After a minor crash at the end of last week, Bitcoin made a violent surge during yesterday’s trading session. Not only has it soared straight through the highs of last week, but it has also managed to break through the 3-year high last seen in December 2017 and reached an intraday peak greater than $19,800.
Already, we have a lot of professionals in the finance industry making their comments about the implication of this rise in Bitcoin price. An asset class like Bitcoin doubling its price since September is not something you put under the box.
We have the infamous Winklevoss twins, Cameron and Tyler — two prominent billionaire Bitcoin investors who see the cryptocurrency going up to as high as $500,000 while proclaiming “trash is cash” in the same sentence. From their recent CNBC interview:
“Bitcoin is going to disrupt gold, but it will also disrupt any volatile emerging market that doesn’t put the welfare of its citizens first and foremost.
Amazon was e-commerce, and now it’s just commerce. Today, Bitcoin is ‘digital gold’ but tomorrow it will be just Bitcoin. It won’t need to be analogized or require any qualifiers.”
They also claimed that with this disruption of gold comes the valuation of Bitcoin at a market cap of $9 trillion, and a very strong recommendation to either hold on to your coins or start buying as many as possible before the next big surge in upward movement.
Oanda’s senior market analyst Edward Moya had this to say:
“Bitcoin and all the major altcoins are rallying strongly, and it seems the momentum trade is strengthening as mass media outlets embrace crypto coverage.”
So the real question at this point isn’t whether Bitcoin is a valuable investment or not, or whether it will go up. The real concern comes around government regulations and laws that limit and/or restrict the transfer of cryptocurrencies between two free individuals.
While countries such as Russia plan to recognize Bitcoin as “property with legal protection”, SEC Chairman said that the American government’s regulation of cryptocurrency is inevitable.
And even though he correctly recognizes it as a “payment mechanism and store of value”, rather than a security, it’s very easy for the SEC to change their tune if they feel it serves their best interests. It’s these types of limitations which would limit Bitcoin’s growth, rather than the inherent value of the cryptocurrency itself.
What do YOU think about Bitcoin inching closer towards the $20,000 mark? Are you a “buy and hold for dear life” type of person, or someone who’s hungry for the next shorting opportunity? Let us know which direction you’re leaning towards by replying to this newsletter!
How Did the Stock Market Perform on Cyber Monday?
As we transition into the final month of 2020, we have a lot to be proud of. Even after a global health pandemic, the markets managed to have one of their best-performing months of November since 1987.
But going back to Cyber Monday, here are the important numbers you need to know about yesterday’s trading session:
- Dow Jones: -0.9% (+11.8% for November)
- S&P 500: -0.5% (+10.8% for November)
- NASDAQ :-0.1% (+11.8% for November)
- Travel stocks: -7.4% for Carnival, -5% for American Airlines
Even with a minor pullback, we still manage to come out on top and show that the American economy is far from dead.
Some experts, while championing the monthly performance seen in November, are quick to note that December may not give us the returns we’re hoping for. For instance, CFRA’s chief investment strategist Sam Stovall had this to say:
“So while the equity market may continue on its course of confidence that a soon-to-be-released COVID-19 vaccine will allow global economies to reopen in earnest in 2021, history hints that December’s return may be subpar as stocks catch their breath from their recent post-election sprint.”
It’s entirely possible that we’ll start to see some pullback over the next 31 days, but don’t let that deter you from making any drastic investing decisions.
Now appears to be the time where people hold on to what they have and celebrate the holidays, preparing in anticipation of what 2021 has to offer.
What do YOU think will happen to the stock market in the month of December 2020? Reply to this newsletter and share your predictions with us!
Zoom’s Stock Plunges Despite a Four-Fold Increase in Quarterly Earnings
Today’s story is one of those odd occurrences which show you that the markets don’t always behave rationally. Like the old saying goes, “The market can remain irrational longer than you can remain solvent.”
Zoom Video Communications came in with their Q3 2020 earnings, and the numbers were nothing short of mind-blowingly impressive:
- Adjusted earnings: $0.99/share (versus projections of $0.76/share)
- Revenue: $777.2 million (versus projections of $694 million, and +367% from $166.6 million in Q3 2019)
- Net income: $198.4 million
- Gross margin: 66.7$ (67.3% in Q2 2020)
- Projected revenue for Q4 2020: $800 million
- Projected total revenue for fiscal year of 2010: $2.575 billion to $2.580 billion (+314% year-over-year)
Think about it… a stock that has catapulted by over 580% in 2020 alone, with revenue increasing by 169% in Q1 2020 and 355% in Q2 2020. But despite this extraordinary news, shares fell by 5% during yesterday’s after-trading hours. It turns out that investors are scared of the exponential revenue growth rate “moderating” after 2020.
