April 6, 2022

Crypto Warnings, Q2 Sectors to Trade and More

As It’s All Erica’s Fault

I realize, dear reader, that over the last few weeks I’ve over-indulged in economic data, the yield curve for example and I thought you might enjoy the amusing origin of my interest in economics, and the stock market.

It’s Erica’s fault.

When I was a freshman at the University of Florida (before inexplicably moving to Michigan in a reverse-snowbird kind of way), I was in line to register for classes for my first semester.

The registration room was this huge, dark, hot hall with snaking lines of students, registration cards in one hand (this is before computerized registration, mind you), course bulletins in the other.

Ahead of me, a pretty girl from my dorm…Erica, registering for Econ 101 on Monday nights at 7pm.

I look at my class list and scratch out “Logic 101” (no irony here) and add in Econ 101 on Monday nights. So began my foray into guns and butter, macro and microeconomics, market theory and more.

I had so much fun in that class – as strange as that sounds – that I never saw Erica again. But it’s still her fault. The next time we’re off on an economics rant here, now you know who to blame.

I could tell you how I wound up in Bible study in the 5th grade, but I think you can figure that one out on your own.

Stock/Sectors We’re Watching

Jeff Wood (Wealthy Investor editor) and I have been running down where money is flowing in the markets as we begin the second quarter.

We made a surprising discovery on Monday: Utility stocks (a number of these have vertical price charts).

That’s indicative of flight to safety and away from risk stocks, such as tech.

The top sectors we found:

·      Consumer Defensive

·      Utilities

·      Financial

We’ll be detailing low-beta (<1), lower PE (<25) and higher margin stocks (+7%) in the days and weeks ahead here and helping you find the right places to put your money in the short-term.

Our Interest Rate Beaters report for Wealthy Investor will take some of the first steps toward those types of companies (due out April 15th).

Crypto Warnings

On February 14, 2022, I held a pre-event session for this year’s Investor’s Blueprint Live event. In that session, I discussed my arguments against Crypto. I remain against Crypto.

In yesterday’s Washington Post, a feature story about a new scam being run to literally steal people’s crypto coins (over $66 Million stolen to date).

I can’t stress this enough: if you’re playing in the Crypto markets, please do NOT ever transmit or sign away any access to your account. If your coins are stolen, you’re screwed. You’re not getting them back.

We may be boring in sticking to stocks and options but remember this: if you have something go wrong with your broker (or your account) you have legal remedies and protections afforded to you. Crypto traders do not. None.

Also worth noting was a little story on March 9/10, that the Biden administration has asked the Federal Reserve/Treasury to determine the viability of U.S.-backed central bank digital currency (CBDC). That’s the first step in the death knell for today’s crypto markets.

The Fed produced a white paper (don’t read it), in which the following two paragraphs contain the most important statements:

“Cryptocurrencies have not been widely adopted as a means of payment in the United States. They remain subject to extreme price volatility, are difficult to use without service providers, and have severe limitations on transaction throughput.

Many cryptocurrencies also … make consumers vulnerable to loss, theft, and fraud.

Stablecoins are a more recent incarnation of cryptocurrency that peg their value to one or more assets, such as a sovereign currency or commodity.” (emphasis is mine)

Now, China (forced use) and the Bahamas (Sand Dollar) have digital currencies; but if the U.S. leads the way (or Japan in my opinion), you could see a complete upheaval in the financial system of the U.S. and global economies.

Once the U.S. banking system figures out how it can profit from digital currency, you’ll see it accelerate to reality (I’m projecting 2028, but that’s a guess).

We’ll be back tomorrow to review stocks we found in our recent research.

Trade Smarter

John Hutchinson
Traders Reserve

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