Category: Market news

Sit tight

“It never was my thinking that made the big money for me. It always was my sitting. Got that? My sitting tight! It is no trick at all to be right on the market. You always find lots of early bulls in bull markets and early bears in bear markets. I’ve known many men who were right at exactly the right time, and began buying or selling stocks when prices were at the very level which should show the greatest profit. And their experience invariably matched mine–that is, they made no real money out of it. Men who can both be right and sit tight are uncommon.” – Jesse Livermore, in Edwin Lefèvre’s “Reminiscences of a Stock Operator”

We are so back!

Little more than 6 weeks after Donald Trump nuked markets with his “Liberation Day” blusterf**k, stock indices are right back where they started. Congratulations on surviving! The circus is far from over, but it feels like we just went through boot camp on how to operate under this administration. My personal goal from now on is to ignore every word the man says and focus on what actually gets done. There is way too much noise!

Anyway, check in on the doomers. They probably need to come out of the bunker, touch some grass and catch some Vitamin D.

The great dealmaker is in Saudi Arabia now, doing deals, I presume. Note the presence of Nvidia’s Jensen Huang among the tech CEOs there with him – I would not bet against that company to emerge from the chaos stronger than ever.

So what’s going on?

Checking on the news, Nvidia isn’t the only AI/semiconductor play catching a bid. Advantest, Tokyo Electron and Disco are all perking up too.

Softbank Group is also on the rise after posting its first full-year profit in four years.

Department store operator Mitsukoshi Isetan announced an expected net profit of ¥60 billion for the current fiscal year, up 14% year-on-year. Those tourists must be spending hard while we plebs struggle to buy rice!

Things don’t look so rosy for the Japanese auto industry, though, with Honda and Nissan crumbling under the uncertainty around tariffs. There is more than tariffs at play here as both have struggled with sales in the US and China. The two companies abandoned plans to join forces earlier this year and who knows where they go from here. Nissan is clearly worse off and will shut 7 vehicle plants and cut 20,000 jobs globally.

Gold rush?

Meanwhile, The Mainichi reports that gold investment is booming in Japan. Investors appear to be snapping up everything from coins and bullion to used gold accessories. They are also buying gold funds and ETFs for the NISA accounts.

Come for the global recession fears, stay for the long-term debasement of the yen!

USD/JPY is back around ¥147 after the BOJ needed a breather from raising rates. If they are planning to wait for some respite from global economic uncertainty before hiking further, we will be back in the ¥150s soon.

Wakey wakey

“If you own crypto, I can’t stress this enough: the best thing you can do is go to sleep for about 3 months. Block out the noise.” – I wrote this in my opening post of the year in January. There have been many dips and ‘it’s so overs’ since then, and yet here we sit in mid-May with Bitcoin back over $100k.

It’s probably time to start paying attention again. Metaplanet is creeping back towards the highs. I sold half of my holding in the run-up in Jan/Feb, and it’s looking like time to start averaging out the rest. Maybe take out half in the next few weeks and save the rest for Valhalla?

Even Ethereum has woken up!

Alts have been battered in the dips. With a tidal wave of ETF inflows, BTC dominance shows no sign of slowing down. Alt holders would like to see the orange coin break the all-time high and then chill for a while. Will they get their alt season? The exit is narrow and it won’t be open for long…

Where does BTC top? Gun to my head, I say we get a run now, followed by a quiet summer, then one more assault on the summit in autumn.

However, if you are looking to take profit, don’t listen to me or any other people on the internet. Nobody knows anything. The smart money is scaling out already. Execute your plan.

If you are a long-term BTC investor, and for at least part of your stack you should be, all you gotta do is sit tight!

Top image by Pexels from Pixabay

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.

Sell America?

Remember when everyone thought a Trump presidency would be business-friendly?

I admit to belonging to that camp initially. Stocks soared the first time he was elected, when most people expected them to tank. They also ripped between the election and the beginning of his second term, as people bet on a golden age of deregulation. Remember all the tech CEOs at the inauguration?

