Tag: investing

Vibe investing – stock analysis with Peter Lynch and ChatGPT

The whole generative AI thing is pretty weird, but I think I’m starting to get it: Some people are using AI to generate torrents of slop. Other people are using it as a tool to learn and get stuff done. I want to be the latter and avoid the former as much as possible.

The thing I initially found LLMs to be useful for was taking a long, information-dense document, perhaps written in Japanese, and getting a nice, concise summary in English. In particular, I used it to read the earnings reports of companies I was interested in investing in. However, here’s the catch: I’m not a stock analyst. So, often, even with a nice summary, I couldn’t decide if a stock I liked was actually a good investment.

I recently got around to reading Peter Lynch’s excellent One Up On Wall Street. It’s a fabulous book, written for retail investors. If I were to really simplify the book’s content, it would be:

1) How to find great investment opportunities simply by looking around you and finding companies you already know offering products you love

2) How to analyse the company’s financial disclosures to figure out if it’s really a good investment

Of course, there is more to the book than that. But these two things alone made it a hugely worthwhile read.

Now, investing in individual stocks is not for everyone. It’s not even necessary. As I write this, the Nikkei 225 index just hit a new all-time high. It’s up almost +50% over the last two years alone. The S&P 500 is up almost as much over the same period. There is nothing wrong with just owning the index and spending your time doing something else. Just don’t make the “something else” generating AI slop posts on LinkedIn or whatever. Please…

Where am I going with this? Oh, yes. After reading the Peter Lynch book, I realised that I could use some of the techniques in there to identify stocks I’m interested in and then use some of the questions Lynch asks to get AI to help me better understand those companies’ earnings reports.

I’ll give you an example, which I may regret. But it’s a stock I actually bought recently using this method.

As I get older, I notice a lot of people around me are wearing spectacles. Some need them permanently, while others, like my wife, can no longer read what’s on their phone without them. Japan’s ageing population problem is well-documented. I guess a lot of these oldies need glasses. Perhaps that’s why there are glasses shops EVERYWHERE!

Like everywhere. Along busy roads, in department stores, in malls. There are tons of eyewear shops.

I often find myself perusing this Trading View list of Japanese stocks. I like how you can use the tabs to sort and view a list of stocks with the most cash or the highest dividend. A few weeks back, I was looking at the list of oversold stocks and I noticed JINS Holdings (3046). And yes, they sell spectacles. I was in one of their shops with my wife just the other day, and it was really busy. Their specs are high quality and low price. And their stock took a beating over the last few months.

So, I decided to see how Peter Lynch works with ChatGPT. I downloaded the latest company earnings report and fed it to the machine. Instead of just asking for a summary and trying to figure it out myself, I asked ChatGPT to provide a summary that focused on answering some Peter Lynch-style questions:

What’s the recent growth in earnings?

What’s the P/E ratio relative to historic levels?

What makes the stock a good buy now?

Are existing stores in profit?

Where’s the expansion coming from?

What’s the debt situation?

How will they finance growth without selling lots of new shares and diluting the earnings?

Are insiders buying?

How does the stock price look versus the earnings over the last 5 years?

What are the dividends, and have they always been paid?

What percentage of shares are owned by institutions?

I won’t post all of the answers I got here. You can try it yourself if you want to. Suffice to say that the information I got was way more useful than a plain summary of the earnings report.

Later, I also asked ChatGPT to search the web and try to identify possible reasons why the stock is down so much recently.

Asking it to give a web-sourced breakdown of the reasons why the stock might be down was deliberate. You’re not supposed to ask LLMs to think. That’s not what they do. In fact, I find that if you do ask them to think, they tend to go out of their way to confirm your bias and tell you whatever it is you want to hear.

So, anyway, long story short, I bought the stock on Xmas Day. It’s down -6.5% since then lol. And it’s down almost -4% today, a day where the Nikkei surged over 3% to another all-time high. (earnings miss haha!)

So, I may be an idiot. But it’s probably a little early to judge.

My point here isn’t so much about whether this approach works in this particular instance. I enjoy picking stocks, but am aware that I am weak when it comes to analysis. Asking good questions is a life skill that can be applied to many disciplines. Peter Lynch is very good at asking questions about company financials. And LLMs can answer those questions in seconds by reading the earnings report, leaving you with valuable time to do something else.

Don’t try this at home. Or do, but don’t blame me if it doesn’t work. The usual disclaimers apply. If you do try it, please let me know how it goes, what you learned and what other questions you came up with.

Let’s revisit JINS later this year and see how it works out. I’ll be trying more of this to get a larger sample size.

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.

Giddyup! NISA allocations for 2026

Happy New Year, everyone! Welcome to the year of the horse. Markets are off to a strong start and have not shied away from early geopolitical shenanigans. The going appears to be good to firm as we come out of the gate in January, and runners and riders are expecting a fast race.

Ok, enough horsing around. January means many of us have NISA investments to allocate. It’s time to make some decisions.

I just scanned through my 2025 New Year post, Snakes and Elephants, and what do you know? This time last year, USD/JPY was around ¥158. Japanese retail investors were largely ignoring the bull market in local stocks and piling into US companies. And Bitcoin was trading at around $93,000.

Great Scott!

At least stocks are a good bit higher than they were this time last year. You would never guess the whole “Liberation Day” debacle happened unless you were there. If your 2025 NISA allocations are not in profit, something went very wrong…

From @CharlieBilello

The difference with Bitcoin is that last year, it was at $93k on the way up. Now, it’s around the same price on the way back down. At least that’s what I think, although many will disagree. But let’s leave the magic internet money for another post.

