Summing Up The Week

This week defined whipsaw action, kicking off when the Bank of Japan widened its bond yield, a move the country’s central bank hasn’t done in decades. 

Then, Nike (NKE) and FedEx (FDX) reported good quarters Tuesday evening to make pundits believe a Santa Claus Rally might be coming this year, only to be followed by billionaire investor David Tepper terrifying everyone in an interview with CNBC on Thursday, causing markets to plummet.

Let’s look at the wild ride that was the news this week…

Market News

Bank of Japan shocks markets by widening bond yields

On Tuesday, the Bank of Japan widened its target range for 10-year Japanese government bond (JGB) yields to -0.50% to +0.50%, reported CNBC. For years (if not decades), the BoJ had kept its interest rate low with it having been -0.10% for some time as an effort to increase growth in the country’s long-stagnant economy. This move allows JGBs to carry a positive interest rate, something that hasn’t happened since the Japanese economy collapsed in the 1990s.

“The decision is being read as a sign of testing the water, for a potential withdrawal of the stimulus which has been pumped into the economy to try and prod demand and wake up prices,” said Susannah Streeter, Senior Investment and Markets Analyst at Hargreaves Lansdown. “But the Bank is still staying firmly plugged into its bond purchase program, claiming this is just fine tuning, not the start of a reversal of policy.”

While some market analysts were surprised by the move, others reflected a more muted response. “This move is absolutely nothing stunning,” said Luis Costa, head of CEEMEA strategy at Citi (C). “You have to take this BOJ measure in the context of a positioning in dollar-yen that was obviously not expecting this tweak. It’s a tweak.”

Nike brings the Santa Claus Rally??

On Tuesday after the market closed, Nike (NKE) blew away all expectations with a spectacular earnings report and excellent forward guidance, causing the entire stock market to rally on Wednesday, reported CNBC.

Nike (one of my biggest holdings in my Investments in Play portfolio) is one of the best-managed companies in the entire world, so many analysts use its earnings reports as guide to global economic conditions. If Nike slips up, the entire market tends to sell off if the concerns brought up aren’t just company-specific. In this case, Nike reported excellent earnings having gotten its inventory concerns in check and seeing increasing sales and a strong consumer.

A strong consumer means that the Fed’s actions haven’t yet despirited the possibility for a soft landing and a decently strong economy, so the market rallied on Wednesday following several days of weak to bearish price action. Hopeful expectations for a Santa Claus Rally (the period between Dec 23 and the end of the year is often a bullish time for stocks), may have led to the strong buying on Wednesday, too.

Famous investor David Tepper killed Santa Claus…

On Thursday, Billionaire investor David Tepper killed the rally that started Wednesday when he told CNBC he was “leaning short” on the stock market going into 2023 because of the Fed, reported Yahoo! Entertainment.

Tepper’s perspective mirrors my own for the same reasons I’ve been talking about here for months now: central banks globally will continue to tighen next year, and, simply put, tightening is bad for stocks. You don’t fight the Fed by shorting on the way up when they’re keeping rates artificially low, and you don’t fight the Fed on the way down by trying to be bullish.

“[The] Fed terminal rate will likely reach a peak of 5.25% and they’re going to keep rates high for a while,” said Tepper. “Central banks are nervous about inflation staying persistently at 4%, and they’re getting ahead of that with their continued tightening.”

Tepper went on to explain why he’s shorting the market by pointing out stocks not believing what the Fed will do. “I got everybody tightening and telling me they’re going to tighten more, and I got markets that just don’t believe it,” Tepper said. “We don’t have coordinated tightening around the whole world with everybody tightening at the same time too often.”

Weaker PCE stems market selloff

After a pretty vicious selloff on Thursday which made it look like the week could end on a bloodbbath, the Personal Core Expenditures (PCE) index released Friday showed that inflation may actually be waning, only increasing 0.1% in November, reported MSN Money. The PCE slowed to 5.5% in November from 6.1% in October, the smallest increase in over a year.

With the PCE being the key inflation gauge observed by the Federal Reserve thanks to the removal of volatile food and energy costs, many analysts and investors hoped that the new release may indicate the Fed’s efforts are actually working.

This figure was particularly important after revised U.S. GDP figures released on Thursday showed that the U.S. economy is even stronger than was previously thought, another “good news is bad news” sign for fighting inflation.

Next Week’s Gameplan

As we rapidly approach the end of the year, my video this week will dive deep into my forecast for 2023 including why I’m bearish and what could turn me bullish, so stay tuned to my YouTube channel (www.youtube.com/getirked) for this special Christmas present coming Sunday.

In the meantime, everyone have a happy holiday weekend and try to ignore all the pain that happened in the markets this week!

I’ll see you 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

Nothing to be bullish about in Bitcoin right now…

Lots of news items hit the wires this week including SBF (Sam Bankman-Fried) and his FTX friends being turned over to the Feds (source: Yahoo! Entertainment).

Bitcoin decisively broke through last week’s low at $16,679.52, not finding support until  $16,273.40 on Monday, and even that’s threatening not to hold for very long. Bitcoin tried to rally with on Tuesday, but found resistance far below last week’s high, setting a much lower weekly high at $17,060.86.

Now, Bitcoin is trading as flat as it can be, with less than a 0.001% change since last week’s update, leaving the crypto’s price relatively unchanged since last week.

The Bullish Case

Bulls point to a story from Coindesk (one of several “news” sites that unabashedly print pro-crypto/pro-Bitcoin “news” stories) claiming that whales are accumulating Bitcoin (source).

While big Bitcoin buys do seem to be taking place, that could simply be short covering by larger firms, not an indication of bullishness. However, as always, Bulls believe anything that suggests further downside to be FUD (Fear, Uncertainty, and Doubt), even when the price action proves them wrong.

The Bearish Case

Bears continue to control the crypto space. With rumors swirling that SBF may work a deal to roll over on both Binance, the competitor brokerage to FTX, and Tether, the multibillion dollar stablecoin, there are lots of potential negative catalysts out there.

Additionally, DCG, the company that runs the Grayscale Bitcoin Trust (GBTC), might have to sell most if not all of its holdings GBTC to pay margin calls, there’s no reason to be bullish on Bitcoin right now.

Bitcoin Trade Update

Current Allocation: 18.487% (+0.025% since last update)
Current Per-Coin Price: $22,594.45 (-0.052% since last update)
Current Profit/Loss Status: -25.613% (-0.221% since last update)

I actually added to my position this week with a very small buy at $16,387.50 when Bitcoin broke last week’s low on Monday. This buy was so small that it only lowered my per-coin cost -0.052% from $22,606.17 to $22.594.45. Obviously, I think Bitcoin will not only test its 2022 lows but break through them in the coming weeks.

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% @ $16,305
0.028% @ $16,022
0.028% @ $15,773
0.028% @ $15,511
0.055% @ $15,284
0.083% @ $14,621
0.111% @ $14,249
0.138% @ $13,904
0.166% @ $12,986
0.193% @ $12,310

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 (COIN) being publicly traded (and one of my own Investments in Play 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?

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.