Market Report 14th September 2020
In the news this week, Japan’s new prime minister, Sheltland Islands seek devolution from Scotland; Copper at all time high, British Economy rebounds by 6.6%
It has been a fascinating and busy week with major implications in the Markets so plenty to roundup this week.
Japan’s Prime Minister Abe, resigned a few weeks ago due to ill health. The elections have taken place in Japan and his successor is soon to be Prime Minister Suga. It is widely thought that he will continue the reforms and maintain the policies of Abe who has been very popular with both the Japanese citizens and global markets. Warren Buffetts US$6 billion investment into the Japanese Market offers support for the policies being implements and the future of the Japanese Market.
Good news for UK’s Brexit, is the trade agreement made with Japan which will be worth around £15 billion to both economies.
The UK economy bounced back with a 6.6% growth but how long that will remain is dubious as it was boosted by incentives from the government to spend and people coming out of lockdown.
The Shetland Islands approved a motion to seek independence from Scotland. The Shetlands are seeking to remain within the UK umbrella but under the same governance rules as apply to The Isle of Man, Guernsey and Jersey. Orkney Islands have stated they are looking at a similar proposal as the don’t want to be part of an Independent Scotland. This would have major implications for Scotland who would be reliant on the oil both Isles generate to balance the financial books.
China and the EU are holding talks for a possible trade agreement however, there are a few stumbling blocks particularly regarding access to both countries. China would have access to most businesses within the EU block however, there would only be limited access for EU companies to the Chinese Markets.
Bank mergers are also in the news with Swiss banks UBS and Credit Suisse exploring a possible merger to become one of the Europe’s largest banks. In Spain Caixa Banks SA and Bankia SA are also in possible merger discussions to become the largest bank in Spain.
The Share Markets are in a temporary holding pattern waiting for the Central Bank monetary policy meetings taking place this week. Meetings being held are on Wednesday the US Fed and Central Bank of Brazil; Thursday see meetings for Bank of Japan; Bank of England; South African Reserve Bank; Bank Indonesia and CBC Taiwan then on Friday Central Bank of Russia. The European Central Bank held its meetings last week and decided to keep interest rates on hold and the quantitative easing program unchanged.
Gold – the price of gold moved upwards slightly with a 0.89% growth for the week with gold now at US$1946.26
Silver – the price of silver moved upwards very slightly with 0.06% growth for the week. Silver now sits at US$26.86
Gold:Silver ratio – remains in the low 70’s at 72.40 indicating there is still good growth potential if buying silver.
Copper – continues its bull run mainly on supply fears with the world’s largest mines in South America being affected by lockdowns. China’s quick recovery and demand for copper has helped fuel the spike in prices. According to Metal Bulletin, some 1.15 million tons of production was lost to the pandemic this year with a further 672,000 tones lost due to other disruptions.
Oil – Prices continue their downward trend with WTI Crude down to 36.97 a barrel and Brent Crude down to 39.50 a barrel this is due to an increase in inventories with the American Petroleum Institue reporting an increase in inventory to 2.970 million barrels higher than analysts had predicted.
Alternative Energy – we are used to seeing many so-called alternative sources which turn out to be hair brained schemes however one idea which keeps coming back and gaining more popularity is making windows in homes solar windows. Scientists now view the windows as a chance to take passive parts of a building and transform them into active power generators with engineers having now developed semi-transparent solar cell panes.
Why You Need a Backup Plan if you are in the Forex Market
Why do I need a backup plan I hear you say? It’s a big market traded every day. What traders fail to realise is how quickly the FX Market could disappear, meaning traders would instantly lose everything tied up in the market. Never before, in its short history, has the FX Market been so vulnerable. The future of the FX Market is balanced on a knife edge. To explain what I mean we need to look at the history of FX trading.
In previous blogs, I have written about the gold standard which ceased in the 1930’s and was replaced after WW2 by the Bretton Agreement. The Bretton Agreement pegged the value of the US Dollar against the value of Gold and all the other currencies were pegged against the US Dollar. This stabilised worldwide currencies and created a benchmark which allowed global trade.
In the 1970’s US President Nixon, due to economic problems in the US, the run on gold because of a devaluing dollar, took the US Dollar off the Gold Standard and the Forex market that we know today, was created. The US$70 million per day trading market, of the 1980’s rapidly increased to over US$1.5 trillion only 20 years later and continues to grow.
Fast forward to 2020, where world economies are in a mess, some countries have astronomical inflation such as Argentina whose inflation rate is 40.60% for the month of July. Argentina has an average inflation rate of 194.97% although this is way down on the 20,000% (twenty thousand percent) in the 1990s. While that is an extreme, many countries are recording high inflation with fears of more countries experiencing hyperinflation.
Debt levels have increased exponentially, with the introduction of quantitative easing and countries only too willing to pump more liquidity into the markets to stop banks and other businesses from failing. During the March 2020 global lockdown, the US printed Trillions of dollars to keep the economy afloat. The UK printed £656 billion during the March lockdown. Levels of debt, never before seen, which caused GDP of many countries exceed 100%. The US, as I write this is on 130% debt to GDP ratio and expected to reach 141% by the end of September. The UK was on 100% GDP in their last quarterly figures.
During the 2008-2014 Great Recession, the experiment in austerity measures failed, stalling many economies from recovering quicker as governments fought to keep hyperinflation out of the recovering economies. Major lessons have been learnt and since 2014 there has been a move to bring back a gold standard. This has gained momentum and favour with many countries. There are two strategies now being considered.
1. The Gold Standard – bringing countries back onto a gold standard would need to see the price of gold go up to help the world’s economies reduce debt to more favourable and manageable levels. This is gaining the backing of many global economies including Europe.
2. SDR Basket – peg currencies against the SDR Basket instead of the US Dollar. The SDR Basket will in turn be pegged against Gold. The SDR Basket is a digital currency used by the IMF. Pegging currencies against the SDR Basket would remove the demands from China for the Yuan to be used as the international currency in lieu of the US Dollar. With China’s track record of manipulating the price of the Yuan to suit its needs very few want to see the Yuan used as an international benchmark currency. The SDR Basket is gaining popularity as the world’s economies contribute to the SDR for example the US dollar contribution is 41.73%; Europe is 30.93%; China 10.92%; Japanese Yen 8.33% and UK Stirling 8.09%.
So, what does this have to do with the Forex Market?
As I mentioned at the start of this blog, the Forex Market only came into being because currencies were removed from the Gold Standard. If a Gold Standard is reintroduced the Forex Market will cease to exist instantly.
How likely is this to happen?
Very likely, as President Trump and his financial advisor Judy Shelton are in favour of it and have been pushing for the introduction since January 2019. Europe with the euro as one of the largest currencies in the world, a large contributor to the SDR Basket are heavily pushing for this to be instigated quickly. It has gained support from the IMF (International Monetary Fund) who are key influencers in the world markets. As more countries look at ways to bring their increasing, out of control economies back into some resemblance of order the new Gold Standard is gaining more popularity.
World economies are desperate to find a way around the heavy debt/GDP ratio and bring currencies back onto a gold standard either directly or through the SDR would help them.
Gold investors are supporting the move as there would need to be a major increase in the value of Gold to rebalance world economies which is beneficial for major institutional investors who in turn are key to help support government fiscal policies.
Banks have been building their gold reserves since April 2019 when Gold was deemed zero risk by the Basel III agreement. Prior to the agreement gold had a risk level which prevented banks from holding more than 30% of their assets in the commodity. By moving Gold to zero risk the foundation was laid to support banks, currencies and a move back to a Gold Standard.
Where does this leave Forex Traders?
Simple, the Forex Market would cease to exist if the Gold Standard is reintroduced as there would be no trade or movement between currencies which have a set price to gold. Now is the time to have a backup plan. A plan of investing rather than gambling for despite all the strategies devised about Forex Trading, it is simply betting on the movement of one currency against the next with a 50/50 chance of being right. If currencies are pegged against a Gold Standard then there is no currency movement and there is no Forex Market.
Amateur Forex Traders need to think seriously about being in the Forex Market. They are likely to be the ones who lose the biggest as they tend to place a larger percentage of their overall wealth or lack of wealth into the hope of striking it big on Forex Markets.
Learn to invest and ensure you have solid investment reserves behind you before entering the Forex Markets as it’s very likely the perceived Goose laying the Golden Egg could shortly be killed off. Have a backup plan to not only protect any wealth you have created but to ensure it can grow without a Forex Market.
The Backup Plan
I learnt trading after I had built and created a wealth foundation. I also predominately trade Gold with the occasional stocks in volatile markets. I ensure no more than 10% of my existing liquidity is used for Trading due to the high risk of the market.
