What’s new
Administrative topics and an introduction
Well folks, hopefully everyone enjoyed their holiday in any way you celebrated. As we said last week, we’re back with dose two. This edition will be a mix of the traditional weekly recap material alongside some 2020 recapping as we leave this past year on the doormat and get ready for 2021 next time we meet.
Let’s get into some stories.
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Fundamentals
Where did the markets end last week?
U.S. Indices 5 Day Performance
Dow Jones: -0.34%
S&P 500: -0.49%
NASDAQ: +0.32%
Asia and Europe 5 Day Performance
Nikkei 225: -0.40%
Hang Seng: -1.09%
FTSE 100: -0.41%
DAX: +0.16%
Rates, Spot Prices, and ‘Good to Knows’
U.S. Dollar Index: 90.223
US 10 YR: 0.933%
Crude OIL: $48.23
Spot Gold: $1,878.97
Market Madness Portfolio: +20.66% YTD 📈
TEDRATE: 0.16
LIBOR (3 month): 0.2401%
Weekly update
An article by Christopher
Financial markets
As we can see from the above data points, the week was a down week almost all across the board for both the U.S. and overseas markets, save a few exceptions to the trend. Financial markets shrugged off the hard work of the folks on Capitol Hill in putting together a stimulus package (which is something that was weighing on investors for weeks and weeks now… eh whatever). Although, to be fair, investors were more concerned over how U.K. / E.U. trade negotiations were going surrounding the Brexit proposal.
All in all, these last few weeks of 2020 continue to follow the trend of the strange and unpredictable. Appetite for equities continues to reign over that of fixed income (bonds), even high yield debt (as those high yields are at a low point in recent years). Options trading has also hit a high point on the year with many investors riding call options as the markets rallied.
H2 2020 was also heavily marked by IPOs, as firms look to seize investor appetite and the hot market while still are both present. So much so, in fact, that many market experts are likening the current ‘bonanza’ in the markets to that of the 1999-2000 dot com bubble. Naturally, of course, those same experts say that the market is different and that the ending result will also chart a different course. For that, we’re going to have to wait and see. It is always the case that the market ebbs and flows, rallying up and contracting down. Regardless of this trend, we always add a little to the pot, never fully retracting all the way down with each passing cycle, fueling the “stocks never go down” narrative. Nothing will ever go down if your time horizon is long enough!
The dawn of a new year, along with annual reports, will bring about an interesting market dynamic for 2021 and future years to come.
Bonus: “Going Bananas” by The Heisenberg Report.
Economic data and stimulus
As I write this on December 27, Capitol Hill and the Office of the Presidency have not come together to agree upon an update to the stimulus proposal. As a result, millions of Americans currently receiving enhanced unemployment benefits will lose those benefits as the systems will need time to process the new benefits (if any arise). Donnie vacated the White House for the holidays, but don’t worry, we flew the bill down in a personal private jet to his Mar-a-Lago estate in case he has a grinch-ly change of heart.
In more real economic news, this past week was a big one for economic data releases. U.S. Consumer Confidence for December falls, and, for the first time in seven months, U.S. household spending dropped. It remains apparent that the virus is continuing to weigh on the minds of households and consumers. Many were hoping that the holiday season would spark a reinvigorated spirit of spending and shopping, but it was not really the case this year. Consumers overall ditched stores and instead shopped at home in their PJs (not that people don’t go outside shopping in their PJs too, but I digress…). As of right now, it looks like the overall spending for the holiday season will come in below the projected forecast.
As far as the labor market is concerned, the weekly jobless claims remain elevated (803,000), but have since retracted from the 3-month high we saw in previous weeks. Tensions and forecasts around the COVID 19 pandemic continue to depress optimists and the overall “V-shaped” recovery we have all come to dream about each night. A lot of pressure is still weighing on the shoulders of Congress to pass some kind of fiscal stimulus to ease the pressure of the Fed’s One-Man-Army approach to keeping the economy liquid and prevent it from flatlining.
To add some more dark to the picture, a new strain of the virus is rapidly spreading within the U.K. and Europe, causing concerns about the potency of the virus with respect to its ability to transit between humans. Additionally, the U.S. had set a goal to vaccinate 20 million Americans by the end of December, but this past week, we only surpassed the 1 million vaccination milestone. I’m not too sure we’re going to vaccinate 19 million more people by the drop of the ball on New Year’s Eve.
