The Breadwinner


The value of Bitcoin has declined to the $44,000-$45,000 level for the third time in the past week.

The BTC/USD group momentarily dipped under $44,000 before bouncing back over $45,000 at the time of this writing.

Some investing analysts have stressed that an uptick in miners’ selling as the cause of the recent drop in price.

But the third test of this support level might have a silver lining for bulls. Data resource Glassnode says that the daily SOPR has undergone a “full reset.”

The SOPR reveals whether spent outputs are losses or profits at the moment of transaction. This important metric turned negative for the first time since Sept. 2020. To make it clear, investors are moving BTC at a small loss, signaling that profit-taking has stopped.

Meanwhile, Philip Swift, the co-founder of Decentrader also highlighted the SOPR crash.

“The SOPR is reset. This means that people are selling at a loss,” he said, adding: “This is a huge ‘buy the dip’ signal.”

The last time this happened, Bitcoin was priced near $10,000. At that time, this number was a key roadblock for Bitcoin to move higher. Since that time, the price has skyrocketed by more than five fold to highs of $58,000.

Nevertheless, many investors are staying cautious as the market goes into the month of March, which has historically been bad for cryptocurrencies, and markets overall.

“I believe March might be slow with low confidence in overall markets but I am bullish on Bitcoin and expect it to go higher over the next few months,” said Swift in comments.

It’s been almost a year since the market experienced one of its largest downturns in history. Who didn’t feel some panic when it looked like a third of their net-worth just vanished into thin air?

If you believe another crash is approaching, you are right. The market has gone through 38 corrections since 1950. But here are 5 reasons you should stop worrying right now.

1. Invest when the panic sets in.

If you would have invested $10,000 into the S&P 500 on March 23 of last year, when the index reached the bottom, you would have over $17,500 right now. While you can’t pinpoint the exact moment stocks will hit the bottom, the point is, a crash can be a huge opportunity to buy if you’re prepared for it.

Rather than being riddled with anxiety about a crash, write down a list of stocks you want to buy during the next downturn. They should be stocks you would already want to own even if the market does not go down. The next crash is just an opportunity to accumulate these stocks at a very low price.

2. Not selling means temporary losses.

To avoid seeing your wealth vanish during a crash: Don’t sell your investments. Give them room to recover, and the losses you’ve seen will largely be regained eventually. Sure, some companies might not survive a large bear market. But instead of worrying about the crash, give your portfolio a look over and sell anything that does not have long term potential.

3. Bad days mean the best days are coming.

If stocks take a big downturn, chances are high that some profitable days are soon to happen. For example, between 2000, and April 2020, seven of the market’s 10 top performing days were within two weeks of its worst days.

Plenty of experts predicted last year that the market might take years to regain its lost territory. But instead, the S&P 500 index took only 126 days to recover after its March bottom. The market’s best day of last year was March 24, when it gained 9.38%.

That does not mean the next recovery will be as fast. But a crash does not guarantee your investments will be negative for years.

4. Dividend stocks to the rescue.

Even if shares are falling, your returns won’t always be zero or negative or zero. Dividend stocks can give you returns, even while a crash is happening. Dividends are never guaranteed. But some companies have enlarged their dividends for over 50 years. While others have a 25-year record of dividend increases. Find these companies and even during long downturns — you can get some peace of mind.

5. The market always recovers.

History says you should not lose sleep over a crash: Your chances of making money from the S&P 500 are 73% in a single year. And over five years, your chances increase to 87%. And after 10 years, your odds reach 94%. Plus, S&P 500 profits over a 20-year time have always been positive.

Recoveries are not always fast. But just like you can expect the market to crash eventually, you can also count on it to regain its lost territory again.

The Nasdaq’s downturn may just be starting.

Fundstrat Global Advisors’ Tom Lee says a major shift is happening in which tech stocks will greatly underperform other stocks.

He’s urging investors to double their stakes in epicenter businesses, which are those businesses that are stationed to profit as shutdowns end and the economy comes back online.

“A lot of these businesses were shut down, things like industrials, energy and the travel industries. They really cut costs,” the firm’s founder said to reporters this week. “We will be shocked by the leverage.”