The “backup” plan has always been my Plan A, build wealth through business, property, shares, bonds and bullion. Build a solid foundation and only when there is a solid foundation use 10% of surplus cash to trade if desired.
With world economies in recession and living standards likely to get tougher, with more countries likely to adopt the new Gold Standard, if you are in the Forex Markets the backup plan is essential. Don’t wait until it is too late.
For more information about learning to invest email email@example.com
Market Report 7th September 2020
Catching my eye in the Financial Markets this week – Banks restrict mortgage lending; Warren Buffett spends US$6 Billion on the Japanese Share Market; UK Publicly Listed Companies start reducing dividends; Bitcoin is environmentally unfriendly and more….
The property market in the UK has seen an unprecedented boom when the Chancellor reduced Stamp Duty making it an ideal time to purchase property. Two key lenders Nationwide and Barclays announced they were reducing the loan to salary ratio downwards and “bank of Mum & Dad” deposits would no longer be accepted meaning anyone buying a property will have to ensure they have much larger deposits saved. This change applies to existing applications as well as new applications (for more information about the investment training courses we run email firstname.lastname@example.org)
Some FTSE100 Companies and some AIM listed companies have started to reduce dividend payouts in an attempt to improve cashflow within their businesses and help build a cash pool to deal with the fallout of the recession. It is worth checking the investments you have and ensure you are still getting the dividends you require for your investment strategies.
Warren Buffett has invested US6 Billion in the Japanese Share Market. As a value investor meaning he looks for undervalued investments, the move is likely to see a boost to the Japanese Share Market. It will also be interesting to watch the currency markets for the Japanese Yen. The Yen has been considered a safe haven currency but with Buffett’s Investments likely to bring more investing into the country the currency market could become more volatile.
NS&I have admitted that people who bought into Premium Bonds are having to wait up to 5 months in some instances, to cash in their bonds and get their money back. For clarity, I do not advocate investing in Premium Bonds but rather using the NS&I platform to invest in Income Bonds and Capital Growth Bonds which are backed by the government up to £1 million and are guaranteed. Funds, form both the Income Bond and Capital Grow Bonds are usually available within 7 days of cashing in.
Gold – The price of gold continued it the downward movement reaching US$1933 as it continues to rebalance due to the speculation in July/August. Overall is was down 1.75% for the week. However for the year the gain is 26.5% which compares favourably to the S&P500 which is up 6.3% year to date.
Silver – is also rebalancing with a downward price of US$26.88 a drop of 3.68%. However, year to date the growth for silver is 48.05%.
Gold:Silver Ratio – again rose to 72.14 indicating how undervalued the silver currency is.
Reports of a shortage of silver by Global Mints led to an increase in price when infact, the shortage was not in silver stock but rather in lack of blanks available to the mints for processing. The shortage of blanks remains as many bullion suppliers are “awaiting stock” of coins and bars for retail.
CrytoCurrencies – are in the news due to them being environmentally unfriendly. A report based solely on Bitcoin, as no data was available on other cryptocurrencies, states the electricity required for mining bitcon and providing extra security is around 0.04% of all generated electricity. To put that into perspective the electricity would run Switzerland’s power grid for 2 years.
Oil – Also continues a downward trend with WTI crude down from US$43 a barrel to US$39. Natural Gas which had been in an upward market reversed the trend and was down to US$2.53
Alternative Energy – nano-diamond battery development. Commercial diamonds have a 15% charge collection efficiency. The nano-diamond battery was able to achieve 40% charge. NDB startup company who are pioneering the nano-diamond battery state the new technology will allow a battery life for cell phones, aircraft, rockets, electric vehicles, sensor and other devices and machinery of approximately 28,000 years almost eliminating traditional battery recycling and waste.
What’s in Your Cupboard?
When we start a new £2.73 Club Mastermind Group, we ask clients to do a couple of things. Look at the Direct Debits and Standing Orders that are on their bank account which should have been cancelled a long time ago but weren’t. Clients are often surprised at how many are on their accounts and how much money they are able to save. This exercise is about taking more control over their finances.
The second thing we ask them to do is to go around their homes. Look at what they have that is no longer needed, no longer has value to them and could be sold. This provides income for investing. So far, clients have raised between £200 to £1000 in a month.
We also do this for another reason, mindset. Investing is a mindset shift. Its about changing the old thoughts and habits around money and creating new more positive and practical mindset that will help you on the journey to wealth and dream lifestyles. Its about creating lifetime skills.
We live in a world where the mindset has become that of get rich quick. Most people want a quck fix solution with instant results now. A world where it is too easy to hand your money over to someone else for a quick buck then cross your fingers and pray like hell that they make money for you and keep making it. Sometimes, in the short term they do make money for you, maybe 1, 2, or more years but eventually the money will stop coming in. It always does because markets are volatile and continually changing.
Financial markets are always moving up or down. They are known as investment cycles. They vary in length of time. The gold market is on an upward 50 year cycle that started in the 1970's. Business is on a downward cycle started around 4 years ago accelerating downwards during lockdown. When your money is with someone else it is often difficult for them to move the money quickly because of the large volumes they handle. Even Warren Buffett one of the most successful investors of our generation is unable to get into the investments he wants because his business is too big.
Traders are in a even more precarious situation as they only get a percentage of trades that work and then they lose money on the remainder. No one has a 100% record. Exceptional traders have a 60% track record of making money. They can make money on an upward and downward market but what happens when the financial markets go sideways as they often do?
Learning the skills of investing and making the essential mindset shift to that of an investor means that no matter what the investment markets are doing you have control. Control over the way you react to the market and control over how quickly you get in or out of an investment. Control over where you park your money in a sideways market. Control over your finances.
The true value of investing is the mindset shift you make from where you are now to where you want to be in the future. The skills and lessons you learn along the way build a reservoir of knowledge that is priceless when the markets turn and they always turn.
When learning new skills, the shift in mindset is so subtle that often it goes unnoticed until one day you have to practice what you learnt. One day you realise when it comes to creating your dream lifestyle and wealth all you really need is what you already know about getting in and out of the markets at the right time and patiently waiting for the right time to arrive.
In the comedy Only Fools and Horses, Del Boy and Rodney are always coming up with schemes to become wealthy. In the episode about how they made their millions, they find out they have been sitting on a valuable item for 16 years not knowing what it actually was or the value of it. The autioneer saying they thought it was a Victorian Eggtimer while infact, it was a rare watch. They had neither the right mindset nor the right skills to take advantage of what was right under their nose all the time. Their cupboard was bare of the right mindset, skills and knowledge.When you look in your cupboard what do you see? A tap connected to someone else’s money pipeline building their wealth faster than yours or a shelf stacked with skills, knowledge and mindset values which will ensure yours and your family’s future for decades to come.
For more information on our courses email email@example.com
Market Report 31st August 2020
Signs that the share markets are waking up to what is happening in the global markets with the FTSE100 down from 6818 a month ago to close on Friday at 5963.57. The Dow Jones still continues to ignore the market data and climbs up to 28653.87
There is growing concern about the increased debt levels for governments worldwide who have used quantitative easing to pump liquidity into the market to the tune of trillions and the debt/GDP ratio has exploded. There is in the short-term likely to be big tax hikes but another train of thought is the amount of gold reserves being accumulated by central banks which could be used to counter balance the debt. This is being mooted by the EU and other countries keen to get back to a gold standard. This would revalue currencies against gold to offset asset/liability ratio on balance books. Gold investors are quite excited at this prospect as gold will likely go up considerably. The third angle countries are looking at is inflation. Inflation is a tool which will make the debt level appear less but will short term affect billions of people’s buying ability. If anything we could see a combination of all three tactics used.
In the UK the Chancellor is expected to hike tax rates with a proposal that corporation tax will go up from 19% to 24% hitting an already beleaguered market and likely hindering an recovery chances in the short term. Owners of second homes are also likely to see their capital gains tax rise from 28% to 40% or 45% hitting the buy-to-let and property investment market.
Grant funds are diminishing as small and medium sized enterprises are increasingly being turned away.
Gold – lost value during the week as the volatilitiy in the market continues. Gold was down 0.79% for the week.
Silver – went against to downward trend for the week gaining 3.59% as industries start to go back to work and the silver shortage supply kicks in. Silver is a by-product of mining and with many mines shut down there are no new silver supplies for the markets.
Gold:Silver Ratio – stands at 71.64 indicating silver is still the best value investment at this stage.
Copper – Panic buying due to falling supplies globally has seen a big increase in the copper price which is up 52% since the mega drop triggered by the pandemic and is up 8% overall for 2020. With prices standing at $6605 a tonne.
