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Market Report 29th June 2020
6/29/2020 10:37:27 AM

Market Report 29th June 2020

My round up of what has happened in the markets for the past week.

 

Business

Intu, the company owning 14 shopping malls in England and Scotland went into administration as shops failed to pay their rent on their units.  Intu reportedly received on 13% of the quarterly rents due.

The collapse of Wirecard with their assets being frozen worldwide by regulators has major global repercussions.  Wirecard provides a money processing platform and risk management system to so many international companies , pre-paid credit cards, mobile phone payments and online shopping carts that the fallout and losses to consumers could be enormous.

 

Shares

The IMF (International Monetary Fund) issued a warning to share investors about a 2nd Coronavirus Wave as it believes investors and trades have lost all reality and share markets are not reflecting the true economic situation

Facebook took a hammering on share markets on Friday.  It lost USD56 billion in value as leading companies withdrew advertising from Facebook over its failure to control hate speech

Amazon purchases start up company Zoox for $1.2 billion as it continues its acquisitions into the autonomous vehicles market.

 

Commodities

Gold – following the IMF warning about the share market the Gold World Council recorded 975,000 ounces of gold was bought through EFTs in 1 day of trading.  A record.  This resulted in gold hitting its highest value since 2012

Silver – ration remains high at 08.51 meaning silver continues to be undervalued and still offers good investment opportunities

Oil – prices which had been recovery since Covid-19 lockdown collapse having reached $40 a barrel pulled back to $38 a barrel on Friday.  This was due to US increases in virus numbers causing governors in 2 US states (Florida and Texas) to start reinstating lockdown measures.  Texas announced the closure of bars, cafes and restaurants.

California passed legislation forcing all trucks to have zero emissions by 2035.  This will be implemented through incremental steps starting in 2024.

 

Summary

The global economy remains fragile and extremely volatile.  For me, physical holdings of gold and silver bullions still remain the best investment options at present.

For more information about bullion investing watch the video below


Seeing the Future
6/25/2020 10:37:53 AM

Seeing the Future

I’ve written this blog to answer the many questions I’m receiving at the moment about a series of videos that Robert Kiyosaki has issued during the lockdown which have caused confusion.  Robert Kiyosaki is a visionary and a genius at understanding how the financial markets work.  He is especially good at seeing the impact today’s financial decisions and legislation have on tomorrow’s markets. What Robert Kiyosaki does is supply you with a certain amount of information, get you to do research for yourself, think about what you are reading and come to your own conclusions.

As an Investor, I follow the money, watching which markets it is leaving and which ones it is being invested into.  By watching the money flow, I can make decisions about where I think the markets and the economy are heading.  So, I understand some of what Robert is talking about but I look at it from a totally different perspective. 

This blog will address some of my interpretation of what the impact of certain decisions has on the investment world that I operate within.  Please remember, this is not investment advice but rather an interpretation of what I am seeing and how that impacts my decisions on the way I invest.

 

What is the Secondary Market?

In the videos, Robert Kiyosaki talks about the collapse of the Secondary Market in September 2019 and how the lockdown has been used to cover up pumping additional funds into the banks and lenders.  So, what is the Secondary Market and how does it affect you?

The Primary Market is the transaction between the bank/lender and the customer.  For banks to lend money they need deposits.  Once a client deposits the money the bank can then lend more money out. 

The Secondary Market, is the credit facilities created as a result of the deposits being made by customers. (Refer to my blog All Money is Loaned into Existence).  There are many different Secondary Markets depending on the investment. 

For example, borrowing money to purchase a property.  The bank does all the checks and lends the money.  Then along the way they bundle the mortgages together and sell to an investment company or another lender.  The types of loans can be varied with some being good loans and some being poorer valued loans.  This frees up liquidity for the original bank and provides the secondary lender with an income for their investment.  Secondary Markets tend to be between investors rather than consumer/lender.

 

Secondary Market Crashes

A Secondary Market Crash often occurs when there is a lack of confidence between banks and Investors generally over the lack of the genuine asset value.  Crashes have occurred throughout history so is nothing new.  It is just the amounts involved keep getting larger.

The crash of 2008, occurred for many reasons but one being the lending packages that were being on sold to investors where the assets were overvalued or the asset backing didn’t exist for the lending packages.  For instance, just before the 2008 crash there was the devastation of the New Orleans Hurricane which saw many families walk away from their homes due to having mortgages they couldn't pay and no insurance to rebuild.  Investors were left with loans that would not be paid and nothing to protect the home owner against loss meaning, the investor had non-existent assets.  Confidence between banks and investors broke down and the secondary market collapsed.