And then the madness began.

I’m not interested in getting into political commentary, but I will say this: it really couldn’t have been handled much worse. Anyone who has read Chris Voss’s book knows that you don’t start a negotiation with belligerence and threats and expect everyone to come meekly to the table. Anyway, my opinion doesn’t matter. The markets have spoken. So far, Trump 2.0 has been an unmitigated disaster.

Wall Street is openly disussing a “Sell America” trade. The great dealmaker must hate that one. It’s happening, though – look at treasury yields, look at the S&P 500, look at the dollar. And look at gold!

Gold isn’t just a safety trade here. It represents a stampede away from USD-denominated assets. European and emerging market stocks are also seeing inflows, but they come with their own risks as the haphazard tariff ‘negotiations’ blunder ahead.

So what happens now?

Is America really done? Does gold go up forever?

No and no are the short answers. However, the world is clearly changing before our eyes. Here’s an excellent thread summarising Howard Marks’ recent comments on what is happening. Like it or not, globalisation made a lot of things cheaper. As countries become more inward-looking and focus on domestic production, prices will rise. America is still expected to outperform in the long run, but it will need to work harder to attract capital. It is no longer the obvious go-to market, at least while all this chaos is raging.

Can gold still go higher? For sure, but it’s starting to look like Bitcoin does in blow-off top phases. Weekly cycles also suggest it is close to a top. If you’re a long-term diversified investor, continue to hold it. If you’re looking for the next trade, then digital gold is where it’s at.

Even the macro guys are starting to agree that Bitcoin looks good right now. This article from @fejau_inc puts it all together nicely and is a must read.

Here’s the conclusion from that piece for easy reference: “And so, for me, a risk-seeking macro trader, Bitcoin feels like the cleanest trade after the trade here. You can’t tariff bitcoin, it doesn’t care about what border it resides in, it provides high beta to a portfolio without the current tail risks associated with US tech, I don’t have to take a view on the European Union getting their shit together, and provides a clean exposure to global liquidity, not just american liquidity.

This market regime is what Bitcoin was built for. Once the degrossing dust settles, it will be the fastest horse out of the gate. Accelerate.”

Meanwhile, the Financial Times reported that Howard Lutnick’s son, Brandon is cooking up a $3 billion Bitcoin acquisition investment vehicle with Cantor Fitzgerald, Softbank Group, Tether and Bitfinex. Reuters summary here.

Is the yen strengthening going to hold?

If you are looking for proof that capital is flowing out of America, it’s right there in the exchange rate, currently around ¥142 to the dollar. It’s quite possible the yen could strengthen further from here, but beware the orange man running his mouth. If Bessent can put the gag on him for a while and they get a few wins on the board in terms of trade deals, then the picture can change very quickly.

Yes, I’m aware that the typical trade deal takes around 18 months to complete. Most likely Trump extracts a few concessions from the major partners, including Japan, and declares some ‘tremendous trade deals’. Then he can move onto pumping the markets back up before the mid-terms.

Long term, I believe the yen is cooked. Nothing has changed there. Short term, we could be at ¥120 just as easily as ¥160 in a month or two. Who knows?

So, sell America or not?

Traders gotta trade, and right now the trade is sell America for anything else you can lay your hands on. For long-term investors, I would view cheaper US asset prices as an opportunity to accumulate. Don’t change your monthly investment allocation too hastily!

Top image by Mediamodifier from Pixabay

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.

Taps the sign

It’s been a long week. Is it me, or are +/-9% swings on the Nikkei 225 index starting to feel normal? Traders must be loving this – at least the good ones.

I’m not so impressed. Of course, there are buying opportunities, but it gets a bit tiresome when markets swing this wildly based on the pronouncements of one guy who just can’t STFU for 5 minutes.

Orange Swan Event.

Click it, I dare you! And don’t get me started with the Simpsons memes.

