Author: Andrew Packer

Cryptocurrencies

Swan Bitcoin: FTX Dumps $1 Billion as Bitcoin Price Dips Below 40k

Posted on by Andrew Packer

After peaking near $49,000 on the news that 11 bitcoin ETFs would start trading, bitcoin’s price has dropped. In fact, it’s technically in a bear market, as the price has fallen more than 20 percent from that recent peak.

It’s clear now that prices have followed a “buy the rumor, sell the news” approach to a bitcoin ETF in recent months. Following the acceptance and trading of multiple bitcoin ETFs, the speculation that drove prices higher simply gave away.

But there are some other short-term factors at play. The Grayscale Bitcoin ETF (GBTC) was structured as a trust before the ETF approval. As a result, it carried higher fees, and still does.

The trust also traded at a discount to the value of its BTC. That disappeared following bitcoin’s bull run higher. The incentives rose to sell the ETF and buy one with lower fees.

It’s also a fund that was holding over $1 billion in funds for FTX. Those funds have now been sold too.

With bitcoin now less than 100 days away from its next halving, where new supply will be cut in half, the recent selloff looks like a buying opportunity for those interested in bitcoin.

That could include holdings in one of the new ETFs, or the cryptocurrency itself.

 

To watch the full analysis, click here.

 

Commodities

Lead-Lag Report: Navigating Value Investing and the Energy Transition with Vitaliy Katsenelson

Posted on by Andrew Packer

After years of underperformance, investors have started to see a higher interest in the energy market. The rise of green energy and electric vehicles saw an explosion in investor interest in recent years.

However, that trend has started to wane. It now seems likely that a fully electric motor vehicle fleet is out of reach. And that shifting a more significant percentage of vehicle sales to EVs will also take considerable time.

That could mean that oil companies are here to stay. And that they may make great investments. That’s especially true for producers that have the lowest production costs. Quality leadership can also play a role there.

Plus, since the adoption of electric vehicles will likely take longer than expected, some industries are likely to have poorer prospective returns in the years ahead. Consequently, they may not be great investments. At least until they’re priced too fearfully by the market.

What’s happening in the energy market is a microcosm for investors as a whole. Looking at the shares of a company as a fraction of a business marks a key tenant of value investing.

Ideally, a company can be both a good value in current terms, but also have some growth qualities ahead of it.

 

To listen to the full interview, click here.

 

Income investing

Dividend Growth Investor: Five Dividend Growth Companies Raising Dividends Last Week

Posted on by Andrew Packer

Markets are making new highs. Corporate profits are also expanding. That’s allowing many companies to pay out dividends. For those that already pay a dividend, increasing the dividend is a signal as to the soundness of the business.

With so many dividend-paying stocks today, announcements of increased dividend payouts occur throughout the year. These companies should trend higher over time as increased payouts and increased earnings lead to higher share prices.

For instance, Fastenal Company (FAST) recently raised its dividend by 11.4 percent. It’s also the 26th consecutive increase in dividends for the distributor of industrial and construction supplies.

Over the past decade, Fastenal has increased its payout even faster, at a 13.3 percent annualized rate. The current dividend yield may sound low at 2.25 percent.

However, continual increases in the dividend in the low-double-digits will likely mean higher returns over time.

Another company raising dividends now is Enterprise Bancorp (EBTC). The company yields 3.3 percent, and has raised dividends at an annualized rate of 7.2 percent over the past decade.

The most recent dividend increase came to a 4.3 percent rise. While a bit lower than average, many smaller banks reduced or eliminated dividends during last year’s banking crisis.

Consistently increasing dividend payouts provides a signal to investors as to the health of a company, and buying these companies when shares are beaten down can provide strong market returns over time.

 

To see the full list of companies increasing dividends now, click here.

Economy

The Compound: Three Reasons Stocks Could Have a Good Year in 2024

Posted on by Andrew Packer

Markets are trending higher. The S&P 500 Index has started hitting new all-time highs, finally joining the Nasdaq. The Dow hit 38,000 for the first time this week.

After spending a few weeks near these prices, the move higher suggests a further rise ahead. That could bode well for the year as a whole, since January tends to reflect the next 11 months. A few other factors point to strong returns for stocks here.

