Category: Cryptocurrency

Bitcoin – when do I sell?

As I sit here on a calm November afternoon, Bitcoin is trading right around the $90,000 mark. In yen, we are getting close to ¥14 million per BTC. Quite a number, huh? The Bitcoin market cap just overtook silver. Yes, silver. And the total crypto market cap briefly touched an all-time high of $3.01 trillion today.

The mainstream media have picked up on the feverish price action since the US election. Being mainstream media, they are making the mistake of reporting on it as a ‘Trump trade’. I have seen this on the BBC, the evening Nikkei news and elsewhere.

Here’s the first thing to note: the bull market was already in motion and primed to enter the parabolic phase. Trump was just a catalyst. It was going to happen anyway. Something else would have kicked it off if it hadn’t been Trump’s victory. If you think this is about Trump, you have missed the point.

That said, the incoming US administration is going to be far more crypto-friendly than the current one, which is something I covered in my previous post, Full Send.

I discussed bull market catalysts back in my October 2023 post: Bitcoin, Pump up the Volume! I was wrong about the US entering recession (so far), but that wouldn’t have stopped the bull market either.

Here is an excellent explanation of how the halving, which took place in April this year, squeezes miners and eventually leads to a surge in price:

The key takeaway: the bull market mania phase was going to happen regardless. Trump was a catalyst. Central banks entering a rate-cutting cycle was a catalyst. They lit the fuse, and now we get to watch the fireworks.

So, when do I sell?

Take it easy now. The decisive break of the 2021 cycle top was only a week ago!

We need to be careful who we listen to when things go parabolic. One week in and crypto ‘analysts’ are already calling the top.

It’s been interesting to note that over the past week, during Asia daytime, price has tended to dip. People are taking profit at these levels. Some of these people probably bought the 2021 top, of course. Then overnight, when Blackrock and the other ETFs start buying, price moves up again. ETF inflows for the first 3 days of this week totalled $2.4 billion. Retail FOMO is only just getting started.

Some have lamented how people are now going to pile in and end up buying high and getting stuck holding the bag. Yes, that’s what is going to happen. It happens everywhere when the price of an asset shoots up. It’s not limited to crypto. Your job is not to join the legions of people who make this mistake.

Study this tweet. Ponder it. There’s a whole chapter of George Soros’ best-selling book in those 6 words. (look up reflexivity from ‘The Alchemy of Finance’)

An asset may start to rise due to fundamentals, an economic or political event, a drag on supply, or whatever. Once it starts going up, people notice and react to the price, pushing it higher. This can get extreme during bull markets and bubbles.

Things are about to get silly. Focus.

Professional traders and investors are generally very good at buying low. Research shows that they are mostly pretty average when it comes to selling high. It’s actually really difficult. Sell too early and you regret leaving money on the table. Wait too long and you get fixated on the all-time high and start willing it back up there when you should be hitting the exit.

It’s hard. Don’t let anyone tell you otherwise.

You are not going to sell the top

Accept this. It’s not going to happen.

So, what to do?

Have a plan

Are you even going to sell? Bitcoin is going way higher over the next 10 years. It’s perfectly acceptable to hodl and ignore all the noise. You don’t have to complicate matters. If that’s your plan, it’s a good one. Please enjoy doing something else!

Many intend to sell during the bull run so they can accumulate more in the inevitable bear market that follows. That requires a plan of action. I can’t tell you exactly what that plan should look like. It’s an individual thing. But have a plan.

Some people need to build a spreadsheet. Some just need a few calendar reminders. Here are some general pointers:

Avoid round numbers – everyone wants to sell $100k. Yep, they did in 2021 too. The market does not owe you a particular number. Your favourite analyst says we are going to $125k – giddyup!!! This is how people screw up. Waiting for a number that never comes. Your favourite influencer says the bull market will run until February 2026 – red flag!!! Don’t get sucked into this kind of thinking. Nobody knows anything.

I would be much more willing to bet that BTC reaches $1 million sometime in the future than I would to bet on it reaching any particular number in the next 10 months.

Average out – the chances are you didn’t buy all of your Bitcoin at the stone-cold bottom of $16k. More likely, you bought little by little during the bear market and the early bull market. Dollar-cost averaging is a great way to buy a volatile asset. It’s also a great way to sell a volatile asset. Exiting a little at a time over the coming months means you will get out at an average price, which is a lot better than round-tripping the whole bag back to the bottom. You might even sell the top on one of those orders!

Alts go first – I stressed this in my previous post: Bitcoin and crypto are not the same thing. Any non-Bitcoin crypto asset needs to be aggressively sold when things get crazy. That means ETH, SOL, SUI, dogs, cats, squirrels. Whatever crazy coin you got yourself into that is destined for the moon. It’s going to crash 90%. And then it’s going to get cut in half again. Most meme coins are going to zero. (don’t worry, Doge will survive!)

