Okay folks, so we've got a lot to talk about. Number One: We need to discuss what the big money is doing right now in this current market condition, and why number Two: We have to give the latest on the Ukraine situation, what it means for you and your money, where the sanctions are hitting the hardest, and what segments of this inflation problem are going to be the most accelerated by this current situation. And you can check out the timestamps below. But let's get right into it.

Okay, so the Wall Street Journal posted a nice chart from S4 Partners showing the state of short selling bets against the S P 500 if you look at the red line. We've now broken past all previous highs in 2021 except for that of the February Peak, which of course ended in a super bloody risk off period that decimated Tech stocks, but especially Growth Tech in terms of options activity. If you look at the segment I also got from the Wall Street Journal, they reported that three out of five of the most active days for put options trading in history have occurred in these first weeks of 2022.. if you look at the notional values provided by Goldman Sachs, you can see that clearly both single stock and Index Etf call options are trending down significantly, whereas Index Etf puts and single stock puts have been on a strong uptrend.

Overall, I guess you could say Putin really earns the first three letters of his name, but overall, if you look at both the trend and the hedging behavior, it seems that markets have been positioning themselves more and more for extreme bearish behavior. So why is this bearish activity going on? Well, let's go ahead and take out my kindergarten notepad and see what it says so. Number One: Well, the Fed is essentially acting against the market. Ivy League graduated bankers are admitting that Jerome Powell is a big damn meanie.

He's saying that investment banks and the markets need to stop riding his damn money printer and start finding good value in companies. The second reason for bearish activity is that economic growth is going to slow down in upcoming quarters, especially when you're comparing year over year. The third reason for bearish sentiment is Putin and Mother Russia. As they say, it's trying to take back some territories that it lost in the aftermath of the Cold War, trying to expand its influence on a global scale which has been dwindling over the last decades.

Russia has a global supply chains. By the I don't want to say what and as the risks of sanctions roll in, the risks of that being squeezed rolls in. Let's be real though, the impact of Putin's movement in Ukraine has very, very little direct impact on the earnings of U.s companies. You look at the S P 500.

Whether we were talking Apple, Amazon, Tesla, Home Depot, Johnson and Johnson, Disney, Verizon, there's very, very little direct impact to most U.s companies in the U.s market. But the real problem, of course, is the indirect impact which is leading us to number four: fact that inflation is increasingly at risk of getting even worse and being even more stubborn because of this situation in Russia and Ukraine and the effect that sanctions are going to have on pricing pressures that are already accelerating at a rapid pace. Cutting off a massive producer on a global scale is not going to help problems and shortages that we've already been having for the last 18 months. And number Five, and really, the overall synopsis of the situation we're in right now is the market hasn't factored in enough risk.

There's tons of different things to be bearish about in the overall macro condition. yet many stocks, especially the biggest cap companies are trading at very, very frothy valuations because you just got off the cycle that poured tons and tons of money into first big tech, which obviously those have come down some but not enough. And also value stocks which have factored in insane pricing pressure, growths, and passing on huge pricing increases to consumers. So-called value stocks are at extreme multiples right now because the market is factored in a berries and roses environment for the economy in 2022, one where companies could keep passing on these extreme pricing pressures to consumers even though consumers have stagnating wages.

When you adjust for inflation in any reasonable way, a lot of Wall Street analysts have very, very strong conviction that consumers are going to be able to pull out that capital from thin air and just dump it into these higher and higher prices without getting paid more. During a time period where debt costs are also going to go up, and a lot of supply side analysts have factored in profit margins increasing at least from the supply side as supply chains start healing and some of those costs go down. But unfortunately, this Putin situation really complicates that As well, You have value stocks factoring in relentless consumer demand and the return of supply and a lot of value. Stocks and companies were thinking, hey, we're going to get all this new supply profit margins are going to go up huge and we can keep raising costs despite our input costs starting to go down when in reality, if this current trend continues, they're going to get the opposite of what they wanted.

They're going to get less consumer demand and worse supply chain problems killing the profit margins. which of course is why you started to see a more broad rotation out of all equities except for maybe energy and gas stocks that are connected directly to commodities. So certainly if you're talking about a short to medium term time frame, there's a lot of reasons for fund managers and active traders to be very bearish right now. Right now, you simply have the situation where active money, active big money algorithms, big hedge funds are looking at the situation and they're not seeing much to be bullish on.

what does short-term capital do? It looks for short-term momentum, and there's just simply not much in the S P, 500 or Triple Q that screams immediate positive momentum. And remember when you look at the price and the movement of stock charts, those prices are driven by active buyers and sellers. And right now the momentum is to the downside. there's just more sellers than buyers.

The long-term trends are damn well clear. You'd have to be really, really stupid to not be bullish over a long term time horizon. But the short run trends? It's a mess. The macro environment is terrible.

You got the Fed working against the market. inflation's not showing any signs of cooling down, unfortunately. and this Russia situation. We don't need to go over all of these talking points again.

But you get my point. If you're a fund manager. looking at this from a risk versus reward standpoint, where is the reward in going long Right now? the overall indices still aren't that far down from all-time highs. the biggest companies that are holding up.

The indices are still very, very frothy despite upcoming quarters probably not going to look too hot for them. And there's all these looming risk factors of how much the Fed's actually going to raise rates, how far this Russia escalation situation is going to go, and so on and so forth That if you're a short-term momentum trader, you're thinking, why would I be long right now That said, backing up a bit trading wasn't that dramatic today. Based on the features last night, it was looking like we're going to have a very, very red day and we recovered about half of that. And certainly, if you're looking at this Ukraine and Russia situation, well, Russia kind of just did an invasion light.

