Category — Finance
Last week I gave a clear warning that Japan was at the epicentre of market moves world-wide. I gave that warning before the large fall in their stock market.
Of course I had no idea that on the very day I wrote my article we would see huge gyrations in their stock market. But I have followed the immense moves occurring in Japanese government bonds (JGB’s) and knew we weren’t far away from some fireworks.
And it seems to me the worst is far from over…
The falling bond market is a completely sensible reaction by investors to the Bank of Japan’s (BoJ) threat of seeking 2% inflation. Most are of course sceptical that the BoJ can achieve a 2% inflation rate. But it’s hard to see anyone buying bonds at a 0.5% yield when the central bank is doing all in its power to ensure investors ultimately receive a negative real yield.
Kuroda, the BoJ governor, has even met with large holders of JGB’s begging them not to sell out. That course of action won’t work. The first man out the door is better off. Who wants to be left holding the bag if Japanese government bond’s collapse further?
Even though the Bank of Japan is soaking up 70% of all new issuance, Japanese government bonds are still selling off. I’m sure they still have tricks up their sleeves (they always do), but I think we are still in the early stages of a large exodus out of Japanese bonds. [Read more →]
May 30, 2013 Comments Off
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Can you feel that?
Sure you can, right between the shoulder blades.
That’s the Reserve Bank of Australia (RBA) lowering interest rates to a record low. And if the banks cut savings rates by the same amount as the RBA rate cut, it could mean a big cut to your savings income.
A word of warning: don’t relax yet. The odds are the RBA will keep hold of that knife and give it a twist within the next couple of months as it sends interest rates even lower.
So, this is bad news right? It is. But it’s also an opportunity. I’ll explain more below…
Central bank interest rates don’t just impact savings rates. It impacts mortgage rates and dividend yields too.
In fact for many people the impact on mortgage rates is more important than the impact on savings rates.
Even though Australia supposedly has a positive private savings rate (I don’t entirely trust the official numbers; even the RBA says the savings rate isn’t accurate), about a third of the population has a mortgage and many more have investment property loans. [Read more →]
May 13, 2013 Comments Off
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In March, I was at a conference in New Hampshire when a few Bitcoin businessmen sat me down to lunch. It seems like the last thing one wants, a long lunch at which one is hammered by unrelenting geek-speak about the glories of some crazy software thing.
It turned out very differently. A developer suggested that I download a smartphone application called Blockchain. I did this. He then took at an image of my QR code — that funny square design that looks like a 3-D bar code. It looks like this:
Within a few seconds, I was the proud owner of my first Bitcoin. I felt the rush. Ownership changes everything.
My wallet lived on my smartphone. Only three years ago, some wonderful applications had already developed around the currency unit. Although I’m a bit of a ‘techy’, I’m not a rocket scientist, and I’m quite certain that I would have been out of my league.
But this is how digital institutions develop to become ever more user-friendly. At the same event at which I became a Bitcoin owner, I also used a Bitcoin ATM. I put in the green stuff, held my digital wallet up to the scanner, and then felt the buzz on my smartphone. Physical became digital. Beautiful. [Read more →]
April 13, 2013 Comments Off
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The story of Bitcoin, the world’s largest decentralized,peer-to-peer fiat currency, which today outranks many sovereign currencies in liquidity (and also overall market value), is indeed a fascinating one in both investment trends and distrust in government. The only reason thisdigital currency even exists is because of broad frustration in the global monetary system.
What was once a currency traded amongst your neighborhood anarchists online, Bitcoin is now blowing up in popularity. So called ‘Bitcoin Millionaires‘ are starting to pop up.
The early adopters of this currency, which started back around Halloween 2008 (near the climax of the subprime meltdown), have seen their holdings in Bitcoin skyrocket in value over the last few years.
image source: bitcointalk.org
In just the last few months, Bitcoin’s value has increased roughly 500%. It is completely unrelated and untied to any government or the unpredictable bearish market that has left many currencies and assets gasping for life. [Read more →]
April 12, 2013 Comments Off
Understanding Bitcoin requires that we understand the limits of our ability to imagine the future that the market can create for us. That is exactly what is happening with Bitcoin right now.
As I type, the price is exploding, the main exchanges are overloaded, and people around the world can’t convert from government currency into this digital gold fast enough.
Absolutely no one imagined such a thing five years ago. Why are we surprised? We should get used to surprises in this digital age. Thirty years ago, for example, if someone had said that electronic text — digits flying through the air and landing in personalized inboxes owned by us all that we check at will, any time of the day or night — would eventually displace first-class mail, you might have said this is impossible.
After all, not even The Jetsons cartoon imagined email. Elroy brought notes home from his teacher on pieces of paper. Still, email has largely displaced first-class mail, just as texting and social network private messages and even Voice over Internet Protocol are replacing the traditional telephone.
It turns out that the future is really hard to imagine, especially when entrepreneurs specialize in surprising us with innovations. The markets are always outsmarting even the most wild-eyed dreamers, and it is certainly smarter than the intellectual who keeps saying such and such cannot happen.
It’s the same today. What if I suggested that digital money could eventually come to replace government paper money? Heaven knows we need a replacement. [Read more →]
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