Sell catalysts

The 2021 bull market peaked at $69k in November of that year. At that time, crypto influencers were loudly calling for a push to $100k by around February 2022. Euphoria reigned. Meanwhile, Jerome Powell and his pals at the Fed were just getting to grips with the fact that inflation was not going to be transitory like they thought. Bitcoin rolled over as it became apparent we were about to enter a rate hike cycle. Maybe we would have got $100k without it, maybe we wouldn’t. I wish I could say I correctly identified this glaring top signal, but I didn’t. I know one or two traders who did, but we are talking about a very small minority.

Just like there are catalysts that ignite a bull market, there are events and conditions that usher in the bear. Whilst averaging out, look for the signs. Averaging out may well require selling on both sides of the cycle top.

The number one thing to look out for is euphoria. When everyone thinks we are going up forever, take cover.

Don’t forget the tax man – assuming you did a great job and averaged out, you should end up with some handsome profits. But don’t rush out and buy the lambo just yet. Remember, you are going to have to declare your winnings and pay the man. Many a successful trader has fallen into this trap and ended up in debt.

Reinvest – make sure you reinvest profits for the future. You don’t have to lump it all back into crypto. Splitting part of the gains into a well-diversified portfolio is a smart move. Past bear markets have seen Bitcoin drop by around 80% from its peak. Start getting greedy again when we get to those levels.

Enjoy the ride – bull markets are fun! Laugh at the memes, smile at the gains, take profits and just beware of euphoria.

Or simply never sell.

Top Image by starline on Freepik

Disclaimer: This should go without saying, but the information contained in this blog is not investment advice, or an incentive to invest, and should not be considered as such. This is for information only.

Full send – what the US election means for risk assets

The American people have spoken, and it’s about goddamn time! We may argue about politics but I think there’s one thing we can all agree on: there is no need for a presidential election campaign to take all year. Can’t you just get it over with in a month or so?

You have likely already had your fill of election hot takes, so I will spare you mine. I will, however, use this post to explore what the result could mean for our investments over the weeks and months to come.

Risk on, for now at least…

The initial market reaction to Trump’s win was well-expected. Stocks pumped, and Bitcoin surged to a record high. Add to that above-trend GDP growth and gold around all-time highs and you have an intriguing risk cocktail in the mix.

And then, last night, Jerome Powell delivered another rate cut. The Santa rally is well and truly in play.

Financial conditions in the US are easing considerably with a strong economy and inflation not fully defeated. What could go wrong? Many, myself included, think that the Fed is cutting too soon.

It’s one thing to disagree with the man’s strategy. However, don’t go asking him any stupid questions!

I’ll take that as a ‘no’.

On the subject of inflation, Powell also wasn’t afraid to say the quiet part out loud:

Take a moment on that one. Prices don’t come back down. Wages have to catch up. If you live and work in Japan, how are those wage hikes coming along? Data released on 7 November showed that Japan’s inflation-adjusted wages fell for the second month running in September. (you may remember that before that they fell every month for more than two years)

In case you missed it, I covered the four must-own assets for inflationary times in my previous post. All roads lead to inflation. Plan accordingly.

Stocks look likely to remain strong into year-end. If you are wondering what can go wrong after that, the bond market is the place to look. America just came out of the longest period of yield curve inversion in history. (short-term interest rates being higher than long-term rates) Without getting too deep into the weeds here, an inverted yield curve frequently precedes a recession. The consensus, however, seems to be that this time it’s different and the US economy is heading for a soft landing. Time will tell.

If you want to challenge yourself to understand the relationship between bond yields and the Fed, have a crack at this X thread. I’ve read it twice now and I think I still need another go…

How high is Bitcoin going?

Forgive me, I know I have been banging on about Bitcoin for a long time, even longer than the US election! My take is that the 4-year halving cycle is the best predictor of price movement – until it’s not. If that cycle breaks, I will change my view but as of now, it is playing out exactly as expected.

