What’s on the Menu 🍴

We’re headed into the holiday season, and markets are looking STRONG.

Today we’re taking a look at why stocks and bitcoin are booming…

And what we think comes next.

Let’s dig in:

• What To Watch This Week 👀

• Why Bitcoin Is Up Over 100% This Year 💯

• Retail Earnings: Not As Bad As Feared 👚

• What Can Kill This Bull Market in Stocks?📺

Today’s newsletter is a 4 minute read.

What To Watch This Week 👀

Stocks surged on the back of lower inflation numbers last week, with nearly every sector and sub-sector participating in the rally.

Even small caps posted huge gains last week with the Russell 2000 index jumping over 5%!

This week is likely to be less eventful (famous last words 😆) with the Thanksgiving holiday in the US closing down stock markets on Thursday and half of Friday.

As usual, crypto markets will be open for trading, so there’s always potential for fireworks there.

Nvidia reports its earnings after the market closes on Tuesday, so that could provide some drama before things slow down mid week.

NVDA stock has staged a nice rally in November and sits well above key moving averages:

The biggest shopping weekend of the year in North America kicks off on Friday, and that could have ramifications for consumer & retail stocks next week.

The macroeconomic calendar is light this week, but we do have the following data releases:

• Canada inflation data (Tues)

• Fed Meeting Minutes (Tues)

• US Durable Goods for October (Wed)

• German Manufacturing PMI (Thurs)

• Japan inflation data (Thurs)

For those celebrating this week, we wish you a joyous holiday!

Why Bitcoin Is Up Over 100% This Year 💯

1: The Countdown to the Bitcoin Halving Event

In April 2024, the Bitcoin community will witness its fourth halving event, a significant milestone in the cryptocurrency's lifecycle.

This event will see the reward for mining new Bitcoin blocks slashed by half, a change that historically has had profound implications for Bitcoin's value.

As we inch closer to this date, investors are keeping a keen eye on Bitcoin's supply dynamics, anticipating the impact this event will have on the market.

2: Scarcity Driving Demand

In the lead-up to the halving, there's been a noticeable dip in the availability of Bitcoin in the market, reaching historically low levels.

This scarcity is not just due to the upcoming halving but also because investors, especially long-term holders, are increasingly reluctant to sell.

This trend of holding onto Bitcoin, as opposed to actively trading it, suggests a widespread expectation of future price increases.

3: The Holding Pattern Preceding Price Surges

A fascinating pattern emerges when we examine the ratio of new Bitcoin created versus the amount saved and withheld from sale.

Currently, the rate of accumulation is more than double the new supply being introduced into the market.

This pattern of accumulation has been observed before previous halving events and often precedes significant price surges. It indicates a collective investor strategy of holding Bitcoin in anticipation of increased value.

4: Small Investors Joining the Hold Bandwagon

It’s not just the crypto whales who are holding onto their Bitcoin; even smaller investors (those with holdings of less than 100 Bitcoin) are increasingly accumulating and retaining their assets.

This broad-based holding pattern further reinforces the market's bullish sentiment.

What It Means: The convergence of these factors paints a bullish picture for Bitcoin as we progress towards the halving.

In the prior 3 halving cycles, bitcoin’s price was up significantly 365 after the halving.

There’s no guarantees this time will be the same - but we’re bullish until we see evidence to the contrary!

Retail Earnings: Not As Bad As Feared 👚

This past week we received many earnings reports from major retailers like Target, Walmart, Ross Stores, TJ Max and more.

There’s been a lot of fear around retailers struggling as discretionary spending slows down.

But, surprisingly, when we get down to the numbers… it doesn’t seem as as bad as feared.

Walmart (WMT)

Walmart has revenue growth that is still above pre-pandemic levels. (This can be attributed to higher prices from inflation and more consumers choosing value (aka: market share gains)).

Operating income is holding near pre-pandemic levels which is a positive sign.

However, going into the report, WMT carried a very rich valuation around 30x earnings. So, it was simply priced for perfection which caused price to selloff after the report.

Target (TGT)

Target has struggled with negative revenue growth, but this quarter was an improvement from the last quarter signaling a possible turn in the trend.

Target has had great financial responsibility and has improved their inventory position. This is leading them to operating income that is holding near pre-pandemic levels as well.

Earnings-per-share (EPS) was 36% higher y/y, showing they’re hanging onto profitability in the face of negative revenue growth.

Target has seen consumers move from higher margin products to lower ones. So, in the future, their financials could see a boost with consumer shifts.

JX (TJ Max)

TJ Max is known as a place for the consumer to get a good deal. It’s one of the most discretionary retailers out there. You shop there for clothing, shoes, home goods and other odd and end products.

So, the fact that many retailers are seeing a slowdown, but TJX keeps showing strength is impressive.

Revenue trends look great still, as does operating income in relation to pre-pandemic levels.

ROST (Ross Stores)

Ross stores are in the same category as TJX. Exact same product offerings, and very similar financial performance!

These businesses simply keep doing just fine.

Even names like Gap (GPS) and Macy’s (M) had large share price gains after their earnings releases despite still showing negative revenue growth.

The reason for the big price gains?

These stocks likely were so oversold, and expectations were so low, that valuations had room to be higher. After all, Gap and Macy’s are still profitable companies.

So, are retailers struggling? Some of them. But, overall the largest retailers seem to be doing just fine and finding their business moving more back to normal after a crazy few years.

Certain discretionary categories are doing better than others (for example Beauty is doing better than Apparel).

The consumer is just being choosy on what they buy, what brands they buy, and finding a good deal.

We still have more retail earnings on the way from Dicks Sporting Goods, Abercrombie & Fitch, American Eagle and more… so stay tuned for more insights!

📺 Video of the Day: What Can Kill
This Bull Market in Stocks?

Last week we saw a HUGE short squeeze in stocks (and crypto)…

But there are some big risks (and potential black swans) on the horizon.

So in today’s video, we’re exploring where we see risks & rewards across all assets.

Also, you’ll learn:

• Why did stocks and bitcoin rip last week?

• What is the future of interest rates looking like?

• How can we prepare for mass unemployment?

• What’s happening with bitcoin mining stocks?

• And much, much more!

Delicious Bites 😋

• OpenAI to bring Altman back as CEO one day after he was fired

• 11 companies that own everything

• A 30-Year Trap: The Problem With America’s Weird Mortgages

Food For Thought 🧠

"I don't look to jump over seven-foot bars;
I look around for one-foot bars that I can step over."
- Warren Buffett

DISCLAIMER: We are not investment advisors, and this content is for educational purposes only. We don’t offer financial, legal, or tax advice. Nothing we say is a recommendation to buy or sell any assets. Trading and investing are extremely risky, so please be careful and do your own research.