Weekly Newsletter- Week of 10.10.2021
Debt Ceiling on the Rise
This week Congress agreed to a short-term increase of the U.S. debt ceiling, avoiding a default and potentially additional economic pressure. Congress was able to temporarily agree on a debt limit extension that will run into December.
Federal Debt
The federal debt is the amount of money the government owes for spending on its payments. Some of the payments include social security, Medicare, military salaries, and tax refunds. The debt limit allows the government to finance those obligations. Unfortunately, raising the country’s debt ceiling is effectively the same as raising the credit card balance. This does not put a plan in place to further pay down the debt. Rather, we just agreed we can go into further debt as a country.
Kicking the Can
While able to avoid a government shutdown, kicking the can out to December will continue to put pressure on consumers. Without a resolution, the federal government could default on some of its obligations, including social security and military salaries & benefits. This means, without a resolution, social security checks could be delayed for several weeks- millions of Americans rely on these checks every month. The same pressures would also be applicable for Medicare, as well as many other programs.
A potential downgrade of the United States’ credit rating would also have a very negative effect on U.S. Treasury. Treasury bonds may appear attractive to investors given their safety as a reliable investment asset. Should demand decrease, we could expect another rise in interest rates. And as we’ve seen over the last 12 months, when interest rates rise, high-flying stocks get hammered. All of this would apply additional pressure to future borrowing costs like car payments or credit cards.
Going Forward
Uncertainty regarding the debt ceiling will continue to be a major driving force in the market until an actual resolution has been put in place. This goes beyond an extension, but rather a full plan to tackle rising debt. Market uncertainly alone can send rippling effects throughout the stock market. Since World War II, Congress has changed the debt ceiling no less than 100 times. In 2019, Congress voted to suspend the debt limit until July 2021. Now, Treasury is using ‘temporary emergency measures’ to buy more time and allow the government to keep paying its obligations.
One more
Previous Market Updates
Weekly Swing Trades
PNRG (Prime Energy)
October 2, 2022
Entry Price:
80.62
Stop Price:
76.85
Target Price:
88.04
Time Frame:
1 Week Hold
Expecting a short-term bump after a recent OPEC+ announcement regarding the a supply constraint to oil. The constraint would result in ~1M less barrels of oil per day, which should cause a price jump. Low RSI and bouncing off our 250 day moving average, both hallmarks of a good swing trade.
DV (Doubleverify)
October 2, 2022
Entry Price:
27.75
Stop Price:
26.75
Target Price:
29.00
Time Frame:
3 Week Hold
Using our moving averages heavily on this swing trade, look for continued strength as we try to notch out a 6-8% gain. Specifically, we are taking advantage of of a recent cross over in the 50 day moving average. Last week closed down, so wait for confirmation of a reversal.
Job Report Underwhelms
This week we received another key point of economic data. The non-payroll jobs report showed our economy added 194,000 new jobs in September. This number came in far below expectations of nearly 500,000 new jobs to be created. Though, the overall unemployment rate continues to slowly tick down despite how sluggish hiring has remained.
Workers Remain on the Sidelines
The biggest concern continues to be how workers aren't coming back to the workforce quickly enough. Labor force participation actually dropped lower in September, despite the end of pandemic jobless benefits. Despite all of this, wage increases continue to increase. The average hourly wage has increased nearly 5% this year. All of this continues to point to an ongoing continuation of inflation. Inflation concerns continue to be a major force driving the stock market.
Where are new jobs?
Hospitality and the leisure sectors led the way with 74,000 new jobs in September. A stark rise from August, when 38,000 new jobs were added in the sector. Factory employment also increased by 26,000. While retail jobs added 56,100.
Texas, the next great crypto hub?
We've talked extensively about how Chinese regulations affect the entire crypto market. On the 9/19 newsletter found here, we reported how China was now banning all crypto mining and crypto transactions. This sent Bitcoin and crypto into a spiral. This is leading to a void in the crypto mining space. Texas is now attempting to position itself as a hub for crypto and blockchain. Texas has been openly welcoming new Chinese miners looking to continue their operations outside of China. Texas also recently announced they are increasing the state's Blockchain Council as well. Texas is also looking to implement new crypto-friendly regulations as a way to entice more crypto miners to the state.
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Market Performance- Week of 09.25.2022
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Weekly Review
Market Performance- Week of 09.25.2022
Recent Winners
SBUX (Starbucks)
Entry Price:
85.00
September 11, 2022
Price at High:
89.90
Return for Members:
5.76%
Timeline:
2 Month Hold
Strong momentum over the last few weeks. Watch for a mean reversion, but if moving averages stay consistent look for an early play to open the week.
PNRG (Prime Energy Resources)
Entry Price:
83.20
September 4, 2022
Price at High:
100.00
Return for Members:
20.19%
Timeline:
3 Week Hold
PNRG had a drawdown to historical levels of support (around the 100 day moving average). Looking to make an entry in the coming days as we also have macro tailwinds with the energy crisis in Europe.
PYPL (Paypal)
Entry Price:
87.00
August 28, 2022
Price at High:
103.00
Return for Members:
18.39%
Timeline:
4 Week Hold
Playing off the dip in June, we're starting to see momentum as the 50MA is crossing over the long-term averages. Look to for momentum to continue and an early entry on Monday.