However, the Republican election sweep just added rocket fuel to the fire. In no particular order, here is the crypto bull case for the next 10-12 months and beyond:

  • The Democrats’ war on crypto is over
  • SEC head Gensler is on the way out – see ya buddy!
  • A significant number of incoming senators are pro-crypto/crypto-curious
  • Senator Cynthia Lummis has submitted a bill proposing a strategic bitcoin reserve. The proposal is for the US to buy 1 million BTC over the next 5 years. That’s 548 BTC a day. Currently, only 450 are mined every day.
  • Detroit, Michigan just became the largest American city to accept crypto as payment for taxes
  • Global easing cycle underway
  • Retail didn’t even get interested yet
  • Solana ETF possibly in the works

The parabolic phase of the bull cycle is upon us. I am not making any predictions as to how high it will go. Nobody knows. But the higher it goes, the harder it will fall at the end. That’s how the 4-year cycle runs. Here’s Mark Yusko with his take:

If you own Bitcoin, you need to decide if your strategy is to hodl for the long term or sell during the bull run so you can increase your holdings in the inevitable bear market that follows. Option two sounds great, but it’s harder than you think. Expect more on that in a later post. In my humble opinion, any other flavour of crypto needs to be sold in the bull market. Those Metaplanet shares too. It will all get crushed when the music stops. But for now, enjoy the ride!

Full send. This is not a drill.

Top image from Craiyon.

Disclaimer: This should go without saying, but the information contained in this blog is not investment advice, or an incentive to invest, and should not be considered as such. This is for information only.

Facing inflation – the four assets you should own

Happy Friday! I thought I would provide a quick round-up of what is going on in markets. In case you missed it, here’s the most important five minutes of financial commentary I saw this week:

If you don’t know who PTJ is, here is his Wikipedia page. The Tldr is legendary trader and billionaire hedge fund manager.

The message here couldn’t be clearer: ‘All roads lead to inflation.’ Note the mention of Japan around the 4-minute mark. The playbook for how nations get themselves out of debt trouble is to inflate their way out. This is happening. Think what that means for your spending power. Think what it means for the yen…

So what assets does a guy like this own to face down the inflation threat? Bitcoin, gold, commodities and tech stocks. Hard assets and tech stocks. Simple.

I have had numerous conversations this past few weeks along the lines of ‘I want to own gold, but I feel like I’m too late.’ Yes, this is why I preach having the core of your assets in a diversified portfolio instead of just lumping it all into a global stock ETF. If you owned a diversified portfolio, you would have 3-5% in gold, and that part of your portfolio would be up +30% this year already. You wouldn’t have to scramble to buy some now.

This is an excerpt from a post I wrote in March 2023:

‘But global stocks have outperformed a diversified allocation over the last 12 months.’ – yes, there will be times when they will do that and there will be times when they won’t…

Here’s the simplest way I can put it: if you are young and in the process of accumulating wealth, then maybe a 100% stock allocation is ok. If you have already built up a nice nest egg, you need to think seriously about how to keep it. Spread the risk and sleep well at night.

When it comes to the satellite holdings, it’s pretty clear what needs to be beefed up right now: bitcoin, gold, commodities and tech stocks. You might already have commodities in your diversified portfolio, but with inflation looming, it’s time to get some more. Note that PTJ mentions how commodities are still under-owned.

Bitcoin is coiled

The Bitcoin four-year cycle is playing out exactly as expected and we are about to enter the fun phase.

The BTC ETFs are buying more BTC than is being mined every day. By a long way. Supply shock incoming. I don’t know how to explain it any more clearly.

If you are waiting around for a Japan Bitcoin ETF, I wouldn’t hold your breath – see this Financial Times article.

Meanwhile, Microsoft placed an ‘assessment on investing in Bitcoin’ on the voting ballot for its 10 December annual shareholder meeting. The Microsoft board recommends voting against the proposal, deeming it ‘unnecessary’ as the firm’s management ‘already carefully considers this topic’. This is a conversation that will take place in boardrooms of more and more major companies. Note here that Tesla still owns 9,720 BTC.

Gold breakout is happening now – are you really late?

Tesla leads big tech earnings

Tesla was the first Magnificent 7 company to report earnings this season and it got things off to a good start. The EV manufacturer’s stock just had its best day in the market in over a decade after reporting better-than-expected results. I understand why some people don’t like the CEO, but betting against his companies is a risky business. A +22% gain in a day is going to hurt some short sellers. More on upcoming Mag 7 earnings here.

That’s all I have for today. Wishing everyone a great weekend!

In summary, all roads lead to inflation. A core diversified portfolio and satellite holdings in bitcoin, gold, commodities and tech stocks is the best way to face down the threat to your purchasing power.

Top image by wirestock on Freepik

Disclaimer: This should go without saying, but the information contained in this blog is not investment advice, or an incentive to invest, and should not be considered as such. This is for information only.

Turning point

So, here we are. Overnight, the Federal Reserve announced a rate cut of 50bps, the first cut in four years. Projections imply a further 50bps later this year and another 100 bps in 2025. Welcome to the rate cut cycle.

US markets reacted cautiously, with stocks rising ahead of the announcement only to give back those gains and close down slightly. 50bps is considered a big initial cut, so it will be interesting to see how markets behave over the next few days as they digest the news.

