Summing Up The Week

It was definitely a busy week with Pfizer shipping its vaccine, the Electoral College making President-Elect Joe Biden’s results official, and lots of negative news about the economy. Yet, Congress still hasn’t reached a deal.

The market rally continued through the week, but does it have more in store or is Santa going to fly the coop on this rally right before Christmas?

Read on to learn the news that moved the markets this week…

Market News

Pfizer shipped vaccine to all 50 states with Monday delivery

On Sunday, the U.S. Government, FedEx (FDX), and the United Parcel Service (UPS) undertook the enormous logistical undertaking of delivering millions of vaccine doses across the country, reported CNBC.

Trucks containing the first packages of vaccine left Pfizer’s Michigan facility on Sunday with delivery expected on Monday in all 50 states. The Centers for Disease Control and Prevention has said the shots should go to front-line healthcare workers and residents at long-term care facilities first.

This follows more than 3,300 deaths on Friday and 2,300 deaths on Saturday from the vaccine along with 219,000 new cases reported on Saturday.

New Brexit standards still not established

Remember Brexit? The good ol’ days of simply worrying about how Britain’s departure from the European Union would potentially depth-charge the entire global economy.

Pre-pandemic worries were so cute, weren’t they?

Well, despite the United Kingdom’s departure in January 2020 being relatively uneventful, that was mainly due to the fact that the U.K. agreed to keep the same standards and regulations until the end of the year, which is now rapidly approaching.

Naturally, the transition period ends in less than three weeks, and there are serious concerns that the U.K. and E.U. will not have a new agreement by then, reported CNBC on Sunday.

European Commission President Ursula von der Leyen said Sunday that Brexit talks with the U.K. will be extended beyond Sunday’s deadline, adding that “we think it is responsible at this point to go the extra mile.”

Failure to get an agreement in the coming weeks could push up taxes and costs for exporters both in the U.K. and the E.U. These negotiations are particularly difficult because they represent the first time in the E.U.’s history that both parties are looking to diverge from a current set of rules which will impact food, labor, and other products and services between the U.K. and the rest of the European Union. 

One expert pointed out in an interview with CNBC that a no-deal Brexit would be “catastrophic” for small- and medium-sized businesses throughout the U.K. and E.U.

U.S. Covid-19 death toll crosses 300,000

On Monday, the number of Americans who died due to COVID-19 crossed over 300,000, reported CNBC. Although health experts warned this morbid milestone was fast approaching, the markets seemed to be taking reopening for granted. 

Once the news broke late in the trading day on Monday, the markets suddenly rolled over and took a downward turn as traders made the realization that potential new economic lockdown measures might be imminent.

Biden wins Electoral College vote

On Monday, the Electoral College voted to cement Joe Biden’s victory over incumbent President Donald Trump with ballots cast by electors in all 50 states mirroring each state’s popular vote, reported CNBC.

Despite this result, many members of the GOP refuse to accept Biden’s win, claiming still-undemonstrated rampant fraud. The allegations of GOP members were so outlandish that they prompted Michigan Representative Paul Mitchell to quit the Republican party over the GOP’s refusal to accept Trump lost the election, reported CNBC.

In a letter to GOP leaders, Mitchell wrote that Trump’s baseless claims alleging widespread ballot fraud and the Republican party’s toleration of those claims threatens “long-term harm to our democracy.”

On Tuesday, Senate Majority Leader Mitch McConnell finally explicitly acknowledged Joe Biden as president-elect for the first time after weeks of Republican delays in recognizing the 2020 election result, reported CNBC.

“Our country has officially a president elect and a vice-president elect – the Electoral College has spoken,” McConnell said on the Senate floor. “The Electoral College has spoken, so, today, I want to congratulate President-elect Joe Biden.” 

Later on Tuesday, McConnell and Missouri Senator Roy Blunt along with Senate Majority Whip John Thune of South Dakota warned senators not to object to the results during a conference call. Doing so would be a “terrible move” for Republicans, who would then have to defy Trump on the record by voting against the objection, multiple sources told NBC.

Bipartisan group releases another Covid relief bill

A bipartisan group released its $908 billion aid legislation bill on Monday,  reported CNBC. However, lingering disagreements over state and local government aid; liability protections; and direct payments make its passage unlikely.

While Congressional leaders claim to be targeting approving both pandemic aid and a spending package before government funding lapses this Saturday, Republicans and Democrats still needed to strike a deal on both front to spare millions facing eviction and/or the loss of unemployment benefits.

While the bipartisan bill did include support for small businesses with additional Paycheck Protection Program (PPP) funds as well as additional unemployment funds, the proposal did not include direct payments to Americans – a sticking point for many on both sides of the aisle – and does not include liability protection for businesses against legal action – a sticking point for Republicans. 

November retail sales decrease more than expected

The Commerce Department said U.S. retail sales fell 1.1% in November, the second month in a row, reported CNBC. The results were likely a result of raging Covid-19 infections and decreasing household income due to unemployment and failed attempts at stimulus from Congress.

Economists also pointed to the decrease as another in the growing number of signs of a slowdown in the economy’s recovery.