Oil – the oil price collapse and deferred drilling campaigns have led to a shortage of drilling rigs for the North Sea covering UK and Norway. With drilling rigs taking a long time to get up and running companies are only considering long-term contracts of a year or more taking exploration off the market for the time being and also affecting small companies who rely on short-term contracts to operate.
Alternative Energy - Are Electric Ships Sci-Fi or a Reality? Irina Slav reports on the challenges ships are struggling with to convert to electric energy. To put this into perspective the average size of an Electric Vehicle battery is 67 kWh; An electric bus in China has a battery of 210 kWh in Denmark a ship is powered by 4300 kWh battery giving it 22 miles travelling before recharging is needed. There is an electric container ship operating between Chinese ports. Ironically, its cargo is coal. The ship hops from one port to another with the batteries being recharged while cargo is being loaded and unloaded.
The Feel-Good Factor
Have you ever bought a winning lottery ticket, watched you favourite sports team win or had a fantastic time with your friends and family? These events bring feel good emotions that make us happy and more carefree because we are enjoying ourselves. It’s the Feel-Good Factor.
In the world of investing you get the feel-good factor when you make a deal that allows you to make money at the start of the investment and again at the end of an investment. You get the feel-good factor when you’ve bought an investment that goes up and up to make you a lot of money.
In September 2007, Northern Rock Bank became the first UK bank in 150 years to see a run on a bank. A run is when there is a panic by depositors wanting to get their money back. This together with a string of economic disasters led to the Credit Crunch in February 2008 and subsequently the worst recession in history. So bad it became known at the Great Recession. Throughout this difficult time everyone became familiar with the terms Austerity or Austerity Measures. It meant everything financially was restricted. There was no government spending as governments tried to balance the books. Benefits were reduced or even scrapped in some cases. Infrastructure spending on roads, schools, energy, railways were all stopped. Wages were frozen. While some loosing of the restrictions did happen eventually, no matter what country you were in everyone spoke about austerity measures.
Fast Forward to 2020 and the Coronavirus lockdown. The lockdown in almost every country was instigated to try and reduce the spread of the virus so hospitals could cope with the massive influx of patients suffering from an illness no-one had previous experience of dealing with. The lockdowns were longer than initially thought dragging into 3 months or more before lockdown restrictions were eased and, in some areas, removed completely. The result of this was an economic disaster which has seen many countries, whose economies were balanced on a knife edge, plunged into the worst recession they have known.
Having learnt, austerity measures have a restrictive effect on growth within the economy governments introduced the feel-good factor to boost spending and increase motivation to get back to work, have holidays and show the world’s populations everything is back to normal. But is it?
As an investor, it has caused confusion within the financial markets with mini booms that will no doubt go bust leaving financially uneducated people struggling to make decisions on what to do with their money. As a professional investor trying to identify the safest investments during this period is difficult, what hope do novice investors have?
Each country came up with their own initiative about which area of the economy needed the biggest boost or would help reduce the impact or a market collapse.
The UK boosted the property market by reducing stamp duty in the UK. England benefitted from this with Wales, Scotland and Northern Ireland, devolved governments, offering less incentives. The impact a robust increase in English with increased house prices taking property investment money from the Welsh, Scottish and Irish Markets. Instead of a stable UK property market it is now fractured.
The UK Share Market is also interesting. Being paid to stay at home gave people a false sense of financial wellbeing with surplus cash in their pockets people started investing the share market to the extent that one business which had called in the administrators and seen it’s share price drop from several pounds to pennies had uneducated people piling their money into the shares thinking it was a buying opportunity instead of a dud.
Finally, the UK decided, if they can’t get workers back into business offices which would trickle spending into high streets and malls, there must be another way to do this. 50% dining vouchers to encourage eating in restaurants and getting the population mobile again. What happens when the vouchers end later this month? Are families still going to eat out?
The US have been plowing money into the Bond Market to prop it up. It is an essential market for the flow of cash in world economies but it has created a false economy where people think they can’t fail as the government will bail them out. The bailout is part of an agreed support mechanism between many countries to keep economies moving.
Instead of the one extreme we’ve seen for many years, that of austerity measures, governments have gone to the other extreme of creating a false economy of reckless spending and investing through the feel-good factor. When the feel-good factor diminishes so will the economic fallout.
There is no doubt, the feel-good factor, is overriding common sense. It is creating unsafe and unstable bubbles which will implode at any time leaving small investors out of pocket. We’ve already seen Gold go up to US$2075.76 and then rebound down to US$1865.79 before settling around US$1924. The UK property market went up 1.7% in a month. The FTSE100 which dropped from 6818 down to 4993 quickly went back up to 6500. Based on current economics this market should be down much further than it is.
Don’t let the feel-good factor lull you into a false sense of being able to make money quickly. Become an investor. Investors are people who sit back, watch the turmoil, absorb the information and wait. And wait. And wait until the right market conditions come to them to make the best, safest, profitable investments.
In the £2.73 Free Facebook Group you see information about what the markets are doing and when. Join the group now and start a pragmatic journey to wealth creation. https://www.facebook.com/groups/1032901670065445
Market Report 24th August 2020
A roundup of economic stories which caught my attention during the past week.
Covid-19 lockdowns and social distancing have played havoc with the US coin market to the extent they asked consumers to pay for whatever they can with coins. Due to lockdown and social distancing the US Mint are unable to produce enough currency coins and bullion coins for the markets to meet demand. A spokesman for the US Mint explains that normally there would be a certain amount of currency coins in circulation but with shops closed and services reduced customers are holding their coins and not spending them. An appeal went out for coins to be used to pay for good and services where possible or to pay with debit cards as businesses are unable to get sufficient coins to provide change when notes are used.
Cardtronics, one of the biggest ATM operators in the UK ask for the interchange fee between banks to be increased so it can increase the number of ATMs in its network. The fee was reduced from 28p to 25p reducing income for the company to provide services. As a result it has reduced the ATM network from 22,000 machines to 17,500. The company state there seems to be a push to remove cash from daily life and move people onto card transactions but that hits certain markets who are totally reliant on cash. The increase in the interchange fee would allow Cardtronics to install more ATMs and provide services to communities who are losing banking services through bank closures.
TSB Bank are trialling the closure of across counter banking services in 14 branches. The branches will stop accepting transactions from 2pm daily with the bank encouraging customers to use alternative ways to do their banking.
The Debt Bubble
In my blog, All Money is Loaned into Existence, I talk about economies being debt based and growing at an exponential rate. Latest data from Office of National Statistics (ONS) shows the UK money printing schemes to support the economy during lockdown has created debt levels in the trillions of pounds and debt is now at 100% of GDP. Other economies have followed suite. The question that remains now is how to get debt back to an acceptable level. Higher taxes and inflation appear to be the two key ways to make the debt appear more controlled. Higher taxes will help reduce the amount in money in circulation and inflation will make the debt appear smaller. Negative Interest rates are already being used as a tool to bring in extra cash.
graph supplied by ONS
Gold – continues its downward trend to a more realistic price level for the current economic situation as the “Feel Good Factor” (see blog Thursday 27th August) impacts the false economy. Gold is at US$1934 offering good investment opportunities before it starts the proper climb in price.
Silver – as always follows suite closing down at US$26.30 again offering good investment opportunities
Gold:Silver Ratio – is moving upwards again from a low of 70 to 71.97. This indicates silver is the commodity to buy at present offering the best value for money and when markets do move upwards again there is still plenty of leverage within the ratios
Although, Gold & Silver markets are correcting at the present the best way to be active in these markets is to have a plan to purchase the commodities on a regular basis. With the price being volatile it is unwise to invest large sums at present and a PCA strategy over the longer term will be cost effective and offer the best opportunities for future growth.
Oil – Warren Buffett sells his US$10 billion holding in Occidental Petroleum. He has bought the common stock to help fund the company’s expansion but the timing was unfortunate with the virus lockdown and crash in oil prices making it unviable for the company to drill for oil.
Carbon Footprint – sees a growing number of oil and gas companies looking at ways to measure and reduce their carbon footprint. This has resulted in a growing number of technology companies launching carbon emissions tracking and accounting software according to Reuters.
Market Report 17th August 2020
Business as usual in the markets even though Britain officially goes into recession.
What a crazy week in the markets which failed to react to Britain going into recession. Not only did the normal corrections not happen but there was a coordinated effect between Central Banks to provide quantitative easing into the economies to try and keep businesses moving.