Surprisingly, the yen fell against the dollar to the upper ¥143 range and Japanese stocks were up strongly this morning. Again, time will tell if the initial reaction is the correct one.

The macro gurus will no doubt be fighting it out as to whether the US economy is coming in for the much-vaunted soft landing or heading for recession. Jerome Powell sounded upbeat on America’s economic prospects and made clear that he views the larger cut as a move to prevent the Fed from falling behind.

We will find out in due course.

Sometimes the most obvious take is the correct one: rate cuts are generally bullish for risk assets over time, although we may need to ride out some volatility in the short term. The doomers will keep dooming but optimists make more money in the long run:

“Bulls make more than bears, so if anything being an optimist about life and about things in general is a great attribute as an investor. You just can’t be starry-eyed and naive.” — Stanley Druckenmiller

Deja vu

Three assets that are a hot topic in this new environment are gold, silver and bitcoin. It’s funny because I remember these three getting a lot of attention four years ago. Granted, the post-Covid crash environment in 2020 was very different from today – for a start, the Fed funds rate was already at zero in September 2020. However, it’s interesting how things move in cycles. Gold is around all-time highs now and silver enthusiasts are clamouring for a breakout. It has a strong 2020 feel to me, so I thought I would take a look back and see what happened four years ago.

Observe the five-year charts:

As you can see, both gold and silver reacted quickly to the stimulus injection that followed the March 2020 Covid shock. Liquidity is generally good for hard assets. Bitcoin took longer to catch alight but when it did, the fireworks were spectacular as it took out the previous all-time high of $20k and then marched right on to $60k and then $69k in 2021. That move started at $6k at the end of March 2020 and BTC was still only $11k on 19 September 2020.

I like all three of these assets in the current environment, but I like one much more than the others.

Game time soon, anon.

Disclaimer: This should go without saying, but the information contained in this blog is not investment advice, or an incentive to invest, and should not be considered as such. This is for information only.

Semiconductors, online banks and Shimamura

As another quarter rolls around, it’s that time again. Yes, the main event this week is, of course, the Nvidia Corp (NVDA) earnings report. Once more, expectations are sky-high and, if the chipmaker fails to meet them, the market mood could sour in a hurry. We find out if the AI bull market narrative remains intact on Wednesday night.

Q1 revenue was a whopping $26 billion with guidance of $28 billion for Q2. Wall Street is expecting even more than that with the average analyst estimate coming in around $28.6 billion. Questions have been asked of this company before – can it deliver again?

US tech stocks are trading warily ahead of the report but the Dow Jones Industrial Average managed to put in another record-high close on 26 August.

In Japan, a Nikkei report says that Resonac Holdings Corp (4004) will make a ¥30 billion investment to improve the performance of power semiconductors used in electric vehicles and other devices. This follows the announcement in early July that Resonac will form a consortium with nine other Japanese and US firms to collaborate on the development of semiconductor technologies for generative AI.

Shares in IOT service developer Future Innovation Group Inc. (4392) went limit up today. The jump follows an announcement that FIG’s subsidiary Realize’s transport robot will be deployed in a semiconductor factory run by Rapidus. Rapidus is working on the domestic production of cutting-edge logic semiconductors.

Online banks are picking up customers

The Nikkei also reported today that online banks have doubled their total number of accounts over the last five years. The six major online banks now boast over 40 million accounts as of the end of March 2024, up 13% from the previous fiscal year. The net banks are taking on traditional banks by linking up with point-based ecosystems and smartphone payments and are also providing systems to external companies.

Rakuten Bank Ltd (5838) and SBI Sumishin Net Bank Ltd (7163) gained +5.2% and +5.3% respectively today on the news.

Selling megabank shares to buy net banks could be an interesting trade. However, investors need to keep in mind that rising interest rates and increased competition could slow the growth of the online banks, particularly those that are reliant on low-interest home loans.

Meanwhile, Paypal’s Solana-based stablecoin, PayPal USD (PYUSD) reached a $1 billion market cap just 383 days after its launch, making it the sixth-largest stablecoin.

In other business

If semiconductors and online banks are too flashy for your risk profile, take note that purveyor of high fashion (ok, I jest), Shimamura Co Ltd (8227) reported a 5.5% increase in same-store sales for August compared to the same month last year. This marks 10 consecutive months in which sales have beaten the previous year’s results. Shimamura’s five-year chart isn’t too shabby and it pays a 2.4% dividend. Money in the bank!

Disclaimer: This should go without saying, but the information contained in this blog is not investment advice, or an incentive to invest, and should not be considered as such. This is for information only.

Lock in

I hope you are enjoying Obon and the summer holiday. After a market crash and a Nankai Trough earthquake warning, things feel a little calmer this week. Hopefully, there won’t be any more ‘big events’ in August other than the local matsuri.

