Summing Up The Week

Earnings reports dissuaded any negative news in the stock market this week, with company after company coming out with breakout quarterly reports beyond what analysts were expected.

Despite negative global economic news from China and U.S. industrial production along with dire warnings from hedge fund investors, the markets continued higher.

Let’s take a look at the news that (didn’t) move the markets this week…

Market News

China GDP disappoints; Q3 growth slows to 4.9%

The week kicked off early on Sunday when China’s National Bureau of Statistics reported the growth of the country’s Gross Domestic Product (GDP) slowed to 4.9% in the third quarter, missing expectations for a 5.2% expansion, reported CNBC.

Given that China is the world’s second-largest economy to the United States and the fastest-growing, the entire global economy depends on China’s growth to sustain positive economic effects worldwide. When China slows, the world slows.

The country pointed to similar supply chain and pandemic-related issues as American companies have experienced. “Since entering the third quarter, domestic and overseas risks and challenges have increased,” said Fu Linghui, spokesperson for the National Bureau of Statistics, in a press conference Monday morning.

Additionally, the ever-present Evergrande debacle could present risks both inside and outside China’s borders. Evergrande is one of the world’s largest property developers, and, due to poor financial management, could be standing on the brink of complete financial collapse depending how the Chinese government decides to handle the epic company’s failure.

U.S. Industrial Production fell more than expected

On Monday, the Federal Reserve reported that U.S. industrial production fell 1.3% in September, more than expected due to the effects of Hurricane Ida and economic weakness, reported CNBC.

Industrial production accounts for manufacturing, utilities and mining. The government reported manufacturing fell 0.7%, utilities dropped 3.6%, and mining – which also includes crude oil extraction – weakened by 0.3%.

Additionally, the Federal Reserve adjusted August’s numbers down to a -0.1% decline from what was a gain of +0.4% initially.

Hedge fund investor believes inflation is major threat to U.S.

On Wednesday, billionaire hedge fund manager John Tudor Jones said inflation is here to stay and that it will pose a major threat to the U.S. economy in an interview with CNBC.

I am always skeptical when billionaires come on CNBC and warn investors away from the markets. While their insights can be valuable at times, these are individuals who already have their wealth – you don’t need to get rich twice. They have very little skin in the game. If they scare millions of investors out of investments and they’re wrong, they aren’t going to come in and provide retirement for those investors.

If a billionaire is wrong, they simply have less money in the future and when you’re talking about billions of dollars – who cares? For the rest of us who are depending on our investments or we won’t be able to retire, making an epic mistake could mean the difference between working until we die or not.

Jones is better than most billionaires as he does still manage a hedge fund, though. “Inflation can be much worse than what we fear; we have the demand side of the equation… and that is $3.5 trilliong greater than what it normally would have… just sitting in liquid deposits,” he said during the interview. “They can go into stocks, or crypto, or real estate, or be consumed, so that’s a huge amount of dry powder just sitting waiting to be utilized at some point, which is why inflation is not going away.”

Jones also warned against investors allocating funds to bonds or other forms of fixed income. “You don’t want to own fixed income,” he said. “You do not want to hold that whatsoever because what they’re saying – what they’re telling you by their actions – is that they’re going to be slow and late to fight inflation and, somewhere down the road, somebody will have to come in… and put the hammer down.”

Next Week’s Gameplan

So far, the thesis on this market doesn’t change. The investors are there to BTD (Buy The Dip) and they continue to do so as the S&P 500 barely pulled back a little over 5% in the last month or two.

Accordingly, my gameplan doesn’t change, either – I am adding to my positions under weakness and doing so after relatively mild pullbacks. Additionally, the key is to add in small quantities so I can continue to add should the bottom fall out on this market and we actually see a significant pullback of 10-20%.

That being said, barring a Black Swan Event, there is so much money on the sidelines that we really could see the markets head even higher into the end of the year.