They certainly invaded. they invaded separatist regions in Ukraine. It was still Ukraine based on international recognition of the territory and based on Ukraine's recognition of the territory. But because they basically already controlled those territories by proxy, It was kind of like not a real invasion.

But if they decide to start going into areas where Ukraine has soldiers and Russian combatants are going to have to go and get through the Ukrainian soldiers in order to take over the area, that's when it's going to get very, very messy and you're going to have a massive, massive disaster. and that's really going to scare the entire world and especially the markets. You start moving from light sanctions to extreme sanctions and then the probability of boots on the ground. But anyways, what's going up right now In reaction? Well, certainly not stocks, but certainly commodities.

You look at a basic overview. Just today, you've got wti Crude oil which is U.s sourced up 1.74, Brent Crude Oil which is European sourced up 3.74 Natural gas up 1.4 You've got corn up 3.26 and wheat almost six percent up. Today a lot of people forget that Russia is the world's largest exporter of wheat, and so wheat prices going up means that they are factoring in a higher risk of the Russian supply of wheat getting cut off. But let's talk about the sanctions that we are seeing in retaliation to Russian aggression thus far.

So, the U.s and President Biden laid out a first stage of U.s sanctions against Russia, which are fairly weak. But I guess that's the point because if you go really, really strong, it starts impacting the Us economy and the global economy. But anyways, include sanctions on sovereign debt and on Russian elites and families. Russia has a lot of high-ranking officials and oligarchs who like to keep money in different banks all around the world from New York to London to Brussels to Paris.

And when you have this sort of situation, the U.s can go and say, okay, well, any bank that is holding assets either in the Us or abroad that the Us does business with has to go and freeze those assets if they want to continue working with the Us, which can make it really, really annoying for the people that make decisions in Russia and have power in Russia. Making it more difficult for Russia to seek good terms on debt or debt at all also is something that has a negative effect on the government's power and authority. U.s has also put sanctions on the parts of Eastern Ukraine that Putin has recognized as independent territories and is sending troops into now. Sanctions that are on a nearby table are further ones that cut off Russia from the global financial system and also make it difficult for them to get components to build everyday products like smartphones and computers and aircrafts and automobiles through export control measures.

The next stage of sanctions are likely going to be things that are aimed at negatively impacting Russia, but having very little impact on say, U.s citizens. But as you go more and more deep in the sanctions that starts reversing. President Biden has said that he doesn't want to hit Russia's energy. Of course, that would accelerate pricing pressures everywhere if he did.

Of course, at the same time, that would be the most effective sanction on Russia. The other sanctions can just be a strong annoyance. This sanction could actually really destroy their economy, but when you look at what countries inside the European Union are doing, they're being a little bit more aggressive. Germany decided to cut off certification of the Nordstream 2 pipeline, which essentially means that natural gas won't be flowing through that pipeline from Russia.

a Super Bowl move. While energy prices are skyrocketing in that region, the more Germany and other countries can't get natural gas from Russia, the more they have to look elsewhere. and the more they rally at prices everywhere. Now the other proposal is to remove Russia from the Swift payment system, which is the main system that financial institutions use to send money into and out of their countries.

This cutoff is made with the intention of terminating all international transactions into and out of Russia, triggering a massive currency volatility and loss of confidence in the Russian currency, and is likely going to cause a massive outflow of capital outside of Russia and could shrink their economy by five percent. As a side note, Russia may want to consider getting on the blockchain for the future, but that's all another story. The blockchain removes the centralized authority of the Swift system and also a lot of the inefficiencies that come with it. Of course, that would be bad for western Powers, and I'm not advising Putin to do that.

Of course I know he watches the videos every single night and hits the ravishing like button with vodka, but still an interesting look at the relevancy of the blockchain if it was in the system. But anyway, so far my take is that we are in the beginning of an escalation period and everybody's trying to guess how far out of control this is going to get. But always remember folks as much as it's easy to get caught up in the fear and the volatility of the day to day. the truth is that if you look back at the last hundred years, every single massive fear sell-off has been a huge opportunity to buy the dip and get a lot of extra alpha on the rest of the market.

The question is always though, how much farther is the dip going to dip? Is it a 50 layer dip, right? And eventually you run out of Fritos to dip in the dip And it's difficult to gauge how much more fear is going to be factored into the market. But if you were to take a data-backed approach, the best times to buy the most aggressively is when the Vix is super super high. The higher the Vix the more likely you are to have a very, very strong return and an alpha on the rest of the market over the upcoming periods. Right now, the Vix is steadily back on an uptrend, but we haven't exactly hit a new breakout just yet.

Pretty soon, though we might, and it's going to take a lot of courage to be able to not just weather the storm, but also get good deals on stocks that you believe in. Quite frankly, the reason that results are so much stronger for periods of high fear and volatility is simple because it's paying you back for all the damn courage to take on that level of risk during those uncertain market conditions. Most people don't want to buy when things are unsorted, they want to buy one, things are back to normal, and those prices have recovered, because then that's regular times, right? And that's fine to do that. But if you want to get that extra alpha on the market, the data suggests that the time to do it is when you do get a breakout into a higher Vix the minute that everybody has decided that.

Yep, stocks are complete garbage and they're never coming back. That's going to be the time where you realize we've hit a bottom. The vix is picking up, but we're not quite there yet. I would say strategically and slowly find good deals, but keep your biggest chips in the chip bag for when you do get that breakout.

But anyways, folks that caps off today's video. If you have any questions, feel free to reach out to us below or join us on Ziptrader Circle if you'd like to learn how to trade. with our step-by-step lessons, our private chat, our daily morning briefings, as well as our updated price target list. I'll go ahead and put a link to Ziptraderu and that caps off today's video.

Have a good one and I'll see you in the next video.