Several Venture Capital groups held their hands out for support with governments looking at how to keep them going. This was first done in March 2020 during lockdown. In the US economy in March they asked for trillions of US dollars. To now see the UK following suit is alarming as it sends out the message if you are a big organisation heavily in debt the government will support you rather than making sure the business models they operate, work properly.
The impact on the share market has seen prices bounce back rather than reflect the true economic position. This has caused the IMF to issue warnings about irresponsible reactions to the economic situation.
Despite this, it seems governments are taking the stance that spend, spend, spend is better that austerity measures. Though at high street chains continue to call in the receivers, it makes you wonder who is benefitting from the spend mentality when John Lewis announced its flag ship store will not reopen and Debenhams called in the administrators. 250,000 jobs were lost in the last quarter so who is the quantitative easing benefitting.
The Travel Industry is one of the hardest hit and it was hoping for a summer come back to get it through the winter and ready for a better 2021. However, this week Virgin Atlantic called in the receivers. The 2nd Virgin Airline to go under as the one in Australia failed during lockdown. More locally for me, Jet2 stopped all flights into Spain and Ryanair, who traditionally, go onto a winter timetable of 3 flights a week from 1st October, announced they would not operate a winter timetable this year and all flights would be cancelled until March 2021.
Banks still continue to have problems and in America, Warren Buffett’s Berkshire Hathaway sold is entire holdings in Goldman Sachs and part holdings in Wells Fargo and JP Morgan.
Gold – fell back from the hefty highs of last week as speculators started to move out of the market. Warren Buffett having raised funds from selling bank shares bought US563 million dollars worth of shares in a gold mining company Barrick Gold. In response to his purchases Ray Dalio’s Bridgewater Fund also purchased a similar amount of gold. As these types of investors move into the bullion market, we are likely to see similar investors move in. This will provide a more stable foundation for the future growth of the gold and silver markets.
Gold price retreated to US$1945. Expect the price to go up and down like a yoyo over future months while governments try different tactics to pull the economies out of recession.
Silver – also retreated in spot price down to US$26 as it follows the trend of gold movement.
However the gold:silver ratio was back up at 74 having dropped to 70 the week before. Silver still provides a good investment opportunity.
Oil – Despite US sanctions, Venezuela upped production hitting an average 325,000 barrels daily average. The increase comes from diesel-for-crude swaps which are not covered by US sanctions. The increase will help ease the fuel shortages in Venezuela as well as providing much needed boost to the economy.
ESG Funds – Environmental, Social and Governance (ESG) Funds are getting a major boost from investors such as Blackrock and Jeff Bezos. With these types of funds proving popular and starting to be regarded as a safe haven investment there is a shortage of products available for investing large sums of money. However, Wall Street are now looking at boosting availability through the ESG portfolio hedge fund.
Don’t Fear Recession. Fear lack of Financial Education.
As countries start tumbling one after the other into recession, fear takes hold and most people panic. What happens if I lose my job? Will I be able to pay my mortgage or rent? How do I pay household bills? There are, a myriad of fears that race through people’s minds. They are genuine fears, yet, the one thing they should fear is not even considered. The fear of not having enough Financial Education to be able to make the right choices for the economic climate.
Opportunities for Investors
When I speak about the difference between Investors and Traders, I cover how patient an investor has to be. They have to patiently wait for the magic of their investments to start producing results. I liken it to watching paint dry. It is painfully slow when you first start investing and while you wait for your investments to get to the level where they can support you.
The other part of patiently waiting, is waiting for the investment opportunities that abound at certain times in certain economic times. As a bullion investor, I have been patiently waiting for 20+ years for the gold and silver to reach a specific level for investments. I am still waiting and expect to be waiting another 4-5 years or more to get the results I expect from bullion investments. I know the market will get to where I expect it to be so I can take advantage of the investment I have made in bullion. I know because I spent years learning about Bullion Financial Education.
Within investment categories – I teach 4 categories – Business, Property, Paper and Cash – there are always ups and downs in each category. Recessions are exactly the same, some investments within each category will go up and some investments will go down. Financial Education will teach you what to look for and how to position yourself to take advantage of the situation. For instance, in a previous blog, I spoke about how in business, some traditional businesses will struggle in a recession, but how there are businesses which will thrive in a recession. Owning one or two businesses will allow you to use the economic markets to your best advantage to grow your wealth and support or even improve your current lifestyle. These do not need to be big businesses they can be side hustles that can produce regular income for a small amount of regular working hours per week. Often an hour a day will have significant benefits.
There are businesses which thrive in a recession such as franchises and network marketing businesses. These businesses attract dedicated people who have lost jobs and are looking for some way to make income. They are dedicated and have a sense of urgency to generate an income. Many of these people will make a success of a business because they know the feeling of being made redundant and don’t want to find themselves in that position again. They work hard to make their business ultra-successful.
Financial Education helps you to see the opportunities that exist no matter what the financial markets are doing, no matter whether there is a recession or not.
Making Money in a Recession
There is no doubt, investment opportunities are different in a recession. However, preparation for a recession is key. People who have been building assets and then watch the indicators that a recession is on the way will usually have prepared for the situation by selling some investments and moving into cash. As they say, cash is king.
Cash will allow you to take advantage of lower priced assets which can be purchased with the cash you have.
Bullion is another cash asset which depending on the markets and the metals ratios will let you leverage money to take advantage of the ratios. For instance, when the Gold:Silver ratio is high you purchase silver. As the Gold:Silver ratio drops you sell the silver and transfer into gold. Then continue buying gold. Silver is the leverage to get into gold. The key to remember with Gold:Silver is not how much gold or silver costs but rather the buying power it has in a recession. If during good economic times it takes 100 gold coins to buy a property what will it take in turbulent economic times. The cost could be 50 gold coins or 10 gold coins. It’s purely guessing at this stage depending on the depth of the recession. However, if you bought 100 gold coins when they were cheaper and then were able to buy 2 houses or 10 houses, with the bullion, as the price of houses comes down and the price of gold goes up. What is your buying power?
Transfer of Wealth
It is often said that during a recession there is a transfer of wealth. But what does transfer of wealth actually mean?
For people who prepare for a recession, it means they have built income producing assets, investments, in all 4 categories of business; property; paper and cash. They balance each of the investments with each category so they always have an asset which is going up in value if another is going down. This is called hedging. A way of protecting what you have.
Investors will ensure they are earning income from as many of the 8 income sources as possible guaranteeing and protecting cashflow. This means they have plenty of resources to purchase more income producing assets when they need them the most.
As an economy starts to recover, those who bought more assets during the recession will see their wealth increase dramatically. By how much is unknown. But this increase in wealth is known as the transfer of wealth.
As countries head into recession, what will you be doing to protect yourself, your family and your financial future? Financial Education is key to this and is not a luxury but a necessity to ensure you make the best decisions you can in the circumstances.
Don’t fear a recession. Fear lack of Financial Education.
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Market Report 10th August 2020
Gold at record highs is the main focus of today’s market report. Last week Gold broke through the US$2000 barrier reaching a high of US$2075.76 before falling back to US$2030.14. This represents an overall gain for the week of 2.78%
Don’t panic! Thinking you’ve missed out on the opportunity to profit from Gold. This weeks prices were based on speculation rather than economic fundamentals so be ready for a drop in price and the opportunities that will arise.
Technical Analyst, Karen Jones, from Commerzbank said “The never-before-reached US$2000/oz is a major psychological resistance level, with gold’s 49-year trend channel resting just below it at US$1983. Only an end-of-month or, better yet, end-of-quarter close above these levels will signal a breakout in the price of gold”.
In other words, there is no support at present for the currently high prices.
Charting is a popular way to analyse bullion movement and predict where you expect the prices to go. Using a 20-day moving average and RSI indicator support for Gold is coming in at US$1875 indicating the correction on the current speculative prices could drop quite substantially.
“The 20-week moving average is currently at US$1755” says Tom Pelc an independent technical analyst.
The general consensus by analysts is the price of bullion will fall back quite sharply. However, when it goes back up, based on fundamentals in the economy rather than speculation the feeling is that gold could go up far more spectacularly offering excellent investment opportunities.
Pelc continued “if resistance is broken, Fibonacci extensions offer short-term targets. These are based on the idea that a rally will extend in predictable proportions extrapolated from a previous rally. One is at US$2067 another comes in at US$2286. Lucas ratos – another tool using a sequence of numbers similar to Fibonacci’s- suggests gold could rise to US$3598 an ounce in 4-5 years.”
If these experts are anywhere near right on their projections then there will be plenty of opportunities to make a decent profit from gold bullion in the near future.