What is the outlook for equities in 2026?

The Bloomberg Outlook always provides a nice window into what Wall Street expects in the year ahead. In short, pretty much everyone is optimistic, and the AI boom continues to be the main story. The Fed is expected to continue to loosen monetary policy, and Trump and Bessent are also standing by to man the liquidity pump.

The leaders of Japan’s securities firms are also primed for another big year in domestic stocks, as per this NHK article. However, the Japan Times reports here that Japanese retail investors are still more interested in US stocks. It looks like Japanese stocks remain under-owned.

If, like me, you enjoy a little crypto and spice with your macro commentary, Arthur Hayes’ latest post is a fun read. He sees the Trump admin running the economy hot in 2026, whilst simultaneously trying to contain inflation by holding gas prices down. That Venezuelan oil may have a purpose, huh?

Suffice to say that everyone is sufficiently bulled up that we should be at least a little worried. Risk lurks in the AI bubble, excessive government debt, BOJ policy and the yen carry trade, rising bond yields, geopolitical crises, and who knows where else!

We all love a challenge, don’t we?

My themes for 2026, which I outlined in my previous post, are mostly unchanged

For Japan:

  • Japan’s base interest rate is 0.75%, and inflation is around 3%, so we have a real rate of negative 2.25%
  • The BOJ can maybe squeeze in one more hike to 1%, so real rates could go to negative 2%
  • This is still very accommodative monetary policy and will support asset prices
  • The weak yen will persist
  • Rice isn’t getting any cheaper, and people’s spending power will continue to decline

By the way, I feel like that last point is going to be critical for the Takaichi administration. People are feeling the pinch, and if prices continue to rise, I expect that beautiful approval rate to take a beating. Complaining about bad foreigners will only distract the public for so long…

Some more general themes:

  • Trump’s new Fed pick will likely force lower rates
  • Trump will want to pump the stock market ahead of the midterms
  • However, the AI trade will continue to come under scrutiny
  • The debasement trade is very much still in play – own hard assets
  • Bitcoin bear market – an opportunity to accumulate

I’ll come back to some of these in future posts.

So, what to do with ¥3.6 million?

Of course, I can’t give broad advice here, but I can tell you my own personal plan for NISA this year. Bear in mind that what works for me may not work for you, and we may have different goals and risk profiles. If you need help figuring out what is best for you, remember that I offer a coaching service.

I view NISA as a long-term investment. I want to mess with it as little as possible. If I make a bad pick, sure, I will drop it and reallocate later, but I prefer it to be set and forget.

Therefore, I will stick with last year’s plan of allocating most of Growth NISA to ETFs. I will continue to pick stocks in my taxable account, mainly because I like doing so, not because I really believe I can outperform. (it’s fun to try, and it works sometimes)

While I will allocate some money to global indices, I want to keep a decent chunk in yen. Converting to dollar assets at these exchange rates is painful!

Here are some ETFs I like:

  • 1489 NEXT FUNDS Nikkei 225 High Dividend Yield Stock 50 Index – The S&P 500’s Dividend Yield ended 2025 at 1.15%, its lowest level since 2000. Japan is a dividend paradise, and I love this ETF as a simple way to earn steady dividends without worrying about how a certain company performs over the next decade. For a dividend fund, it has delivered impressive growth these last few years, too.
  • 2644 Global X Japan Semiconductor – this will be volatile, but long-term chip demand is only going up
  • 1624 NEXT FUNDS TOPIX-17 MACHINERY – this is 25% allocated to Mitsubishi Heavy Industries, so a bit concentrated
  • 1627 NEXT FUNDS TOPIX-17 ELECTRIC POWER & GAS – this is a new one for me, and I’m substituting it in for an energy ETF. I’m bullish on power companies.
  • 2559 MAXIS World Equity – good old All Country!
  • 1545 NEXT FUNDS NASDAQ-100 (Unhedged)

The difficult part is timing. Markets are ripping early in the year, and I would love to catch a dip. But who knows when that will come? I will aim to have Growth fully allocated by the 30 March ex-dividend date for Japanese stocks. Maybe Trump can then crash everything in April again for a bit more déjà vu…

Tsumitate, I will keep the same at 40% JPX 400, 30% All Country, 30% NASDAQ. Average in and chill.

How about you? Do you have a plan in place, or are you still mulling the options? I would love to hear what other people are doing.

Wishing everyone all the best for 2026. Let’s make it a great year!

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.

USD/JPY: ¥160 and beyond!

I came back from the gym this morning and found my wife at her desk.

“Wow, my stocks are up again!”

This is good news.

“But why are they going up so much? News on the economy doesn’t seem so great.”

I begin an explanation of how low interest rates have finally reignited inflation in Japan and fueled a boom in stocks. And despite the recent rate hike by the Bank of Japan, real rates remain negative, which means the price of things, including assets, will continue to rise.

Her eyes quickly glaze over, and she goes back to work. I put some coffee on. Then I begin writing this, in case someone is actually interested!

USD/JPY is at ¥157. GBP/JPY is ¥210!!!

Last week’s BOJ rate hike was viewed mainly as an effort to prop up the currency. But it seems unlikely to halt the slide back to ¥160. Could we go further than that next year?

Here’s a quick reminder about the bind the central bank finds itself in, from my January 2023 post How screwed is the yen?:

The BOJ is caught in a spiral of rising bond yields and a falling yen. And between the bond market and the yen, it can only save one. The programs you would have to enact to save the yen are the exact opposite of the programs you would have to enact to save the bonds. To save the currency, you have to raise rates. To save the bond market, you need to keep rates low.

