Summing Up The Week

Financials or Freedoms? The double-edged sword of American business.

The U.S. China Trade War brought up an interesting philosophical argument this week as many American companies backpedaled and sacrificed many ideals thought to be instrumental to democracy in the name of protecting international profits.

The NBA tried to smooth over comments supporting protesters in Hong Kong made by one of its General Managers, Activision-Blizzard (ATVI) stripped a pro-gamer of his title and winnings following comments and gestures made in support of Hong Kong protesters, and Apple (AAPL) removed an app from the App Store in the name of “safety” following complaints made by the Chinese government.

As the trade war moves on, many American companies are going to have to grapple with a true double-edged sword: do they sacrifice American ideals and potentially lose U.S. sales in an effort to retain their Chinese customers, or do they uphold the key freedoms found in democracy at the cost of shareholder profits?

No matter which strategy companies choose, they will lose sales and face challenges from either their customers or their shareholders.

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

Market News

Fed May Try Easing Measures “Soon”

As the markets sold off early in the week, Federal Reserve Chairman Jerome Powell said that the Fed may start expanding its balance sheet again “soon” during a press conference on Tuesday, reported CNBC. In order to help prop up the American economy, the Federal Reserve Bank has the ability to purchase Treasury bills – the bonds offered by the American government.

The purchases serve to increase liquidty as banks which would normally prefer to buy the Treasury bills at lower prices (the Fed’s purchases raises the prices of the bonds) will investigate other avenues of investment such as loans to companies or consumers.

China! China! China!

It was nonstop China news this week:

It started when the General Manager for the Houston Rockets tweeted his support for Hong Kong protesters over the weekend, setting off an international incident. The NBA supported his right for free speech but bent over backwards to appease their Chinese overlords to no avail – the Chinese still stripped all Rockets paraphernalia and even canceled game coverage (source: The New York Times).

Later, China went after Apple (AAPL) with claims that an app allowed protesters to track the movement of police in Hong Kong. Apple pulled the app from their Store on Thursday (source: The Wall Street Journal).

Add into this the trade talks which started on Wednesday, except that the South China Morning Post reported that the high-level talks would only take place on Thursday. This news caused stock futures to plunge in overnight trading, until the White House told CNBC that the report was inaccurate causing futures to bounce.

Then, on Thursday, a principal in the negotiations told CNBC that the U.S.-China trade talks had become “fluid.” CNBC tried to make sense of all the trade-talk stories but even they became overwhelmed, releasing a story with the headline “It’s been a crazy day for U.S.-China trade news – here’s what we know.“

Toward the end of trading on Friday, CNBC reported that Trump tweeted that the U.S. had reached “a very substantial phase-one deal” with China which caused the Dow Jones Industrial Average to roar to a session high of more than 500 points, before pulling back substantially as investors realized the deal simply delayed next week’s tariff hike.

Next Week’s Gameplan

I continue to hold pat with my gameplan – taking profits on positions that reach new highs and adding to the rare position that reaches a particularly oversold value.

I remain relatively bearish overall as many analysts suggest that while the indexes would pop following a full trade deal with China, we’ll also see a dramatic sell-off as investors grapple with the reality that global economic growth is slowing.

If a real trade deal isn’t reached, the markets will continue their volatility through the 2020 election in November more than a year from now. Either outcome isn’t a recipe for going all-in right now as the S&P 500 is just a few percent off its record all-time high.

This Week in Play

Stay tuned for this week’s episodes of Investments in Play and Trades in Play coming online later this weekend! 

Crytpo Corner

Bitcoin Price Action

Bitcoin traded relatively sideways this week up until Wednesday when it suddenly saw bullish price action carrying it to a weekly high of $8,826.00 earlier this morning before pulling back substantially.

The monthly low of $7,701.00 continues to hold, however, it does look like the Bears might be trying to test that over the course of the next week.

Final Bitcoin ETF… DENIED!

The U.S. Securities & Exchange Commission (SEC) denied the last Bitcoin Exchange Traded Fund (ETF) in application on Wednesday, October 9, 2019, reported MarketWatch. Bitcoin enthusiasts and speculators hoped an ETF allowing individuals to buy Bitcoin in retirement accounts without having to buy and sell the actual cryptocurrency would increase Bitcoin’s popularity.

However, the SEC denied the Bitwise ETF due to the concerns the SEC has pointed to for denying all other Bitcoin ETFs – with so many exchanges operating outside of the United States, there is little protection against fraud and price manipulation. In addition, with the number of famous hacks, the ability for an institution to act as a proper custodian of the actual commodity was brought into question.

So, for the moment, there will be no Bitcoin ETF so optimistic HODLers will have to pin their hopes on a different catalyst to cause Bitcoin to “moon” once again.

Bitcoin Gameplan

I made no additional moves to Bitcoin position this week even as the Bullish price action caused Bitcoin to rise above my per-coin cost of $8,722.68, if only briefly. My allocation is sized in such a way that I won’t lighten up at my per-share cost until Bitcoin begins a consolidation above my cost, not simply a break of it.

I closed small positions in Bitcoin Cash (BCH) and Ethereum (ETH) for gains of 3.78% and 11.15%, respectively, as the altcoins seemed to lead the way higher this week before losing steam and rolling over. My only other non-Bitcoin position still open is Litecoin (LTC) which didn’t see the same size pop as its brethren, so with my per-coin cost at $66.13, about 15% from here, it will be a longer hold.

My next buy target for Bitcoin is at a key support level of $7,822, however, I will only be adding about 0.5% of my position allocation at that point. Currently, I hold about 4.38% of my entire desired position allocation in Bitcoin. I still have buy targets all the way down to the $1800-$1900 price range in this volatile asset.

While its current price action suggests we won’t see the epic 50% selloff we saw last year around this time, it’s hard to know for certain. All outcomes are fair game in the land of cryptocurrency speculation.

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.