If you can’t cope with a 10% price swing, you shouldn’t be in it.
We refer to Bitcoin.
In yesterday’s Daily Cut, we noted the Bitcoin price was (at the time of writing) just below the previous record high.
Overnight, it took out that old high and created a new one.
As we now write (2:38 p.m. ET), Bitcoin is at $61,700.
Who knows where it will be by the time you get this message?
Of course, Bitcoin isn’t the only investment game in town. While Bitcoin bubbles… tech stocks and commercial real estate have their own issues.
Let’s take a peek at how both those stories are shaping up. First…
Market Data
The S&P 500 closed down 1% to end the day at 5,078.65… the NASDAQ lost 1.7% to close at 15,939.59.
In commodities, West Texas Intermediate crude oil trades at $78.17, down 58 cents…
Gold is $2,137 per troy ounce, up $12 from yesterday…
And bitcoin is $64,007, down $3,495 since yesterday.
And now, back to our story…
Tech Takes a Dump
Tech stocks are also taking a beating.
The “Magnificent Seven” stocks look anything but magnificent.
Tesla (TSLA) is down 4%.
Apple (AAPL) is down 3%.
Microsoft (MSFT) is down 3%.
And Amazon (AMZN) is down 2%.
And non-“Mag-7” chip stocks Intel (INTC) and Broadcom (AVGO) are down more than 5%.
Why are tech stocks taking a proverbial bath? Well, according to Bloomberg:
Stocks came under pressure as a trio of tech heavyweights slid, with traders wading through mixed economic data in the run-up to Jerome Powell’s testimony to Congress.
Equities lost traction after a rally that has spurred concern about sky-high valuations — especially in mega-caps, leaving the group vulnerable to big moves in the face of bad news. Apple Inc.’s iPhone woes in China deepened, while Advanced Micro Devices Inc. hit a US roadblock in selling an artificial intelligence chip to the Asian nation. And Tesla Inc. extended its rout as China shipments slumped.
In other words… stocks go up… stocks go down.
By the way, Elon Musk is no longer the world’s richest man. According to the Bloomberg Billionaires Index, Jeff Bezos has retaken that top spot.
Source: Bloomberg
So far this year, Musk’s wealth has dropped a whopping $31 billion… down $17 billion in one day alone!
Meanwhile, Mark Zuckerberg has seen his wealth increase by $50 billion this year.
If he’s got any sense, he’ll stay out of the spotlight. Meta Platforms (META) and its Facebook product have had plenty of problems over the years. The $10 billion “metaverse” fiasco among them.
But since that fuss, the stock is up more than 450%…
Source: Bloomberg
That’s in less than 18 months. Who says it’s hard for mega-cap stocks to double, triple, or more?
But staying on the gloomy side of the market: commercial real estate. Again, according to Bloomberg…
Bond investors have punished banks with heavy exposure to commercial real estate, potentially adding even more pressure to the lenders’ profits as Wall Street scrambles to assess how widely pain in property debt will spread through the financial system.
Banks with high levels of commercial real estate exposure tend to have bonds that trade at relatively wider spreads, according to an analysis by Barclays Plc credit strategists led by Dominique Toublan. In some cases, spreads on those bonds have been widening, even as investors have broadly piled into financial industry bonds in pursuit of higher-yielding securities.
The report names three banks: Bank OZK (OZK), Valley National Bancorp (VLY), and Webster Financial Corp (WBS).
The respective stocks were all up today. Goes to show you that sometimes… nobody cares. As often is the case in a market like this, the winners from this may not be obvious until many months from now.
Are the smart investors those who are heeding the warnings and bailing out of commercial real estate-exposed stocks?
Or will the real winners be those dumping what seem to be clearly over-valued tech stocks to buy some unfairly beaten-down regional banks?
A 3.4% yield on Bank OZK – with dividend growth of 12.1% over the past five years – may just be too tempting for some adventurous investors to resist.
Our take?
For something like this, we kind of like the risk/reward. We’ve written in these pages about the “10×10” Approach and creating different investment funnels.
You’ll need to do a lot more research. But our bet is you could do worse than looking at some of the opportunities in this sector.
Not everything, of course. There will be some stinkers. But we’ll bet there are enough value plays in the sector that could make a potentially profitable speculative bet for one of your “10×10” portfolios.
More Markets
Today’s top gaining ETFs…
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First Trust Financials AlphaDEX Fund (FXO) +1%
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KraneShares Bosera MSCI China A 50 Connect Index ETF (KBA) +0.9%
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iShares MSCI Japan Value ETF (EWJV) +0.9%
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Pacer American Energy Independence ETF (USAI) +0.8%
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Invesco Taxable Municipal Bond ETF (BAB) +0.8%
Today’s biggest losing ETFs…
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Global X Lithium & Battery Tech ETF (LIT) -5.2%
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Amplify Transformational Data Sharing ETF (BLOK) -4.8%
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Invesco Dorsey Wright Technology Momentum ETF (PTF) -4.5%
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ProShares Ultra QQQ (QLD) -3.6%
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Siren Nasdaq NexGen Economy ETF (BLCN) -3.5%
Cheers,
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Kris Sayce
Editor, The Daily Cut