Summing Up The Week

The markets seemed to finally wake up to reality this week. After last week’s rally on the back of Federal Reserve Chair Jerome Powell’s interview where he said the Fed would likely hike less than 0.75% in the December meeting, it felt as though investors realized that a hike of 0.5% is still historically huge this week and the market selloff gained in earnest throughout the week.

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

Market News

JPMorgan CEO expects recession in 2023

On Tuesday, the market selloff continued as more experts gave bearish warnings for 2023 including JPMorgan Chase (JPM) CEO Jamie Dimon who said inflation is eroding consumer wealth and may cause a recession in 2023, reported CNBC.

“Inflation is eroding everything I just said, and that trillion and a half dollars will run out sometime midyear next year,” said Dimon in an interview on CNBC’s Squawk Box. “When you’re looking out forward, those things may very well derail the economy and cause a mild or hard recession that people worry about.”

Dimon also warned the the Federal Reserve’s plans to hike the benchmark interest rate to 5% may not be enough, indicating that the Fed may have to take more drastic action. That being said, he also reassured listeners that a 2008 crisis is likely not in the cards, “The American banking system is unbelievably sound in a million different ways; our capital cup runneth over.”

More bank CEOs pile on the “Recession Train”

On Wednesday, the CEOs of Wells Fargo  (WFC) and Bank of America (BAC) fueled the recession rhetoric with comments about slowing growth and expectations of recession in 2023, reported CNBC.

BofA CEO Brian Moynihan said “the rate of growth is slowing” at a financial conference. “You’re starting to see that [slowdown] take hold,” he said. “The real question will be how soon they have to stabilize that in order to avoid more damage; that’s the question that’s on the table.”

Wells Fargo’s CEO Charlie Scharf reported seeing shrinking growth in credit card spending and flat debit card transaction volumes, “There is a slowdown happening, there’s no question about it,” he said. “We are expecting a fairly weak economy throughout the entire year, and hopeful that it’ll be somewhat mild relative to what it could possibly be.”

Wholesale prices rose more than expected in November

On Friday, inflation reared its head once more when the Producer Price Index (PPI), the price manufacturers pay for base components, rose 0.3%  for November and 7.4% from a year ago versus Dow Jones economists expecting a 0.2% gain, reported CNBC.

An increase in PPI indicates that the Federal Reserve’s rate hikes are still not slowing inflation, adding fuel to the fire of fear burning in the markets that next week’s Fed meeting may yield a more hawkish Fed.

“The monthly increase in producer prices illustrates the need for continued tightening, albeit at a slower pace,” said Jeffrey Roach, Chief Economist at LPL Financial. “The inflation pipeline is clearing and consumer prices will slowly move closer to the Fed’s long run target.”

Next Week’s Gameplan

Next week promises to be another big one as the Federal Reserve meets for two days with an announcement about their next rate hike (expected to be +0.50%) as well as perspective on the future.

While the market has priced in a 0.50% rate hike, Fed Reserve Chair Jerome Powell could surprise the markets with another 0.75% hike if the committee feels that inflation data remains too hot. Naturally, this surprise would shock the markets to the downside.

Additionally, if Powell reverses the dovish tone he provided in last week’s speech at the Brookings Institute and goes hawkish, the markets will react very negatively, too.

So, as always, it’s important to have a plan for both directions since the market will react next week… we just don’t know which way.

I’ll see everyone back here next Friday!

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

The definition of an “uneventful” week…

In a bit of a surprise, Bitcoin did nearly nothing throughout the entire week, moving within the range between a new weekly high at $17,424.59 and a low at $16,679.52. The next big move will likely come if the crypto breaks either of those two levels.

You can read the Bull and Bear case below, but I remain sided with the Bears. There’s been nothing but bad news in the crypto space and the overall macroeconomic and world view shows nothing but bearish catalysts throughout 2023.

I have no reason to believe Bitcoin will head higher from here, only lower.

The Bullish Case

Bulls believe the stabilization of Bitcoin’s price indicates that the crypto has finally bottomed and we’ll be exiting Crypto Winter shortly. One particular noteworthy investor, Tim Draper, actually believes Bitcoin will $250,000 per coin by June 2023… less than six months from here! (Source: CNBC)

The Bearish Case

Bears point out that Bitcoin typically doesn’t remain in such a tight range and reverse its direction. Usually, a flat range indicates an investment asset is “resting” before continuing its trend. And, in this case, that trend is down.

Guy Adami, a trader on CNBC’s Fast Money, summarized Bitcoin’s price action like this, “An investment typically doesn’t give you this long to buy the bottom. In other words, Bitcoin’s headed lower.”

Bitcoin Trade Update

Current Allocation: 18.462% (Unchanged since last update)
Current Per-Coin Price: $22,606.17 (Unchanged since last update)
Current Profit/Loss Status: -24.077% (+1.099% since last update)

As you can imagine, with Bitcoin trading in such a tight range, none of my buy or sell orders were hit. The past week was simply another one of checking in once or twice a day, yawning, and then moving on to other tasks.

I have updated my buying targets below, but since I strongly believe Bitcoin won’t bottom until the $10K-$11K range, at best, I continue to buy with very small quantities.

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:

0.028% @ $16,236
0.056% @ $15,808
0.056% @ $15,560
0.140% @ $15,083
0.140% @ $14,304
0.140% @ $13,289
0.140% @ $12,717
0.140% @ $12,137
0.140% @ $11,530
0.140% @ $11,019

Not Your Keys, Not Your Crypto…

In light of everything happening with brokerages, I no longer keep any of my crypto on an exchange and I only keep enough USD on the exchange to execute my next few buys. I use multiple cold wallets from the brands Ledger and Trezor to hold my crypto (click the links to access the direct sites, and I receive no affiliate benefits from these links).

Additionally, I have now divided my allocated USD between two different exchanges – Gemini and Coinbase – in case one (or both) becomes insolvent. Disclaimer: We both receive a bonus if you use either my Gemini or Coinbase referral links to open accounts.

Given everything that happened with FTX and Sam Bankman-Fried claiming customer funds were safe only to have it go completely bankrupt, I do not trust anyone in the space, even with Coinbase being publicly traded (and one of my own positions).

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 (possible moves include drops of -90% or more and gains of +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.
• In December 2019, Bitcoin crashed -54% to a low of $6430.00 in December 2019.
• In February 2020, Bitcoin rallied +64% to $10,522.51.
• 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 November 2022, Bitcoin crashed -78% to a low of $15,460.00.

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.