Tag: personal-finance

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.

Is Quantum Computing the next megatrend?

Last month, I read a fascinating article about punters in the NFL. What was particularly surprising is how Australians now dominate punting in American football.

I looked up the word ‘punt’ and it has four distinct meanings: a narrow, flat-bottomed boat, to kick a ball upfield, to speculate or gamble and the basic monetary unit of the Republic of Ireland, before the Euro.

You can probably guess which one I’m interested in.

As regular readers will know, I favour a core-satellite approach to asset allocation. The core is a diversified portfolio, mainly denominated in your base currency and matched to your risk profile. Satellite holdings give things an extra spice, or maybe even, an extra kick. If 20% of your investments are in satellites, that 20% may also be broken down into traditional assets, such as commodities, niche stock market sectors – such as biotech, or alternatives. You may even want to take a small portion of the 20% and have a punt on something truly speculative. Imagine if you took a punt on AI a few years back.

The art of the punt is to find a candidate for the next megatrend and allocate a small amount of your wealth to it. If you are wrong, it’s money you can afford to lose. And if you are right, the returns are asymmetrical.

Megatrend: a long-term, large-scale shift that can impact economies, industries, and the way people live. Megatrends can be driven by technological advancements, demographic changes, or global policy shifts. Some examples of megatrends include: the rise of the internet, the ageing population, the shift to renewable energy, rapid urbanization, and technological breakthroughs.

That overview came from Google’s AI, by the way.

Earlier this month, Google caused a stir when it introduced Willow, a state-of-the-art quantum chip. Willow has been in development for 10 years and has reached the stage where it can ‘perform a standard benchmark computation in under five minutes that would take one of today’s fastest supercomputers 10 septillion (that is, 1025) years — a number that vastly exceeds the age of the Universe.’

Does that sound like a megatrend? It sounds like a punt to me! The key thing about technologies like this is that the pace of development is exponential. Nothing happens for years and then massive progress is made in a short period.

A few years back, a friend dragged me to a quantum computing seminar. He was attending to show support to one of the presenters. My friend is a finance pro and I’m a pretty good generalist and I remember clearly how, about a minute and a half into the presentation, we looked at each other like, WTF?????

Needless to say, I will not attempt to explain how QC works. Do your own research, as they say!

Here’s a nice friendly BBC article to get started with.

And, here’s a great thread by Charles Edwards. It helpfully identifies four stocks that punters can buy if they want to get exposure. They are IONQ, RGTI, QUBT and QBTS.

Please note: This is not investment advice. These stocks are a punt! You should not put a large chunk of your net worth into them. Also, they have gone up a lot since the Willow announcement. They will exhibit a ton of volatility and there will probably be better entries in the future. Funnily enough, three of them were down big just last night. I have seen threads detailing how QUBT barely has a business. Three of them might amount to nothing. Maybe all four companies will go bankrupt. However, one of them might develop the ChatGPT of quantum computing.

So, buyer beware. Do as much reading as possible and, if you decide to get involved, only play with money that is truly available for a punt. There is no need to rush into anything and you don’t need to invest a lot to spice up a well-diversified portfolio.

And, unless it’s really your thing, don’t go to any quantum computing seminars!

Top image by benzoix 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.

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.

PlanetDAO: A new approach to preserving Japanese cultural properties

Today, we have a guest post from the team at PlanetDAO. I discovered their Facebook ad last week and was intrigued by their focus on protecting cultural heritage whilst embracing the principles of decentralisation. After exploring their website, I made a modest investment in the Hayama Bamboo Forest House project – not primarily for financial gain, but because I believe in the project and want to be part of it. I’m excited about engaging with the local community and other co-owners.

This is not a paid post, and there are no affiliate links. I’m sharing simply because I admire PlanetDAO’s work and the DAO model.

And now, I will turn it over to PlanetDAO to explain more.

Contributed by the PlanetDAO Team

PlanetDAO was launched to address a growing challenge in Japan: the preservation of cultural and historical properties. As local economies evolve and traditional inheritance patterns shift, many significant buildings risk being lost to time. This innovative model addresses this challenge by connecting global investors with Japanese cultural properties.

The Challenge of Cultural Preservation

Historic properties in Japan, particularly temples and traditional houses called kominka, struggle with maintenance and preservation when local resources can no longer sustain them. PlanetDAO’s mission is to unlock these properties’ potential through the collective participation of a diverse global community.

A Collaborative Model

The model operates in four distinct phases. The process begins with identifying properties and building relationships with local communities during the sourcing phase. In the fundraising phase, opportunities open for interested parties to participate in property ownership. Throughout renovation, the focus shifts to property transformation while maintaining cultural integrity. The operational phase then combines vacation rental management with community engagement.

