December 2024 Newsletter

Newsletter:
All the information in this letter is NOT to be considered financial advice; it is the author’s personal view and agreed views of others from their overviews of present markets. This content includes a summary of articles that I believe to be insightful and data that has been verified. The purpose is to provide content that is of interest and relevance to MarginCall.Club members.

Seasons greetings to all that visit

Welcome to the December 2024 Edition of the MarginCall.Club FinTech Newsletter

This month, we’ll review the key financial events of November 2024 and explore how they might impact December and beyond. As always, our goal is to provide you with timely, relevant insights to help you navigate the market effectively.

Financial Market Highlights – November 2024

  1. Stock Market:
    • Dow Jones Industrial Average (DJIA): As of November 30, 2024, the DJIA closed at >$45,071<, reflecting a modest 7.54% gain for the month amid mixed investor sentiment following the U.S. presidential election results.
    • S&P 500: The S&P 500 finished November at 6,032.38, virtually flat with a slight increase of 5.7% compared to October, the most since November 2023.
    • Nasdaq Composite: The Nasdaq Composite closed at 19,218.17, up 5.36% month-on-month, led by resilient tech earnings and optimism surrounding AI-driven growth.
  2. Economic Indicators:
    • GDP Growth: U.S. Q3 2024 GDP growth was revised slightly upward to 2.7%, and initial forecasts for Q4 suggest a modest deceleration as consumer spending cools.
    • Inflation: The Consumer Price Index (CPI) for November showed a year-over-year increase of 2.3%, continuing its gradual decline from 2.4% in October. Core inflation ticked lower to 2.8%.
    • Employment: The U.S. unemployment rate remained steady at 3.6%, with a slight uptick in layoffs across the tech sector. Wage growth showed some recovery, particularly in retail and hospitality ahead of the holiday season.
    • Interest Rates: The Federal Reserve left the federal funds rate unchanged at 5.25%, but market speculation over a potential early-2025 rate cut gained momentum as inflation continues to ease.
  3. Cryptocurrency Update:
    • Bitcoin (BTC): BTC closed November at >$97,400<, up from >$72,800< at October close, buoyed by continued optimism around spot Bitcoin ETF approvals and institutional adoption.
    • Ethereum (ETH): ETH gained momentum, closing November at >$3,600<, breaking through resistance levels amid rising activity on Ethereum Layer 2 networks.
    • Regulatory Developments: The SEC further advanced crypto regulations, hinting at greater clarity for centralized exchanges. Meanwhile, scrutiny of DeFi protocols continued to increase.
    • DeFi and NFTs: DeFi platforms experienced steady growth, while the NFT sector saw renewed interest in digital art and metaverse land tokenization.
  4. Geopolitical and Macro Economic Factors:
    • Geopolitical Tensions: U.S.-China trade tensions persisted, with little progress in negotiations. Additionally, developments in Eastern Europe and the Middle East remain key sources of market volatility.
    • Energy Prices: Crude oil prices hovered around >$68< per barrel in November, slightly up from October, as geopolitical concerns and seasonal demand supported prices.

Key Events to Watch in December 2024

  1. Post-Election Market Dynamics
    Following the U.S. presidential election results in early November, markets are adjusting to potential shifts in fiscal and monetary policy. The incoming administration’s stance on government spending, tax policy, and inflation management will shape investor sentiment heading into the new year.
  2. Holiday Retail Season and Consumer Spending
    The December holiday shopping season will provide critical insight into consumer sentiment and economic resilience. Strong spending could support GDP growth, while any weakness may signal caution heading into 2025.
  3. Federal Reserve’s December Meeting
    The Federal Reserve will meet again in mid-December. While no rate change is expected, their forward guidance will be closely watched for signals regarding the timing of potential rate cuts in early 2025.

Market Sentiment and Investment Insights

  1. Cryptocurrency Market
    November solidified Bitcoin’s bullish trajectory, and the crypto market remains optimistic about institutional adoption. Bitcoin’s year-end target of $115,000 remains in focus, though resistance near $98,000 may create some temporary pullbacks.
  2. Key Market Threats – December 2024
    • Economic Data: Weak holiday retail sales or disappointing GDP growth figures could prompt corrections in equities.
    • Federal Reserve Policy: A surprise hawkish tone in the December meeting could dampen market sentiment.
    • Geopolitical Risks: Escalating tensions in global hotspots may lead to a risk-off environment, benefiting gold and other safe-haven assets.
    • The cup & handle in the week chart: There is a 350% C&H in the Bitcoin 7 day chart that started on the 9th Nov 2001, cup set on the 16th March 2024, the handle set at end of Oct/start of Nov 2024, that would make a Bitcoin target of the next run up at >$275,000<, if that price hits before August/September 2025 then expect a pullback and then a pump past $500,000 before October, that’s 500 days after the last halving.   

Updated Q&A Section

Q: Why are yields still elevated, and what’s driving swap spreads in December?
A: The factors behind elevated yields and widening swap spreads remain largely consistent, though recent developments have added new dimensions:

  1. Treasury Issuance and Demand-Supply Dynamics:
    • The U.S. Treasury continues to issue significant debt to cover fiscal deficits, maintaining upward pressure on yields.
    • Institutional demand has increased slightly as yields approach attractive levels, but this has not been enough to offset the overall supply surge.
  2. Federal Reserve Policy and Volatility:
    • While the Fed has paused rate hikes, uncertainty about the timing of future rate cuts contributes to volatility in fixed-income markets. This uncertainty widens swap spreads, reflecting increased hedging costs.
  3. Geopolitical and Fiscal Uncertainty:
    • Persistent geopolitical risks, alongside unresolved fiscal challenges, are keeping long-term risk premiums elevated.
  4. Liquidity Constraints:
    • Reduced dealer capacity in both Treasury and swap markets, combined with post-election repositioning by hedge funds, exacerbates market dislocations.