Silver reached a high of US$29.88 before dropping back to US$28.33. This gave an overall increase for the week of 16.07%. Silver hit an all time high of US$49.45 on 18th January 1980 and then in the 2008-2014 Great Recession went up to US$42 to ounce. There is still a lot of opportunities available with this currently undervalued commodity.
It’s worth noting that despite the high prices for gold, traditionally, silver outperforms gold. Historical charts show it initially lags behind gold and when it moves it’s 3 times more than gold in either an upward or downward direction. The latest charts again show silver outperforming gold.
Put a plan together to regularly invest in small quantities and you will do well in the coming years. Using a PCA strategy will even out the costs and when the economical fundamentals support the price going up you will be in the best possible situation to reap the rewards.
ETC’s broke all records last week as more funds were transferred into them during the “gold rush”. It is estimated that ETC’s now have more gold reserves than the Bank of Japan which is a major holder of the commodity.
Where has the money been flowing
Indications to date, are that with the economic impact countries are seeing investment money go into different markets. In the UK, property prices have gone up in July indicating more investment into those markets while in the US and in parts of Europe the Share Markets have rebounded. IMF have warned that economies are unlikely to get back to pre-covid-19 until 2022. Undoubtedly, money will flow in and out of markets making it extremely volatile in the coming months.
Why a Business is Your Biggest Investment?
Most people think of business as something they work in daily that brings in money to keep a roof of their head and food on the table. But a business is an investment and one of the biggest investments you are likely to have.
What Type of Business Do you Start?
A hobby was the first business my husband and I set up. My husband was a racing driver who built his cars and engines. He was approached by a friend who ran a garage to see if he could do some specialist welding repairs on a vehicle. This led to the friend being able to take on insurance work using my husband as a subcontractor. This business was run as a hobby. My husband would do his full-time job during the day and in the evening, he would do the welding repairs. In his day he was one of two guys in New Zealand who could do plastic welding. He was also one of a few people who was a specialist welder for vintage and veteran car rebuilds. Welding was not his profession, it was a skill he had learnt for building his racing cars but became a side hustle.
Most people become self-employed because
1. They are made redundant and are unable to find another job quickly so they start a small business in an attempt to bring in extra cash to replace a lost wage.
2. They believe they can do a better job than their boss or the company the work for so set up their own business
3. They have a hobby and think they can monetise it
4. Are fed up with their jobs and are looking for a way out
5. Have always wanted to have a business but timing was never right to start it.
There may be other reasons but when talking to clients these are the key reasons that they come up with.
How Do You Start a Business?
So, how do you actually start a business? You first have to find clients. No one has a business if they don’t have clients.
I often see people talking about designing a logo, getting business cards, having a business plan, having a website, setting up their social media post etc. But, until you have your first client you don’t have a business so the number one focus has to be finding the client first. The logo, business cards, website etc. always came once I had paying clients who covered the cost of setting these things up.
The old adage is people do business with people and that is very true. I’ve started businesses by networking. Going to a variety of different types of events and talking to the people who are there. I get their business cards and follow up with them. I’m not waiting for someone to call me. I take charge of the situation.
Now you have the opportunity to get your first clients and start trading.
Why Business is Your Biggest Investment
There are 4 key investment categories, business, property, paper and cash. Business is the key which generates the income that allows you to be able to invest in other categories. Without a source of income, you are unable to get started in other types of investing.
But having a business is not just about generating and income. There are people whose investment strategy is based on building and selling businesses. They might start a business from scratch. Build it to a certain level then sell it and start over again.
There are investors who prefer to buy into an existing business and increase the value of it before selling. Another strategy is to buy and hold several businesses all generating income for you.
Business is an investment. It is not just another job from 9am – 5pm that provides your monthly wage. It is a genuine investment which can provide investment capital to buy into other investments.
Business can be the biggest investment you will ever make.
For more information about investing and the training programs we offer connect with us at email@example.com
|Market Report 3rd August 2020|
Welcome to my weekly report of the things which have caught my attention over the past week.
Shockwaves reverberated around markets on Friday as the US recorded it’s biggest economic contraction in history with the economy down 32.9% for the 2nd quarter. This is very worrying as the US is yet to reach the peak of the pandemic and furlough schemes ended on 31st July 2020 suggesting unemployment will escalate.
In Europe, countries also released their GDP 2nd quarter figures with Spain down 18.9%, France 13.8%, Italy 12.1% and Germany 10.1%. Britain has not yet released it’s figures.
Gas has long been one of Russia’s biggest exports, but the surge in demand for gold has seen Russian exports in metals exceed oil for the first time. Russia’s Central Bank reported that the country’s gold exports jumped to 65.4 tons in April and May with a value of approximately US$3.55 billion. In the same period natural gas exports dropped to US$2.4 billion. The drop in demand is in line with global drops in demand due to the pandemic.
Chinese banks start banning their clients from purchasing gold. They have taken measures to prevent customers from buying gold, platinum, palladium and other precious metal-related products through them. The Shanghai Gold Exchange and Bank of China have also stopped opening new accounts for trading.
TikTok a growing video platform is broiled in controversy due to it being a Chinese owned social media company. With the ever-increasing hostilities between US, UK and China this company has come under fire with espionage claims. US Government have told China they must sell their US arm of the company or face closure.
Gold – reached an all time high before dropping back slightly to US$1975.85 but that still equates to a weekly increase of 3.85%.
Goldman Sachs has revised its 12-month gold forecast to $2300 per troy ounce. Investors in Gold remain mainly speculators although mainstream investors are likely to enter the market if gold reaches US$2000.
For the second consecutive week more than US$100 million has flowed into Gold ETC’s due to the volatility offering trading opportunities
Silver – closed at US$24.41 with a weekly growth of 7.11%
Gold:Silver Ratio – which had been steadily dropping increased slightly over the week to 81.48 indicating silver is still undervalued and offers the best investment opportunities at present.
Oil – the price has been moving sideways, at $40 a barrel, for a couple of weeks but is now going down again with WTI Crude closing $39.73. Saudi Arabia and India announce they are likely to cut back production.
Chevron Coporation reported it’s worse losses in history on Friday with a net loss of US$8.3 billion. A combination of reduction in demand due to the pandemic and US sanctions against Venezuela which force the company to close down it’s operations there.
Other oil companies are also struggling with UK, company BP has indicated it is likely to cancel their dividends. This is a huge blow to pension companies who rely on dividends to boost their revenues for the pension schemes.
Alternative Energy – After 35 years of negotiating, planning and delays the 5 year plan to build the largest fusion reactor in France has finally started. The project is funded by US, Russia, China, India, Japan and South Korea. It will be the largest tokmak fusion device capable of generating 500MW of thermal fusion energy as soon as 2025.
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What is the Gold Standard and How Does it Work?
Over recent months there has been growing support in the EU to go back to a Gold Standard. But what is the Gold Standard and how does it work? Will it work in a modern society?
The Gold Standard was around for hundreds of years. It was a commitment by participating countries to fix the prices of their domestic currencies to a specified amount of gold. National money and other forms of money were freely converted into gold at the fixed price. The UK used a type of gold based standard as far back as1717 before formally adopting the Gold Standard in 1819. In 1834, the United States fixed the price of gold at $20.67 per ounce, where it remained until 1933. Other major countries joined the gold standard in the 1870s. The period from 1880 to 1914 is known as the classical gold standard.
Why did the Gold Standard Break Down?
During WW1 countries needed to print money to pay for the cost of war. It became impossible for the countries to hold enough gold in reserves to cover all the currency being printed. It was briefly reinstated from 1925 to 1931 and called the Gold Exchange Standard. Under this standard, countries could hold gold or dollars or pounds as reserves, except for the United States and the United Kingdom, which held reserves only in gold. This Gold Exchange Standard broke down in 1931 following Britain’s departure from it due to it being unsustainable to keep gold reserves with the amount of debt and capital expenditure required for the British economy.
In 1933, during the Great Depression in the US, President Franklin D. Roosevelt nationalized gold owned by private citizens. The Gold Exchange Standard was abandoned as the US tried to create jobs to help bring the country out of depression.
Replacing the Gold Standard with a Dollar Based Standard
The Bretton Woods agreement was created in July 1944 when 730 representatives from 44 countries, mostly WWII Allies got together at Bretton Woods, New Hampshire, US.