Last week’s rate hike was a band-aid. Many were hoping for at least a short-term bounce in the yen, but it didn’t come. The BOJ can’t manage an aggressive hiking cycle without destroying the bond market and taking down the banks, pension funds and insurance companies that own the bonds.

Nobody wants to say it, but further devaluation of the yen is the only option. And the new Takaichi administration is implementing policies that will only accelerate the decline. (Japan Diet enacts 18 trillion yen extra budget for PM’s expansionary stimulus)

¥160 and beyond is firmly on the table.

This is all very depressing, I know. However, I imagine many of us will be looking to allocate money to NISA, etc, next year and need to begin thinking what to do with it. I haven’t made any decisions myself yet, but I’m beginning to put together a list of themes that will influence these decisions:

Themes for 2026

  • Japan’s base interest rate is 0.75%, inflation is around 3%, so we have a real rate of negative 2.25%
  • The BOJ can maybe squeeze in one more hike to 1%, so real rates could go to negative 2%
  • This is still very accommodative monetary policy and will support asset prices
  • The weak yen will persist and perhaps go beyond 160
  • Rice isn’t getting any cheaper, and people’s spending power will continue to decline

To be clear, I’m not in the doomer “Japan has reached the end of the road” camp. Japan is the world heavyweight champion of muddling through with extraordinary monetary policy. There’s still a lot of road to kick this can down. However, those who do not own financial assets will struggle. It’s not going to be pretty.

Outside Japan, things could get pretty spicy, too.

Better have a plan to not get knocked out!

A few additional themes:

  • Trump’s new Fed pick will likely force lower rates
  • Trump will want to pump the stock market ahead of the midterms
  • However, the AI trade will continue to come under scrutiny
  • The debasement trade is very much still in play – own hard assets
  • Bitcoin bear market – an opportunity to accumulate

I will think on this some more and come back with a plan for 2026 in the next few weeks. Let’s see if the yen breaches the ¥160 mark before the year’s end.

Thanks for reading. Wishing you all a wonderful Christmas!

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.

Financial repression playbook

One down, one to go. With the FOMC resulting in a dovish cut, we now await the BOJ meeting next week. So, how are things shaping up for the end of the year and 2026?

The Fed delivered the expected 0.25% rate cut. It was accompanied by cautious commentary on next year, without really turning hawkish. Pretty much a goldilocks result for markets. Stocks rallied into the close, while Bitcoin pumped to $94k before quickly retracing. The Fed’s dot plot and 2026 outlook seem wildly irrelevant given where things are going after Powell’s term ends.

Does anybody need that stated more clearly? The next Fed chair will be appointed by Trump and will do his bidding. Their primary function will be to cut interest rates. End of story.

Leaping into the future, it will be fascinating to see if a post-Trump Democrat administration will work to reinstate the Fed’s “independence”. I bet you they won’t…

Anyway, I digress. The US is moving toward financial repression in 2026. Inflation allowed to run hot, and interest rates forced lower = Negative real rates. Negative real rates are a stealth tax on savers. It’s how the government reduces the debt burden.

It’s not good. But it’s what is going to happen.

Americans who own assets will be fine. Those who don’t will struggle.

Lots of liquidity, equities up, hard assets up, and a weaker dollar.

So, Bitcoin to the moon, right?

Hmmm, given what I wrote above, we are looking at the perfect environment for Bitcoin. The macro gurus, who are relatively new to Bitcoin, are declaring the 4-year cycle dead and preparing for new all-time highs in 2026. Except that’s not what usually happens. October marked a picture-perfect 4-year cycle top. It doesn’t get any clearer. The bottom should be around Oct/Nov next year.

I’m long BTC and happy to be proven wrong, but I think there is pain to come. I think we will see $40-50k, and buying Bitcoin when stocks are pumping will seem like the dumbest thing a person could ever do with their money. Sentiment needs to be broken before we run again.

And yes, I will buy at those levels. Until then, there isn’t much point in thinking too hard about it.

As for stocks…

The midterm general election is in November. Sometimes the most obvious outcome is the correct one.

Is the BOJ going to spoil the party?

The BOJ is signalling a hike. It’s been reported in the Nikkei. It’s pretty much baked in and would be more of a surprise if it didn’t happen. I don’t think it’s going to shock markets. It might strengthen the yen a little, but it probably won’t be earth-shattering. See my post on the Yen Carry Trade from last week.

Japan, of course, is already at negative real rates. That should support the Japan equity bull market. It only sucks if you don’t own stocks…

I have the flu. That’s as much brain power as I have this morning. Time for a lie down.

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.

The yen carry trade explained

It looks like the Bank of Japan (BOJ) is finally ready to raise rates again this month. So, right on cue, out come the doomers to ring the alarm on how the unwinding of the yen carry trade is going to blow up global financial markets.

Should we be worried? How could a potential unwind of this trade affect investors in Japan?

What is the yen carry trade?

The core idea behind this trade is to borrow money in a low-interest currency (JPY) and invest it in higher-yielding assets elsewhere.

For example, a fund could borrow yen at less than 1% interest, invest in US Treasuries earning 3.5%, and pocket the difference. This works perfectly until exchange rates make a big move. Then things can get interesting.

A conservative estimate puts the size of the carry trade at around $1 trillion, based on Japanese banks’ foreign lending. Some estimates use the notional value of FX swaps and forwards using the yen to reach a figure closer to $14 trillion.

Of course, hedge funds are not necessarily just buying conservative US government bonds on this trade. A mountain of cheap yen is converted to dollars and other currencies and flows into all kinds of assets. A deep dive would likely reveal that a large portion of this trade has gone right into the red-hot Magnificent 7 stocks.