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

A new all-time high for Bitcoin?! Already???

Bitcoin hit a fresh, brand-new, all-time high at $66,999.00 on Thursday following the launch of the Bitcoin futures ETF (BITO) on Tuesday (see below). While the ETF news was certainly positive, almost nobody expected Bitcoin to crack through its previous high before pulling back first.

To be clear, a new all-time high with “only” a pullback of around -55% is unheard of in the history of Bitcoin, so we are completely in unchartered territory of what comes next from here.

The first Bitcoin ETF launched on Tuesday, reported CNBC. For those interested in adding Bitcoin to their IRAs, this is not the ETF you are looking for. This ETF is a Futures-based ETF; rather than actually buying and selling the cryptocurrency itself, this ETF buys the futures contracts themselves.

TLDR: BITO, the Bitcoin ETF, is a volatile asset that may not accurately track the price of Bitcoin. In fact, it could have the opposite effect many investors are looking for when it comes to adding Bitcoin to a long-term portfolio.

However, the ETF is good news. By approving the ETF, the Securities and Exchange Commission (SEC) is demonstrating that they do recognize Bitcoin and crypto as legitimate asset classes, and a true crypto ETF could be on its way in the future.

The Bullish Case

Bulls can barely (pun intended) contain themselves following the crypto’s new all-time high earlier than even some of the bullish analysts anticipated. As I mentioned above, Bitcoin has never made a new all-time high without a pullback of more than 80% following its previous all-time high, so many bullish analysts believe the crypto will see highs of over $100K before the end of 2021.

The Bearish Case

Bears were gobsmacked when Bitcoin made its new all-time high this week. While some still believe the crypto will crash to $20K, their credibility has been shot after Bitcoin did what nearly every single Bear said wasn’t possible – a new all-time high before seeing $20K. With the crypto’s all-time high confirmed, I will be taking any bearish analysts predictions with a huge grain of salt as every single one of them was completely and utterly wrong with their predictions.

Bitcoin Trade Update

Current Allocation: 0.276% (*New Trade*)
Current Per-Coin Price: $62,825.59 (*New Trade*)
Current Profit/Loss Status: -1.574% (*New Trade*)

Now that Bitcoin has established a new historical precedent, I decided to get in a bit earlier than I normally would with a buy order that filled Friday at $62,825.59 with a fairly small 0.276% allocation.

From here, I am using very conservative sizing since, although Bitcoin has made a new all-time high, there is no reason to think it won’t crash back to $30K or below. That being said, since there’s also a possibility it could find support much sooner and rocket to all-new highs, I must stick to my discipline of having a plan in both directions.

Bitcoin Buying Targets

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

0.138% @ $60,382
0.138% @ $59,364
0.138% @ $57,361
0.138% @ $54,360
0.138% @ $50,527
0.138% @ $48,136
0.428% @ $43,426
0.437% @ $40,947
0.924% @ $37,108
0.663% @ $35,407

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 some of Bitcoin’s price movements over the past couple of years:

• In 2017, Bitcoin rose +2,707% from its January low of $734.64 to make an all-time high of $19,891.99 in December.
• 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 crashed -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.
• Then, Bitcoin rallied +988% to a new all-time high of $41,986.37 in January 2021.
• Later in January, Bitcoin dropped -32% to a low of $28,732.00.
• In February 2021, Bitcoin rallied +103% to a new all-time high of $58,367.00.
• Later in February, Bitcoin dropped -26% to a low of $43,016.00.
• In March 2021, Bitcoin rallied +44% to a new all-time high of $61,788.45.
• Later in March, Bitcoin dropped -19% to a low of $50,305.00.
• In April 2021, Bitcoin rallied +29% to a new all-time high of $64,896.75.
• In June 2021, Bitcoin crashed -56% to a low of $28,800.00.
• In October 2021, Bitcoin rallied +133% to a new all-time high of $66,999.00.

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.