Participant Engagement

Participants who join the PlanetDAO community become co-owners, part of something larger than traditional property investment. The term “co-owners” rather than “investors” reflects the collaborative nature of these projects. Co-owners participate in voting on key decisions, engage with fellow community members through both digital platforms and in-person events, and play an active role in shaping the future of these cultural properties.

First Success: Ryogonji Temple (PlanetDAO001)

PlanetDAO’s first project, Ryogonji Temple, demonstrates the potential of this innovative approach. Located in the historic Irokawa district, this 170-year-old temple gained recognition as a registered Tangible Cultural Property in 2021. Adding to its historical significance, the stone stairs leading up to the temple have also been recognized as cultural heritage, symbolizing the enduring craftsmanship and cultural richness of the region. Despite its relevance, only four local supporters remained, leaving the temple’s future uncertain.

Through community investment, the project raised ¥34,540,000 for preservation and development. Today, the project has 134 co-owners from 15 countries actively participating in its development. Co-owners engage through regular online meetings and voting, and several have already visited the property in person, demonstrating the genuine community involvement that the model fosters.

The project is now entering an exciting phase, with architects submitting proposals for the renovation. Co-owners will be involved in key decisions throughout this process, maintaining their active role in the property’s evolution. The property is scheduled to open for bookings in early spring 2026.

Current Project: Bamboo Forest House (PlanetDAO002)

The second project focuses on an 80-year-old residence in Hayama’s Kamiyamaguchi district, recognized as one of Japan’s top 100 Satoyama landscapes. The Bamboo Forest House holds historical significance as a former farmer’s residence and a cherished gathering place for local artisans.

The property features an impressive 7,199 square meters of bamboo forest, offering a tranquil retreat from urban life. The surrounding bamboo grove, carefully maintained for decades by the local community, creates a natural sanctuary that embodies traditional Japanese landscape aesthetics.

The project is currently open for investment, with detailed information about participation opportunities available on the PlanetDAO website.

Building Trust in a New Model

While the first project demonstrated the potential of this innovative approach, each new project brings its own challenges. The global nature of the DAO model, which invites participation from people worldwide who share a commitment to cultural preservation, requires building trust across borders and cultures.

Connecting with potential participants who may be unfamiliar with this investment approach takes time and patience. While in-person conversations often help address initial skepticism, establishing credibility in the digital age remains an ongoing journey. This challenge reinforces the importance of transparency and community building in PlanetDAO’s commitment to cultural property preservation.

Looking Forward

PlanetDAO continues to evolve its approach to cultural preservation. The team is exploring opportunities to expand to additional properties across Japan while developing new ways to engage global participants in local cultural preservation.

Those interested in joining this community of cultural preservation enthusiasts, or learning more about current and future projects, can visit the PlanetDAO website. The team welcomes scheduling online calls to share more about their vision and answer any questions.

Disclaimer: This post is for information only. It should not be considered personal financial advice and does not constitute an offer or solicitation to invest in any of PlanetDAO’s projects. Investments like these carry specific risks and readers should conduct their own research before proceeding.

Bitcoin – when do I sell?

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

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

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

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

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

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

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

So, when do I sell?

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

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

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

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

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

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

Things are about to get silly. Focus.

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

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

You are not going to sell the top

Accept this. It’s not going to happen.

So, what to do?

Have a plan

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

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

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

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

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

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

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

Sell catalysts

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

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

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

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

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

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

Or simply never sell.

Top Image by starline on Freepik

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

Full send – what the US election means for risk assets

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

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

Risk on, for now at least…

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

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

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

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

I’ll take that as a ‘no’.

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

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

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

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

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

How high is Bitcoin going?

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

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

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

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

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

Full send. This is not a drill.

Top image from Craiyon.

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

Facing inflation – the four assets you should own

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

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

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

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

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

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

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

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

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

Bitcoin is coiled

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

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

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

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

Gold breakout is happening now – are you really late?

Tesla leads big tech earnings

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

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

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

Top image by wirestock on Freepik

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

All aboard for the Tokyo Metro IPO!

Last week, a reader suggested I write a post about the upcoming Tokyo Metro IPO. This seemed like a great idea, except I have paid precisely zero attention to the offering and would have to spend some time getting up to speed. I don’t really know much about IPO processes and generally see them as a scheme where retail investors provide exit liquidity to venture capital while banks make off with huge fees. Hmmm, I thought maybe I’ll look into it when I have time…

Then, the next day, my wife texted me from work about it. She works with a couple of shrewd investors who were excited about the IPO. Ok, now my wife wants to participate, so I really do have to figure out what the deal is!