Where was I? Tapping the sign, right. The free lunch quote has been attributed to Harry Markowitz, although I have heard Ray Dalio say something similar. It’s a drum I have been banging for years, sometimes with minimal effect.

When the stock market is going up, nobody cares about diversification. Why would I want to own bonds and gold and other stuff when stocks are on a tear? Just buy the index and chill, right? It’s easy to forget that stocks take the stairs up and the elevator down.

Until you get a reminder.

In 2002, psychologist Daniel Kahneman won the Nobel Memorial Prize in Economic Sciences for his work on the psychology of judgement and decision making. Kahneman points out that individuals are more depressed with investment losses than they are satisfied with equivalent returns. In other words, people hate losing money considerably more than they like making money.

Big liquidation events are like waking up after a party. It was fun, but now it’s time to sober up and review your time horizon, risk profile and asset allocation.

Are you diversified enough?

If recent events haven’t troubled you, and you have barely looked at your investments, the answer to this question is probably yes. Carry on!

If things have been a little nervy, then maybe you were over-exposed.

Don’t get me wrong, I’m all for buying stock indices and holding them forever. It’s not a bad strategy, as long as you can stomach the downturns. And as long as you don’t need the money soon. And, it’s not like a diversified portfolio doesn’t go down in times like these either. When panic sets in, people will sell anything they can get their hands on, but pretty soon you will see a flight to safety.

An underappreciated aspect of diversification is the opportunity to tactically rebalance and take advantage of market events. I sold some of a gold ETF this week near all-time highs and bought stocks while everyone was puking them. I didn’t need dry powder. Just a little reallocation.

You can’t do that if you don’t own the gold in the first place. You have to find more cash.

A quick thought experiment

If you are reasonably young and earning good money, then the recent market gyrations are just a blip, but do me a favour: imagine you are 65 years old, about to retire, with a nice fat nest egg invested in the MSCI World Stock index.

And the market dumps 20% in a couple of days. It takes a breather over the weekend and then resumes dumping in earnest. 30% of your retirement pot is gone. Financial media is screaming about recession, trade war, deleveraging or whatever it is this time. Remember in March 2020, when the market crashed and we faced the reality that the entire world was about to shut down? The doomer economists are running victory laps, and the market looks like it is never coming back from this.

How do you feel?

Remember that feeling when you are making future investment decisions, especially as you get closer to spending the money.

Of course, what happened after March 2020 was that central banks slashed interest rates and unleashed a tidal wave of stimulus, and the markets came roaring back before the year was even over. But that type of thing comes at a cost – that’s why your hard-earned cash doesn’t buy as much stuff any more…

Ok, so how do we do this diversification thing?

There are various ways to get yourself a diversified portfolio. How hands-on do you want to be?

For the people who want to put as little effort as possible into it, you can simply buy multi-asset ‘balanced’ mutual funds. I recently came across a collection of Japanese funds that are divided up by age group: “Happy Aging 40”, “Happy Aging 50”, “Happy Aging 60”. The allocations get more conservative the higher the age. These types of funds are available everywhere. Simply dump your money into the fund that fits your time horizon and get back to whatever you’d rather be doing.

In my advisory business, for larger chunks of money, I recommend professionally managed investment portfolios fitted to the client’s base currency and risk profile. Yes, they cost more than an ETF, but they are incredibly well diversified. The asset allocation is reviewed annually, and every quarter the managers implement a ‘tactical overlay’ and buy more of the assets they like and sell some of those they don’t. These guys don’t just buy a broad stock index – they are breaking equity holdings down by style: value, growth, small/large cap, etc. Of course, the entire portfolio is rebalanced annually.

I also recommend a core/satellite approach for even broader diversification. That’s how you slot in the algorithmic trend following strategy that trades stocks, interest rates, currencies, metals and other commodities with very little correlation to any one market. Funnily enough, it likes volatile times like this.

For coaching clients, I take the knowledge I have gained from watching professional money managers and help them develop their own asset allocation using low-cost ETFs. Click the coaching link to find out more.

