foxex: Holy Guacamole!

The Market Sum | Insight after the bell

By Caleb Silver, Editor in Chief

Wednesday's Headlines

1. S&P 500 rallies for 5th consecutive day. Avocado prices soar - Not related

Markets Close

Dow
26,218,13 +0.15%

S&P
2,873.40 +0.21%

Nasdaq
7,895.55 +0.60%

VIX
13.74 +2.84%

INV Anxiety Index
98.96 Low Anxiety

US 10-Yr Yield
2.517 +1.45%

And...We're back.

All major U.S. indexes closed in positive territory today for no particular rhyme or reason. We can make some things up, but you're too smart for that. Instead, we are going to do a millennial focused newsletter today.

Credit Cards and Debt

It is Financial Literacy month here in the U.S., and we've been digging into credit card debt among several other financial instruments that can be money traps for consumers. Here are some recent stats:

Americans owe a record $1.04 trillion in credit card debt – up from less than $854 billion five years ago, according to the Federal Reserve
Only 60% of borrowers pay their balance in full every month
On average, Americans owe $6,354 on bank-issued credit cards
The average APR (Annual Percentage Rate) on a credit card is 17.67%

While not the biggest source of debt for consumers, credit cards are in the top 5, per Experian.

What's the Problem?

Essentially, it's a lack of education combined with how easy it is to obtain a credit card (or a few of them, for that matter). How much of your junk mail is unsolicited credit card solicitations? Credit card companies make their money on account transfers and those interest charges...and those interest rates - at 17.67% on average - are at their highest levels in more than 20 years.

Wait...I thought interest rates are heading lower?!

Why are credit card interest rates so high when interest rates in general are heading lower or staying the same? Credit card interest rates are partially based off what is called the prime rate, which is based off of the federal funds rate, set by the Federal Reserve. But they are also based off of the borrowers APR 'average daily balance'.

The credit card issuer divides your APR by 365 (days in the year) to determine your daily periodic rate. They multiply that by the number of days in the billing cycle to determine your monthly interest rate. While a credit card company quotes every borrower the same APR, read the fine print of your next statement and you'll see that your interest rate is unique to you, your average daily balance and your average outstanding balance. The more you borrow, the higher your rate.

The other reason credit card companies can charge rates like this is...well... they can. It is buyer beware, but unfortunately, most buyer's don't care until it's too late.

More News:

Top 10 Performing Stock ETFs of 2019

OPEC and India Are Stoking Bullish Sentiment

Why Lyft Could Plunge 42% In Warning Signal To IPO Investors

Avocado Prices Soar

This is the kind of story that gets everyone's attention. I've seen headlines like "Millennials in Crisis as Avocado Prices Soar", "The Worst News Ever...Avocado Prices are Skyrocketing", "U.S. to Run out of Avocados in 3 Weeks", and the like.

It's true that the price of avocados imported from Mexico spiked 34% on Tuesday. It was the biggest one-day jump in a decade and it was attributed to President Trump's threat to close all or parts of the border last Friday. That's a serious matter, and avocados are just one product that would be impacted by an actual border closure and trade stoppage. According to the U.S. Chamber of Commerce, nearly $1.7 billion of goods and services flow across the border daily, as well as nearly half a million legal workers, students, shoppers and tourists.

Still, it's the buttery fruit from the Mexican state of Michoacan that gets all the attention. The U.S. gets 90% of its $2 billion worth of avocado imports from Mexico, and while prices are on the rise, they were higher last Fall, and they'll spike again around cinco de Mayo (May 5th), and around the Super Bowl next February. Those are the two biggest days for avocado and guacamole consumption in the U.S. Chart, below, courtesy of marketwatch.com.

Related, but not Really

Chipotle's stock, which was on its deathbed a year or so ago, is hotter than a habanero right now. Read more.

Now, this is Absurd

We are sharing this because it's completely absurd...but kind of funny. Since we are on the millennial theme today, someone out there in FinTwit (Financial Twitter) actually chartered avocado prices against the recent spike in Bitcoin prices. Yes, the cryptocurrency formerly known as Bitcoin has had a resurgence of late, based on who knows what. James has more for you on that in our daily chart with some actual analysis. The fact that Bitcoin and avocados spiked on the same day is as random as a lottery number. I'm just sharing this because it made me laugh, and it's a slow news day. Make NO investment decisions with this information, please.

Chart of the Day: Bitcoin Breakout Boosts Cryptocurrency Market

The past two days have made many cryptocurrency investors very happy, and maybe a bit confused. Driven as usual by Bitcoin, the surge in cryptocurrency values that began on Tuesday has been sudden and dramatic. As of this writing, the original cryptocurrency and bellwether for the entire market has risen a whopping 27% in the past two days. During the same two days, Bitcoin Cash, a 'hard fork' of Bitcoin, has risen over 100%. Such velocity of market moves, while not unheard of in the wild world of cryptocurrencies, are still exceptionally rare.

The chart above shows the phenomenal recent trajectory of the top four cryptocurrencies by market cap - Bitcoin, Ethereum, Bitcoin Cash, and Ripple. The first three of these cryptos all broke out this week to new year-to-date highs that haven't been seen since November of last year. While Ripple has also surged sharply in the past two days (over +16%), it has only hit its highest level since January.

It's unclear exactly what has driven the outsized moves on Tuesday and Wednesday, but recent reports have suggested that a buy order for over 20,000 bitcoins (worth around $100 million) early Tuesday morning may have triggered further algorithmic trading activity that boosted prices dramatically. The resulting buying frenzy lifted most of the smaller cryptocurrencies in a wave of bullish contagion.

Clearly, unlike more traditional asset classes, it's almost impossible to analyze cryptocurrencies from either a fundamental or technical basis. So we're not even going to try. With crypto investing, it's mostly about buying, holding, and waiting for times like these (at least for now).