Bitcoin Breakout

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  • March 20, 2023

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February 19, 2023

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The Big North-American Market Dinos (BMD)

Inflation Infuriation

Source: Google Finance​

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The Toronto (Stock-Exchange): the Centre of the Universe

The water was choppy in the stock market this week as Canadian stocks went up, up down, up down (Songspiration)! Despite all the volatility, Canada’s main stock index, the S&P/TSX composite managed to gain some ground early on, before a late week pullback in the energy and technology sectors dragged it back down.

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The pullback was largely due to hawkish comments made by Bank of Canada (BoC) governor Tiff Macklem, who said that the Canadian economy is still overheated and the labor market remains too tight to end the fight against inflation. After announcing the central bank will temporarily pause interest rate hikes last month, Macklem reiterated that he is ready to raise rates further if inflation doesn’t let up.

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South of the Border

The U.S. market told a similar story this week, as stocks inched upwards, before investors were reminded once again that inflation isn’t going anywhere just yet. This reminder came after January’s producer price index, an inflation measure that tracks wholesale prices, rose 0.7%. This was well above the expected 0.4% and it’s safe to say that investors were not too keen on the news. A strong labor market piled on to these concerns as the Labor Department reported an unexpected fall in jobless claims for last week. Despite the ongoing concerns of never ending rate hikes, the big three American stock market indices were resilient, posting modest increases for the week.

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Risky ROI

Crypto

Source: Google Finance​

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Bitcoin Bump

After trading relatively flat to start the week, Bitcoin shot out of a cannon surging past US $24,000 for the first time in two weeks. Bitcoin had fallen below US $22,000 on several occasions following the highs in early February as investors stressed over new potential crypto regulation targeted mainly at stablecoins, along with concerns about U.S. Federal Reserve’s ongoing action to cool down inflation.

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All that was quickly forgotten this week as investors liquidated about US $60 million worth of short positions in Bitcoin, resulting in a bit of a short squeeze for the world’s largest cryptocurrency. Bitcoin wasn’t the only investment that reaped the benefits of this short squeeze as the broader crypto market, as well as crypto related equities followed suit, posting solid gains.

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Mining Mania

Canadian gold miner B2Gold Corporation (NYSE:BTG) announced this week that it has signed a deal to buy Sabina Gold and Silver Corp. (TSX:SBB) in an all stock deal worth CAD $1.1 billion. While Sabina operates a much smaller operation than B2Gold, it owns the coveted Back River gold district in Nunavut and is ready to begin a large-scale project in the area that will significantly increase its production capacity.

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Under the deal, Sabina shareholders will receive 0.3867 B2Gold shares for each Sabina share they own. The offer was valued at $1.87 per share based on B2Gold’s closing share price of $4.83 last Friday. Sabina shares closed at $1.58. While the wheel’s are very much in motion on this one, the deal still requires approval by a two-thirds majority vote by Sabina shareholders at a special meeting expected to be held in April.

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Moderate and Mellow Market Methods

Sector Spotlight

Earnings Power

Since going public back in 2015, Hydro One Ltd. (TSX:H) has been going steady. After all, that’s exactly what most would expect from a power utility company. Not too flashy, but Ontario’s largest transmission and distribution provider doesn’t give investors a whole lot to worry about either.

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That was exactly the case this week as Hydro One reported strong fourth quarter earnings, announcing a 10% increase in fourth quarter profits compared to last year. Revenue totaled $1.86 billion for the quarter, up from $1.78 billion a year earlier, while revenue, net of purchased power, was $967 million, up from $865 million. Shares of Hydro One were little changed following the earnings release and while it remains down slightly on the year. When it comes to diversification, holding a position in established utilities companies can provide income while reducing downside risk and volatility in your investment strategy.

Meme Stock Stalkers

Book It

It seems like it was just yesterday that Airbnb Inc. (NASDAQ:ABNB)went public via initial public offering (IPO), and it didn’t take long after that for the meme stock crowd to take notice of the new stock on the market. The hype was real as Airbnb soared more than 50% in its first couple months of trading, but per usual, the hype didn’t last and Airbnb has fallen more than 40% since peaking back in 2020.

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Now, the meme stock is on the rise once again, but this time for a more logical reason. Airbnb exceeded analysts’ expectations this week, posting record fourth quarter revenue and profit and achieved its first profitable year to boot. Shares jumped nearly 10% in after hours trading following encouraging results. While shares of Airbnb are now up more than 40% in 2023, it still has a ways to go before climbing back to its IPO price, let alone its all-time highs from 2021.

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ESG

Green Goals

This week, Telecom giant Verizon Communications Inc. (NYSE:VZ)committed to a new type of coverage! No, we’re not talking about 7G or whatever number they’re on now. Verizon revealed that it is on track to exceed its goal to source or generate renewable energy to 50% of its total annual electricity usage by 2025, and announced a new target to have 100% of electricity usage covered by renewable energy by 2030.

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Financial Jargon Word of the Week:

For investors, death spiral financing is nearly as scary as it sounds. Death spiral financing refers to debt that is financed through the use of a certain type of convertible bonds or convertible stock resulting in an increasing number of outstanding common shares. This waters down the value of each individual share and can often result in bankruptcy for a company.

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In a sentence, please!

Companies who use death spiral financing are a big red flag for me as an investor so I try to keep my distance.

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