In 2020, growth trades were among the big gainers. The Nasdaq gained 44%, while the Nasdaq 100, which tracks tech companies, increased by 48%.

“They’ve made a lot of profits for traders and investors. But they are very overbought trades,” Lee said. “They’re very expensive compared to the epicenter group.”

Plus, he stressed that rising interest will create more challenges.

“Growth stocks don’t perform as great,” he said. “You will want to own asset-heavy, cyclical and economically sensitive businesses. Which is what we call an epicenter trade.”

Around the time the FDA began approving vaccines last year, stocks linked to economic growth started bringing in more money. Lee says they are now going to take off.

“There’s an urgency for investors to have plenty of exposure to these stocks to capture the upside this year,” said Lee.

He stressed energy as a top play, since it directly profits from the recovery. The Energy Select Sector SPDR Fund, has increased 33% so far in 2021.

“The top part of the epicenter is the energy business,” he said.

Lee, who’s bullish on the economy as a whole, contends this new circumstance could hamper tech for years.

“It might be an entire generation,” Lee said. “We are two months into something that might last 10 to 20 years.”

Marc Desormeaux, a senior economist for Scotiabank, has said that his company is bullish on precious metals as it expands its positive forecasts for this year. But he added that they predict silver will  outperform gold.

Looking at growth in 2021, Scotiabank says it predicts the global economy will expand by 5.6% and 4.4% in 2022. They also see the American economy growing by 5.8% this year and 4.3% in 2022.

But Desormeaux said this growth would come with a cost.

“A withdrawal from emergency conditions and the potential of a stimulus-backed recovery is feeding inflation predictions and devaluing the dollar, supporting metals—especially silver,” he wrote in his report.

Precious metals are supported by rising inflation, and improving economic activity is expected to take some of the demand out of the U.S. dollar as a safe-haven.

The comments come as the U.S. dollar has fallen to a two-month low below 90 points.

“We expect the dollar to keep depreciating as economic conditions improve, which should bolster commodities which are priced in the world’s reserve currency,” said Desormeaux.

Looking at gold, Desormeaux says his company sees prices keeping steady for the rest of 2021, averaging about $1,850 per ounce. But he took note that this was the highest average price on record.

“Rock-bottom interest and the Fed’s allowance for inflation continue to underpin prices for inflation hedging. Though the metal is lower incrementally versus January, it stays at historically high levels,” he said.

Desormeaux also said that silver’s popularity this year could be another factor in gold’s lacking performance. Looking ahead, he said they expect silver to continue to do very well.

“Given the same inflation hedge drivers, silver also has many industrial uses—making it a very hot asset as stimulus payments ramp up,” he said.

CNBC host Jim Cramer believes retailer GameStop (GME) – the company at the center of the recent short selling trading frenzy – should invest in bitcoin.

With shares in the company up by 100%, Cramer tweeted: “GME–give one billion in stock, then buy one billion in bitcoin and see your stock reach $430…”

Tesla, MicroStrategy, Square, and other companies have been purchasing bitcoin as a planned hedge against inflation and a decreasing dollar.

Cramer has recently endorsed MicroStrategy’s bitcoin buy and said he would not bet against CEO Michael Saylor, whom he said was a “gunner.”

Earlier this month, GameStop sky-rocketed as traders inside of Reddit’s r/WallStreetBets bought the stock while it was being shorted by large wall-street hedge funds.

When the group started the buying, the stocks increased and some hedge funds lost billions.

This week, it came out that GameStop CFO Jim Bell had left his position for reasons not disclosed.

In yet another tweet about GME, Cramer said, “This is like the wild west […] The SEC must be freaking out!”

One week ago, Bank of America hinted at a tsunami of monetary stimulus, combined with a surge in monetary velocity leading to unprecedented economic overheating… or rather historical as some have mentioned the post-WW1 Germany which saw an epic surging velocity and inflation after the end of war psychology, and especially the government’s monetization of debt, and compared it to what is going on right now.

The other name for that period: Weimar Germany.