First of all, this is clearly going to be a popular offering. You don’t have to be a high-level analyst to determine that the Tokyo Metro is profitable and occupies huge swathes of prime Tokyo real estate. Additionally, this is not a start-up exit to public markets. The Tokyo and national governments are selling half of their holding to the public. (the central government plans to use the proceeds to repay reconstruction bonds issued after the 2011 Tohoku earthquake and tsunami)

What’s the deal?

Tokyo Metro Co. Ltd will be newly listed on the Tokyo Stock Exchange on Wednesday 23 October, 2024. In total, 232,400,000 shares of common stock will be sold to the public. An additional number of shares may be offered depending on demand.

How to participate

Investors who wish to participate can apply through participating securities companies during the application period. If you have an online brokerage account, you will most likely find advertisements and guidance for the offering when you log in.

The price of shares will be determined through a ‘bookbuilding’ process, which is a method to gather investor interest and determine the final price based on demand. The bookbuilding period will be from 8 October to 11 October. This is when you submit your purchase request via your brokerage account. The minimum number of shares you can apply for is 100 – and increments of 100 thereafter. The indicative price per share is ¥1,100. This means the IPO would raise ¥319.55 billion, giving the company an overall value of ¥639.1 billion.

The final offering price and the number of shares to be allocated will be announced on 15 October and the actual public offering period runs from 16 October to 21 October. This is when participants need to deposit sufficient funds to pay for the shares in their brokerage account – make sure you follow the instructions here or you will end up missing out.

There is no guarantee that participants will be allocated all of the shares they apply for. It will depend on the demand for the offering.

Need more info?

For those interested, a Zoom webinar will be held on 3 October at 14.00. You can find details of the offering and a Zoom link here.

About Tokyo Metro

Tokyo Metro operates an extensive subway network with 9 lines mainly in Tokyo’s 23 wards. The most used stations are Ikebukuro (2.487 million daily passengers), Shinjuku (2.165 million), and Shibuya (1.955 million). Total average daily ridership in 2023 was 6.574 million passengers.

The real estate business manages many major properties, including Shibuya Stream, Shibuya Scramble Square, and Tokyo Plaza Ginza. There is also the Shinjuku West Gate Area Project, which is scheduled for completion in 2029.

Tokyo Metro also operates retail businesses such as Echika, a shopping street in some of the metro stations. In-station advertising is, of course, another major business area.

Show me the money!

Tokyo Metro suffered a severe drop in revenue during Covid, but recovered to 95% of pre-pandemic levels by July 2024. The return of inbound tourism, increased population and infrastructure investments played key roles in the recovery.

As part of its growth strategy, Tokyo Metro is focussing on improving accessibility and expanding partnerships with other transport services to increase ridership.

A new trip-planning app is planned for launch this year along with an updated rewards program for frequent passengers – gotta have a point card strategy in Japan!

Tokyo Metro aims to integrate its services better with tourist facilities and provide tailored travel experiences via the app. This is part of the strategy to create more reasons for passengers to use the metro, especially for leisure and tourism. The company is also promoting more contactless payment methods, such as QR codes and credit cards, to streamline fare collection and enhance convenience for passengers.

Tokyo Metro is also working on the expansion of certain metro lines, including the Yurakucho and Namboku lines, which are projected to be completed by 2030.

What to expect from the investment

The share offering is clearly going to be in high demand, with investors looking for a long-term position in a profitable business with a solid dividend. (I’m hearing rumours of a dividend around 3.5% but no idea how accurate that is) There will always be plenty of passengers/customers and the real estate value alone makes the company highly attractive.

On listing, I can imagine a scenario where the share price increases significantly in the first few weeks/months. That may well be followed by a correction in price. Many will view this as a trading opportunity, but remember that you will be trading against every investor in Japan (and many abroad), all of whom will think they have come up with a winning strategy!

My view is that Tokyo Metro will be a solid long-term hold, but admittedly the temptation to sell the initial rally to buy back lower will be strong. If you are going to do so, it’s probably better to be first!

So, there it is. If you are looking to get involved, check your brokerage account and make sure you are prepared to make your bid on 8-11 October.

Best of luck!

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.

Lock in

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

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

US markets

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

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

Yen / Japan stocks

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

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

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

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

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

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

Getting hard

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

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

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

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

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

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

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

Digital gold

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

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

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

Don’t say I didn’t warn you!

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