Why Japan?

The carry trade can take place using any currency with a low interest rate. Japan has been the primary go-to market due to its unique characteristics:

  • The lost decades following the bursting of the bubble in the early 90s
  • Deflation and slow growth
  • The BOJ’s long-term low/negative interest rate policy
  • Hence, the yen became the world’s cheapest funding currency

How the carry trade makes (and loses) money

This trade works based on the interest rate differential – the carry. With a stable or weakening yen, it will remain profitable. In this type of environment, it’s hard to miss.

Problems occur if the yen strengthens. If an institution borrowed yen at ¥150 to the dollar but later the yen strengthens to ¥130, it suddenly requires more dollars to repay the same yen loan.

The unwind then happens as follows:

  • Sell the dollar asset (treasuries/stocks, etc.)
  • Convert to yen
  • Repay the yen loan

This unwind puts downward pressure on the asset being sold, which could be US treasuries or global stocks. And the flood of capital back into JPY accelerates the yen’s strengthening. A relatively small move in exchange rates can snowball into something much larger.

Famous unwind events include the 1998 Asian financial crisis and the 2008 global financial crisis. In 2024, we saw a mini unwind as the BOJ shifted policy.

Why does it matter to everyday investors, especially in Japan?

With the US central bank cutting rates and the BOJ looking to raise rates, there is a real possibility that the yen will strengthen in the short term. Most Japan residents will be relieved as foreign goods and overseas trips will become more affordable.

However, the unwind can suck out global liquidity and do some real short-term damage to our investments. Not many risk assets fare well in this kind of event, so be prepared for international stocks, Japanese stocks, high-yield bonds and crypto to take a beating. Japanese exporters, such as Toyota, are particularly sensitive as a stronger yen erodes their overseas profits.

So, are the doomers right this time?

Beware of people claiming that the yen will suddenly surge and stocks will crash overnight. The reality is:

  • Yen carry trade unwinds tend to happen in bursts, and not always in a straight line
  • Central banks will often intervene, verbally or via policy tools.
  • Markets tend to pre-position before the worst moves happen

You can already see this pre-positioning happening. The yen has strengthened over the last few days after the BOJ hinted at action at its next meeting. Note how BOJ governor Ueda is trying to communicate his thoughts in advance and avoid a “shock rate hike” a la August 2024.

People writing epic threads on X tend to overstate the timeline risks. Sharp moves can indeed happen. However, it doesn’t necessarily guarantee an imminent crash.

Should we be worried?

Concern about the carry trade unwind is most rational if you have:

  • Investments heavily exposed to foreign currencies
  • A portfolio dominated by global stocks
  • Income linked to export-driven Japanese companies

There is less to worry about if you have:

  • Mostly yen-denominated assets
  • A long time horizon
  • No plans to move money internationally soon

Concerns about a carry trade unwind are certainly not irrational. However, the real risk lies less in timing the event and more in understanding how currency moves can affect your portfolio and positioning accordingly.

So it really comes down to portfolio structure. Trying to predict macro events is insanely hard…

Ok, then how do I hedge against this?

Of course, some assets will benefit from a carry trade unwind:

  • The yen, of course, is the obvious winner – that trip abroad could get a lot cheaper next year!
  • Gold is historically a beneficiary of unwinds as investors deleverage and seek out safe havens. If the yen is rising, the dollar is usually falling, which is generally good for gold.
  • Long-duration government bonds generally do well as the world goes risk-off and money flows into the safest assets. Bond prices go up as yields go down.

In conclusion, don’t let the doomers scare you out of long-term investments, but be prepared for some volatility. Keep an eye on central bank rate decisions, the corresponding US-Japan interest rate gap, USD/JPY exchange rate and global risk sentiment.

Personally, I am long-term bearish on the yen, but in the short term, anything can happen.

It’s always good to keep some dry powder to pick up risk assets while investors run scared.

And make sure your passport is still valid for that overseas trip you’ve been planning!

Top image from 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.

Bear with me

Markets are not looking so hot right now. I really hate to be bearish, but it’s becoming unavoidable.

Last week, Bitcoin made its first daily close below $100,000 in 188 days. Then yesterday it closed below the 50-day moving average on the weekly chart. This is always bad news for bulls. Some of the people who were telling us the 4-year cycle is over are still holding out for a reversal, but they are probably grasping at straws.

We are so done. Thank you for playing.

I know it’s unlike me to be so negative, but when a situation changes, it’s important to confront reality quickly. Crypto is heading into a bear market, and it’s right on schedule.

Initially, Bitcoin is acting as the pressure release valve as investors lose faith in an overheated risk environment. You will note how, over the last week or so, Bitcoin is lower when you wake up. Asia propped up the price in the daytime, and then America sold hard while we slept. Now Asia is selling, too.

Worse still, BTC tends to lead equities, and in my humble opinion, BTC is heading lower.

Stocks are already wobbling. In particular, the AI trade is coming under increased scrutiny. Nvidia earnings are due on Wednesday. I don’t think there are numbers big enough to satisfy the masses this time, although the numbers will likely be impressive regardless.

I talked about Michael Burry in my last post: In this economy?

Burry put on his Nvidia/Palantir short and then closed his fund. Now he doesn’t have to worry about investors trying to pull their money when the market moves against him. People are debating whether he is actually any good at calling this stuff, which is a valid question. It’s such an obvious trade that you wonder if it can really be that simple, especially with Trump there to pump the markets every time they stumble.

But it doesn’t look great to me. In the short term, at least, I’m siding with the bears.