Keep it simple

Here are a few action points if you want to take on this job yourself:

Separate regular and lump sum money. Regular is the money you invest every month in a pension, savings plan or Tsumitate NISA. If you are relatively young, you can just allocate all of this to stock indices/funds. Let Dollar Cost Averaging do the work for you.

Lump sum money is a chunk of cash you have saved up that you are looking for a better return on. Here, you are going to want more diversification, and you should focus on the currency you are most likely to spend the money in (your base currency). The asset classes you want to look at are: cash, domestic (base currency) bonds, overseas bonds, domestic stocks, overseas stocks, property, and commodities. Hold more stocks if you are young, and more bonds and cash if you plan to spend the money soon. Allocate 70-80% of the lump sum to this broad portfolio, and the remainder can go into satellite holdings to beef up the areas you are most bullish on. For example, if you like Bitcoin, that’s a great satellite holding.

I have written plenty about base currency, asset allocation and core/satellite in the past. Feel free to take a look at earlier posts.

If you are gonna get really serious though, you are going to want to diversify your bonds.

Peace out!

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.

Pump my bags!

I know I shouldn’t be posting about the guy everyone is sick of hearing about this week, but he’s proving hard to ignore.

I always argue that political changes have far less impact on asset markets than people expect, and I still believe that is true, but you have to hand it to the new Prez – he is pumping everything!

I write this following a highly enjoyable meet-up in Tokyo last night. We finished at a very responsible hour but I can’t say I am firing on all cylinders today – that’s the price of getting old. So, I will try to make this update as quick and painless as possible.

We all know about the flood of executive orders issued in the past few days. Trump sure loves a good fanfare. However, it was his online address to the World Economic Forum that caught my bleary eye this morning:

Trump said he would ask OPEC to lower the oil price and “with oil prices going down, I’ll demand that interest rates drop immediately,” adding that “likewise they should be dropping all over the world.”

Fed chair Jerome Powell will have something to say about that, of course, but it’s clear that Trump’s intention is for the US to lead global interest rates on a downward path. The S&P 500 reacted by notching its first all-time high close of 2025, rising +0.53% to $6,118.71.

Powell is not the type to be bullied and the Fed is actually signaling a slowdown in rate cuts this year as it awaits further economic data. However, the central bank is going to come under a lot of pressure to pave the way for higher asset prices.

Trump wants a booming stock market to brag about.

He wants higher crypto prices, too.

Last night he signed an executive order establishing the Presidential Working Group on Digital Asset Markets. Here are the main points:

  • Secure America’s position as the world’s leader in the digital asset economy
  • Create a federal regulatory framework for digital assets
  • Prohibit the creation of a central bank digital currency
  • Evaluate the potential of a strategic national digital asset stockpile

Hot on the heels of the executive order, the SEC rescinded the controversial SAB 121 accounting guidance, opening the door for banks to custody crypto assets. This one is bigger than many people realise, although it brings new risks as tradfi will surely make the same mistakes crypto lenders made last cycle – you shouldn’t dabble in under-collateralised fractional reserve lending on an asset you can’t print. But no doubt they will try!

The Bitcoin price whipsawed overnight, rising initially and then dumping in disappointment that the order did not explicitly mention Bitcoin or plans to acquire more Bitcoin. The most likely outcome seems to be that the government will hold onto existing crypto assets seized in legal proceedings.

My two cents: traders and Bitcoin maxis have become too fixated on the idea of the Strategic Bitcoin Reserve and are probably going to end up disappointed. However, the new administration’s appetite for clear regulation and openness is a huge positive for the industry. It is probably also going to provide a healthy level of support for the ongoing bull market. Too much good news all at once could easily have led to a Q1 blow-off top.