In this scenario, it was the dumb-as-a-rock investors who caused the price to go down. Every single metric pointed towards a logical increase in shares, which did happen during the market hours (+1.43%).
Funny how the markets work so illogically and sometimes go against all common sense!
A 20% Boost in Bonus Payments for Traders at JPMorgan Chase… Not Enough!
You know what’s even better than having a fat six-figure base salary at one of the world’s leading financial banks? A generous bonus payment to make you feel on top of the world and re-affirm your commitment to the bank.
Such is the case for JPMorgan Chase and their traders, who have managed to pull in $23.5 billion in revenue for the first 9 months of 2020. As a result of this record achievement, traders will be paid out a bonus of 15-20% depending on individual performance.
Yet the traders aren’t too happy as they’ve just discovered JPMorgan Chase intends to cut down on costs and raises… for both the workers and the C-suite executives. Given that revenue is up 48% this year, they were probably expecting a bonus boost in a range well within that increase.
This is far less generous than banks such as Bank of America, which intend to keep bonuses somewhat close to 2019’s payouts… and may even go higher to reward the top performers. But as always, this would be bad public optics in the eye of the average American who is struggling to earn a full-time living during the ongoing COVID-19 pandemic.
It really goes to show the increasing divide between “us” and “them.” Those traders, who deserve praise for their performance, should keep their traps shut and be grateful for receiving ANY kind of bonus this year!
Generation X Has an “Interesting Way” of Utilizing Credit…
You ever wonder how credit is managed among the different generations, and what each cohort of people are doing differently from one another? The “2020 State of Credit” report released by Experian shows some particularly interesting numbers for Generation X (i.e. anybody between the ages of 39 and 53)…
- Credit score: 676 (versus 658 for Millennials, 654 for Gen Z, 716 for Boomers, and 729 for the Silent Generation)
- Average number of credit cards held: 3.3
- Average credit card balance: $7,718
- Average revolving utilization rate: 32% (30% for Millennials and Gen Z, 24% for Boomers, 13% for the Silent Generation)
- Average past due delinquency rates, 90-180 days: 5.3%
So as we can see from this data, Generation X faces two unique problems.
First, their credit utilization rate is far higher than any other generation. In an ideal situation, you want your credit balance to be 10% or lower of your total credit limit. Keeping credit utilization too high signals to lenders that your reliance on credit is too strong to the point where you might not pay it off, further lowering your credit score.
Second, they seem to have a higher rate of missing payments compared to every other generation. This one is the easiest habit to fix, and the most significant one as making payments on time is by far the largest determinant of a good credit score.
As we all know, a better credit score helps you do more. Better deals on taking out loans for a car or house, not to mention getting access to credit cards with more generous rewards.
If you’re a Gen X-er reading this newsletter and your credit score isn’t where you want it to be… you know what to do!
When Your 401(k) Is Maxed Out, Where Else Can Your Money Go?
Let’s be honest: Most of us have not reached the point of financial success where our 401(k)’s are easily maxed out at the end of each year, whether it’s $19,500 for the under-50 crowd or $26,500 for the over-50 crowd.
But if you’re one of the few who manages to achieve this milestone and still has some leftover cash, you’re probably wondering about other instruments that are worth putting your money into. The Motley Fool contributor Kailey Hagen has three suggestions for such individuals…
HSA (Health Savings Account): As long as you have a high-deductible insurance plan (+$1400 deductible for an individual), you can put your savings here. Contribution limits will rise by $50 in 2021, and the 2020 limit is $3,500 for individuals. Another great way to lower your taxable income.
Plus, you can make withdrawals for medical purposes without paying a penalty or any tax whatsoever!
Brokerage account: Unlimited contributions, and unlimited penalty-free withdrawals. So long as you hold your assets for at least one year before selling them off, you get taxed with long-term capital gains tax instead (maximum of 20%) instead of short-term capital gains tax (maximum of 37%).
IRA: Unlike a 401(k), you have more flexibility with the number of instruments you can put invest your money towards. Contribution limits are $6,000/year for those under 50 and $7,000/year for those over 50. Just know the difference between a Roth IRA (funded via after-tax dollars) and a traditional IRA (funded via pre-tax dollars).
As an American with money to invest, your options are NEVER limited! There’s always one more place where your capital can be put aside to grow. ☺