Time preference is key

It’s ok to be bearish, but the big question is: over what timeframe?

BTC is a good starting point for this discussion, as it is highly sensitive to both global liquidity and overall risk sentiment.

When Bitcoin topped in November 2021, it was just as the Federal Reserve pivoted to begin a brutal tightening regime. Interestingly enough, in November 2025, the Fed is going in the opposite direction. In fact, the market was pricing in a further rate cut in December until the US government shutdown delayed the data and muddied the waters. Uncertainty around rates is a huge factor in sparking the sudden loss of appetite for risk.

The liquidity picture for 2026 actually looks pretty rosy. Trump is effectively going to gain control over the Fed, and he has the midterm elections to pump the market for. On the flip side of that lies a slowing US economy.

Bitcoin’s level of institutional adoption was meagre in 2021/2022. In fact, it turned out the industry was on the brink of collapse. And collapse it did: Terra/Luna, Celsius, Blockfi, 3AC, and, of course, FTX all fell during the bear market.

The picture is very different now. US Bitcoin ETFs have almost $120 billion in assets under management. $72 billion of that is in BlackRock’s IBIT alone. What’s more, the Trump administration is pro-crypto. This is not an industry on the brink of collapse any more. It’s just going to need to take a breather for a while.

Plan for the worst

The typical bear market drawdown from the peak for Bitcoin is 80%. So, worst case, we are going back to $25,000. Ouch! Not pleasant at all, but I would not bet against this outcome.

If ETFs and institutional adoption, plus a favourable liquidity cycle count for anything, which I think they do, we may not go that low. Personally, I’m not really interested in bidding $90k. I’ll get interested at lower levels. $50k seems a bit more like it. (this is my finger in the air, best guess if you are wondering how I got this number)

Here’s a little perspective:

What about stocks?

Nvidia’s P/E ratio is around 53. Investors are willing to pay that amount for each dollar of the company’s earnings. I probably don’t need to tell you that future earnings expectations are a little on the high side. The Magnificent 7’s average P/E ratio is around 28 to 35. Those expectations may well be due for a sharp adjustment.

The other 493 stocks in the S&P 500 are not looking so bad, although they could get dragged down somewhat in a Mag 7 correction.

Global stocks, Japan included, are unlikely to emerge unscathed, but we could well be looking at an interesting buying opportunity.

Personally, I kind of like the idea of reducing US exposure (particularly Mag 7) and increasing Japan. The only problem is then you get trapped in yen. Finance Minister Katayama is making the usual concerned noises about exchange rates, while taking absolutely no action to counter the yen’s decline. Real interest rates in Japan remain negative, and as long as they persist, the currency will continue to struggle.

Negative real rates are a boon for stocks, though. If rates somehow ever turn positive, it’s time to rethink.

All in all, it comes down to where you are in the financial planning process. I covered this in the Burry post, but here it is again in simpler form.

I see three key stages in the personal finance journey:

  1. Accumulation – spend less than you earn and invest the difference into stocks and other high-growth assets. If asset prices decline, don’t panic and keep buying. In fact, buy more if you can.
  2. Diversification – a mix of protecting capital, whilst continuing to accumulate. The key to knowing when to diversify comes down to three factors:

a) The data tells you – you hit your number and simply don’t need as much risk any more

b) You become conscious of the amount of money you have at risk and start thinking about what to do

c) Asset prices are considerably higher than the average price you paid when accumulating. Despite the wobbles, we are still in this zone for anyone who has been accumulating for a while. It may not last much longer, however…

3. Distribution – you begin living off the income generated from your accumulated assets, or simply spending the money

If you are in stage 1 or 3 and are properly allocated, a stock market correction should not bother you too much. If you are at stage 2 but have not diversified yet, the current window of opportunity may be about to close for a while. Don’t panic, but perhaps give it some thought.

Personally, I have been selling stocks that have done well over the short term, particularly tech/semi/AI-related stuff. A few Japanese tech stocks I owned got a big boost when PM Takaichi was elected and are probably due for a reality check.

In other business

My next casual meetup, billed as the Nikkei ¥50,000 party, is on 26 November from 7pm at Hobgoblin Roppongi. Everyone is welcome. You don’t have to talk about investing, and you don’t have to drink unless you want to. Some of us may need to!

Before you ask, yes, the event will go ahead even if the Nikkei is below ¥50,000. That is an achievement unlocked, and I’m sure we’ll be back above that level in due course.

Don’t get too bearish!

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.

In this economy?

It’s been another interesting week. ‘Big Short’ legend Michael Burry returned to X to call out the AI bubble, posting charts that question whether the ongoing mega AI capex boom really matches demand. Burry pops up every now and then to predict disaster, and his hit rate post-2008 is not all that spectacular. However, he followed up by filing his investment firm’s 13F 11 days early, showing that he is short 1 million Nvidia shares and 5 million Palantir shares.

Money where his mouth is.

The market took notice and US tech stocks tumbled on 4 November. Japanese stocks followed suit, with Softbank Group dumping almost -17% over 2 days. This comes at a time when the US government shutdown is blocking the liquidity faucet and tightening things up considerably.

Crypto didn’t like it either, but hey…

Predictably, President Trump issued some positive comments about stocks and Bitcoin overnight, and the situation calmed down. Every time I think this market is ready to begin its descent into hell, I’m reminded that the guy in charge of America has a vested interest in keeping it above ground…

Clearly, Burry is hitting a nerve with AI bubble enjoyers. Here’s a great thread from Marko Bjegovic covering why he is probably correct.