Let’s hope the shenanigans I wrote about earlier this week in Are you tired of winning yet? were a blip and the new admin will focus on the long-term health of the industry rather than pumping dumb stuff. I can’t say I’m convinced on that one…

Meanwhile in Japan

It’s BOJ day! Japan didn’t get the memo about cutting rates. No shocks this time as the Nikkei Shinbun was ahead of the decision to raise rates to 0.5%, the highest in 17 years. The BOJ expects wages to rise this year with inflation at around 2.5%. Real interest rates are expected to remain negative and policy is still largely accommodative.

The Japanese stock market is calm this afternoon but let’s give it a day or so before we judge the reaction. Part of me hopes for chaos next week and a chance to allocate the rest of my NISA with blood in the streets but I think I would prefer peace and quiet.

All roads lead to inflation?

In the US, the Fed is cutting rates without first scoring a decisive victory over inflation. Trump’s tariffs, if enacted, are likely to be inflationary. The resurgence of inflation appears to pose the biggest risk to markets this year.

With debt to GDP at 263% and little chance of growing out of the hole, Japan seems destined for higher inflation. It’s going to be tough for the BOJ to raise rates high enough to prevent this outcome and the weak yen will only accelerate price rises. JPY cash remains a bad place to hang around for too long.

I covered the four assets to own to face inflation back in late October and I don’t see any change there. Bitcoin, commodities, gold and tech stocks remain the best plays. If you don’t own Bitcoin already, I would caution jumping in at this point in the bull market. I don’t know what innings we are in but it’s certainly not early. If you own it and are planning to exit this year, we are approaching the time to begin averaging out. I sold around a third of my Metaplanet holding just before the inauguration as expectations of something special from Trump drove it close to ¥5,000. Euphoria and hopium should be sold more and more aggressively in my opinion.

The last word on Trump: he loves to brag about stock market performance as proof he’s doing a great job and has even started taking credit for the Bitcoin price. I wouldn’t bet against US stocks and BTC this year while he is in the driver’s seat.

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.

2025 – Snakes and elephants

Happy New Year, everyone! Welcome to the year of the snake. Just as we get back in the swing of things, a three-day holiday lies ahead. I watched the news last night and was reliably informed for 20 continuous minutes that it is snowing in the places where it always snows at this time of year. It’s nice when things go to plan, huh?

If you enjoy winter sports, it looks like a great season for it!

It would be nice if the investment climate was equally predictable, but alas, it’s complicated. In many ways, 2024 was smoother than expected. Global stocks gained around 19%, led by the Magnificent Seven and the hype around the AI trade. Japanese stocks kept pace well, although gains were concentrated in the first half of the year and things got a little scary for a minute there in August!

I had a look back and over the year I wrote 26 posts, covering the usual financial planning and asset allocation stuff along with macro views, currency, stocks to watch, crypto, AI, quantum computing and more. I hope it kept you entertained and maybe provided some actionable ideas. I plan more of the same in 2025, with the focus remaining on action. There’s already far too much information out there and the key for me is uncovering what we can actually do with it.

January is prime NISA allocation season and I’m sure many of you are already getting your accounts organised. If you are a ‘keep it simple’ type and have already completed this task, I salute you! Just like the gym, most of the battle is simply showing up and getting stuff done.

If you haven’t started yet, here are some things to consider:

Consensus views

So what is the forecast for 2025? The Bloomberg Outlook is always an interesting read. In short, the ‘experts’ are calling for more of the same: a strong US economy, a continued AI-led boom, albeit with a slightly tempered outlook on stocks.

Smart consensus sees US interest rates continuing lower, a weaker dollar, gold higher, and oil lower, with a mild stock market correction likely, but no bear market. Simple enough!

The potential spanner in the works is inflation reigniting as you know who takes office in the US. For what it’s worth, I think a lot of Trump’s tariff talk is bluffing/negotiating but we will know more in a few weeks. All bets are off if he invades Greenland lol! The inflation risk is a more pressing concern. You may have noticed how slightly stronger PMI data sent rate-cut expectations plummeting earlier this week. The market is near all-time highs, yet ultra-sensitive to the rates higher-for-longer narrative.