However, September is approaching and it feels like that will be the time to get locked in and focused. So here are a few thoughts as we speed into the last four months of the year!

US markets

There is a slew of economic data coming out of America this week, with the Producer Price Index (PPI) coming in a little softer than expected last night. CPI is tonight and another soft print will heighten expectations of a Fed rate cut in September. Toys will be thrown if Chair Powell does not deliver, but I’m also becoming a little more cautious about the outlook for stocks if he does go ahead and cut. History favours a recession scenario at the end of a hiking cycle. A lot of effort has gone into the soft landing narrative, so we should be on our guard. No reason to make adjustments to long-term investments but things rarely go as smoothly as the crowd expects.

That said, the completion of the US election will remove a lot of uncertainty, regardless of who wins.

Yen / Japan stocks

After starting August with a bang, the Bank of Japan has swiftly backed down from any plan to raise rates again this year. They got as far as 0.25% and the stock market melted down. They didn’t even get to the bond market jitters part of the project. I would love to hear from anyone who can explain how the BOJ will go about a meaningful tightening from here. Imagine what rates at 0.5% would look like. How about 1%?

I just saw a Bloomberg headline that said that PM Kishida is stepping down in favour of a leader who is supportive of the central bank’s efforts to normalise policy. Best of luck to whoever picks up that poison chalice!

Let’s just call BS, shall we? You can’t normalise a ponzi.

Nonetheless, if the Fed does begin to cut, the yen should strengthen. I don’t know how far it will get. 130? 120? 100? It doesn’t matter, because once that cycle is over it is only going the other way. You can save the bond market or the currency and no one is sacrificing the bond market.

I have said it before but I’m nothing if not a broken record: if you are going to spend your future money outside of Japan, you should forget about those alluringly cheap Japanese value stocks and get your money out of yen and into your base currency while you have the opportunity.

If you are here for the long haul, by all means, have at it. In the shorter term, Japanese stocks should do ok and I would even be tempted to look for names that will benefit from a stronger yen. Exporters that did well under the weak yen don’t seem such a great idea going forward.

Getting hard

With the US election looming, the cynical among us would be watching out for a liquidity boost to pump up the US stock market. Rather than the Fed, we should probably be looking at the treasury to provide the liquid refreshment. This ‘Bad Gurl Yellen’ piece by Arthur Hayes goes deep into the fountain of liquidity that is about to spring forth. In short, the treasury needs to lower the debt-to-GDP ratio, and it will do so by issuing yet more debt.

The Congressional Budget Office projects that interest payments on America’s debt will total $892 billion in fiscal 2024 and rise significantly in the next decade.

If you are wondering what that looks like, get a load of this chart:

Tell me you’re gonna print more money without saying you’re gonna print more money…

I wrote about currency debasement and and how to protect yourself in Harden up your assets! If you are looking at stocks to plough your hard-earned money into right now, that’s one way to do it but maybe there is a better option.

As you can see, some technical traders are getting excited about gold. JP Morgan agrees, arguing that the structural bull market remains intact and forecasting an average price of $2,500 in Q4 and $2,600 in 2025. Geopolitical tensions, rate cut expectations, central bank buying and ETF flows all point to elevated gold prices – report here.

Of course, those are short-term targets and the real point of owning gold is to protect against currency debasement over time. Remember, this is what you’re up against:

Digital gold

Ever the broken record, allow me to point out once more that the boring phase of the Bitcoin bull market is drawing to a close. We probably bounce around for a few more weeks, maybe even a couple of months. The timing is difficult to predict but I expect significantly higher prices by the end of the year. And more to come in 2025. If you are thinking of getting on the train, you don’t have long left…

Despite a reshuffle of the Democratic nominee, pretty much everything I wrote in the Bitcoin bull market update still stands. All aboard!

If you are still trying to get your head around the hardest asset on the planet, the presentations from Michael Saylor’s keynotes are a great resource.

Don’t say I didn’t warn you!

Disclaimer: This should go without saying, but the information contained in this blog is not investment advice, or an incentive to invest, and should not be considered as such. This is for information only.

Buckle up!

It’s the 1st of August. The two big central bank decisions are behind us and summer is in full swing. So what comes next? Where will markets be at the end of this year? Nobody knows the answer to that question but I can almost guarantee you one thing: there is turbulence ahead.

Just like Japanese summer, the volatility already got started in July. However, we seem to have entered a new phase and central banks are the main drivers of the momentum shift.

Having hiked rates to levels unseen in 15 years, there is little doubt that the BOJ has entered a tightening cycle. Governor Ueda did not rule out another hike this year and the yen responded quickly to his comments, rising to 150 against the dollar. Today it is trading at around 149. Weston Nakamura sees 152 as the most important price level in global macro right now and we are already well beyond it.

