[Charts] The Fraud of a Frictionless Economy

Lou Basenese

Friday, July 29, 2022

Can I get a whoop whoop? Because it’s Friday in the Trend Trader Daily Nation.

That means slinging words takes a backseat to flashing pictures, so I can quickly convey an important investment insight or two.

Quick is important, especially today, since I’m trying to enjoy the last days of summer vacation in Nicaragua with my three kids before we return to the United States tomorrow and they return to school on Monday.

So let’s get to the charts…

This week, I’m dishing on the steady return to normal, pre-pandemic life for the airline sector and the problems it keeps causing.

Then, it’s onto the fraudulent promise that frictionless services (and stocks) like ride-hailing and food delivery would be profitable.

More Turbulence Ahead?

I’ve been taking flights through the entire pandemic. That means I witnessed airports turn into apocalyptic ghost towns.

That’s not the case anymore.

As you can see, we’re essentially back to pre-pandemic passenger levels, based on foot traffic through TSA checkpoints.

(click image to enlarge)

To say it’s encouraging to see a return to normalcy for this unabashed travel junkie is an understatement.

And while it’s also good news for all of us looking to take a long overdue vacation, it’s mixed news for airline executives.

Why? Because the aftermath of the pandemic includes notable and persistent headwinds for the sector, including runaway fuel prices, staffing shortages, and crazy weather patterns wreaking havoc on flight schedules.

Against such a backdrop, consistent profitability and stock price increases promise to be elusive.

Add it all up, and although I was previously optimistic about the potential for the U.S. Global Jets ETF (JETS), which provides instant access to a portfolio of 40 airline and airline-related stocks, I think it’s best to avoid all airline investments right now.

There’s more turbulence and more unprofitable times ahead.

Speaking of unprofitable…

Forever a Money Loser?

I’ve long contested that the problem with the ride-hailing sector and “frictionless” economy is simple: the economics just don’t add up.

For too many years, this reality has been obscured by investor capital essentially subsidizing massively money-losing businesses.

I previously exposed the fraudulent promise of consumer convenience services translating into investment profits for the ride-hailing industry here.

The same is true for food delivery services, which shouldn't be a surprise, since the restaurant and grocery industries are notoriously low margin.

And vindication (finally) cometh!

As you can see, the share price performance for the major food-delivery and ride-hailing companies can only be described as a complete disaster.

(click image to enlarge)

The takeaway: As I shared last week, don’t treat the peak in bearishness in the markets as a signal to buy up every beaten down segment and stocks. Plenty deserve to be cheap and are going to get cheaper still.

How cheap? When it comes to the frictionless economy, I’m convinced that it’s a race to zero. So the only way to profit from these companies is to bet against them.

Ahead of the tape,

Tags: air-travel food-delivery