Under the agreement, countries promised that their central banks would maintain fixed exchange rates between fiat currencies and US dollars. If a country's currency value became too weak relative to the dollar, the bank would buy up its currency in foreign exchange markets. This would lower the supply of the currency and raise the price. If the value of the currency was too high then the central bank would print more money, thereby, reducing the currency’s price. Under the agreement trade wars would not exist as each country agreed to regulate their currency so no country could benefit from manipulating the value of their currency. The agreement meant that the Gold Standard ceased to exist and the world move onto the Dollar Standard. The dollar was pegged to a set value of gold 1/35
The Collapse of the Bretton Woods System
In 1971, the United States was suffering from massive stagflation—a combination of inflation and recession, which, in turn has an effect on unemployment and economic growth prospects.
In response to an alarming drop in value of the US dollar, caused by too much currency in circulation, President Nixon started to devalue the dollar against gold. Nixon revalued the dollar to 1/38 of an ounce of gold, then 1/42 of an ounce. The devaluation plan backfired. It created a run on the U.S. gold reserves at Fort Knox as people redeemed their quickly devaluing dollars for gold.
In 1971, Nixon passed legislation removing the dollar from gold backing. Without price controls, gold quickly shot up to $120 per ounce ending the Bretton Woods system.
The creation of Bretton Woods resulted in countries pegging their currencies to the U.S. dollar. In turn, the dollar was pegged to the price of gold, and the U.S. became dominant in the world economy. The U.S. was the only nation that could print the globally accepted currency, and countries had more flexibility than they did with the old gold standard.
When the dollar ceased to be pegged to the price of gold, it became the monetary standard with other currencies pegging their currencies to it.
A Society Based on Debt
In a previous blog, I discussed how today’s economies are based on debt. Every pound, dollar, euro or whatever the currency is for a specific country is loaned into existence.
Relevant governments agree to pay interest to holders of the debt (Bonds) until the debt is repaid. Successive governments need to generate more debt each year to cover the costs of servicing the debt, running their infrastructure services such as hospital, schools and benefits. There is insufficient tax take each year to balance the books and so more money has to be raised to meet the ever-increasing demand. Governments are in a continuous spiral of creating more and more debt to provide for the services within their countries.
The growth of debt is exponential, just look at how much was printed by each country for the first wave coronavirus. America was in the Trillions of Dollars, Britain was £600+ billion and growing.
In the 2008-2014 Great Recession, governments adopted what was called “Austerity Measures” where they tried to cut back on debt spending and bring their countries debt under control. The measures were in place for many years and was an experiment that was doomed to fail not only as countries could not balance their books (despite coming up with creative ways to seem as if they had) but it had far reaching consequences to economic growth with many countries barely coming out of recession.(again figures were manipulated for it to appear they had) When the world economies are based on debt suddenly telling its citizens to reduce their own debt, start saving and stop shopping means the flow of income for growth stops. It reduces the tax intake for countries forcing them to lend more money into existence. It’s a vicious cycle.
A Gold Standard
This brings me back to the opening statement that EU are floating the idea of going onto a gold standard. Will it work in modern society?
My belief is no. Bullion has had a free run since 1971 and has become the safe haven for investors. With the amounts physically held in storage by investors and the growing debt based economy it is doubtful that there is enough gold in circulation to meet demand.
The effect of coronavirus around the globe has seen many mines closed and the production of gold and silver has been greatly reduced. Hence, when economies are struggling and people are looking for safe haven investments there is insufficient supply to meet demand resulting in the soaring prices we see today. Most of the growth to date has been speculative with very little traditional investment. It will be interesting to see where the price is likely to go once mainstream investors start moving into gold and silver.
China has on several occasions, raised the prospect of moving from dollar based markets to yuan based markets. As a country which, denies it, but undoubtedly, manipulates the price of its currency the prospect of moving to a Yuan based global market is unlikely. However, it is possible there could be some break away countries that support the Yuan and there could be 2 separate currency markets one pegged against the dollar and one pegged against the yuan.
Central Banks have started to purchase gold and hold reserves. Since the introduction of the Basel3 agreement in April 2019, gold was deemed a zero risk asset many banks started to purchase gold to increase their reserves.
Gold would need to be nationalised for governments to move onto a gold standard again. With the amount in circulation, with reserves held in banks, any form of nationalisation would collapse the world banking system.
I am sure, there are economists with more knowledge than I have about the money markets and the global economy who are behind the scenes trying to come up with a way of introducing a new type of gold standard, especially if, the EU are looking at it. But, my belief is the economy is too fragile to be able to cope with the transition to a new gold standard. Any transition, if implemented would most likely be once there has been a collapse of economies and currencies. Only time will tell.
Market Report 27th July 2020
A round up of things in the markets that have caught my eye during the past week.
Debenhams are looking for a buyer for the business. London Investment Bank, Lazard, have been called in to kickstart the process.
IAG are considering a shares issue to raise £2.7 billion. The are the parent company of British Airways and Iberia Airways both have been particularly hit hard with lockdown. The lockdowns and no go travel areas continue to hit the travel industry very hard.
British Government announced more investment opportunities with better interest rates through NS&I income guaranteed bonds. NS&I is the governments arm for raising domestic cash to go towards government coffers. Traditionally, they would look to raise around £6 billion however this time they are looking to raise £40 billion hence the favourable rates.
The EU are again pushing for currencies to go back on the gold standard. There is definitely some interest and could be one of the reasons reserve banks have been stock piling gold, but whether or not it is feasible remains to be seen. My blog on 30th July will explain more about the gold standard.
Gold – money has been pouring out of the share market and into gold. Gold was up to $1902.57 an increase of 5.02% for the week.
Silver – which was lagging behind gold has become more favourable over the past few weeks with some accelerated growth. Silver is up 50.52% over a month. This week it went up 17.69%
Gold:Silver Ratio – as silver continues to outperform gold the ratio continues to drop. This week it stands at 83.48. So, silver still remains a good investment opportunity but now is the time to start thinking about the percentages of silver to sell as the market nears 50 percent which is very likely in the next few weeks.
Oil – is holding around $40 a barrel. However, there is strong suggestions that the prices are being manipulated by the rising tensions between the US and China.
Mexico placed an oil hedge in March known as the Hacienda on Wall Street. It was one of the biggest and most secretive hedges in history. When oil prices dropped the success of the hedge generated so much income it is thought to have saved Mexico’s economy from ruin. Russia is currently looking at a similar hedge buy staying coy about it.
Alternative Energy – China is in the market to bolster it’s holdings in hydro power and is eyeing up international companies. The Chinese prefer smaller projects in the range of 1-2 GW.
Pumped storages are increasingly gaining popularity as the instalment of wind and solar projects keeps growing. The intermittent nature of renewables strengthens the need for pumped storage.
Both the US share markets and the UK markets closed down on Friday over fears of the US and China tensions, increase in second wave - coronavirus impact on the markets with 40 countries now facing increases of infections and the infection rate. Hong Kong is on a third wave.
As we head into more turbulent economic times the markets become more interactive and volatile offering many investment opportunities.
Are You Part of the 92% or the 8%?
It’s an interesting question and one that triggered a few responses to a blog site I run when I wrote this article in 2012. I’ve repeated sections of the blog here as it is worth reminding readers about the statistics.
Several years ago, a class of teenagers with dreams and aspirations for their futures became part of a study group where they participated in a lifetime study. This is the basis for the statistics stated below supplied by Harvard University.
The students selected were from similar backgrounds. They did not come from privileged backgrounds or have above average incomes or above average intelligence. They were ordinary teenagers who went on to live their adult lives.
The results of the study are very interesting as of 100 pupils coming up to their 65th birthday – the then retirement age – the statistics were;-
38 were dead
62 were still alive. Of those 62 still alive
38 were financially broke
16 still needed to work just to survive
7 had retired and had a liveable income in their retirement years
1 was wealthy
Only 8 achieved financial independence and only 1 was wealthy out of 100 participants of the study.
This study raised a lot of questions for me such as why did only 8% achieve financial independence, when during this period people tended to work with the same employer for most of their lives and retire with a golden handshake and pension for life. The other question is why did only 1% become wealthy.
The common themes I have come across while coaching clients is
1. No plan and no goals to become wealthy
2. Lack of knowledge about investing
3. Buying liabilities instead of assets while thinking they are buying assets
4. Lack of confidence or desire to prepare for retirement often expecting the government to provide for the future.
5. A belief that investing is too complicated for them to understand.
No Plan and No Goal to Become Wealthy.
It is very rare that wealth just happens. You have to plan for it.
I was in my teens when I became fascinated with wealth and lifestyle. I studied wealthy people, what they were doing and how. I worked in the Inland Revenue and Banking so had an understanding of money but it wasn’t until I was 39 years old that I realised the reason I didn’t become wealthy was because there was no plan.
I created a plan and some action steps and retired by the age of 43 wealthy enough to never have to work again.