One factor is improving economic conditions. Inflation has come down significantly. It’s not quite at the Federal Reserve’s target level of 2 percent. But it’s enough that the central bank is done raising interest rates. And the bank hasn’t raised rates since July.

Next, corporate profitability looks reasonable. Earnings season has shown few surprises. The banks have been a bit weaker than expected, but they’re still dealing with higher interest rates.

Investors can still get great returns with companies that offer reasonable growth and have a strong brand. That includes companies like credit card provider Visa (V), and insurer Progressive (PGR).

These are financial companies that can increase their earnings without being as directly subjected to changes in interest rates like a bank.

While last year was an above-average one for the market, conditions are in place for markets to continue to trend higher.

 

To watch the full interview, click here.

Stock market

Elliott Wave Options: All Time High… Elliott Wave Algorithm Targets 5000

Posted on by Andrew Packer

Stocks are pushing higher. Economic data seems to be in a “goldilocks” spot, where it’s not too bullish or bearish. That suggests that the market is in the middle of the Wave 3 of the Elliott Wave theory.

If that holds true, it could mean the markets trend higher for a few more months before a small pullback. Once that happens, the final wave could mean a massive surge higher.

The S&P 500’s break to new all-time highs over 4,850 puts the 5,000 level in play in the short-term.

That’s in line with prior moves higher after stocks make a new all-time high. It also lines up well with the peak of earnings season in the coming weeks.

Of course, nothing is perfect. 10-year Treasury yields have ticked higher. That’s the benchmark asset that could cause the market to pull back in the coming months.

For now, it’s a warning signal, not a dangerous one.

After a major move higher, cryptocurrencies have pulled back in recent weeks.

These assets don’t always line up with traditional assets such as stocks. And the rise in cryptos ahead of the bitcoin ETF news may be leading to some simple profit-taking now.

Overall, conditions are clear for stocks to keep trending higher in the next few weeks. But don’t get too leveraged, as a normal pullback will likely happen in the months ahead.

 

Click here to get the full analysis.

 

Cryptocurrencies

Simply Bitcoin: The Bitcoin ETF Will Take Bitcoin to $1 Million

Posted on by Andrew Packer

After months of speculation, the Securities and Exchange Commission (SEC) approved trading of 11 bitcoin ETFs last week. These ETFs have already started to see billions of dollars in inflows and trading.

It’s easy to see why. Cryptocurrencies have been a new asset class, and haven’t been easily tradeable for investors since its inception. And unlike the creation of other assets, cryptos started at the individual level, not the institutional one.

Retail investors able to navigate the process of buying crypto have been able to get in before this institutional money.

Big financial players have largely had to sit on the sidelines. But the bitcoin ETFs now allow them to allocate money to this asset class. And even a small allocation of 2 percent could still represent billions of dollars in demand.

That’s one big reason why institutional adoption looks so bullish for investors. And why some investors, like Ark Invest CEO Cathie Wood see bitcoin hitting $1 million by 2030.

While bitcoin saw a slight jump with the start of ETF trading, the price action has been slow so far. But bitcoin will have another “halving” event in the coming months. That will reduce the reward for mining new bitcoin by half.

Prior halvings have led to price shocks higher. With this year’s rising demand, a reduction in new supply could lead to big returns for those who look to buy now.

 

To listen to the full podcast, click here.

Commodities

ZEAL Speculation and Investment: Gold-Inflation Disconnect

Posted on by Andrew Packer

Inflation ticked higher in December, based on the latest government data. Higher inflation tends to be good for hard assets like commodities, particularly gold.

However, even though gold hit new all-time dollar highs last year, it’s been underperforming. Over the past few years, gold has tended to rise when inflation appears to be cooling. Yet it’s dropping when inflation has been moving higher.

What can explain this disconnect? Over the past few years, investor interest in gold has waned since the original pandemic-era stimulus. Demand for gold via ETF holdings, a key sign of trading activity, is lower.

While physical buying remains strong, particularly from global central banks, investors have cooled on the concept.