Now, overnight, none other than Michael Burry of Big Short fame, has sent out a lengthy tweetstorm predicting hyperinflation.

Below is an easily readable repost of Burry’s lengthy post, which shows just how close our current situation is to that of Weimar Germany.

“Trillions more in stimulus & then the re-opening will boost demand as employee and supply chain costs go through the roof,” he tweeted.

He then quoted from Jens Parsson’s 1974 analysis of what the Weimar period looked like:

“Almost any type of business could make a profit. Business bankruptcies were few. The boom removed the normal processes of weeding out weak businesses.”

“Speculation, while adding nothing to Germany’s economy, became its largest activities. The urge to join in and make a quick profit affected all people..Everyone was playing the market.”

“Throughout those years the economy was building itself up for the downfall. Germany’s inflation cycle ran for nine years but there were eight years of gestation and only one year of inflationary collapse.”

Then his key take away: 

“The above was written in 1974 about 1914-1923” and then he makes the final warning that “2010-2021 is our gestation” saying that “when dollars fall from the sky…management gets creative and end up taking more risk.. paying out debt-backed dividends or getting into risky opportunities will beat a frugal posture in this climate, hands down.”

We are almost there now. The only question is when do we enter the exponential collapse phase.

There are some stocks that simply should not be bought. Some of the most common reasons are a declining business and a terrible balance sheet. While it might be tempting to see them as possible value stocks, their stocks could always decrease further as profits get worse.

AMC Entertainment (AMC) should be in this category. The stock has experienced a crazy year already in 2021 at near $2 before going to $20 by the close of January. Aided by the Reddit forum WallStreetBets, the shares got brought into the short squeeze that pushed other stocks like GameStop.

These types of moves are not predictable, and the stock is more than double where it began 2021. Investing in hopes of another move like this will likely only end in losses.

Bad business

AMC’s numbers were hurt by restrictions aimed to stop coronavirus. In Q3 of last year, revenue dropped by almost 91% down to $119.5 million, and AMC’s losses increased to $905.8 million all the way from $54.8 million.

And the company continues to face serious issues, including smaller time periods before movies can be seen on services like Netflix, which is hurting the movie theater business. In 2019, AMC’s movie revenue fell by over 2.5% to $3.3 billion. Revenue from food helped to offset this by increasing 2.9% to a total of $1.7 billion. But this increase came about because of AMC raising its prices, which will be difficult to do again in a down economy and among greater competition from video services.

Coronavirus is helping the momentum of movies being released on streaming services. For example, Warner Brothers plans to release its 2021 movie list directly onto their HBO Max right along with putting them into theaters. Walt Disney is taking a different approach, mixing theater releases with releasing movies on its Disney+.

This sets up a huge challenge for AMC since consumers now have many choices for watching new movies.

Debt-riddled business

Also, AMC has accumulated quite a debt pile. It might have escaped bankruptcy more than once in 2020, but that’s not a reason to buy shares in the company. The most recent financial event was in January when the company issued a $917 million debt-and-equity. With CEO Adam Aron saying, “Any discussion of bankruptcy for AMC is entirely off the table.”

Before its latest capital raise, AMC had $417.9 million in cash and $5.8 billion in debt. While its operating cash flow was -$771.6 million for the first half of last year.

So, while management did raise money, this will only postpone the hard reality. The company still must have a solid plan to turn things around.

With more ways to watch movies, that’s a hard order. Maybe AMC can pull it off, but I would not count on it.

The Federal Reserve’s system that facilitates the movement of money between financial institutions electronically went down on Wednesday, but seemed to be come back later in the day.

In what the Fed has described as an “operational error,” multiple services were affected, including the important automated clearinghouse, which allows for sending electronic transfers.

There were no reports that foul play was involved.

Other than the Fed ACH service, the systems that were affected included FedCash, Fedwire, Check 21, and the national settlement service.

A message from the central bank stated it discovered the problem around 11:15 a.m. ET. An official at one Wall Street bank reported the ACH system and Fedwire appeared to be operational again at 2:45 p.m. ET.