There is still a stigma in society that people shouldn’t talk about money, should be seen to be wealthy and as a consequence very few people actually put a plan together and action steps to ensure their wealth and dream lifestyle are achieved.
Lack of Knowledge about Investing
Since the Great Recession of 2008-2014 the world’s governments have been slowly passing the responsibility to the general public to provide for their own futures. They have amended work pension schemes and entitlements to state pensions while failing to provide the education for people to be able to make their own informed decisions.
Amendments to legislation for IFA’s have seen a big hole develop in the market where IFA’s have to receive payment from the customer so the IFA is no longer tied to specific products. This means the IFA or even the banks, who used to provide advise are looking for clients who have a substantial amount to invest. The person with £1000 or £5000 with no financial education are suddenly left with no support, no education and no understanding of how to provide for their futures.
The £2.73 Club was created to fulfil that role of educating clients, who have little or no financial education and little or no money and teach them how to understand the markets and how to think about providing for their futures.
Buying Liabilities instead of Assets While Thinking they are Buying Assets
Rob Kiyosaki author of the Rich Dad, Poor Dad books came up with a fantastic description which easily explains the difference between assets and liabilities. An Asset is something that puts money in your pocket. A Liability is something which takes money out of your pocket. A very simple yet effective way of understanding Assets and Liabilities.
Each time you buy something ask yourself the question, will it put money in my pocket or take it out? Once you start acquiring income producing assets then money flows in on a regular basis and provides an income for the life of the asset or as long as you hold it. The more assets you acquire the wealthier you become.
Lack of Confidence or Desire to Prepare for Retirement often Expecting the Government to Provide for the Future.
Governments have lulled people into a sense of false security by repeatedly stating part of the taxes you pay are for your retirement so you receive a pension at retirement age. Sadly, all models the government come up with for setting the taxes aside either don’t eventuate or do not provide the returns needed to sustain a pension fund.
As each new government realises there is lack of funding for the ever increasing, older population, the panic sets in and they start tinkering around reducing the level of payment and increasing the retirement age.
All the while taxpayers believe they have contributed enough to a pot to receive a good pension when in reality there is only a very basic pension which often doesn’t even cover property taxes, utilities, food or clothing let alone provide for the lifestyle retirees were expecting.
The best time to start preparing for your pension is at the youngest possible age. Parents who realise this often start savings plans for their kids which can be contributed to when the kid becomes an adult. Adults immediately they start work should be thinking of setting aside a percentage of their income, around 10% if possible, to ensure they have a fund for life’s emergencies, redundancies and retirement. The only person who will look after you in your old age is you. The sooner you prepare for it the better.
A Belief that Investing is too Complicated for them to Understand.
Investing is very simple. Learning to invest is very simple. People make it seem complicated so you will buy their products and services. You don’t need to be a rocket scientist to succeed at investing. All you need is a plan to become wealthy, education so you know what you like or don’t like and an action plan to get you there. Don’t let other people rob you of your faith and ability to become a very successful investor and live the lifestyle of your dreams.
If you would like more information about learning investing skills please contact us on firstname.lastname@example.org let us help you learn the knowledge and skills of investing so you can become part of the 8% who live a comfortable life with no money worries.
Market Report 20th July 2020
A weekly roundup of the things which have caught my eye during the past week.
A publican in England posted 2 job vacancies on his twitter feed. Normally this would attract around a dozen applications. This time though he received 484. A sign of the growing unemployment in the UK. It has been estimated that 650,000 jobs have disappeared as a result of the lockdown.
Bellway House Builders ask subcontractors to reduce their prices by 5%. While they are keen to stress their forward order book has 6000 builds this is down compared to pre lockdown.
British airways announces, it has retired its fleet of 747 aeroplanes 3 years ahead of targets. With the skyways opening up again they have decided it is not worth the costs to bring the 747s back into service. They will now focus their longhaul flight program on Dreamliner planes.
Ryanair have removed fees on bookings, for a short period, in an effort to attract travellers to fly with them.
Marks & Spencers announce they are closing down more stores another blow to the high street which is struggling to attract back businesses.
Community Access to Cash pilot is launched to provide banking systems to towns and villages around the UK who have lost all the banking services and atm machines. There are 8 pilots being launched which should be operational from September for the 6 months trial period.
EU stock markets closed near a one-month high as EU leaders gather to discuss a rescue package. Initially, it was flouted there would be a 500 billion euros fund to support countries. This has been knocked back and currently discussions are around a smaller amount nearer 390 billion euros.
All markets have been positive about a possible vaccine with the UK placing an order for 90 million injections with Pfizer.
US markets declined on the fear of a second wave virus and states being put back into lockdown.
Gold – the price is fairly static with a slight increase of 0.16% over the week. Russia has now become the largest exporter of Gold. China is trying to buy gold mines and production facilities globally with Australia and Canada trying to protect businesses from hostile Chinese takeover bids.
Silver – the increase also slowed on silver with the weekly increase of 1.31%. Recent reports show silver demand is continuing to increase while the supply of silver is restricted due to a variety of factors. Silver is a by-product of mining other metals and mining has slowed due to lockdowns around the globe. With businesses getting back into manufacturing and silver being a consumable the demand has increased. The gold:silver ratio is attracting more investors into silver.
Gold:Silver ratio – continues to decline and is down to 94.47. While it is still dropping, silver still remains an undervalued asset.
Oil - OPEC and Russia are trying to reach agreement on the quantity of oil output. They are hoping to reach an agreement that will go through to 2021 or even 2022. Renewed fighting between Azerbaijan and Armenia together with greater conflict between Russia and Turkey is threatening the vital Baku-Turkey pipeline for oil and gas transfer to many countries.
Nuclear Fusion – tests were successful this week in the quest for unlimited energy from nuclear fusion. Over the past few years, the size of operations/testing has been upscaled. There is still a long way to go to prove stability in a full scale working model but there is optimism with the successes of the latest upscale.
Investing is Boring
Think investing is all about excitement and glamour? Think again. Investing is dull and boring.
When talking about investing many people imagine the share market. They think instantly about traders screaming at one another across a crowded room. They imagine prices going up and down, making or losing thousands of pounds in a blink of an eye. Most remember the movies “Wall Street” with Michael Douglas and “Wolf of Wall Street” with Leonardo di Caprio. But, there is a big difference between being and investor and being a trader. Traders watch the markets constantly looking for the next trader. Yes, they can lose money in the blink of an eye.
Investors, on the other hand, have a plan to become wealthy. Their plan will include buying income producing assets which they hold for a long time before selling, if they do indeed sell. A large proportion of investors never sell instead passing their assets on to loved ones upon death.
The plan will be reliant upon the current markets, looking for the right investment opportunities. All investments have cycles where the investment is up or down. Investors will be patiently waiting for the right opportunity when they can buy low and sell high. Patience is the key. They can’t force markets to do what they want, instead they have to sit back and wait for the markets to come to them. I liken this to watching paint dry. It’s boring.
There are 4 key asset classes for investing. There are tens of thousands of different investments which filter into 4 key categories – business; property; paper and cash. Within each of those categories are sub-categories. For instance, if you look at property you can invest in residential property; commercial property; holiday lets; storage units; garages or land. Then there are more specialist areas such as within holiday lets you can let rooms; whole houses; villas; apartments; caravans; yurts etc. As you can see, each key category can be split down to find something to suit someone somewhere. Each of the investment categories take time to build. A business doesn’t grow overnight you have to build it step by step. It’s a fluke if you buy a share that takes your £100 to £1 million over night. You have to keep buying more shares and watch someone else build a business so your share value goes up.
When you become an investor, you must have your why. When I work with clients, I ask them to create their perfect day, then break it down into steps of easy to achieve goals. These goals will keep them focused on why they started investing. So, during the long boring period while waiting for the investment to work its magic they have the dream and the vision of their goal to help them stay focused and patient.
However, with the £2.73 Club, you can become a millionaire in 5 years. You can start building your dream lifestyle and the wealth you need to maintain it. While 5 years might seem a long time, it is a small time commitment. While your investments are boringly growing you can continue doing what you normally do just putting a few hours a month into growing your future dream lifestyle.
Investing is boring. You have to be patient to give the investments time to grow and generate the type of income you want. However, there is no better time to start your investment journey than now.
If you would like more information about the next Mastermind Group training starting in August please contact me on email@example.com so you too can discover just how boring investing is.
Market Report 13th July 2020
This week my focus has been on China. They are in the news for a variety of reasons. The interesting thing with China is they are like magicians in that they draw your attention to one area when they are trying to distract you from seeing what is really going on. Reading between the lines is key to understanding what they are doing and what impact that has on the financial markets. Generally, the markets seem to go with what seems the least noxious.
