Market Tidbits: Bitcoin Hits Year High, Swine Flu Spreads to Wall Street, Bold Move in Cannabis SectorBitcoin jumped to its highest level in a year on Monday, extending the streak that’s seen price more than double since March. China is currently battling African swine flu, which has decimated its pig population. According to reports, Canopy Growth Corp. is set up to capitalize once cannabis is legalized in the United States.
While the U.S. was honoring its fallen heroes on Memorial Day and preparing for the start of summer, a few events were taking place around the world that could have an impact on the financial markets this week and maybe even your portfolios. Here are a few odds and ends worth watching early this week.
Bitcoin Surges to Year-High as Cryptocurrency Recovery Continues
Bitcoin jumped to its highest level in a year on Monday, extending the streak that’s seen price more than double since March.
The bellwether cryptocurrency soared as much as 10 percent on Monday from levels hit on Friday, and was trading at $8,847 late in the session. Rival crypto coins were also posting solid gains at the start of the week. Litecoin jumped nearly 9 percent and Ether, the second largest digital coin, rose 6 percent.
Although the technical guys have come out in droves to analyze every single move in Bitcoin with every technical indicator and oscillator known to man, and the fundamentals guys are still digging for reasons for the rapid rise since March, I think the simple approach is best.
Firstly, don’t mess with a trend. Let the trend tell you when it’s over. Secondly, it’s a pure volatility play. Volatility gets wide then it gets tight. When it hit its all-time high, volatility was extremely high. When it reached its low in March, volatility was narrow. Now it’s getting wide again. Thirdly, if it is a trading vehicle then it’s subject to the laws of the 50% retracement. If $20,089 was the all-time high and $3,150 was the March low then given the current upside momentum, the 50% level of this range at $11,619.50 seems like a reasonable target.
Finally, if you think it’s an investment, then let her rip. If you want to trade it, then figure out an exit strategy first then play the long side. Don’t get in then try to figure out where you are going to get out. That strategy never works because when it turns against you, you won’t get out and you’ll turn a short-term trade into a long-term investment. Always know your exit before placing a trade. If you can’t find an exit, then don’t trade.
China’s Swine Flu Hit Wall Street
There’s another deadly flu in Asia, but this time it’s not spreading globally in the usual way. Furthermore, it’s not even affecting humans. China is currently battling African swine flu, which has decimated its pig population. There are reports that as many as 200 million Chinese pigs have died because of the disease.
Why is this important to you as an investor? Because there is opportunity in pork futures as well as other markets. There is great demand for pork in China so the country may have to turn to U.S. producers to make up for the lost supply. Furthermore, pigs eat feed corn and soybeans. That’s the corn and soybeans traded at the Chicago Board of Trade.
A few stocks on Wall Street could also feel the effects of the pork shortage. Recently, J.P. Morgan downgraded Deere to underweight on concerns about the “rapidly deteriorating fundamentals in U.S. agriculture.” This is due not only to the trade war, but also the decline in soybean and corn demand in China as a result of the reduction in the hog herd due to the outbreak of the African swine flu. Deere is a Dow component.
Restaurant hospitality group Bloomin’ Brands was downgraded. Hormel Foods warned that sales could be hit on flue worries. Animal food manufacturers like Darling Ingredients and Phibro are also feeling pressure from the swine flu.
Could the U.S. use the swine flu outbreak as a weapon against China to get them to return to the negotiations table? It’s certainly a possibility. China has to feed its people and the U.S. may have the hogs. Here’s to hoping the swine flue breakout leads to a speed trade dispute settlement.
Mark Cuban’s Take on How to Fight the Trade War
Billionaire Mark Cuban proposed an unusual idea to fight the trade war with China. It makes sense to me though. He told Yahoo Finance that instead of slapping tariffs on Chinese products, President Trump should stop allowing Chinese companies to go public or trade on U.S. stock exchanges.
“I’d shut down all Chinese IPOs-that’s the first step,” says Cuban. “Given Trump’s propensity for using Twitter and throwing warning shots, I would throw out there that we might put a halt to the trading of Chinese-listed stocks in the United States.”
Given that a study by the Federal Reserve Bank of New York, Princeton, and Columbia found that the Trump administration’s trade policies and tariffs cost U.S. consumers $1.4 billion in income per month as of November, Cuban’s plan doesn’t sound like a bad idea.
Canopy’s Deal a Boon for Cannabis Sector
According to reports, Canopy Growth Corp. is set up to capitalize once cannabis is legalized in the United States. The company plans to acquire U.S. multi-state operator Acreage Holdings Inc. The bold move has won the support of a U.S. private-equity firm that specializes in investments in the cannabis sector.
The $3.4 billion proposal is being deemed the “most significant” as well as the biggest deal in the sector so far, and brings a much needed infusion of capital to an industry starved of cash, according to Marketwatch.