Liquidity drives markets. How high will risk assets go? Well, that probably depends on the money supply more than anything else.

Bubble watch

Getting away from the consensus views, this morning I found legendary investor Howard Marks writing about bubbles – his memo here is worth a read.

If you want to skip to the Tldr and know where the potential bubble could be, get a load of this:

So much for Mr & Mrs Watanabe being conservative. In my experience, the average ‘balanced’ Japanese investor has half of their money in the bank and the other half in whatever went up the most last year. And they are buying this with a weak yen???

So, how about Japanese stocks?

Global asset allocators that I pay attention to are still overweight Japan. And why not with USD/JPY at ¥158! There are many positives here in the land of snow in winter, with companies expected to post record profits for the 5th year straight. On average, wages increased +5.1% in 2024 and are expected to rise again this year, which is good news for consumer spending. The question is whether the hikes will keep pace with inflation. Remember, real wages have been down only over the last three years…

Still, there are several good reasons to own Japanese stocks: the TSE has successfully pushed companies to enhance returns for investors, resulting in a marked increase in dividends and buybacks. Companies also continue to unwind cross shareholdings.

Of course, the elephant in the room is the Bank of Japan. Having skipped a December rate hike, the BOJ is poised to continue its efforts to ‘normalise’ in 2025. In true Galapagos fashion, Japan boasts the only developed-world central bank trying to tighten policy this year. If you’re looking for a potential wrecking ball, look no further. A sharp upward move in the yen would severely curtail exporters’ profit. Not to mention the whole carry trade unwind thing. (oh, another elephant!)

On the other hand, banks will benefit from rising interest rates due to improved margins on their loan business. Homeowners won’t enjoy that one so much.

With demand for electric vehicles and smartphones flattening, the semiconductor sector will rely heavily on AI growth. A lot is riding on the rise of the machines.

All in all, though, the outlook is constructive for Japanese equities.

Time for some action!

Ok, I promised some action points. Obviously, I can’t give broad advice here, but this is how I am organising NISA this year:

  • Tsumitate is set and forget. I’m at 40% JPX 400, 30% All Country, 30% NASDAQ
  • Growth – I allocated about a third this week and plan to allocate the rest in the next week or two
  • I am leaning toward a much broader ETF allocation this year rather than trying to pick stocks. The last two years have been too easy – you could just throw darts and the stocks you hit would go up. I’m not convinced it will be so simple this year
  • At ¥158 to the dollar, I will keep a sizeable allocation to Japanese stocks. 1489 High Dividend is a favourite of mine and I also like the 1624 Machinery ETF

Can we forget about Bitcoin now?

Bitcoin has crashed to $93,000. These are desperate times!

If you are new to crypto, allow me to remind you that -30% dips are normal in a bull market. We had a -50% dump right in the middle of 2021. You get used to it, kind of…

If anything, the drawdowns have been mild so far. Unless you own Alts – those dips sting!

If you own crypto, I can’t stress this enough: the best thing you can do is go to sleep for about 3 months. Block out the noise.

I think we are all aware that 90% of what the orange man says is hot air, so if you are relying on the President-elect to send your bags higher, you may be disappointed. However, make no mistake, the new administration in the US is massively crypto-friendly compared to that of the outgoing dinosaur dude. It will be a factor.

The best indicator is right here – keep an eye on it: (chart from MacroMicro)

Money supply has just taken a dip of its own, hence the market reaction. However, it won’t stay down for long. Unless inflation really runs wild, conditions will loosen.

You may think I am nuts. A year ago I wrote The Investment Case for Bitcoin with the price at just under $40,000. Some guy on Facebook called me a scammer and proceeded to spout a bunch of talking points I recognised from mainstream media circa 2017. These people are everywhere and they are brimming with confidence. I wonder if he has any other assets he thinks we should avoid?

Currently, sentiment is remarkably bad for $93k. ‘Crypto influencers’ are stressing over every dip. When we reach the top, these same people will tell you that dips are mathematically impossible and we are going up forever. Welcome to magic internet money musical chairs!

