Bitcoin & Bond Rates!

Bitcoin!  Trading at a high of 61,758 on April 16th, 2021, took a slight tumble down to 30,0000 last week before recovering a bit!  What’s the hype?!

Can you visualize going to the supermarket, swiping your phone and bitcoin is transferred from your phone wallet to the retailer for the purchase your groceries?  Imagine, one day, a bitcoin is worth 30K and the next 40K.  That would make shopping a huge challenge.  Groceries change prices enough, already!

Over the last few months, I’ve read as much as I can on Bitcoin, simply because it dominates the news, and it certainly has impacted stock trading up until now.

The US dollar is still the currency of choice to complete your purchase of goods and services.  I don’t see this changing anytime soon, as so much else would need to change!  However, I’ve learned a couple things in my 36 years in the industry!  Never say never!

Market Wrap/International Equities?

Last week witnessed a mixed stock market as the Dow retreated (.43%), the S&P 500 (.39%) and Small Caps (.41%).  The Nasdaq Composite rose .33%, however International Equities performed best, with Foreign stocks rising 1.08% and Emerging Markets 1.75%.

Is it time to increase allocations to International Equities?  I’ve heard this argument each year for several years and the results have been the same.  The US Market has outperformed!

We are entering a potential new phase.  We won’t know who, what or where for a while, however Income, Capital Gains and Estate Taxes are going higher, at some point.  Add to this, our Federal Reserve has been pumping MASSIVE LIQUIDITY into our system and markets for several years.  This massive liquidity and extremely low level of interest rates won’t last forever, unless the economic recovery peters out.

So, what will we look like when the Federal Reserve is no longer accommodative?  Mortgages, car loans, business loans, etc., will be much more expensive.  Perhaps this is why Jerome Powell, chairman of our Federal Reserve is saying Inflation will be transitory.

If taxes do go higher, the Fed stops buying 120 Billion of Bonds Monthly and then increases interest rates, the International Market attractiveness increases.  They’re already looking attractive from a valuation standpoint when compared to US equities!!

 Bond Rates

US interest rates have resiliently stayed near historic lows.  The 10 Years Treasury yield finished last week with a yield of 1.63%.

Reading my daily research, one company has suggested that “fair value” of the US 10 Year is 3%, with the low range of 1.75% and the high range of 4.25%.  Earlier this year we hit the low range of 1.75% and Powell jaw boned the yield back down over the next couple of weeks.

If Argus research is correct, at some point, both stocks and bonds will face significant challenges.

Let’s keep our thumbs closely on the pulse of all issues!!


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