The Fed sees 4.2% GDP & 5% unemployment in 2021

In its monthly statement on Wednesday, the Federal Reserve announced that it expects to see real Gross Domestic Product (GDP) to fall 2.4% in 2020 compared to the 3.7% decline predicted in September and raised its 2021 forecast to 4.2% from 4.0%, reported CNBC.

As for the job market, the Fed estimates the unemployment rate to fall to 6.7% this year, an improvement from September’s 7.6% projection. The Fed also expects unemployment to fall to 5.0% in 2021 versus its previous 5.5% estimate.

In order to combat a potential recession, the Fed said it would continue to buy at least $120 billion of bonds each month “until substantial further progress has been made toward the Committee’s maximum employment and price stability goals.”

The Fed kept its inflation estimates for 2020 unchanged at 1.2% with the expectation to see inflation running to 1.8% in 2021 versus previous estimates of 1.8%.

The Fed has announced previously that it has no intention of raising interest rates – an action typically taken to prevent rising inflation – even if inflation rises above 2-3%, the Fed’s historical maximum target. In a previous interview, Fed Chair Jerome Powell went so far as to say, “we’re not even thinking about thinking about raising rates.”

It is worth keeping in my mind that with the Fed interest rate set to zero, individuals who save money in savings or money market accounts are making little to no interest with the highest rate I’ve seen at 0.5%, below the rate of inflation by nearly 2/3.

In other words, if you’ve got cash on the sidelines, you might consider putting it to work somehow rather than leaving it liquidated as all of the money printing and low interest rates are reducing the value of fiat currencies worldwide.

Weekly jobless claims hit highest level since September

the Labor Department reported 885,000 new jobless claims in the past week, the most since the week of September 5, reported CNBC. Economists expected a number falling to 808,000, so the surprise was certainly to the downside.

The numbers “really highlight the fragility of the labor market, particularly now as the second resurgence of coronavirus [is] leading to further business closures and additional job losses,” said Lindsey Piegza, chief economist at Stifel, in an interview with CNBC’s “Squawk Box.” 

Congress scrambles before 12:01am Saturday deadline

As of Friday, Congress still hadn’t reached an agreement on stimulus or keeping the government opened, both of which must be accomplished by the deadline at 12:01 a.m. ET on Saturday, reported CNBC.

Congress continues to tell Americans that it aims to finish a combined coronavirus relief and government funding deal by the deadline, even while millions of Americans await aid in a receding economy. If Congress fails to act, the government will shut down on Saturday leaving 12 million Americans without unemployment benefits beginning the day after Christmas.

As of Friday afternoon, Congressional leaders continued to claim they are close to finalizing a $900 billion stimulus plan that would include small business aid, direct payments to Americans, and a federal unemployment supplement package, however, any progress was simply repeated statements from both parties. 

Next Week’s Gameplan

Next week’s gameplan rests entirely on the shoulders of Congress. If they fail to pass a stimulus plan and/or shut down the government, the entire stock market will see a deep and devilish selloff.

To make matters worse, this could be one of those “sell the news” scenarios where Congress does what’s expected – passes a funding bill for the government and a $900 billion stimulus plan – and the market sells off as the news has already been “priced into the market” for weeks.

The saving grace going into the year-end, could be the ongoing “Santa Claus Rally,” the result of the Fed backstopping the market combined with trillions of dollars of investors’ cash sitting on the sidelines with nowhere else to go.

This Week in Play

Stay tuned for this week’s episodes of my two portfolios Investments in Play and Speculation in Play coming online later this weekend! 

Crytpo Corner

Important Disclaimer

Get Irked contributors are not professional advisers. Discussions of positions should not be taken as recommendations to buy or sell. All investments carry risk and all readers must accept their own risks. Get Irked recommends anyone interested in investing or trading any asset class consult with a professional investment adviser to determine if an investment idea is suitable to them and their investment goals.

Bitcoin's Road to Nowhere - Get Irked

Click chart for enlarged version

Bitcoin Price (in USD)

%

Weekly Change

Bitcoin Price Action

Bitcoin bounced hard off of last week’s lows, making another run at its all-time high of $19,915.14 on Saturday and Sunday last weekend, which proved to only be the beginning of a breakout rally culminating in an outrageous all-time high of $23,776.94 on Thursday, crashing through the nearly-mythic $20K mark for the first time ever in spectacular fashion.

From last week’s low of $17,580.00, Bitcoin rallied more than +35% to make its new all-time high at $23,776.94, a bullish move not seen in quite some time.

The Bullish Case

Bulls get their moment in the sun, able to tell all the nay-saying Bears “I told you so” as Bitcoin nearly perfectly repeated the fractal pattern seen in 2017. This exuberant move may actually add credence to the concept that “this time is different” because there is actual institutional money driving the move, not just speculation.

Naturally, Bullish analyst continue to adhere to their thesis that Bitcoin has much further to go from here, and while some expect a price consolidation pullback, expectations are nothing more than 15-20% drawdowns before the next move.