The ‘K-shaped’ economy

You are probably hearing this term lately. The K-shape represents the latest expression of wealth inequality. Essentially, high earners and large corporations are getting richer as asset prices rise, while low-income households and small businesses, the lower leg of the K, are struggling to get by.

High-end products are selling, while companies like Chipotle are finding their customers poorer and less inclined to visit.

Here’s another way of looking at the K-shape, from a different Marko:

Speaking of liquidity and the AI bubble, Ray Dalio just posted about how the Fed is stimulating at an odd time. I’m not sure the Fed is really beginning QE, as he says, but it is certainly ending QT, cutting rates and taking an expansionary stance. This is something it would generally do when the economy is in trouble. Instead, the backdrop for the Fed’s easing is high asset valuations, a relatively strong economy, inflation above target and abundant credit. Not to mention a bubble in AI-related stocks – the elephant in the room, so to speak.

The Trump administration is taking a bold and probably reckless bet on growth, and particularly AI growth. What could go wrong???

Time to take profit?

We’ve been talking about a melt-up before a melt-down, but that’s by no means guaranteed, and we’ve already melted up a lot.

Stock investors, belonging to the top leg of the K, have done very well, but are now faced with a choice: remain invested and ride through the bubble or protect capital. As Michael Burry experienced in 2008, bubbles can keep inflating and punishing shorts for a long time before they finally pop. Younger investors can probably handle the drawdown, provided they are disciplined enough not to sell the bust. We all know the drill when panic hits: as the last desperate few capitulate, central banks will cut rates, stimulate, and markets will surge back over the next 12-18 months.

People who are getting closer to spending their investment money should probably think more carefully. There may not be a better opportunity to take risk off the table and diversify for some time. Nobody ever went broke taking profit, especially around all-time highs.

For people in between, US treasuries are holding up as a safe haven as well as anything else at this time. Spreading some of the risk also serves an often overlooked purpose: offering the opportunity to rebalance and buy the bottom in stocks if we do suffer a crash. I stand by my belief that anyone with a meaningful amount of money should be well diversified at a time like this.

The stock market is not the economy

Here in Japan, we are enjoying the Nikkei holding above the ¥50,000 mark. That doesn’t mean we escaped the K-shaped economy. In a rare quiet moment the other evening, I was thinking about Japan’s economy and why interest rates don’t seem to go up much. Aside from the rich asset holders, many people are struggling. Wages still lag inflation. 5kg of rice is almost ¥5,000. The lower/middle classes do not have a lot of money to spend.

Fewer people spending money is bad for the economy. The general expectation seems to be that interest rates will rise gradually. They certainly won’t rise quickly. Higher rates would mean higher interest payments on government debt. PM Takaichi is focused on growth, not inflation.

Should we really expect a meaningful rise in interest rates? I simply can’t see it.

If rates can’t rise, then the yen remains weak, prices increase, stocks and Tokyo property appreciate, and low-income families continue to struggle.

If all this is true, then what’s the trade?

Own dollars, own financial assets, own hard assets, and be kind…

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.

Retail therapy

Our family just came back from a weekend break, which was my treat in celebration of our stellar investment returns. Note: don’t tell your significant other how well your portfolio is doing unless you are prepared to spread some of the winning around! We had barely been back home for 5 minutes when the doorbell rang and a new pair of boots was delivered. She bought those herself, so no complaints from me, but you can see how this goes.

Even the stock market is enjoying a little retail therapy.

In case you’re not familiar with the term, retail in this case means individual investors: regular people, you and me. One theory is that covid is behind this surge in retail-driven performance. Stuck at home with their stimmy checks, regular investors learned to buy the dip, and it’s been working for them ever since. Stocks, crypto, gold – whatever retail jumps on goes up. Institutional investors look on in bewilderment, stuck with their risk models flashing warnings as the market leaves them in the dust.

It may not be healthy, but these are the cards we’ve been dealt. And with the Fed expected to cut a couple more times this year while simultaneously ending its balance sheet runoff, it’s hard to find a compelling reason to ease off the gas. Trump has even been talking about handing out money from tariff proceeds to the public. Can you imagine?

An interesting tidbit:

Maybe retail is buying washing machines, too!

Nikkei ¥50,000 party!

It would be rude not to do this! I’m looking at late November, maybe 26th, 27th or 28th. I’m open to suggestions on the venue, but my basic rule is that it must be a cash bar, so we don’t have to worry about whether everyone turns up to cover costs or fiddle around sorting out the bill. What do you say? If you don’t live in Tokyo and have been thinking of taking a trip, well…

Send me a message, email, DM or whatever if you want to come along. Will mostly plan this on X, so keep an eye on this thread.

We’ve been talking about an end-of-year melt-up for a few weeks now. So far, so good. I noticed the Nikkei Asia already started talking down the likelihood of a BOJ rate hike later this week. You can pretty much take that to the bank, right?

Is the Bitcoin 4-year cycle over?

After the most vicious deleveraging event ever just a couple of weeks ago, the crypto market has recovered. Yes, retail bought the dip once more!

There has been a wave of speculation over whether the 4-year cycle is still intact. It’s fascinating, actually, as crypto-natives have been hyper-trained on this narrative. It’s probably the reason Bitcoin is not significantly higher right now. Long-term holders have been unloading, while retail ETF buyers continue to accumulate. Many of the new investors have no idea what the 4-year cycle is and just have a monthly allocation set up for their account.

Price agnostic.

Felix Jauvin makes a pretty good case for the end of the 4-year cycle in this thread.