Japanese stocks reacted positively to yesterday’s decision, pumping across the board. However, the Nikkei 225 index slumped -2.5% today as exporters felt the pinch of a stronger yen.

US tech investors rotate into small caps

In the US, Fed chair Powell left rates unchanged while hinting that he is getting closer to a cut. The market fully expects this to happen in September and there will be visible disappointment in people’s brokerage accounts if it doesn’t. Volatility is already rearing its head. Tech stocks have sold off over the past month amid fears that the AI bubble might be bursting. Nvidia has been trending down from its 6 June high of $140.76 and a -7% dump on 29 July seemed ominous, but last night it pumped +12.7% after AMD’s better-than-expected earnings release. Go figure…

Hats off to strategist Tom Lee for calling the rotation into small caps. IWM has been the main beneficiary of the tech selloff.

The crypto coaster rolls on

Not to be outdone by chipmakers, crypto remains unpredictable over short time frames. At the Bitcoin conference in Nashville last week, none other than Donald Trump showed up to play to the crowd. His list of “promises” included: keeping the Bitcoin the US government has seized as a strategic reserve, (yes, wow!) firing Gary Gensler on day 1, ending the democrat’s war on crypto and making the US a leader in mining.

The air quotes around “promises” don’t need much explanation. Trump has zero interest in crypto and is plainly exploiting the dem’s antagonistic stance toward the industry for votes. But don’t let that distract you from the bigger picture: governments are examining Bitcoin as a strategic hedge against their own money-printing excess. The fact that this conversation is even happening is remarkable. Bitcoin game theory is going to get very interesting in the months and years ahead.

Bitcoin is back in the $64,000 range today, as it appears that the Biden/Harris camp may be selling off the reserve that Trump promised to keep. It’s never boring. See my Bitcoin bull market update for more.

Meanwhile, investors in Japan received a lesson in FOMO from Bitcoin proxy Metaplanet Inc. this week. Shares went on a tear after the company announced its Bitcoin treasury strategy in April and many people piled in late. Now the stock is coming back down to earth with a bang as the excitement wears off. Shares are down over -70% from their 24 July high and the move down doesn’t look done yet. Of course, every man and his dog wanted the stock when it was skyrocketing and nobody is interested now. There’s a clear lesson there. That said, I wouldn’t be surprised if Metaplanet makes another run if/when Bitcoin makes a decisive break above its previous all-time high and enters the parabolic phase of the cycle. Timing is everything in narrative-driven trades.

So, what to do?

I have noticed an uptick in clients trying to position and trade some of these macro moves, particularly the USD/JPY angle. The problem with access to unlimited information, content and opinion is the urge to react to it and do something. So here’s my two cents:

The summer, and perhaps the rest of the year, will see some turbulence. Volatility goes both up and down. Overall, the backdrop keeps me optimistic. Rate cuts in the US are coming – it’s just a question of when. As things currently stand, it would not be a panic cut, which is constructive for risk assets. US stocks, gold and crypto should react accordingly. Regardless of who wins, the US election will remove a lot of uncertainty. If you are broadly diversified, you could do a lot worse than fastening your seatbelt and taking a nap for a while.

If the BOJ is tightening and the Fed is loosening, the yen should continue to strengthen. This is going to put some strain on export-related Japanese stocks and the market as a whole looks more unpredictable than the US. Governor Ueda said he doesn’t think the rate hike will damage the Japanese economy. He’s probably right for now, but let’s see what kind of toll a series of hikes will take. The last time the BOJ tried to hike was 2007/2008 and that move was reversed in a hurry…

If you have been waiting for your chance to escape JPY and get into your base currency, that window is opening. Don’t miss it – long term it does not look good for the yen.

Stay hydrated folks!

Disclaimer: This should go without saying, but the information contained in this blog is not investment advice, or an incentive to invest, and should not be considered as such. This is for information only.

Gradually, then suddenly

After showing signs of wobbling the last few weeks, US markets slumped on 24 July with big tech shares leading the move down. Tesla Inc (TSLA) fell -12.3% after a Q2 earnings miss while Alphabet Inc (GOOGL) dropped -5% despite beating earnings expectations. That was enough to trigger an avalanche and the NASDAQ ended -3.6% lower and the S&P 500 endured its worst day since 15 December 2022, falling -2.2%.

Correction territory

Japanese shares followed the US market down, with the Nikkei 225 index falling -3.3% today as exporters laboured under a strengthening yen. The benchmark index peaked on 11 July at ¥42,426 and has trended downwards since then. It turns out that I wasn’t imagining things when I asked Are we shaking? at the end of June.

