Summing Up The Week

 2020 is finally gone – in the markets, at least!

This was another shortened four-day holiday week, this week was all about the stimulus package and the delays in rolling out vaccines to the population. The markets made new highs for much of the week and closed out the year at…

Let’s look at the news that moved the markets this week…

Market News

Trump capitulates after refusing to sign stimulus bill

Over the weekend, President Donald Trump’s continual refusal to sign the stimulus bill due to $600 payments he wanted to be $2,000 resulted in millions of Americans losing their unemployment benefits on Saturday, reported CNBC.

However, on Sunday evening, Trump capitulated and signed the bill while still demanding $2,000 direct checks, reported CNBC. In a statement that night, Trump said the Senate would also “start the process for a vote that increases checks to $2,000” despite Senate Majority Leader Mitch McConnell not recognizing any such vote.

The House passes vote for $2,000 direct checks

On Monday, the House of Representatives passed a bill for $2,000 stimulus checks and passed it on to the GOP-controlled Senate, reported CNBC. 

House Speaker Nancy Pelosi called on Trump to put more pressure on his party to back the payments, “To reject this would be in denial of the economic challenges that people are facing and it would deny them, again, the relief they need.”

McConnell blocks $2,000 stimulus checks, introduces bill

Given Senate Majority Leader Mitch McConnell’s repeated denial of increased stimulus checks, it should come as a surprise to no one when on Tuesday morning McConnell blocked Senate Minority Leader Chuck Schumer’s attempt to approve the House-passed bill to increase direct payments to $2,000, reported CNBC.

Later in the day, McConnell introduced a new bill that would boost the stimulus checks, however also repeal Section 230 legal liability protections for internet platforms as well as create a commission to study election issues, reported CNBC. The unrelated issues represented a power play by the Majority Leader to force members to vote for two issues unrelated to the stimulus funding that might not have otherwise passed.

Political pundits ponder whether the Republicans’ failure to act may have an effect on next week’s runoff elections in Georgia, guiding voters who may have supported the Republican candidates to, instead, elect the Democrats.

Georgia’s two senate seats have been up for grabs since the general election was too close to call. A second election, called a “runoff election” will take place on January 5. If both seats go to the Democrat candidates, the result will give the Democrats a majority in both the House and the Senate resulting in the potential for additional stimulus and significant regulation changes during President-elect Joe Biden’s term.

Although potentially positive for the country, such a result will be very negative for the stock market which prefers divided government and its lack of change. Many stock analysts believe the market has not discounted the possibility of the Democrats gaining a Senate majority. Should it happen, these analysts believe the markets could see a significant correction.

Boeing 737-Max flies in U.S. after nearly two-year ban

On Tuesday, American Airlines became the first airline to return Boeing’s 737-Max to service since the jet was grounded in March 2019 following two fatal crashes, reported CNBC. The flight left Miami International Airport and landed safely at New York’s LaGuardia Airport.

“We’re flying on a Boeing 737 Max,” said Captain Sean Roskey over the PA system to the applause of some passengers who included American Airlines’ president. “We have the utmost confidence in this aircraft. As a matter of fact, my wife is on board.”

Boeing (BA) is one of the United States’ biggest private employers and is also responsible for the country’s most significant international exports thanks to its airline sales. Its inability to sell the 737 Max for the past two years plus lower demand due the Covid-19 pandemic, Boeing has suffered significant revenue and sales drops, having dramatic negative effects to the entire country’s Gross Domestic Product (GDP) as a whole.

Many analysts pointed to the 737-Max’s return to service as a sign of the entire economy recovering. Brazilian airline Gol uses an-all Boeing 737 fleet and was the first airline in the world to relaunch the jets earlier in December.

The 737-Max is more fuel-efficient than previous models and remains central to the plans of airlines worldwide. At a MSRP of more than $150 million each and with more than 3,000 on order, their return of service marks a significant milestone in Boeing’s recovery following years of strife with the FAA resulting in the replacement of the company’s CEO and many other changes and challenges.

Vaccinating Americans will take 10 years at current pace

On Wednesday, reports from Operation Warp Speed showed that the distribution program would take almost 10 years to inoculate enough Americans to get the pandemic under control, reported CNBC.

The Goal of Operation Warp Speed is to deliver safe and efective Covid-19 vaccines to the public, ensuring that 80% of the country’s 330.7 million people get the shots by late June.

However, to meet that goal, CNBC pointed out that more than 3 million people would need to get the shots each day. Currently, only 2 million have received their first shots since the 11.5 million doeses were delivered in the last two weeks.

“I don’t think we’re going to be able to distribute the 20 million doses that were promised [this year],” said Dr. Scott Gottlieb, former commissioner of the Food and Drug Administration. “Georgia, for example, just started vaccinating nursing homes yesterday, and the vaccine has been on the market now for almost three weeks; so, we’re late getting into some of these facilities.”

On the bright side, Gottlieb also pointed out that once people start getting the first shot, “you will start to see an impact on the most vulnerable population, I think, soon.”

This improvement is thanks in part to data which show that the vaccine is partially protective after the first dose. “We don’t know exactly what the magnitude of that protection is and how long it lasts,” said Gottlieb. “But, there is evidence that there’s partial protection after the first dose.”

