become on it and I'm willing to add more of my short positions on it. Apparently I'm not alone on this thesis. See below an analysis I have seen today. I obviously don't know when the parabolic move for oil will turn around but with a small risk, I'm willing to bet for a potentially huge return if it's finally pulled down by gravity! Be careful about FOMO on oil🙄

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The price of oil has gone parabolic.

Oil traded as high as $130 per barrel overnight. It has since settled back to $123. That's 33% higher than where it was last week. Oil is up about 65% so far in 2022.

This is a panic move. It's parabolic. And, it's unsustainable.

Think about the price of lumber last May. Or the price of natural gas last October.

What we're seeing in oil right now is the exact opposite of what happened in March of 2020 – when oil was trading at $30 per barrel one day, then just one week later it was at minus $30 per barrel. That was an unsustainable move to the downside. The price recovered 100% of that decline in about two weeks.

Once this parabolic move ends, and no one can say for sure when that will happen – though we're probably quite near the end, we're likely to see one heck of a move to the downside. And, to the extent that rapidly rising oil prices have affected other securities, other markets should reverse as well.

It is important, if you're trying to trade in this environment, to recognize how emotions will affect your trades. Lots of folks are rushing into oil (and other commodities as well) right now, chasing prices higher into extremely overbought conditions, out of fear of missing out (FOMO). That's probably not the strongest foundation on which to place a trade. It's like buying shares of Gamestop (GME) last year as it surged above $350 per share – on its way to $480-ish. One week later, the stock was below $60.

US is the big loser in this Ukraine crisis

While we are far away from the war zone, physically at least, we are actually intimately impacted by the war in many ways. Here are some:

"The SWIFT prohibitions on Russian banks are also not a free lunch in terms of putting pressure on Russia," Jim reminds us.

"Every buyer has a seller, and every sender has a receiver. If Russian banks cannot transact on SWIFT, that means Western banks that are counterparties will see non-performance on a large number of contracts and open trades.

"As Western banks scramble to cover those open positions, there will be dumping of collateral and other assets that may disrupt financial markets.

"Unlike a stock market crash, this kind of interbank distress does not happen all at once. It can take days or weeks to play out. Still, those ripple effects or spillovers are coming.

"We're probably in the opening stages of a major global liquidity crisis," Jim concludes. "What happens in Russia doesn't stay in Russia."

The U.S. could alleviate the global energy shortage and
help Europe in the short-run simply by opening its fracking
capacity, authorizing new drilling on Federal lands,
finishing the closed Keystone XL pipeline and authorizing
new drilling in Alaska. None of these policies is likely
to happen. 

Remember, all of the above were functioning well under Great President Trump!

The war will not go on indefinitely. If Russia fails to conquer
Ukraine, we can expect turmoil inside the Kremlin
and possible regime change. If Russia does conquer
Ukraine, it will emerge from the war even stronger while
NATO will be shown to be a dysfunctional alliance of
little real military import.
The U.S. loses either way. The U.S. looks weak for not
being able to stop the war with diplomacy. It looks even
weaker for not being able to assist Ukraine in timely and
effective ways. And it may emerge relatively weaker if
Russia is successful in implementing its regional hegemony.
This will be the legacy of weak leadership by Biden
and of his recent Afghanistan retreat, which left some
Americans dead and others abandoned behind enemy
lines. Putin took notes during the Afghanistan debacle
and acted accordingly in Ukraine.
The most long-term legacies of the War in Ukraine will
be disrupted supply chains, shortages of consumer goods,
and much higher prices. Modern supply chains took
thirty years to build and are being blown up in a matter
of months. They will take years to rebuild. (Jim Rickards)

Embrace high volatility

After a rather quiet and sustained bullish year in 2021, we are entering into a quite volatile year to date. VIX has been consistently above 20, a sign of nervousness in the market. However, for contrarians, this may not be a bad time to trade. As you can see in this next chart, over the past 31 years, when the VIX has spiked above 33.5, stocks have done exceptionally well over the subsequent year. In the past two weeks, VIX had shot up to 35 several times. If you buy when VIX is above 30 and hold it, the chance is high that you will gain nicely a year later. But I know rarely people have the guts to do so. That's why most people lose money in the market😏

Here's Jason Zweig with some good advice in the Wall Street Journal: How to Invest Calmly in a Chaotic World. Excerpt: Now that Russia has attacked Ukraine and emotions are running high, it might be tempting to get out of the market to keep your money safe, if you're feeling afraid – or to bet on what sounds like a sure thing, if you're feeling aggressive. But hasty decisions are often wrong, and big hasty decisions almost always are. You could try restructuring your portfolio to profit from a scenario that might unfold in the wake of Russia's invasion, like a boom in U.S. exports of natural gas, or rising inflation and higher military spending. The risk, though, is that scenarios that seem likely often don't materialize—and, even if they do, they can become too popular, eliminating the bargain prices that produce superior returns over time. A couple of things are pretty close to certain. One is that it's a bad idea to overhaul your portfolio when you're afraid. The time to become more conservative is when things are going well, not when the world seems to be coming apart.