Investors will now be wondering if this is simply a healthy correction after a big run-up or the start of a larger move downwards. It is too early to begin talking about a bear market but we are certainly in correction territory. A correction is defined as a fall of -10% from a recent high and the Nikkei closed today down -10.7% from the 11 July peak.

At 3pm today, USD/JPY was trading at ¥152.7. The current rebound in the yen is being driven by expectations that the Bank of Japan will raise rates at its policy meeting next week. In addition, the US Federal Reserve appears to be moving in the direction of rate cuts starting in September. A sustained sell-off in stocks may well need confirmation of rate cuts in order to stabilise.

Semiconductor stocks fall hard, Lawson delisted

Semiconductor-related stocks are bearing the brunt of the current selloff with Disco Corporation (6146) falling for seven straight days. Disco fell a further -4% today to close at ¥46,850, well off its peak of ¥68,850 set on 11 July.

In other news, convenience store operator Lawson Inc. was delisted from the TSE on 24 July following a successful tender offer from KDDI Corp. KDDI will partner with Lawson’s parent company, Mitsubishi Corp to take the company private.

A stock to watch

Crypto followed the trend in traditional markets with Bitcoin falling to around the $64,200 mark. Ethereum is down around -8% despite the successful launch of the Ethereum ETFs in the US on 23 July. 

Meanwhile, Japanese Bitcoin proxy Metaplanet Inc. (3350) has been on a wild ride. The stock has risen more than +1,100% since the company announced its Bitcoin treasury strategy in early April. However, the FOMO really kicked in this week with shares accelerating to ¥300 on 24 July. Metaplanet is back trading around ¥220 today but is still a stock to watch as investors try to front-run the potential decisive break of Bitcoin’s all-time high in the coming months. 

It seems likely that traders view Metaplanet as a tax-efficient way to gain exposure to Bitcoin price moves. Crypto in Japan is taxed as miscellaneous income, whereas stocks are taxed as capital gains.

Disclaimer: This should go without saying, but the information contained in this blog is not investment advice, or an incentive to invest, and should not be considered as such. This is for information only.

Bitcoin bull market update

Are we having fun yet?

It’s been almost 8 months since my Bitcoin bull market prep post Bitcoin – Pump up the Volume. It feels like it’s time to check in and see how things are going. I don’t know how accurate Rekt Capital’s estimation of progress will turn out to be but it feels about right. When I talk to people about Bitcoin, which I probably do far too much, I’m still stunned to find how little the halving cycle is understood. Nobody is interested in buying in the bear phase, but when the price starts going up and making news, people start asking if they should be getting involved.

For those of us who bought in the bear market, this is supposed to be the fun part. However, the timeline has been strangely depressed. I think a lot of people got sucked into alts and memecoins when they were rallying earlier this year and are stuck there. This is why I tell beginners to focus on Bitcoin. As volatile as it may appear to outsiders, it is actually quite predictable. So, what’s going on at the moment?

ETFs

The spot Bitcoin ETFs that launched in the US in January have been wildly successful. Blackrock’s IBIT took just 137 days to reach $20 billion in assets. The fastest before that took 985 days. The ‘sell the news’ traders did not come out of this well. The five US spot ETFs are at around $56.5 billion in assets. There is nothing complicated here – increased demand for a finite asset is going to have an effect on price and year-to-date the leading crypto asset is up a little over +50%.

What’s more, Blackrock CEO Larry Fink, previously a crypto sceptic, is regularly on TV talking about his belief that Bitcoin is a legitimate financial instrument which has a role in portfolios. Note the repost from Michael Dell:

Playing defense

Larry might be talking his own book, but he has actually grasped another thing that the majority of people are missing: that rather than a get-rich-quick scheme, Bitcoin is actually a defensive asset that can protect against currency debasement and other economic ills.

I’ll say that again: Bitcoin is a defensive asset. Let’s be real here, it’s not going to replace fiat currency as the base layer of the financial system. Governments have far too much invested in the status quo to let it go. And they are going to continue recklessly printing fiat money and inflating their debt. That money is going to go down in value against hard assets over time. Read Harden up your assets for more on that.

Guess who else seems to have just changed their opinion on Bitcoin?

You think Dimon flipped and doesn’t own any? Dips are for buying in the bull market folks.

Ever the opportunist, Donald Trump has seized on the Democrat’s hostility towards crypto and is speaking at a Bitcoin conference in Nashville later this month. I like the orange coin much more than I like the orange man but a Trump victory in November would likely be a full-bull mania catalyst.

Who are your bets on for Prez these days?

Never mind the parabolics, it’s the banana zone!

