Five day sell off followed by a
massive comeback on Friday, Bitcoin prices continue to fluctuate and the
positive jobs report. What do these things mean to you and your money?
Let’s
be honest, it has been a tough and painful week, if it was not for the great
jobs report that came out Friday morning sending the market up an astounding
173 points, the Dow would have ended down over 218 points for the week. Luckily
if you read my article from last week where I suggested buying put options on
major retailers you would have ended the week with a profit.
-
Wal-Mart was down 1.24% for the week.
-
Sears was down almost 25% this week
-
J.C Penny was down over 18%.
-
Amazon was down 2.73%
Wise bets against
any of the companies above would have yielded immense profits but let’s not
talk about what happened last week let’s talk about what’s going to happen next
week. This week was obviously a sell off week, and a much needed one at that.
The Dow closed up for 8 straight weeks, and I hate to say it needed to cool
down. The very positive jobs report on Friday though stopped the selloff in its
tracks; un-employment fell to 7% from 7.3%. The economy added 203 thousand jobs
in November, blowing past estimates of 183 thousand.
Unfortunately this
positive jobs report might be a double edged sword considering that it might
cause the Federal Reserve to start tapering its bond buying program in early
2014. The good news is that Wall Street appears to have gotten over its
moodiness and forget the fears of an early taper that have plagued the markets
since talk of them began.
In my opinion the
sooner the Fed begins tapering the better, and hopefully when they do start to
taper it might cause a much needed correction in the market. Now I said in one
of my last articles, that although the markets might see a sell off as early as
January or February next year the companies that will be hit the hardest will
be the ones that have seen their stock surge way past the average of the market
without growing their revenues in any substantial way, and the companies that
currently see their market evaluation out pace their revenue growth.
Such companies are
found, mostly in internet, and specifically social media although companies
such as Netflix, Tesla and Yahoo are also amongst the companies I figure will
be hard hit in a market correction.
Now this might
make me sound like a bear but in truth in the long term I am a bull all the
way, I have faith that the U.S economy will continue to recover and that after
a correction and the popping of several specific bubbles the markets will surge
to well beyond their current all-time highs.
What I am really interested
in discussing though is the new virtual currency bitcoin. If you do not know
what bitcoin is, it is a currency that exists solely in cyber space, in essence
bitcoin represents the future of all currencies. With that said though the
price of bitcoin went from $10 in January to over $1,200 dollars in December
(before falling 20% to786.40 after China announced that its central bank will
no longer accept Bitcoin as a source of payment and that it will not insure any
transaction made with Bitcoin)
Bitcoin’s massive
surge in price is mostly due to speculation, may I remind people that the cause
of every financial bubble is over speculation. With that in mind it is easy to
call Bitcoin the perfect bubble, comparable to that of tulips in the 1600’s and
the Internet bubble in the 1990’s. My major grievance about Bitcoin is that it
is not backed by anything! Nothing the currency really doesn’t have any
substance to it. This along with the over speculation in Bitcoin makes me want
to discourage any people from buying it.
Off course the
second I came up with this analysis I started looking for a way to bet against
the Bitcoin bubble. Unfortunately my search proved discouraging; in order to
bet against bit coin you must convert your money into bitcoin and invest in
certain Bitcoin exchanges that are few and far between. In essence if you want
to bet against bitcoin you must first invest into it at its current price.
But in the end
virtual currency is the future and although I do not think Bitcoin is the
currency that will replace all others I do think that in the near future our world’s
major currencies such as the Dollar and the Euro will be configured to the same
virtual cyber space as Bitcoin exists in now.
I would ask that if you may please
leave comments about how you liked the article and any suggestions you have
about how to make it better. Also if you enjoyed this article I would ask if
you please spread the word since currently I am advertising only through word
of mouth.
I will be posting an article every
weekend and looking back at the political and economic events of that week,
both personally impacting events and suggestions about my opinions on the
future of the market
No comments:
Post a Comment