Felix is awesome, and I love his Forward Guidance Podcast, but time will tell. 2013, 2017 and 2021 were all followed by a nasty bear market. Yes, Bitcoin wasn’t a macro asset like it is now. Yes, you can make a great case that liquidity is rising, and the boomer ETF buyers will keep buying. I really want to believe, you know! But let’s just say I’m ready for anything. Warren Buffett hates crypto, but his quote about finding out who’s been swimming naked when the tide goes out could have been written for the industry. All we need is one good leverage flush to start the dominoes falling, and we all get a chance to buy at $50k again. Don’t think it can’t happen.

At least it will give these guys something to chirp about.

These guys are great! They’ve done zero work, but they will gladly tell you how Bitcoin is too volatile to be investable.

Well, BTC has closed above $100,000 for 172 consecutive days now. If you wanted to sell, you have had plenty of time to do so. If 2026 is a bear market, make sure you ignore these nitwits on their victory lap and back up the truck.

Melt-up before the melt-down, though, right? I’m yet to see real euphoria in crypto this year. Remember the images of people lined up on the street to buy gold a week or so ago? That’s what we’re looking for. We’re not there yet.

It’s a busy week with the Fed meeting, BOJ and Trump on the loose in Asia. I don’t know when the next dip will come, but you can bet that retail will be ready to buy it!

Top image 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.

Is offshore investing still relevant?

As you may know, I have worked as an independent financial adviser for many years. I first got involved in this business in 2002, and the world has changed drastically since then. Some of the financial products that were popular at that time are almost obsolete now. So, is offshore investing over? Or is it still something worth considering for the right person?

A note here: I have never used this blog to promote offshore products, and that is not my intent here. However, I’m probably as qualified as anyone to discuss this topic, so here we go!

Much has changed

In 2002, if you were an expat in Japan, earning good money and looking for a way to invest, your options were fairly limited. Opening an investment account in Japan was not something many people considered. Along with the obvious language barrier when it came to reading product information, opening an account would involve meeting with a broker from a Japanese securities company and going through their sales process. If you think offshore advisers had a bad reputation, local securities company salesmen were not much better – they were well known for heartily recommending whatever was booming at the time and throwing their clients in at the chuffing top of the market.

Therefore, speaking to a British guy in a suit and cufflinks and investing in the Isle of Man was usually a more palatable option. Of course, these guys operated on commission, and some of them did not have your best interests at heart. Buyer beware! Many people got duped into long-term savings plans they didn’t understand.

To be fair, some of these people partly deserved what they got. All these offshore products had terms and conditions readily available in English. You just had to get a copy and read them! Plenty of people managed to ask questions, read the documents and invest in a product that they actually understood.

These days, investing in Japan could not be simpler. Go online, choose a brokerage, fill in the initial online form (with your name in half-width katakana hahahahahaha!) and then post off copies of your residence card/My Number card. You can have a brokerage account and a tax-free NISA set up in a couple of weeks.

So, is offshore investing dead?

Other advisers may have different mileage, but from my perspective, the demand for offshore products is certainly down significantly. I attribute this to two factors: getting a low-cost brokerage account is very easy, and nobody wants to pay for anything these days.

Not that avoiding high fees on investments is a bad thing. It’s one of the simplest things you can do to improve your returns. However, when offshore advisory is done well, you are not necessarily paying a lot for the product. Lump sum investment products in particular have very flexible fee structures, and a good adviser will be reducing their initial commission and taking an annual management fee for servicing you and providing ongoing advice.

Of course, much depends on your country of origin, how long you plan to spend in Japan and where you will go next. Offshore isn’t a great fit for everyone. (Americans in particular, take note. NISA isn’t necessarily a great fit for you either, and you are likely better off getting US-specific advice and investing in US-based accounts.)

Here’s a simplified view of how I see the steps to allocate money:

  • Make sure you have an emergency cash reserve
  • Fill up anything tax advantaged first – in Japan, that would be NISA, iDeCo
  • Any money over and above that is up for consideration – it could be invested in a taxable Japan brokerage account, an international brokerage account like Interactive Brokers, or offshore.

Again, a lot depends on nationality and personal situation, so no advice here, but some of the benefits of offshore get overlooked in the relentless pursuit of low fees.

I will leave the offshore regular savings plans out of this, as they are somewhat outdated. But many people, including myself, still have plans set up years ago, and that’s fine.

The offshore portfolio bond is for larger lump sum investments. It’s essentially an insurance structure; the individual owns the policy, and the policy owns the assets. It is open architecture so policyholders can access ETFs, mutual funds and individual stocks. For Japan residents, you are not required to report capital gains and dividends within these policies as they occur. You report when you exit the policy and pay a one-time tax payment (一時所得) of around 20% of gains. E.g. You invest $100k and the policy grows to $200k – you cash out the policy and owe approximately $20k.

So you effectively get gross roll-up inside the policy. You can switch investments and take profits as much as you like without triggering a taxable event. For some people, that alone is worth the fees.

If you leave Japan, you just take it with you, and when you cash out, you may end up owing nothing here. Of course, some people may have to factor in the exit tax and the lookback, etc. It depends on amounts and timeframes.

Use of trusts

The other thing you can do with offshore insurance products is put them in a trust. Trusts can be very effective for estate planning, particularly for, but not limited to, British nationals.

In the case of Isle of Man assets, probate will be required on the death of the last policyholder before proceeds can be paid out of the plan. Placing the policy in trust avoids this lengthy and often frustrating process, allowing money to be paid out quickly to the beneficiaries.

Trusts allow the donor to maintain a degree of control over the assets and, in some cases, to have limited access to the capital. A discretionary trust, for example, can instruct the trustees to hold the assets until the beneficiaries reach a certain age before distributing the proceeds to them.

