Bitcoin Bonanza

Bitcoin has been in the public consciousness for several years, but the best-known cryptocurrency has raised its profile to new heights in recent weeks. 

The value of Bitcoin has more than doubled its value thus far in 2021 as more financial institutions have begun to embrace the asset, and some companies – including most notably Tesla– have added positions to their balance sheets in place of holding cash.

Last week, cryptocurrency brokerage platform Coinbase had its initial public offering. Early trading assigned the company a market value of more than $100 billion – more than the market value of the New York Stock Exchange, NASDAQ and Chicago Board Options Exchange combined.

“While that seems a bit of a stretch, we seem to be living in a world these days where anything can be worth anything,” says John Stewart, chief investment officer at Farmers Trust Co. “It remains to be seen just how long it can last.”

Talking points in this episode

Featured Insights: Consider alternatives

  • With stock valuations elevated and interest rates low, it may be worth considering some exposure to so-called “alternative” investments.
  • One strategy that has the potential to perform well regardless of the macro market environment is a long/short, or equity market neutral strategy.
  • This involves taking positions in stocks that have favorable outlooks and offsetting it by selling short stocks that have unfavorable outlooks.
  • While there are no guarantees, a skilled manager can produce 5 to 6 percent average annual returns with very low volatility and minimal risk.

Looking Ahead: Labor shortage?

  • One side effect of epic levels of government stimulus?  There are a fair number of people in lower wage jobs who aren’t in much of a hurry to get back to work.
  • Many small businesses are complaining that they can’t fill open positions, and restaurants seem to be bearing the brunt of the problem – wait times at popular dining locations are running in excess of two hours in many places.
  • While this may put a strain on many companies’ profit margins in the near term, (along with the input cost inflation I’ve been discussing recently) the good news is that the problem will likely solve itself as people either exhaust their stimulus funds and/or employers decide to pay wages high enough to lure back employees – just don’t be surprised when those costs are passed on to you as a consumer.

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