Maybe this cycle will be different. Nothing is certain in life. We could be wrong here after all. But if we’re not, the next phase of the bull market is banana-shaped. Raoul Pal is a bit excited:

Ahhhh, liquidity

Summer in Japan officially starts now. It’s going to be a hot one and there will be much call for regular liquid refreshment. And, what comes after summer?

That’s right, rate cuts in the US!

Jerome Powell is now pretty openly signalling that he intends to begin cutting this year, possibly as soon as September. The market believes him too. The biggest investing lesson I learned in the last few years is that liquidity drives markets. Liquidity is coming back and Bitcoin is thirsty. Don’t get me wrong, stocks love liquidity too but Bitcoin slurps it up with the highest intensity of all.

I don’t know if I’m as bullish as Raoul, but I’m not far off.

So, to sum up, we’ve got an asset that has been through three consecutive 4-year bull/bear cycles and is potentially 40% of the way through the current bull phase. We’ve got a bullet-dodging potential US President speaking at a Bitcoin conference. We have the kings of fiat finance changing their tune. And JPow is about to cut rates.

Am I forgetting anything? Oh, yeah. Ethereum ETFs look set to go live next week!

Disclaimer: This should go without saying, but the information contained in this blog is not investment advice, or an incentive to invest, and should not be considered as such. This is for information only.

We’re so back!

The all-time highs keep coming. On Monday 9 July, the Nikkei 225 index made its highest ever close at ¥41,580.17. Semiconductor-related stocks led the way, while other notable movers included Hitachi Ltd (6501) and Fujikura Ltd (5803).

Not to be outdone, the S&P 500 and NASDAQ Composite also closed at record highs on 9 July. Gains were heavily weighted to big tech stocks as the AI narrative continues to drive market sentiment. Fed Chair Jerome Powell stuck to the script during his first day of testimony, reiterating that the Fed’s objective is to cool the economy and progress towards the 2% inflation target without cooling it too much. Market consensus continues to favour a soft landing scenario, with one or two rate cuts expected later this year. CPI data is due on Thursday and if that comes in line with expectations, the positive mood should continue.

Meanwhile, Tesla Inc (TSLA) continued its rebound, closing higher for the 10th consecutive day.

Japan’s real wages fall again, BOJ discussing cuts in bond purchases

Despite the good times in the stock market, much of Japan’s economy still looks relatively weak. Real wages fell by 1.4% in May, marking a record 26th month in decline. Wages are actually rising at the fastest pace in 31 years, but the increases are being offset by inflation, meaning households have less purchasing power.

USD/JPY is trading around ¥161.47 with no end to yen weakness in sight.

This week sees the Bank of Japan meeting with major market players to discuss the tapering of the central bank’s bond purchases. Some market participants are calling on the BOJ to cut bond purchases in half while others favour a more gradual reduction. The final plan is expected to be revealed at the BOJ’s end-of-July meeting.

Semiconductor shares remain strong, Hitachi and Fujikura impress

Chip stocks are once more powering ahead with Advantest Corp (6857) and Tokyo Electron Ltd (8035) gaining +4.1% and +3.8% respectively on 9 July. Chip materials maker Resonac Holdings Corp (4004) announced that it will form a consortium with nine other Japanese and US firms to collaborate on the development of semiconductor technologies for generative AI. Resonac shares surged +8.7% on the news.

Hitachi shares jumped +5.2% on reports that the company is increasingly focused on improving shareholder returns. On 2 July, the electronics giant provided an update on the progress of its buyback of up to 21 million shares at a cost of up to ¥200 billion. The company is targeting a total return ratio of around 50%, including dividends and buybacks – that would be on an expected net profit of 600 billion this fiscal year. Hitachi shares are up +89% year-to-date.

Another big mover was Fujikura Ltd, which jumped +11.4% on 9 July. Fujikura is an electrical equipment manufacturer that develops a range of telecommunication system products, including devices for optical fibres. It appears that Fujikura’s surge was spurred by a 12% move by Corning Inc (GLW) on 8 July after the company revised its sales forecast upward. Fujikura gained a little more today and is now up +228% in 2024.

Japanese stocks rose again today with the Nikkei 225 closing at another record high of ¥41,831.99. Financial stocks were up again on hopes that higher interest rates would bring improved profits. Mitsubishi UFJ Financial Group (8306) has gained over +8% in the past month and almost +50% year-to-date.

Bitcoin also bounced back from its current correction somewhat, moving from around $57,000 to $59,000 despite an increase in market supply from Mt Gox and the German government. Bitcoin ETF flows were positive again and traders eagerly await the SEC decision on Ethereum ETFs.

Disclaimer: This should go without saying, but the information contained in this blog is not investment advice, or an incentive to invest, and should not be considered as such. This is for information only.