Long term, it’s going way higher than you think against Fiat. Don’t sweat it if you fail to execute a perfect dismount from the bull. Just don’t FOMO in money you can’t afford to sit on for a few more years.

If you haven’t subscribed, feel free to do so to get my posts by email. If you need help, please check out the coaching link, and follow me on X for jokes and details of Tokyo meetups.

I wish you all the best for the year ahead. Let’s make it a sensational one!

Top image by 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.

2024 Final Boss

I don’t mean to think about the Bank of Japan this much.

As we enter December, US markets continue to push to all-time highs and Wells Fargo just got all bulled up and issued a target of $7,007 for the S&P 500 in 2025. Here in Japan, stocks have hardly been in easy mode but are still up around +17% year-to-date. Yesterday, the Nikkei 225 index jumped +1.91% as hopes rose that Japan will be spared the wrath of the incoming US President’s trade controls. These days people seem to love Japan as a destination for investment as much as they do for tourism.

What could go wrong?

The Bank of Japan meets on 18/19 December. For some reason, these dates are marked on my schedule. It must be some kind of PTSD hangover from the July meeting. Remember when they surprised markets with a hike then? I bet you remember the few days that followed. Is Governor Ueda poised to spoil our Santa rally?

Judging by Ueda-san’s recent comments, he aims to avoid any surprises this time around. Earlier this week, he told the Nikkei that rate hikes are ‘nearing’ as economic trends line up with the central bank’s forecasts. The market is interpreting the comments as a signal of a hike with bond yields rising and the yen strengthening against the dollar. In fact, you could say it would be more of a surprise if the BOJ didn’t raise rates this month.

I’m not saying we will see volatility like early August but, once again, Japan’s mainstream financial media seems remarkably calm about the potential impact on markets. With the US in a rate-cutting cycle, tightening in Japan will drive a stronger yen and could lead to another dramatic carry trade unwind. A stronger yen is also not kind to Japanese stocks.

Keep an eye on the Nikkei news for early leaks of the BOJ decision to soften the impact.

What do I care?

Given how quickly markets recovered from the August plunge, it doesn’t seem like there is much to worry about for long-term holdings. However, I once more find myself sitting on some Japanese stocks that have done rather well. And again, I am tempted to take some profits while the going is good. The benefit here is that I could use this money in January to fund my NISA instead of adding more cash. I’m sure I’m not the only one considering this. Imagine how clever we’ll feel if we sell before the meeting, sidestep the crash and buy it all back cheaper in January. (of course, it is never that easy)

Given the possibility of impending central bank shenanigans, the deadline for profit-taking is looming. I’ll give it a few more days and see.

What else is going on?

In other news, Fast Retailing Co. Ltd (9983) shares got a boost as the clothing giant announced a 12.2% rise in domestic same-store sales for November. People must be stocking up on their heat tech!

Donald Trump seems intent on blocking Nippon Steel Corp’s (5401) takeover of U.S. Steel. U.S. Steel released a statement on Tuesday in support of the acquisition. The company is crying for help but foreign takeovers are not a great fit with Trump’s ‘America First’ agenda.

SBI Holdings Inc. (8473) seems to be the beneficiary of the demise of DMM Bitcoin. DMM is giving up the ghost after losing some ¥48.2 billion worth of crypto in a leak back in May. Customer assets will be transferred to SBI VC Trade Co. by around March next year. SBI shares have seen a nice move as a result. One thing about Japanese crypto exchanges – the customers tend to get their money back these days.

Staying with crypto, I’ve joked before that it’s time to sell when hostesses start trading on their smartphones, so make what you will of this post:

Bull market things…

Finally, Saxo has released its annual Outrageous Predictions list, which is always a fun read. Nvidia surging to double the value of Apple, the end of OPEC and Trump blowing up the dollar feature on this year’s list of unlikely, yet intriguing events.

You never know…

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.

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.