Sanctions are Coming

February 25, 2022 Good morning traders! Welcome back to The Daily Setup. Markets were headed to a bear market thanks to Russia’s invasion of Ukraine but reversed course after President Biden announced sanctions against Russia. The Nasdaq was down as low as 3% before ending the day up 3.3%. Here’s what’s on the docket today: - A Russia / Ukraine Thursday recap - The US GDP beats expectations - Coinbase reports earnings Let’s have ourselves a weekend. Nick How’d the markets look? Market Outlook 👀 DOW 33,223.83 +0.28% S&P 500 4,288.70 +1.50% NASDAQ 13,473.58 +3.34% BITCOIN $38,402.06 +1.88% South Jersey Industries, US GDP, and Russia / Ukraine BIGGEST MOVER “It’s a South Jersey Thing” Shares of South Jersey Industries (SJI) rocketed [40.36%]( higher thanks to the announcement that the natural gas and clean energy development company will [be taken private]( by Infrastructure Investments Fund. [South Jersey CEO Mike Renna]( said, "the transition from fossil fuels toward low carbon and renewable energy made the timing of the acquisition particularly opportune." - IIF is a private investment vehicle that has considerable knowledge in investing in critical infrastructure assets. - South Jersey’s shares will be acquired for [$36/share, representing a 46.3% premium]( over their 30-day volume weighted average price. - The deal is valued at $8.1B and is expected to close in Q4 2022. With SJI being taken private, its shares will soon cease to exist. If you want to invest in the natural gas sector, a great way to do so without single-stock risk would be to take a look at the United States Natural Gas Fund (UNG). On February 2nd, UNG spiked into the [$17-$21]( range where the majority of Q3 2021’s trading took place. The stock quickly receded from that area but is once again knocking on that $17 level. If UNG continues its up move through that level, we may see the stock traverse the entire range with $21 being the upside target. I’m a grower, not a shower The U.S. economy grew slightly faster than economists were expecting. Fourth quarter [GDP came in at 7%](, which edged out the very "nice" estimated 6.9%. Thanks rounding. With consumers spending more during the holiday season and companies increasing their inventory, Q4 GDP tripled the 2.3% number recorded the previous quarter. And that’s pretty much where the good news ends. According to the [Atlanta FED’s GDPNow]( tracker, which aims to estimate real time GDP, current forecasts for Q1’s GDP come in at a meager 1.3%. - The slow start to 2022 can be attributed to the 'vid (of course), levels of inflation not seen in 40 years, a tight labor market, and the newest variable- Russia’s invasion of Ukraine. - GDP for the full year 2021 came in at 5.7%, the fastest rate of growth for the U.S. economy since Michael Jordan’s rookie season (1984). - [For full year 2022](, economists are still predicting between a 3%-4% growth rate, but we all know that economists are about as reliable as a meteorologist. I’m making a bold statement here, but I believe the S&P 500 is the best representation in the stock market of the health of the economy. Like any economic number however, it can be distorted by government intervention. *Jerome Powell* That said, the market is finally correcting itself after putting in a bottom on March 23, 2020 and rallying consistently for almost two years. Volatility should continue for the foreseeable future, but as traders, volatility means opportunity. To give myself an overview of what is going on in the market on any given day, I have the following symbols on my watchlists: ES, NQ, RTY, CL, NG, GC, SI, and ZN. Invasions and Sanctions One has to wonder if Biden considered announcing the additional sanctions via a meme... A couple of days ago we talked to you about Vladmir Putin’s sort-of-maybe invasion of Ukraine and all the fun sanctions that resulted. Well surprise surprise, that wasn’t enough to deter President-for-life Putin, as the invasion went [full-swing]( Wednesday night. NATO reacted, Putin reacted, and the markets reacted, it was (and will be) a whole thing. Once again, there’s a lot of information coming at you so kick back, grab some vodka, and slip into your most comfortable tracksuit cause your boys at The Daily Setup have you covered. - Here’s the lowdown on the fighting: Russia (with help from Belarus) opened up [three fronts](, leading with air and missile strikes. Noted flashpoints are [Hostomel airport]( outside the capital Kiyv, and [Chernobyl](. Yes, that Chernobyl. - Since it worked so well the first time, Biden and his NATO allies announced a [second round]( of sanctions against Russian entities and individuals. These include Russia’s biggest bank Sberbank, in addition to VTB Bank, Bank Otkritie, Sovcombank, OJSC, and Novikombank. 13 major enterprises affected include Gazprom, and RusHydro. Individuals targeted include much of Putin’s inner-circle including [Defense Minister Segei Shoigu.]( - To put it into financial terms, markets were in the sh*tter at open and looked to be heading towards bear markets. The markets however took the sanctions news in stride, as investors [flocked to growth stocks]( like Netflix (up +6.14%) and Twitter (+6.78%). This rally is likely due to [treasury yields falling]( and because Thursday’s sanctions weren’t as scorched-earth as expected. - Oil [rallied over $100 per barrel]( for the first time since 2014 before retreating after the news of the sanctions to $95. Well it’s only day one into what can now be called a fully-fledged war so there’s still quite a bit left to be seen in how the situation develops. With that in mind here’s what we do know: gas and oil prices are going to [increase](, and since it’s really all NATO can do without starting WW3, more sanctions are bound to happen. So far the West has been hesitant to revoke Russia’s access to [SWIFT]( (basically the system that makes global commerce possible), but the option is still on the table. If things heat up that could very well become a possibility and it’s likely the markets would not be especially happy. Of course the conflict is still developing but this is also a good reminder to stay patient with the markets and this is the kind of environment where buying the dip is not always prudent. Coinbase is Keeping it Cool Token Talk