For individuals who are treated as UK long-term residents, a trust is an effective way to shield assets from UK inheritance tax. Trusts are also worth considering for anyone who plans to become a UK long-term resident in the future.

A note here: trusts will not help you to mitigate Japanese inheritance tax. Japanese tax authorities do not recognise foreign trusts and generally look through them and tax the assets. If Japanese inheritance tax is a concern, you should first do your own reading and then discuss with a local tax professional before taking action. Reddit is an incredible resource, but you should not be taking personal tax advice from there.

If you have an offshore policy that you have been holding onto and perhaps do not know what to do with, it could be worth discussing with your adviser as to whether it would be better to put it into a trust. If you have lost contact with your advisor, you are welcome to contact me. I can also assist with general advice on whether it is better to keep the policy or cash it in and invest elsewhere.

In conclusion

Offshore investing is generally less relevant than it used to be. However, it is far from dead. In particular, high-net-worth individuals may find there are significant benefits to investing in a tax-free jurisdiction, and/or taking assets out of their own name.

For simple day-to-day investing for longer-term Japanese residents, NISA and iDeCo are incredibly hard to beat, and local brokerage accounts provide access to a wide range of assets. We are really spoiled these days. If you need help getting things organised, don’t forget that I offer fee-based personal finance coaching!

Top image by Clker-Free-Vector-Images 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.

Hyperliquidation

Well, that was fun…

I woke up last Saturday morning and, as is my habit, checked on the overnight market movements. I did a double-take and wondered what the hell had happened. Bitcoin, perhaps the nimblest indicator of global risk appetite, had dumped heavily. Several possible scenarios ran through my mind, but I knew it could only mean one thing…

Donald Trump has posted something!

Bingo! After market hours on a Friday, America’s fearless leader had somehow mangled a Chinese announcement on rare earth exports and sent out a post threatening further 100% tariffs on China. After all the TACO earlier this year, I had forgotten about the trade war!

Had stock markets been open, they would not have liked it at all. As they were closed, crypto bore the brunt, and anyone unfortunate enough to be awake got to witness the biggest liquidation cascade of all time. Bitcoin fell to around $104,000 initially before bouncing. Alts were nuked without mercy, with $ATOM token getting as close to zero as you can really get without going negative.

Something in the range of $18.7 billion in positions got liquidated in a matter of minutes, and around $560 billion was wiped from the total crypto market cap. Fun times!

I won’t get into the whole conspiracy theory of what happened. Suffice to say, a very large and very suspicious short position appeared in the market shortly before the fun began. This seems to be the only person who made money that day. It could be a coincidence, of course. I guess we will never know…

Japan is moving to ban insider trading in crypto, by the way. Seems like a good call.

Bitcoin hodlers would be a little concerned to see the price fall so quickly, but most take it in their stride. Leveraged traders, however, some of whom don’t even own Bitcoin, did not make out so well. Many got a lesson in risk management they will never forget.

Of course, by the US open on Monday morning, Trump had already straightened things out, and stocks acted like nothing had ever happened.

It’s always the leverage

Most people should stay away from leverage. Hell, even skilled traders should handle it with care. And yet, Volatility Shares just filed for a total of 27 leveraged 3x and 5x single asset ETFs. If approved, every Robinhooder will be able to go 5x long Nvidia, Palantir, XRP and more. What could possibly go wrong?

Wall of worry

We’re so back! Add to this the growing concern over the AI-driven boom and whether it is, in fact, a bubble, and you have to wonder if the Q4 melt-up might be cancelled.

The AI bubble talk is understandable. OpenAI has around $1.5 trillion in AI build-out plans. This for an unprofitable company with only $13 billion in annual revenue. Both smart money and dumb money alike are positioned for a bullish Q4. Tech stocks sure have a long way to fall if investors lose their nerve.

A week or two ago, the CEO of Goldman Sachs warned that a stock market correction could occur in the next 12-24 months. Thanks for the deep insight, bro! Jamie Dimon is talking about gold possibly going to $5,000 or even $10,000.

Throw in the US government’s shutdown, and you may wonder how stocks can possibly rise further. Surely the Bitcoin bull run is over, too?

While Trump was busy TACOing, Jerome Powell came out on Tuesday and said that “the downside risks to employment appear to have risen.” That appears to imply a further rate cut at the Fed’s end-of-month meeting. More importantly, JPow signalled the end of the Fed’s balance sheet runoff. If quantitative tightening is really over and liquidity flows, the wall of worry could melt rapidly.

I don’t know what’s going to happen, and you certainly shouldn’t be making investment decisions based on my offhand opinions, but if we get a strong earnings season, I still see a bullish Q4 and then trouble on the horizon in 2026. It’s never dull, is it?

Yes, Prime Minister

Organising a Prime Minister seems to be a tough gig these days. France had a guy quit and then get reappointed in the same week! Here in Japan, Sanae Takaichi went from being a done deal to less than Liz Truss in a couple of days. Now the LDP is courting the opposition, and it’s looking like they might find the votes to anoint the country’s first female Prime Minister after all. Who knows?

The market has already tipped its hand if the deal gets done. JP stocks up and yen down. I will unapologetically cheer for our iron lady just because I want my Nikkei ¥50,000 party. The yen is cooked anyway.

A diversified portfolio matched to your base currency and risk profile with satellite holdings in debasement assets.

I sound like a broken record, don’t I? By the way, I found a Japan Physical Palladium ETF (1543). It’s amazing what is available these days. Don’t do anything I wouldn’t do!

Thank you for your attention to this matter.

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.