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Week In Review – January 11 2021
Week In Review – January 11 2021

Week In Review – January 11 2021

Democrats Sweep Georgia Senatorial Races and a Crazy Day at the Capitol… Democrats won both senate runoffs in Georgia and protesters stormed the U.S. Capitol as the Senate counted electoral votes, temporarily disrupting the counting process.

What it means— Economic news took a back seat to politics this week, as the Senate became evenly split and protesters took their grievances over the 2020 election directly to the heart of politics. As president of the Senate, Kamala Harris will cast any necessary tie-breaking votes, which will give Democrats the edge. But before she votes, there must be a tie. The even split along party lines gives outsized weight to moderate voices on both sides of the aisle, such as Manchin, Murkowski, and Collins, who might cross over any time. This should calm fears of Supreme Court packing and other extreme measures.

Protesting Trump supporters found their way to the Capitol after a rally on Wednesday, during which a few hundred of the more than 100,000 people pushed their way into the Capitol Building. Capitol police shot one woman, who later died of her injury. The protesters didn’t burn or loot the building. It’s not clear what they hoped to accomplish beyond disrupting the process. The protesters were cleared in the early evening and the electoral count resumed early Thursday morning, solidifying Joe Biden’s win.

The U.S. Economy Lost 140,000 Jobs in December… The unemployment rate remained steady at 6.7%.

What it means— The unemployment numbers for last month were depressing, but generally in line with expectations. While analysts expected the economy to create 50,000 jobs, not lose 140,000, a 190,000 swing in a labor force of 160 million barely registers. The bigger point was that, with more lockdowns and travel restrictions, everyone expected modest results.

Investors largely looked past the employment figures and toward more stimulus spending as well as toward continued quantitative easing from the Fed. Printing $120 billion every month can paper over a lot of ills.

Federal Reserve Minutes Show Bankers Expect To Hold the Course… Minutes taken at the last scheduled meeting of the year showed that the central bankers are comfortable with the current pace of quantitative easing.

What it means— The bankers don’t seem interested in picking up the pace of bond buying, and they even discussed how they might taper their purchases once the economy has recovered. That might sound like a modicum of restraint, if they weren’t printing a whopping $120 billion every month. The Fed’s balance sheet sits at $7.2 trillion. Considering whether they need to buy assets at a quicker pace is like asking whether a bonfire needs a few more gallons of gasoline.

The Fed’s insatiable appetite for bonds gives the U.S. government an outlet for the debt it is selling to finance gargantuan deficits. None of this matters as long as short-term interest rates remain low, because the U.S. government can roll over debt for next to nothing. But rates won’t stay near zero forever, at least not without tremendous intervention by the Fed. At some point, this will be a huge problem for the U.S. government and taxpayers.

Bitcoin Soars Toward $40,000, Market Cap Over $1 Trillion… Buyers pushed the price of the digital dollar up almost 100% in just two months.

What it means— J.P. Morgan estimates that Bitcoin could eventually reach $146,000 as it becomes the new gold. They estimated that price by determining what cost per Bitcoin would bring the market cap in line with all of the gold bars held for investment. Other analysts have put the potential price much higher, at over $300,000 per Bitcoin, to include all gold coins held for investment as well.

J.P. Morgan warned that Bitcoin could suffer severe selloffs on the way to six figures, especially when it hits round numbers like $50,000 and $100,000.

Tesla Delivers Almost 500,000 Cars in 2020… The electric vehicle maker delivered 499,550 vehicles last year, just a bit shy of the company’s goal.

What it means— Missing the mark didn’t matter to investors, who cheered the report as if Tesla had just landed a contract to make every new car in the world. Shares of Tesla soared near $800, giving it a market cap of more than $750 billion, which is more than seven times the size of Volkswagen, the largest car manufacturer in the world. For reference, Tesla made just over 0.5% of the new cars sold last year, whereas Volkswagen made around 10%. Clearly, such numbers don’t matter to the Teslarati.

117th  U.S. House of Representatives Adopts Rules to Change Him/Her/She/He, etc., References to They/Them… The new rules apply to written legislation, not speech, so lawmakers don’t have to abide by the rules when speaking from the podium. The rule strikes all gender-based references, such as uncle, aunt, brother, sister, stepsister, etc. The new rules didn’t explain how to distinguish between an individual “they,” or what we used to call “him” or “her,” from a plural “they.” Thank goodness our Congressional leaders are spending their time on such important changes.

 

Data supplied by HS Dent Research

“When the facts change, I change my mind.

What do you do, sir?” ~ John Maynard Keynes

Our plan is “the plan will change.”

What is your plan?

 

Relative strength measures the price performance of a stock against a market average, a selected universe of stocks or a single alternative holding. Relative strength improves if it rises faster in an uptrend, or falls less in a downtrend. It is easily applied to individual positions in your portfolio and to sectors and asset classes.

 

A copy of our form ADV Part 2 is available online.

 

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Investor Resources Podcast

  • Bond Bear Market June 21, 2024
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  • Change is Hard May 11, 2024
  • Don’t Tell Me! May 10, 2024
  • 10 Years From Now May 9, 2024

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