However, there’s a small possibility that the Fed declares victory in the war against inflation too soon. Should that happen, they may cut rates too quickly. Or a monetary change could lead to a resurgence in inflation.

If that happens, we may see another wave of high inflation. That would be similar to the rising inflation trends of the 1970s.

Under that scenario, gold would be more likely to trend higher. Investors would want to own the metal as a hedge.

Until that scenario emerges, it’s likely that gold will trend lower. If it appears that inflation has truly been knocked back lower, then gold prices may cool further.

 

To read the full analysis, click here.

Income investing

Ari Gutman: Getting Wealthy With Dividends Requires Growth

Posted on by Andrew Packer

For decades, investors had an advantage with buy-and-hold investment strategies. That’s because the brokerage costs used to be far higher. Today, in many cases, they’re zero. Plus, short-term taxes used to have a far higher rate as well.

With taxes and fees heavily eating into returns, buy-and-hold worked since it meant reducing the costs of those activities. However, without that drag, investors looking for income can, and should, look to employ some growth strategies.

That’s because today’s dividends are still fairly low. The S&P 500 yields less than 2 percent right now. A $1 million portfolio with a 2 percent yield is earning about $20,000 per year.

Meanwhile, short-term bonds are paying closer to 5 percent. That same $1 million would make more than twice as much income without the short-term risks of stocks.

That’s why investors who are focused on dividends may want to look at higher-growth opportunities.

More growth means a bigger potential portfolio over time. And the bigger the portfolio, the bigger the potential cash from dividend payouts.

Some growth stocks even pay small dividends. While a low dividend may not be attractive now, a high rate of growth and a growing dividend can pay off better over time.

Either way, just investing for income isn’t ideal until an investor is already wealthy.

 

To watch the full analysis, click here.

Economy

Heresy Financial: The Fed’s Secret, Ongoing Bank Bailout that Just Keeps Growing

Posted on by Andrew Packer

Big bank earnings have come in over the past week. And the overall results have been lackluster. Most banks are raising their loan loss reserves, and taking other cautious measures.

That has hit profitability in the short-term. But it also indicates that the banks see some dangers ahead. That’s in line with a sector still reeling from last year’s sizeable bank failures. While that appears contained, it may not be the case.

When Silicon Valley Bank and others failed last March, the Federal Reserve sprang into action. They created a short-term lending facility. Banks could swap out long-term assets for short-term ones.

That facility is known as the bank term funding program. It came with a one-year time limit. That deadline is coming up in March.

This facility has helped stem the possibility of further bank runs. And banks having to sell long-term assets at a temporary loss to meet capital demands. But the program continues to grow.

That’s a sign that the Fed’s “higher for longer” approach to interest rates has left banks vulnerable. And it’s likely that, to avoid a crisis, the term funding program will be extended for another year, if not indefinitely.

Should the program end, however, it’s possible that banks, particularly regional ones, could be in for some higher stress in the months ahead. Investors may want to cash out. And traders may want to buy put options if that’s the case.

 

To watch the full analysis, click here.

Stock market

FX Evolution: Has the Stock Market Flashed a Warning Signal?

Posted on by Andrew Packer

January has proven a slow month for the market. But there may be some weakness in the weeks ahead. That’s due to a variety of factors, including the strength of the market’s bull run heading into the end of last year.

The overall moves in the market point to some short-term weakness. Should that clear up, investors will be able to see a resumption of the longer-term bull market.

One warning signal right now is that market volatility has been historically on the low side. Even with some down days, the volatility index, or VIX, has barely inched higher to 15 at its recent peak. A reading between 15-20 is fairly normal.

When the VIX is trading lower, it’s a sign that markets may be too complacent. That could lead to a sudden 3-5 percent pullback.

While markets had a bit more volatility going into the monthly options expiration this week, investors may be in for a more turbulent few weeks.

For long-term investors, any pullback here will likely be little more than a speed bump. For those using leverage or trading, the ideal strategy may be to reduce trades until volatility ticks higher.

A warning signal doesn’t necessarily mean a bear market is around the corner. But markets remain a bit too complacent, even after slowing down significantly in recent weeks.

 

To view the full analysis, click here.