2020: a year in review
An article by Christopher
Just as edition 100 was about me and celebrating my milestone, edition 127 is for you all - my readers as we look to close out the year where Market Madness began. An impulsive decision, followed by several weeks of planning and outlining, all backed by your support, allowed me to publish Edition One.
All the while I’ve been writing and you’ve been reading, we’ve all been collectively battling the ongoing COVID 19 pandemic in our respective ways. It has been, by no means, an exceedingly difficult year. Yet here we are about to close out one chapter, in hopes for a better next chapter to come. Jokingly, I am the world’s number one optimist. In this scenario, I am optimistic for the future and hopeful that we are going approaching a bend around a dark corner and heading toward a newly lit streetlight on this dark, difficult road. No, we’re not seeing THAT light. We’re seeing a light of optimism shining down the road and, slowly, we as a globe and as a populous are taking strides toward it.
We’re getting a little sentimental, I know. This year calls for some degree of sentimentality just for what we’ve all been through. Everyone’s 2020 story is different, but no less important.
In many ways, I feel blessed that I was able to study finance and economics and then dive right into these writings as a live demonstration of what I’ve learned vis-à-vis the real world. Studying fundamentals of a company for an investment decision in 2020 became increasingly meaningless as the pandemic ensued. What were considered foundational economic principles were shattered as we saw nation after nation dive into negative interest rate territory as a means to combat the virus’ toll on global economies. Here in the states, we saw rates hit the floor as Jerome Powell and the Fed took on some 2008-style actions and some new efforts to help fight the economic unwind. Many of those things are continuing today and will have an economic impact for many years to come (the Fed’s balance sheet is not going to unwind itself).
We saw a heavy hand of IPOs in the tail end of the year, and speculative investing all throughout. Everyone and their dog opened a Robinhood account with the hopes of gaining overnight riches (and a vast majority of those account holders tuned in to Wall Street Bets as a trading self-help site).
On the economic side, we saw a rise in attention being paid towards the questionable, yet interesting, MMT (modern monetary theory). A handful of companies filed the dreaded chapter 11 proceedings, admitting defeat and calling out for help during their time of need. Others, mainly large corporates, were able to take advantage of low rates, issue more debt, and have the Fed purchase that debt as part of their virus economic stability mandate. Prior to the pandemic, we saw record-low unemployment and that quickly turned into record-high unemployment.
In some respects, the reports I write here have grown redundant over time, as the focus week in and week out revolves around the same few talking points with the same few optimistic forward-looking hopes. For that, I appreciate your continued readership and I look forward to returning to a business-as-usual state in the financial world and economy so we can cover on more focused/niche topics as we did in the early editions.
Thank you, each and every one of you, for your readership, feedback, and sharing Market Madness; none of this would be here without all of you.
Here are some of my favorite editions:
Edition 0100: The First Hundred Days
Edition 0118: The Team Expands
Check out the editions that came before the move to Substack right here!
Quick Takes
To fill in the gaps
Airlines look to bring back employees with the passage of new COVID 19 relief package — published before the bill was trashed by Donnie. (via WSJ)
Another follow-up on the SolarWinds hack. (via WSJ)
Walmart gets sued by U.S. for fueling the opioid crisis. (via WSJ)
An exposé on Amazon’s rise in industry. (via WSJ)
SEC fires off on cryptocurrency firm Rippe and execs over unregulated securities offering. (via CNBC)
COVID rushed businesses the embrace a future. (via WSJ)
Bitcoin informational video. (via WSJ)
Donnie goes rogue. (via WSJ (1), and WSJ (2))
Tesla officially in the S&P 500. (via WSJ (1), and WSJ (2))
Elon talks about offering a sale of Tesla to Apple. (via WSJ)
Israel faces fourth election in two years after government collapses. (via WSJ)
Goldman Sachs opens their customer range as they roll out wealth management tools to the masses. (via CNBC)
A detailed breakdown of market participants. (via TradingView)
A Brexit trade deal was reached between U.K. and E.U. (via WSJ)
General Banter
What’s on the minds of our editors and writers
Happy holidays to one and all! We wish you a safe, happy, and healthy 2021!
Reader’s Corner
A place for suggestions for readers like you
The reader is out for the holidays but is sure to return optimistic in 2021’s first edition!
Well done. You’ve made it through the madness. I’ve worked hard to ensure that you leave this page having learned something, and I hope that it benefits you in your daily adventure. Thank you again for checking in.
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