Hot off of the viral success of their [superbowl ad](, Coinbase posted Q4 earnings on Thursday that were equally exciting. COIN’s revenue for the quarter did solidly beat estimates but they did that thing that shareholders hate, and tempered expectations. That’s right, even though revenue exceeded $2.5B, COIN leadership warned that trading volume would likely [decline in Q1](. $COIN gained 3.95% during trading, but fell 5.83% in after hours after the earnings were released. - Not only were sales looking good, but the number of monthly transacting users (MTUs) were also healthy. [MTUs in Q4 were 11.4M](, up from 7.4M in Q3. - On the whole, Crypto’s [market cap is down -20% from Q4]( in the new year. Reasons cited by COIN are tightening financial conditions and Fed intervention, which are likely the cause for their tepid outlook on Q1. The causes of Coinbase’s gloomy perspective on crypto in Q1 are pretty much out of their control and it appears they’re aware of that. To combat the inevitable, their report outlines a strategy to diversify revenue streams including an NFT marketplace in [cooperation with Mastercard.]( Currently, altcoins account for 70% of COIN’s trading volume (up from 40% in 2021) and are doubling down in an effort to serve as the "[primary crypto account](" for its customers. In addition to [their plans to break into derivatives](, this report has made it clear that COIN is not content to rest on their laurels and are eager to steadily expand. UnitedHealth Group Gets a Time Out Deals and Rumors The Biden administration might sleep through war-time diplomacy, but it certainly isn’t afraid of regulating the free market. [On Thursday](, the Justice Department filed an antitrust lawsuit against UnitedHealth Group’s (UNH) planned $13B acquisition of Change Healthcare (CHNG). Citing the deal as “unlawfully reduc[ing] competition” this lawsuit marks Washington’s growing willingness to [curb trusts](. Naturally, UNH plans on fighting the lawsuit but who knows how they’ll fare against the feds. Either way, the Russians should be glad they aren’t a domestic corporation apparently. - With an annual revenue of $288B in 2021, [UNH is the largest American insurer](, covering around 45M people with 60k affiliated or employed doctors. Their acquisitions have been vertical in the past, but apparently this is a step too far. - CHNG earned around $3.1B in fiscal year 2021. Their business revolves around payment services and back-end across the healthcare industry. Part of the DOJ’s concern over the acquisition is that UNH would gain access to its competitors’ [sensitive claims data](. - UNH stock took a hit upon the news, dropping -0.81% by market close, while CHNG stock rose +2.96% in contrast. This wasn’t exactly a surprise to anyone, UnitedHealth stock already took a hit [last week]( after a report divulged the DOJ’s schemes. What this does tell us is that amongst their already hawkish antitrust stance (see Lockheed’s [foiled deal]( with Aerojet), the DOJ and FTC are turning their eyes squarely towards the healthcare industry. Earlier this month the FTC [sued to block a health system merger]( in Rhode Island, so while I might have been eyeing any healthcare darlings with big deals on the horizon I’m probably going to want to wait for a bit. Link Roundup 📿 Other News Other News Link Roundup - FUBO Stock Still FUBAR – FuboTV Hits Record Numbers ([link]() - Vaccines Cha-Ching – Moderna Rallies on Earnings Beat ([link]() - BABA Stock Could Use a Magic Carpet Ride Higher – Alibaba Earnings Not Terrible ([link]() - Give me that back – AMD announces $8B buyback program ([link]() - Job Market Tighter Than a Pair of Jordache Jeans – Continuing Claims Reach 52-Year Low ([link]() Meme of the day They had us in the first half, not gonna lie, [via yours truly]( (shoot me a follow). Questions or concerns about our products? Call or text us on your mobile: (410)-775-8315 © Copyright 2020, [RagingBull]( - [Refund Policy]( - [Privacy Policy]( - [Terms & Conditions]( DISCLAIMER: To more fully understand any Ragingbull.com, LLC ("RagingBull") subscription, website, application or other service ("Services"), please review our full disclaimer located at [(. FOR EDUCATIONAL AND INFORMATION PURPOSES ONLY; NOT INVESTMENT ADVICE. Any RagingBull Service offered is for educational and informational purposes only and should NOT be construed as a securities-related offer or solicitation, or be relied upon as personalized investment advice. RagingBull strongly recommends you consult a licensed or registered professional before making any investment decision. RESULTS PRESENTED NOT TYPICAL OR VERIFIED. RagingBull Services may contain information regarding the historical trading performance of RagingBull owners or employees, and/or testimonials of non-employees depicting profitability that are believed to be true based on the representations of the persons voluntarily providing the testimonial. However, subscribers' trading results have NOT been tracked or verified and past performance is not necessarily indicative of future results, and the results presented in this communication are NOT TYPICAL. Actual results will vary widely given a variety of factors such as experience, skill, risk mitigation practices, market dynamics and the amount of capital deployed. Investing in securities is speculative and carries a high degree of risk; you may lose some, all, or possibly more than your original investment. RAGINGBULL IS NOT AN INVESTMENT ADVISOR OR REGISTERED BROKER. Neither RagingBull nor any of its owners or employees is registered as a securities broker-dealer, broker, investment advisor (IA), or IA representative with the U.S. Securities and Exchange Commission, any state securities regulatory authority, or any self-regulatory organization. Employees, owners, and other service providers of [RagingBull.com](, LLC are paid in whole or in part by commission based on their sales of Services to subscribers. WE MAY HOLD SECURITIES DISCUSSED. RagingBull has not been paid directly or indirectly by the issuer of any security mentioned in the Services. However, Ragingbull.com, LLC, its owners, and its employees may purchase, sell, or hold long or short positions in securities of the companies mentioned in this communication. [Unsubscribe from all RagingBull emails](