Weekly jobless claims at 787K vs 828K expected

The Labor Department reported 787,000 new jobless claims in the past week versus the 828,000 expected by Dow Jones economists, reported CNBC on Thursday. Even the typically-optimistic reporting of CNBC pointed out “the labor market is still under pressure as the coronavirus pandemic rages on.”

The number of people receiving benefits across all unemployment programs dropped by 800,000 but still stands at a nearly unbelievable 19.6 million. “There is no real improvement in the data,” John Ryding, an economic advisor at Brean Capital, told CNBC. “What we’re seeing is a very difficult time in the economy with the virus pickup that we have seen and the slow rollout of the vaccination.”

Currently, the U.S. has been recording at least 181,998 new coronavirus cases each day based on a seven-day average from John Hopkins University. “There is good news ahead, but you can’t see it in the numbers,” said Ryding. “That good news is going to come at the point where there are enough [vaccine] shots in people’s arms and we approach something like herd immunity; that’s not going to be, unfortunately, until this summer.”

Next Week’s Gameplan

So, there ends 2020 – probably the most insanely volatile year in the markets that many of us will ever see in our lifetimes. What kind of excitement will the markets bring us in 2021 as we continue to play out the global pandemic?

Come back next week and see!

Happy New Year’s, everyone, and thanks for sticking with me through all this craziness!

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

Bitcoin Price Action

Starting early Christmas morning, Bitcoin decided to offer up a holiday surprise and notched several new all-time highs over the extended weekend and into the New Year’s week with the last one setting the bar at its incredible new high of $29,321.90 on Thursday, a 20.67% increase over the previous $24,300.00 high set last week.

The Bullish Case

Bulls hold on to the possibility that Bitcoin will reach $50,000, however, even some of the more bullish analysts are wary of Bitcoin’s current overbought conditions. Some believe a pullback of 5-10% followed by a decent amount of time in price consolidation is needed to ensure Bitcoin doesn’t suffer a more historical reaction to such parabolic highs.

The Bearish Case

Bears believe Bitcoin’s current overbought condition of mirrors its similar state back in December 2017 when the euphoric activity and past all-time high marked the top for Bitcoin for nearly three years followed by a substantial pullback. Some Bears do think the institutional involvement in crypto may prevent an -85% pullback like what happened in 2018-2019, however, these Bears think a 20-40% drawdown from these levels may be likely.

Bitcoin Gameplan

**Closed Position: How a gain of +13.43% is reduced to +10.34% after fees** 

Buy Price: $22,588.10 
Sell Price: $25,621.01 
Total Allocation: 0.937%
Realized Profit: +13.43%   Actual Profit: +10.34% (after fees)

When Bitcoin first made its all-time high at $25,990.00 (of course, it didn’t stop going much, much higher from there…) my position was up 14%+ and, while that’s not the profit target I used to shoot for, it’s much harder to make 14% gains in the $20,000 range than it is in the $10,000 or even $1000-$9000 ranges. 

A 20% gain on a $9,000 buy price is an upside move of $1,800 to a sell price of $10,800 where a gain of 20% on a $22,500 buy price requires an upside move of $4,500 to a sell price of $27,000… who thought Bitcoin would go higher than even $27k?!

I used a protective stop-limit loss order to close my position at $25,621.01, a gain of +13.43% over my initial $22,588.10 starting price.

Of course, thanks to Coinbase’s transaction fees, my realized gain was reduced to +12.299% followed by Coinbase’s new “Coinbase Withdrawal Fee” which charges users to remove crypto off their network and reduced my total final gain to +10.34%.

The profits added 0.463% additional crypto to my long-term core Bitcoin position.

Planning the Next Trade

From its new, new all-time highs, Bitcoin is just way too exuberant and overbought so I’ve reverted back to my smaller trading size to start since the possibility for a significant selloff like those historically seen of 20-40% (or more) is still very much out there as we move forward. 

The amount of exuberance in the space definitely makes me a little nervous – I feel like I’ve seen this movie before and, last time, it ended with Bitcoin losing nearly 85% of its value before rebounding.

Bitcoin Buying Targets

As a special holiday treat, I’ve decided to list my 16-move trading plan for Bitcoin from these levels.

Given that Bitcoin is at all-time highs, the potential for a devastating pullback is out there, so my plan incorporates key past points of support as well as even lower targets if Bitcoin sells off more than it ever has.

You’ll notice that the percentages do not add up to a 100% allocation, rather just around 66%. I do this to leave some powder dry should I want to change up the formula during a selloff.

Do I expect Bitcoin to drop below its 2017 low of $3130-$3150? Not at all, but that doesn’t mean I don’t plan for it.

Here are the moves and quantities:

0.471% @ $23,609
0.415% @ $20,986
0.356% @ $18,067
0.293% @ $14,779
0.664% @ $12,478
0.381% @ $11,764
0.805% @ $10,563
0.566% @ $9,982
1.771% @ $8,517
2.815% @ $7,147
1.737% @ $6,671
4.635% @ $5,688
9.773% @ $4,469
8.680% @ $3,955
9.914% @ $3,230
22.307% @ $2,528

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, Bitcoin rallied +660% to a new all-time high of $29,321.90 in December.

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.