In the news this week with China:-
· They have again raised using the Yuan as a counter currency to the US Dollars. This was first raised during the 2008 credit crunch; when they started the silk road project they raised it again and again they are raising the issue possibly due to all the bad news stories hitting the headlines
· US Congress passes legislation requiring Chinese companies on the NYSE to be delisted due to their failure to allow US regulators to audit the companies. A requirement of all companies on the US Markets
· Fake Gold worth 22% of China’s annual production, held in storage as security for Kingold loans is found to be guilded copper rather than gold bullion.
· The crackdown in Hong Kong has resulted in many countries withdrawing political connections with China including withdrawal of extradition orders
· Reports indicate the incredible growth in the Chinese Share Market is being manipulated by the Chinese government with major concerns being raised internationally through various organisations including the IMF.
· China has created friction on several borders with multiple countries sending military into the region this includes the Indian border, and the Chinese sea borders where new military bases are being established. Hong Kong is a major concern.
UK economy is faltering with the country facing major business closures and redundancies. The incentives from the government to secure jobs is being turned down by major companies. Primark announced the incentive was worth £30 million but the cost to the company during coronavirus was £800 million.
Boots, John Lewis, M&S and a host of pubs, restaurants are all indicating they will be closing stores and it is likely there will be 250,000 redundancies.
Gold – has remained fairly flat this week with a 1.36% increase to $1799.74
Silver – continues it’s upward trend reaching $19.07 before dropping back to $18.75 but even at this price it has gone up 3.73% in one week.
Gold:Silver Ratio – is reducing down from a high of 125 to this week being 95.93 indicating silver is still the best investment opportunity.
Oil – Arab Countries are struggling with the drastic cuts in oil production which has results in a severe drop in oil dollars affecting the liquidity of Middle East Banks. Governments are encouraging mergers to keep some banks afloat with reports that $440 billion in deal mergers is currently on the table.
Natural Gas – Egypt has issued a decree for all new cars in the country to be run on Natural Gas.
Alternative Energy – Scientists find a way to harvest water droplets and converting them into electricity. This means the new method can generate electricity from rain and other sources using a system of converting mechanical energy to electricial energy. The stability of the system allows the energy to be stored in excess of 100 days with little degradation.
Fake Gold, Shadow Banking and How it Affects You.
Why does finding 83 tonnes of fake gold in a Chinese Vault have major impact on the Global Shadow Banking industry and how is that likely to affect you?
Before we talk about the fake gold, let’s look at Shadow Banking and what it is.
What is Shadow Banking
Shadow banking is a generic term used to describe financial activities that take place between non-bank financial institutions globally.
Some of the different types of institutions you would find using the shadow banking system are investment banks, mortgage lenders, money market funds, insurance companies, hedge funds, private equity funds and loans which are not regulated.
The shadow banking system is not regulated, and has successfully fought against regulation, on the grounds that, unlike traditional banks and credit unions, the organisations which operate in the shadow banking industry do not take “over the counter” deposits from clients.
Derivatives, mortgage bundle packaging and peer-2-peer lending have been major growth areas in the shadow banking system. The value of these types investments is unknown but it has been estimated that derivatives alone are in the quadrillions of dollars value bracket. The Chinese shadow banking system is said to be worth $3 Trillion per year.
Since 2017, China entered the derivatives market directly targeting risky financial practices such as excessive borrowing and speculation in equities. This has had a flow-on effect of boosting the Chinese Share Market and creating a “cannot fail” attitude of many investors in the Chinese Markets.
Shadow banking institutions were deemed to be the innovators in the financial markets and were able to finance deals, such as real estate and other major lending which would normally, not be accepted due to rules on capital and liquidity that are required by traditional lenders. These regulations are in place to prevent bank failures, runs on banks and supposedly financial crises.
China is now at the centre of one of the biggest gold scams in recent times. This is due to a company call kingold. The company is supposed to have taken out risky high value loan for various projects which failed due to various economic circumstances.
The loans were backed by gold assets (83 tonnes of gold valued at 14 billion yuan) and insurance company’s underwrote the loans due to the gold backing. Kingold defaulted on loans and the lenders attempted to seize gold bars to cover the defaults. However, it was discovered that 83 tonnes of gold, set aside as assets for the loans are in fact, gilded copper.
There are major repurcussions from this in the shadow banking system as 5 Chinese banks were behind the loans and it is unknown how they will be affected and if the market could collapse. 83 Tonnes of Gold equates to 22% of China’s annual gold production affecting the gold market.
The credibility of the insurance companies is affected as they failed to audit the gold.
In addition, US lawmakers have started removing Chinese companies from the US share markets as they have failed to allow auditing.
How Does this Affect You?
In 2008, the shadow banking system (called the sub-prime market) was the catalyst for the credit crunch and subsequent global recessions. The system broke down as a result of several economic situations which affected the public and institutions being able to meet the payments. This was exacerbated by the hurricane which hit New Orleans where many home owners were uninsured and just walked away from their mortgage payments. In addition many mortgages were coming out of the fixed term adding to borrowers unable to make payments.
Asset security was undervalued or the value not even know and trust between banks ceased to exist. In his book, Mervyn King, the current Bank of England Governor, says that if he and Hank Paulson, his equivalent in the US were trying to keep the markets working. They were just 30 minutes away from the total collapse of the financial markets and fiat currency.
Wind forward to 2020, history is repeating itself and stability in the shadow banking system is on shaky ground. Instead of the hurricane, we have the coronavirus outbreak with the economic repercussions from the fallout. We are facing a perfect storm which could trigger one of the biggest economic crashes in history.
How Can you Protect Yourself?
Financial education is key to protecting your wealth and your future. Bullion is definitely a major investment opportunity, as I write this, which should not be overlooked. Both Silver and Gold provide a hedge against downturns and insecurity within the markets.
For example, over the past month as all this news is breaking together with coronavirus second wave, gold has risen in price by 5.30% and silver has gone up 6.79%.
To learn more about the investment programs we run join our FB investment group https://www.facebook.com/groups/1032901670065445 or contact us for more details at firstname.lastname@example.org
Market Report 6th July 2020
World economies are struggling with the fallout of lockdown. As we head into recession and probable depression the second wave of virus infections has started with two US states going into secondary lockdown and several others introducing restrictions. Spain has one region in semi-lockdown and 2 regions in full lockdown while UK has one city in lockdown. A fragile economy struggling to recover from the first round of lockdowns is hit even harder with a second round of lockdowns. But, in turbulent times there are always opportunities which will become more visible in coming months.
Casual Dining Group called in the administrators this week. They own Café Rouge, Bella Italia and Las Iguanas. This follows Carluccios and Chiquitos having already closed, together with the closure of Jamie Oliver’s Restaurants a few weeks ago sees the restaurant industry struggling. In 2008 when the restaurant chains closed local fast food shops such as Fish & Chip Shops boomed.
Markets remain volatile. They were subdued on Friday with the US markets shut for 4th July celebrations. FTSE100 closed lower as investors in UK and Europe took profits.
In China, the government has seized profits from the banks to help prop up the economy. Chinese banks total take is expected to add 1.5 Trillion Yuan to government coffers.
Gold – the value remained static at US$1778 per troy ounce.
Silver – has steadily increased in value closing at US$18.41 an increase of 1.76% for the week. Silver is up 5.22% for the month. With the gold:silver ration at 98.30 this week silver still remains under valued and offering good investment opportunities.
Oil – this market is very active, volatile and very much in the danger zone. Elon Musk’s Tesla developments will see the use of cobalt disappear from electric cars. Cobalt is very expensive and accounts for 40% of the total cost of a car. In addition, lithium-ion batteries are being replaced with lithium-iron batteries which are far more efficient and will allow cars to travel up to 400 miles before needing a recharge making electric cars more affordable and more attractive. With the zero emission standards set for trucks starting to come into effect from 2024 and global political issues the oil industry is looking less vibrant for future investment.
Gas – natural gas is at very low prices and offers good investment opportunities. Warren Buffett announces Berkshire Hathaway has purchased 25% stake in Cove Point LNG with a $4Billion purchase tag and $5Billion towards reducing debt.
Mining – In Spain, the lockdown has had an impact on the use of coal with all coal plants being closed ahead of schedule with many plants unlikely to reopen.
Trump last year signed a deal allowing mining in Space. NASA this week confirmed the viability of mining the moon within 5 years as it has identified various metals and minerals in craters. Preliminary reports show the deeper the crater the better the concentration of metals meaning they can be mined in a very specific location reducing costs of searching and deploying mining facilities.
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