A smart move by Virgin Hyperloop…

With the market on edge, experiencing huge volatility, I'm glad to see some great achievement in the startup companies that I have a stake in. Virgin Hyperloop is one of them. I'm sure this will be a great reward waiting for me when VH goes for IPO some day. Go go go, Virgin Hyperloop💪🤗✌ 

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Virgin Hyperloop has just announced a major pivot away from shuttling passengers to moving cargo. This move comes as the company cut half its staff to be more efficient.

Regular readers may be familiar with Virgin Hyperloop. It develops hyperloop technology to deliver fast, direct, and autonomous travel at scale.

Specifically, it uses magnetic levitation and vacuum tubes to power super-fast "pods" at speeds of up to 600 miles per hour (mph). At this speed, we could travel from New York City to Washington, D.C., in just 30 minutes.

And it's the only company that has proven this technology with human passengers. Passengers have successfully traveled in a 500-meter-long test tube facility in West Virginia. The capsule hit speeds over 100 mph.

We can see the hyperloop in action below:

The Hyperloop in Action

Source: YouTube

And while its shift away from human transport might seem surprising, Virgin Hyperloop's pivot is a smart move for multiple reasons.

Since the onset of COVID-19, travel has naturally fallen. We see this in weekly flight departure statistics. At the end of 2021, the number of flights was still 11% below 2019 levels.

This makes sense. We can now "zoom in" to a meeting anywhere in the world. No train or plane needed – only a good internet connection.

Additionally, there are far fewer regulatory hurdles in transporting cargo than people, which simplifies Hyperloop's business. On the very low chance of an accident, the loss is cargo – not human life.

And there is a need. We've seen massive disruption to both supply chains and labor in the last couple of years.

I can imagine Hyperloop building either above ground, or – even better – an underground network of tubes to connect major shipping and logistics hubs. This would reduce the need for semi-truck drivers. And as the tunnel is underground, there is no risk of running into weather delays.

Imagine having a Hyperloop station at the Port of Los Angeles, where goods could be simply unloaded, checked through customs, and then placed in a pod to shuttle the products out to a distribution facility for sorting and re-routing.

What's more, goods could travel at speeds up to 600 mph. This is 10 times the speed of long-haul truckers. And this hyperloop technology will reduce gasoline demand since the pods run on electricity.

Hyperloop already is in talks with 15 potential customers to deliver goods… And the company has government interest. The Saudi Arabian government is considering a tube from Jeddah, a major port city, to the capital of Riyadh.

Virgin Hyperloop is a company we are tracking on our list of private companies. I wouldn't be surprised to see customers line up for its technology. If this happens, it could make for an exciting initial public offering (IPO).

And this is one more piece of evidence of the shift toward automation.

We're seeing this shift across the board as a result of the supply chain crunch and worker shortages… That's why Virgin Hyperloop's new focus makes so much sense. 

Passenger travel can come later after the cargo business takes off. Not having passengers also accelerates time to market because it no longer requires the intense regulatory approvals related to safety that would be required for passenger transport.

Jeff Brown

Why am I shorting energy stocks?

I have started to short energy stocks. Due to the ongoing Russian invasion of Ukraine that is keeping oil elevated, my shorting trades are not performing yet but I'm not concerned at all. As a matter of fact, I will add more such shorts due to further deterioration of the underlying momentum for energy stocks. 

Below is a good analysis about what the oil futures are telling us right now: a correction, potentially a big one, is coming!

Backwardation

The first is "backwardation."

Should a futures contract strike price be lower than today's spot price, it means there is the expectation that the current price is too high and the expected spot price will eventually fall in the future. This situation is called backwardation.

For traders and investors, lower futures prices or backwardation is a signal that the current price is too high. As a result, they expect the spot price will eventually fall as the expiration dates of the futures contracts approaches.

Backwardation can occur as a result of a higher demand for an asset currently than the contracts maturing in the future through the futures market. The primary cause of backwardation in the commodities' futures market is a shortage of the commodity in the spot market. Manipulation of supply is common in the crude oil market. For example, some countries attempt to keep oil prices at high levels to boost their revenues. Traders that find themselves on the losing end of this manipulation and can incur significant losses. – Investopedia

Currently, the backwardation in the Brent Crude market is at the highest level since 1992.

If we look at those peaks in backwardation, they align with previous peaks and more severe financial events.

Given the extreme level of backwardation currently, such suggests that considering a process to reduce oil-related risk (aka sell energy stocks) may be prudent.

Dumb Money Confidence craters

Retail options traders rush for protection (by SentimenTrader)

Last week's reversal was one for the record books. While reversals always look impressive on a chart, generating a bevy of excited chatter and headlines, they are unreliable patterns. And retail traders aren't buying into the hype.

Two weeks ago, small options traders spent a tremendous amount of their volume on protective put options. They took a mild break after markets initially rebounded but now are at it again. Last week, they spent 29% of their volume on buying put options to open, among the highest levels in 22 years. 

Last week, the smallest of options traders bought $4.3 billion worth of put options and $4.5 billion worth of call options. So, their spending on hedges was 96% of their spending on speculation, one of the highest ratios in 22 years.

Our Backtest Engine shows only modestly positive medium-term returns but excellent long-term ones. That's because this kind of behavior only occurred during the depths of the worst declines of the past two decades.