“Fedwire Securities Service, Fedwire Funds Service, and National Settlement Service have come back online,” the Fed declared around this same time.

The outage has occurred the same week that Fed Chairman Jerome Powell talked to Capitol Hill lawmakers about the success they have made on their payments system and goals to create a “digital dollar.”

Powell claimed this would be “a vital year” for the program.

“It will be a year in which we interact with the public very actively,” Powell said during the committee hearing.

The Fed has been creating a digital payments system for years that would help people have wider access to payments systems.

Powell did not provide details but said the Fed might need some authorization to continue with its plans.

“We might well need legislative approval for such a plan,” he said.

Outages, particularly with an important system like the ACH system, have wide-ranging affects. The system handles direct deposits of weekly payrolls across the nation, income tax refunds as well as Social Security payments.

Bitcoin plummeted as deep as 17% yesterday as investors grew weary of sky-high valuations, triggering the selloff of leveraged buys and sparking a downfall in cryptocurrency markets.

The world’s top cryptocurrency saw its largest daily drop in 30 days, falling to as much as $45,000. In scattered trading, it was lower by 15.6%.

The decrease brought its losses to more than a fifth away from its record high of $58,354 on Sunday and highlighted the instability of the digital asset – though it has still gained 60% this year.

“The rallies we’ve seen are not maintainable and just lead to setbacks like this,” said Craig Erlam, senior analyst at OANDA. “The market was extremely overbought.”

Ether, the second largest crypto by market size which often follows bitcoin, also fell by more than 20% to $1,410, which is down by 30% from last week’s peak.

Cryptocurrency has run hot this year as big investors and companies start to look at the emerging asset seriously, piling money into the market and supporting confidence among smaller speculators.

A $1.5 billion purchase by Tesla recently has aided bitcoin in reaching over $50,000 but may now cause pressure on the company’s stock as it becomes affected by bitcoin’s movements.

The highest performing investor in the world of exchange-traded funds is Cathie Wood. Her ETFs are a powerful and popular force in the industry, and their doubling in price in 2020 is huge proof of what she can do.

Wood is always buying stocks for her five ETFs. But three companies really stand out recently, given the size of her purchasing activity. Let’s take a look at these companies right now.

1. Tesla

Tesla (TSLA) was the underlying force behind Wood’s success in 2020, and the EV maker’s stock is a primary holding across many ARK Invest ETFs. She is optimistic about the company’s future. Across all her funds, she has spent around $160 million to buy Tesla stock to keep the stock at 8-10% in each of her funds.

Wood likes Tesla not just for the EV industry, but also because of close opportunities like artificial intelligence, and battery technology. Last week, she said ride-sharing was a possible industry for Tesla vehicles.

2. AbbVie

AbbVie (ABBV) was a huge favorite for her ARK Genomic Revolution ETF (ARKG). Wood made several purchases adding up to around 0.5% of her genomics ETF’s assets. 

Many of the companies in her genomics ETF are new to the industry, but AbbVie has a long pipeline of candidate treatments along with solid numbers for possible acquisitions and partnerships. Wood thinks that AbbVie is perfectly positioned to take advantage of what she views as groundbreaking trends in the space.

3. Palantir Technologies

Palantir Technologies (PLTR) was a huge buy from Wood last week. Her top Innovation ETF (ARKK) purchased over 5.27 million shares on Feb. 18. Then she made a Feb. 16 purchase of another 1.56 million shares for her Next-Generation Internet ETF (ARKW).

Her initial buy came after Palantir announced its quarterly financials, which brought the stock much lower and gave Wood a bargain buy-in. Some investors were cautious although Palantir’s revenue jumped 40%, it had to lose money more than most had expected. Yet as with many new companies, Palantir had much stock-based compensation to put toward its bottom line. Plus there were encouraging things like improving margins and growth in its private-sector sales.

I’d anticipate Wood will keep adding to her stake in Palantir at every opportunity.

Keep watching Wood’s stocks

With so many people watching Wood’s every move, it’s vital to know what she’s doing. Her opinions carry huge sway, and she can be a great source of ideas if you’re searching for profitable stocks to buy.

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