Summing Up The Week

It doesn’t matter how many times Fed Chair President Jerome Powell says interest rates will remain higher for longer, it seems that the stock market just doesn’t want to hear him. Even with the bond market screaming that the economy nearly certainly has to be on the verge of a recession, stocks seemed to move on their merry way.

… until this week.

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

Market News

Fed Chair Powell: Interest rates “likely to be higher”

During his testimony before the Senate on Tuesday, Federal Reserve Chairman Jerome Powell warned the panel that interest rates are “likely to be higher” than was previously anticipated, reported CNBC.

Powell pointed to data from earlier in 2023 which showed inflation has reversed the deceleration (don’t you just love the double-negative contraindicatory statements?), leading the central bank to warn of the need for tighter monetary policy to slow the economy.

“The latest economic data have come in stronger than expected, which suggests that the ultimate level of interest rates is likely to be higher than previously anticipated,” Powell said in remarks prepared for two appearances this week on Capitol Hill. “If the totality of the data were to indicate that faster tightening is warranted, we would be prepared to increase the pace of rate hikes.”

Powell reiterated that whether the Fed decides to raise interest rates by 0.25% (or more) in the next meeting will be dependent on meeting-by-meeting reviews of the data and their impact on inflation and economic activity, rather than a preset plan of attack.

As a result the markets sold off on Tuesday since there was no question that the Fed Chair’s outlook is decidedly hawkish.

January job openings declined but still outnumber workers

On Wednesday, the Labor Department released their JOLTS report (Job Openings and Labor Turnover Survey) which showed 10.824 million openings in January, down 410,000 from December but still 1.9 openings per worker, reported CNBC. While an indication of a very healthy economy, the JOLTS report also indicates the Federal Reserve continues to have more work to do.

Normally, the market would likely sell off with this kind of strong data, but with the indexes still reeling from Tuesday’s selloff, the market remained flat following the release of the report.

Payrolls rise 311K in February, more than expected

On Friday, the jobs report – the statistic everyone was waiting for – came in higher than expected which is good for the economy, and, therefore, bad for stocks. The nonfarm payrolls report showed 311,000 new jobs created in February, far higher than the 225,000 estimate and demonstrating an economy that remains too hot, reported CNBC.

Pundits tried to find any good news in the report, pointing to a slight easing of wage inflation as the only good news. “Perhaps the best news from this report was the easing of wage pressures,” said John Lynch, chief investment officer at Comerica Wealth Management. “A drop in the largest costs for businesses is a welcome development. Nonetheless, 50 basis points is still on the table for the March policy meeting, given recent economic strength and dependent on next week’s [consumer price index] report.”

As a result, the market, which had already been beaten up, continued to sell off as investors finally realized that both the short-term and long-term outlooks for stocks are not good right now.

Next Week’s Gameplan

I had a YouTube viewer ask me why I remain so bearish. It’s simple – I’m long.

I’m a long-term investor so I’m always invested. That means the bull case takes care of itself for me – if my stocks go up in value, that’s great. There’s no point in me spending any time worrying about the high-quality problem of not owning enough.

For me, I’m more concerned about the War in Ukraine, inflation that seems invulnerable, potential financial disruptions, and the ongoing rumblings of a potential credit event that could be looming just over the horizon. Given all that and the fact the S&P 500 isn’t even too far off its all-time highs, and I’m definitely more worried about downside risk than I am about having too much cash on the sidelines earning 4-5%.

So, yeah. I’m bearish.

Alright. Enough of the negativity – I hope everyone has a wonderful week and I’ll see you 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

Silvergate commits seppuku, announces bank closure

When Silvergate Capital (SI) announced it would voluntarily liquidate and shutter its doors on Wednesday evening, basically committing seppuku (an ancient Japanese form of ritualistic suicide where a dishonored individual could choose to take his/her own life).

Since last Friday, Bitcoin dropped below the Downtrend #2 line on the back of significant selling pressure, but still found support before the more significant monthly support at $21,366.45, setting another new weekly support at $21,530.00.

When the Silvergate news broke, Bitcoin seemed to remain relatively stable throughout a lot of Thursday, initially, but, then, it lost all sense of composure midday, breaking through its new weekly and past monthly lows in an all-out dump.

Bitcoin broke through all previous significant support before setting a precarious new weekly low down at $19,568.52. Beyond that, the next level of support takes us back to October 2022 where the crypto found support at $18,131.00. Then, of course, is the bottom set in November at $15,460.00.

The Bullish Case

Bulls point to the fact that Bitcoin didn’t sell off more following the Silvergate news as a bullish sign, arguing that there is finally enough liquidity in crypto weather particularly bad news.

The Bearish Case

Bears believe Silvergate is just the tip of the financial iceberg. Not only are there potentially more teetering financial institutions within the crypto sector, there’s a lot off concern massive European bank CreditSuisse could liquidate and that even the Bank of Japan has been struggling to keep the yen afloat in recent weeks. None of this is good news for any investment sector, but particularly those with direct financial exposure like cryptocurrencies and Bitcoin.

Bitcoin Trade Update

Current Allocation: 2.179% (+0.144% since last update)
Current Per-Coin Price: $20,463.07 (-0.25% since last update)
Current Profit/Loss Status: -2.504% (-11.681% since last update)

Bitcoin’s crash started triggering buy orders early Thursday afternoon and continued to hit some of other buy targets thereafter, leaving me with an average buy price of $19,758.82 (after fees).

The buys lowered my per-share cost -0.25% from $20,514.93 to $20,463.07 and raised my allocation +0.144% from 2.035% to 2.179%.

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% @ $19,037
0.138% @ $18,761
0.255% @ $18,278
1.107% @ $17,609
1.146% @ $17,126
1.794% @ $16,553
4.053% @ $15,629 <– Slightly above the current Crypto Winter 2022 low
1.196% @ $14,366
1.661% @ $13,607
1.661% @ $12,806

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.