In Summary: Elevated yields and swap spreads reflect a combination of supply-side pressures, liquidity constraints, and political uncertainty. A stabilization of yields could occur in early 2025 if the Federal Reserve signals readiness for rate cuts and geopolitical tensions ease.

Final Thoughts on Crypto

As we close out 2024, the markets remain focused on post-election dynamics, Federal Reserve guidance, and holiday spending trends. The crypto market continues to show resilience, offering a potential hedge against macroeconomic uncertainty.

Stay tuned for more updates, and remember that well-informed decisions are the best foundation for strong financial outcomes.

My Thoughts on election.

Some may read this and dismiss me as a conspiracy theorist wearing a foil hat. Let me assure you, I own no such hat, nor am I someone prone to rash or imprudent behaviour. 

In fact, my approach to decision-making in investing and life is rooted in a principle I hold dear: every story or event has three sides: Yours, Theirs, and the Facts. 

The recent U.S. presidential election, where Donald Trump secured victory, prompted me to reassess my perspective on Bitcoin’s future value, particularly over the next four years. Using deduction and evaluation, I’ve tried to map out potential scenarios in this shifting political and economic landscape. 

To start, we need to acknowledge the significant “elephants in the room.” By combining informed opinions and logical deductions, I’ve pieced together the following: 

Deductions

1. The U.S. Debt Crisis: 

  • The U.S. debt clock is rapidly approaching $40 trillion—a staggering figure. 
  • Those influencing the Democratic Party likely see this as an unsustainable burden they’d prefer not to inherit. 

2. A Calculated Loss in 2024? 

  • To avoid being the party in power when the debt bomb explodes, Democrats might of chosen to select candidates for 2024 strategically—ensuring a loss to Trump and the Republicans. 
  • This mirrors the strategy seen in the UK, where the Conservatives seemingly handed Labour a win in 2024. 

3. A Comeback Strategy in 2028: 

  • In 2028, the Democrats could position a strong candidate—potentially Michelle Obama—as a saviour figure to “rescue” America from financial woes they expect to land Trump with.

Opinions 

Trump’s Bitcoin Game Plan: 

  • Trump, a seasoned political and business strategist, likely recognizes Bitcoin and crypto as a path forward amidst mounting debt. 
  • He has announced that he wants the U.S. to amass a Bitcoin reserve of 1 million BTC over the next five years. 
  • At today’s prices, this would equate to a $90 billion asset, with immense potential for value appreciation. 
  • By extending this timeline, Bitcoin’s rising value could transform it into a key national asset, helping to offset the national debt. 

A Detailed Strategy: 

1. In Year 1, the U.S. could purchase 200,000 BTC via dollar-cost averaging (DCA) at an average price of $100,000. 

  • This would cost $20 billion—a fraction of the $175 billion already sent to Ukraine.  ­­­­

2. Simultaneously, Trump could launch a subsidized Bitcoin mining initiative within the U.S., boosting domestic production and adoption. 

3. Over time, Bitcoin’s valuation on government books would rise, reducing the debt burden. 

The Numbers Game: 

  • To halve the national debt by 2028 (let’s say it remains at $36 trillion with the implementation of DOGE), the U.S.’s Bitcoin holdings would need to be valued at $18 million per BTC. 
  • A more modest goal of reducing the debt by 33% would require Bitcoin to reach $12 million per coin.
  • An achievement that would lead voters to believe that 2 more terms of Republicans would see Trumps MAGA meme come to reality, and would set him as one of the greatest US presidents ever in many eyes. 

While these figures may seem astronomical today, consider Trump’s tools: 

  • The U.S. government effectively has a money printer at its disposal. 
  • Tether (USDT), the world’s largest stable coin, is increasingly tied to U.S. Treasury bonds, creating a bridge between crypto and traditional finance. 
  • Sovereign wealth funds and oil-rich nations, seeing a stronger dollar and Bitcoin-backed reserves, may be incentivized to purchase U.S. bonds. 
  • This cycle could generate significant liquidity, allowing Trump to continue buying Bitcoin, driving prices higher, and reducing the debt on the books. 

 The Political Landscape in 2028 

  • If the Democrats choose Michelle Obama as their candidate, Republicans response could be strategic. 
  • Tulsi Gabbard might serve as a strong VP pick if the opposition opts for a female ticket. 
  • If they select a male candidate, Vivek Ramaswamy could become the Republican VP. 
  • By 2028, the Democrats’ strength will depend on who faces legal consequences and what narratives emerge over the next four years from the past eight years. 

Trump’s Tactics: 

  • Expect him to hit the ground running on Day 1 of his second term, unafraid to unleash his agenda. 
  • Names like Elon Musk, Larry Fink, and others could play pivotal roles in reshaping financial systems: 
  • Larry Fink, for instance, sees Bitcoin as a tool for financial transformation, encouraging the public to buy USDT, which then buys U.S. bonds, stabilizing the system—for now. 

Final Thoughts: 

While speculative, this scenario reflects a strategic interplay of politics, economics, and cryptocurrency. If Trump can leverage Bitcoin to reduce even a portion of the national debt, he might achieve a legacy-defining economic transformation. But as always, the next four years hold countless uncertainties.

The conclusion, you cannot afford not to have Bitcoin in your portfolio, what percentage is your call, but if as I believe a $1 million is closer than we all think then 10% would maintain your present portfolio value.­­­­­

Regards,
James