🎰 Hedge Funds Bet Big Against Bitcoin

What’s on the Menu 🍴

Real estate, stocks, and bitcoin…

The most popular investment asset classes to grow your dough.

Also, the most controversial and opinion-driven markets.

Today we’re looking at both sides of the coin with these 3 massive movers!

  • Where’s The Value In Equities? 💸

  • Will Job Market Resilience Keep Recession Risk Low? 📉

  • Hedge Funds Bet Big Against Bitcoin 🎰

Today’s newsletter is a 5 minute read.

Where’s The Value In Equities? 💸

It’s no secret: large cap equities aren’t cheap.

The S&P 500 price and price-to-earnings ratio has been trending higher, leaving investors wondering where to find a deal to park cash.

You can see how the P/E ratio has trended historically:

The good news? Value stocks may be a good place to dive for opportunities if the Federal Reserve keeps rates higher for longer.

Value stocks valuations vs. growth stocks are at multi-decade lows still.

Everyone has been super focused on the high-performing magnificent 7, but, in higher interest rate environments, value tends to out-perform (seen on the right).

Clearly, growth stock outperformance during low interest rates dwarfs value stock performance during higher rates, but, it’s still worth a look.

A great way to farm ideas for value stocks could be to look at holdings of dividend and value stock ETFs.

You can also do a simple scan on Finviz for stocks with price-to-earnings ratios below whatever the market multiple is (in the case of today, around 21x).

The key with investing in value stocks is avoiding value TRAPS.

Companies that aren’t growing, or don’t show signs of getting back to growth should be avoided. Also, watch out for companies with high net debt loads (cash minus debt).

Want to learn how to research growth and value stocks? We teach you how in our Wealth Building Community. You get access to premium course on building a wealth plan, researching and investing in individual stocks, crypto and more! You also get access to our 24/7 chat room to ask mentors questions.

Will Job Market Resilience
Keep Recession Risk Low? 📉

As inflation fears rise, and odds of rates cuts in spring time diminish, we’re back to thinking about where the economy is heading.

The jobs market may be giving us some clues into where we stand on a future recession, and in turn, stock market valuations.

It’s quite difficult to have a recession without a weakened jobs market. It appears from the recent data that we’re still seeing signs of resilience.

Longer term trends in unemployment data are looking pretty normalized after the large pandemic spike.

In the short-term, initial jobless claims for unemployment have been increasing, and continuing claims have been declining overall.

It’s a good sign that people who get on unemployment seem to be moving out of the system vs. staying on unemployment for a longer time.

Jobless claims data simply is hanging in there, and that’s a good thing.

Even the Federal Reserve is projecting that the unemployment rate stays historically low.

Even if we see a slight bump above 4%, the trend wouldn’t look too bad overall.

Even job openings are still high and showing numbers above pre-pandemic levels.

The labor market isn’t cracking yet and with assets near all-time-highs helping the wealth effect along, a recession isn’t looking likely anytime soon.

This doesn’t mean everything is peaches and cream out there though.

The consumer is showing signs of weakness in retail spending. Ulta Beauty [ULTA] and Lululemon [LULU] have been juggernauts in the retail space in high growth areas like beauty and athleisure.

Guidance disappointed across both names in recent earnings releases.

Not only that, the layoffs in tech seem to be continuing. Amazon just announced another round of layoffs and the U.S. Challenger Job Cuts data is showing cuts picking up in the tech and government sectors.

Ultimately, there are puts and takes out there, but, we’re still not seeing data that leads us to a recession being in our near future.

Hedge Funds Bet Big Against Bitcoin 🎰

Hedge fund are playing a high-stakes game with Bitcoin, but it's not just a simple bet against the cryptocurrency.

Picture this: it's the end of the first quarter, and Bitcoin's soaring run is hitting a pause. The smart money, known in the biz as leveraged funds (think hedge funds and their kin), is piling on bearish bets like never before.

We're talking record numbers, with short positions in Bitcoin futures through the roof.

But it's not all doom and gloom.

Some of these speculators might actually be rooting for Bitcoin in a roundabout way. They're playing both sides, shorting futures while snagging actual Bitcoin, aiming to pocket the difference.

It's a classic carry trade move, and with Bitcoin's premium in the futures market still juicy, these funds are like kids in a candy store.

Yet, not everyone's just in it for the arbitrage.

There's a camp betting outright that Bitcoin's going to take a hit, especially with the U.S. economy flexing stronger than expected and the Fed playing hardball on rates.

The timing's crucial, with Bitcoin's halving event just around the corner, and history tells us it's usually a bullish signal.

But with the game-changing entrance of U.S. spot ETFs earlier this year, we’re in uncharted territory.

So, as we navigate these choppy crypto waters, the question looms: are we on the cusp of a new bull run, or is this just the calm before the storm?

Only time will tell, but one thing's for sure – the more people that bet on downside moves through shorting, the bigger the “squeeze” if bulls hold up the trend.

Just because sharp-looking Ivy Grads on Wall Street are shorting bitcoin, doesn’t mean it’s doomed. In fact, we’ve seen time and time again, retail bulls run over pessimistic bears over the last 3 market cycles.

Food For Thought 🧠

"In a bear market, money returns to its rightful owners.”
- Jesse Livermore, a legendary trader
known for his ability to short the market successfully.

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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.