Summing Up The Week

Russia shows no sign of coming to its senses this week, fabricating wild and unproven claims to explain the inexcusable atrocities it continues to commit. Even with the world continuing to back Ukraine and harder sanctions flying in from both the public and private sectors, Russia continues its inexplicable invasion.

Oh, and inflation is getting worse, not better.

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

Market News

Biden says U.S. will ban Russian oil imports

On Tuesday, President Joe Biden announced that the United States will ban imports of Russian oil in response to Moscow’s invasion of Ukraine, reported CNBC. With oil and gas being Russian’s major exports, eliminating their import will cut off much of the funding Russia’s using to finance its unwarranted invasion of Ukraine.

As a result, oil prices surged and other sectors such as clean energy and the carbon credit market saw significant gains. With the current conflict in Ukraine exacerbating oil prices, many investors feel the transition to clean energy and renewable alternatives may happen sooner than expected, thus the shift into those sectors.

Russia warned that should the U.S. ban imports that the country would cut off Europe entirely. While the European Union announced plans to reduce its use of Russian oil by 2/3 by the end of 2022, a full cut-off could leave many EU citizens quite literally in the cold while the EU attempts to locate other alternatives for its substantial energy needs.

Russia-Ukraine talks falter

After a huge snapback rally on Wednesday, markets returned to selling off on Thursday following news that attempted talks between Russia and Ukraine continue to falter, yielding no results, reported CNBC.

The Russians’ inability to reason confoudned Ukraine Foreign Minister Dmytro Kuleba who went as far as to describe Moscow’s leaders as “living in their own reality” following Russia foreign minister’s explanations for Russia’s horrendous attack on a maternity hospital stemming from the hospital being taken over by “ultra radicals” while offering no proof.

“Unfortunately, I can confirm that the Russian leadership, including Minister Lavrov, live in their own reality. In our talks, behind closed doors and in the absence of the media, he told me looking in my eyes that the pictures of pregnant women being taken from under the rubble of the maternity house are fake, that they hit the maternity house as a military target because the Russian military was absolutely sure that it was under the control of Ukrainian army,” said Kuleba.

Inflation getting worse, not better – CPI rose 0.8%

On Thursday,  the Consumer Price Index (CPI), a key gauge of inflation, showed a year-over-year increase of 7.9% in February, a month-over-month pop of 0.8% compared to estimates for 0.7%, reported CNBC.

“The inflation situation is getting worse, not better. Household staples are becoming more and more expensive, crowding out spending on discretionary categories and delaying the spending reallocation back to services. And while gas prices explain much of the story, food and housing prices were also key drivers in February,” said John Leer, Morning Consult’s chief economist. “Unfortunately the war in Ukraine will make it more difficult to get inflation under control. Gas and energy prices continue to rise, wheat prices are through the roof and supply chains remain in chaos.”

Next Week’s Gameplan

With inflation continue to rise, next week’s meeting of the Federal Reserve will almost certainly produce a benchmark interest rate hike of 0.25%. While most economists agree that the rate must be lifted off its current near-zero levels, concerns about the potential impact to the economy loom large.

Accordingly, as always, it’s important to prepare a buying (and selling) plan for all portfolio positions. I have been taking profits in gold and oil stocks as the commodities shift from an orderly rise to downright parabolic, while also analyzing my positions for potential buying opportunities.

The market shows no sign of calming down, so for anyone experiencing anxiety over the entire situation, sometimes the best approach is to walk away or even not review portfolio positions until the world takes a time-out.

In the meantime, I hope you all have a wonderful week and I’ll see you back here!

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

Bitcoin – 2 Legit 2 Quit… and, yet, selloff!

Bitcoin and the rest of the cryptocurrency space popped Tuesday evening ahead of President Joe Biden’s announced executive order on the crypto space. While it can seem counter-intuitive that new regulation could cause a sector to go up in value, the lack of any real regulation in crypto has actually been a detractor to legitimate investors wanting to be in the space.

However…

… crypto is the most “Sell-the-News” space I have ever encountered in my nearly 25 years of investing. There is a stock adage – “Buy the Rumor, Sell the News” – and the concept is that investors will buy an asset when there’s a rumor of good news, and then take profits when the news is confirmed. When it comes to Bitcoin, this approach is followed in a BIG way.

After a big pop on Tuesday evening, Bitcoin completely collapsed early Thursday morning, more or less eradicating any gains stemming from the news announcement. The crypto has now established an ever-tightening trading range with a weekly high at $42,597.84 and a weekly low at $37,161.88. The next big trend will happen when one of those breaks.

The executive order focuses on six key areas:

• Consumer and investor protection
• Financial stability
• Illicit activity
• U.S. competitiveness on a global stage
• Financial inclusion
• Responsible innovation

The space has been waiting some time for the legitimacy that comes with proper regulation and Biden’s executive order is certainly a huge step in the right direction.

The Bullish Case

Bulls claim Thursday’s selloff is just a short-term round of profit-taking following the news of the executive order. With more regulation, Bulls say, the space will become more investable and will attract new money, resulting in new all-time highs for the crypto.

The Bearish Case

Bears continue to point to the macro bearish move in the space as the Downtrend? line continues to be a zone of significant upward resistance. Bears continue to believe that Bitcoin will drop to $20,000 and potentially lower.

Bitcoin Trade Update

Current Allocation: 5.308% (-0.107% from last update)
Current Per-Coin Price: $41,674.69 (-$33.07 from last update)
Current Profit/Loss Status: -5.791% (-4.668% from last update)

I added a tiny bit back to my position on Sunday when it appeared Bitcoin was leveling off with a small buy at $39,023.12. Then, on Thursday evening, I made a second small buy at $38,626.20 giving me an average buy price of $38,824.66, locking in a -11.236% discount replacing some of the Bitcoin I sold last week at $43,739.04 and lowering my per-coin price a negligible -$33.07 from $41,707.76 to $41,674.69.

However, thanks to some adjustments to the plans for the other crypto I am also currently trading, the allocation size was actually reduced by -0.107% from 5.415% to 5.308%.

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:

0.060% @ $37,508
0.091% @ $36,073
0.121% @ $35,018
0.318% @ $34,086
2.446% @ $31,333
2.733% @ $27,669
5.650% @ $24,212
6.028% @ $22,073
9.309% @ $19,858
4.110% @ $15,670

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 April 2021, Bitcoin rallied +51% to a new all-time high of $64,896.75.
• In June 2021, Bitcoin crashed -56% to a low of $28,800.00.
• In November 2021, Bitcoin rallied +140% to a new all-time high of $69,000.00.
• In January 2022, Bitcoin crashed -52% to a low of $32,933.33.

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.