The Bearish Case

Bears were left eating a lot of crow after Bitcoin’s recent move. Most didn’t expect Bitcoin to break its previous all-time high, even fewer thought Bitcoin could make it so high into the $20k range before resting. Bears continue to point to historic 40% pullbacks during Bull Rallies as a reason for care and concern, however Bitcoin hasn’t shown any interest in acting the way it has historically. From here, shorting the cryptocurrency could be very dangerous.

Bitcoin Gameplan

*POSITION CLOSED: +15%*

Final Total Allocation: 0.900%
Per-Coin Average Buying Price: $17,528.26
Per-Coin Average Selling Price: $20,161.97
Total Gain: +15.026%

When Bitcoin pulled back a bit on Sunday from its rally, the price action seemed to feel like the crypto was trading in a range, so I decided to take some profits when Bitcoin pulled back to $19,255.00 which allowed me to capitalize on gains while keeping an allocation on to take advantage of the surprise upside.

On Wednesday, I used stop-loss orders to close my position when Bitcoin looked like it might pull back just over $21,000, giving me an average selling price of $20,161.97. The result (after trading fees) is a +15.026% gain in a three-week trade from November 25 to December 16.

The trade only added 0.862% to my banked Bitcoin, so I decided to increase my initial buying allocation in trades from here. While taking on a bit more risk, a larger initial purchase will allow me to take more profits if we don’t see dramatic pullbacks.

*NEW POSITION OPENED*

Current Allocation: 0.937%
Current Per-Coin Price: $22,701.17
Current Profit/Loss Status: -0.570%

On Thursday, I opened a new position when Bitcoin started price consolidation from making its new all-time high (ATH) with a purchase around -5% lower than the ATH which filled at $22,588.10 which gave me a real position starting price of $22,701.17 after factoring in Coinbase’s trading fees (yes, Coinbase has 0.50% commission fees despite all other brokerages having eliminated fees altogether).

As I mentioned above, I used a larger initial allocation, purchasing nearly 1% of my entire desired amount. 

However, since a historical pullback of up to -40% (or more) is a very real possibility after Bitcoin achieves a new ATH of this magnitude, I’m taking a very cautious approach in terms of quantity purchasing from here.

I will be sticking with identical allocation amounts per level until I need to increase my quantity to maintain my desired position-down percentage of -25% or less.

Bitcoin Buying Targets

Using Moving Averages and supporting trend-lines as guides, here’s my plan for my next ten (10) buying quantities and prices:

0.394% @ $20,848
0.394% @ $19,397
0.394% @ $18,439
0.394% @ $17,238
0.394% @ $16,351
0.394% @ $15,336
0.544% @ $14,587
0.544% @ $14,135
0.544% @ $13,672
1.312% @ $12,778

No price target is unrealistic in the cryptocurrency space – Bullish or Bearish.

While traditional stock market investors and traders may think the price targets in the cryptocurrency space are outlandish due to the incredible spread (sometimes a drop of near -90% or a gain of up to +1000% or more), Bitcoin has demonstrated that, more than any speculative asset, its price is capable of doing anything.

Here are just a few recent price movements over the past couple of years:

  • Bitcoin rose +2,707% from its January 2017 low of $734.64 to make an all-time high of $19,891.99 in December of the same year.
  • Then, Bitcoin crashed nearly -85% from its high to a December 2018 low of $3128.89.
    In the first half of 2019, Bitcoin rallied +343% to $13,868.44.
  • From June 2019, Bitcoin dropped -54% to a low of $6430.00 in December 2019.
  • From December 2019’s low, Bitcoin rallied +64% to $10,522.51 in February 2020.
  • In March 2020, Bitcoin crashed nearly -63% to a low of $3858.00, mostly in 24 hours.
  • From March 2020, Bitcoin rallied +516% to a new all-time high of $23,776.94 in December 2020.

Where will Bitcoin go from here? Truly, anything is possible…

What if Bitcoin’s headed to zero?

The only reason I speculate in the cryptocurrency space is I truly believe Bitcoin isn’t headed to zero.

I am prepared for that possibility, however, by knowing I could potentially lose all of the capital I’ve allocated to this speculative investment. Professional advisers recommend speculating with no more than 5% of an investor’s overall assets. Personally, I’ve allocated less than that to speculating in crypto.

I feel that anyone who doesn’t fully believe in the long-term viability of cryptocurrency would be better served not speculating in the space.

On a good day, this asset class isn’t suitable for those with weak stomachs. On volatile days, the sector can induce nausea in the most iron-willed speculator. If a speculator isn’t confident in the space, the moves will cause mistakes to be made.

DISCLAIMER: Anyone considering speculating in the crypto sector should only do so with funds they are prepared to lose completely. All interested individuals should consult a professional financial adviser to see if speculation is right for them. No Get Irked contributor is a financial professional of any kind.

Suicide Hotline – You Are Not Alone

Studies show that economic recessions cause an increase in suicide, especially when combined with thoughts of loneliness and anxiety.

If you or someone you know are having thoughts of suicide or self-harm, please contact the National Suicide Prevention Lifeline by visiting www.suicidepreventionlifeline.org or calling 1-800-273-TALK.

The hotline is open 24 hours a day, 7 days a week.

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