Fast forward to 2020 and banks have spent 12 years supposedly, rebuilding their assets. In America banks have been allowed to fail.  During the Great Recession 2008-2014 US banking failures were:

2008 – 25 banks

2009 – 140 banks

2010 – 157 banks

In 2020 to date, 2 banks have failed.  This was not due to the coronavirus but rather due to issues which existed before lockdown and can be tracked back to 2019 when the quarterly financial reports were issued showing banks were not financially stable. They had a measuring ratio of 1050% when any bank at 100% is considered at risk.

 Currently investors are still buying secondary market investments in an economy, which is based on debt growth. The lockdown has caused the economy debt momentum to stall. (refer blog on quantitative easing and blog on all money is loaned into existence) What the coronavirus lockdown highlighted was the lack of reserves held by investors and banks.  This resulted in the US Feb pumping trillions of liquidity into them once lockdown was announced.

The lockdown highlighted that the money/debt ratio system is extremely fragile and does not have the liquidity and reserves that should have been expected. 

 

The Future Impact on the Secondary Market

Many of the top investment companies, banks and general businesses in the world have little or no liquidity within their businesses.  They operate a Just in Time stock system with 30 days plus invoice payment system.  Many operate on 60 or 90 days.  They operate on a debt system with no cash reserves for emergencies.  Just look at the number of businesses which have gone into administration over the past 3 months of lockdown.

This has a flow on effect for support businesses and consumers.  It also means the tax takes will be down for governments who are reliant on income to meet their obligations including benefits for those who have lost their jobs and pensions for the elderly.  School, hospitals and all the services provided by governments are affected.  The government are reliant on income to pay for the interest on the trillions they have pumped into keeping liquidity moving in the economy.

Just this week, the Bank of England stated they cannot raise interest rates until the level of debt goes down as it will bankrupt the country.  In other words, every time a government prints money the value of the paper currency (fiat currency) devalues.  The only way for debt to go down is for inflation to reduce the impact of the debt ratio. For services to be cut back and the goverments payment for benefits and pensions to be reduced.

In the past couple of weeks, central banks around the globe have issued bonds with no interest payments or negative interest payments just trying to raise funds for their economies.  As their currencies lose value as the debt ratio increases.

 

The Coronavirus Impact

As countries one after the other went into lockdown economies crashed.  First out of lockdown was China, which over recent years has pumped a great deal of money into building manufacturing links (the silk road project).  Once out of lockdown China increased manufacturing providing coronavirus safety equipment to countries in desperate need. Despite this it is estimated the impact on China's economy through lockdown will see unemployment between 15%-20%. But with China you never know the real figures.

On the other side, many countries have invested into finance market systems (services) such as New York Exchange, London Exchanges, Hong Kong and Singapore Exchanges dealing with money flow services. Service industries are reliant on other industry sectors being robust and needing their services leaving these countries exposed with little or no manufacturing to support the economy.  

Most financial transactions use the US dollar as the base currency with each countries own currency fluctuating against the dollar.  The US set up the US Currency Swap Lines to provide some stability for currencies.  15 countries signed up to the agreement. Canada, UK, EU, Japan, Switzerland, Australia, Brazil, Denmark, Korea, Mexico, New Zealand, Norway, Singapore, Sweden and Indonesia.  Those countries were able to borrow credit from the Swap Lines.  They are known as the positive Swap Lines and countries which didn’t sign up to the facility have negative swap lines.

The impact of this is if you have a global business with a head office in a country with a positive swap line getting into difficulty, it is more likely that the governments will step in and support essential businesses by taking part ownership of the business in the form of assets for liquidity. Just this morning we have heard the UK government are looking at nationalising the railways.  In a global economy where there is non-global resources available to governments who are not part of the swap line agreement business will probably fail. The nationalising of businesses (asset swap for credit lines) put the world based on freedom of trade at risk.  


Share Markets

When investing in shares it is going to become far more important to research thoroughly all the markets a business operates in and the possible impact on that business as to whether or not it is likely to remain on the share market, is it possible, part or some of it will be nationalised; is it in a +Swap line country or -Swap line country.  What is the stability of the currency and current government policy.

Two key areas most likely to be affect are country infra-structure stocks and mining stocks.  With gold and silver likely to be the default currency in the event of fiat currency failure governments are more likely to step in and nationalise the industry for their own benefit as was seen with Venezuela who taking control of gold mines and oil fields. Venezuela even demanded all gold held overseas in banks had to be returned to the Venezuelan Government.

One piece of advice is, don’t invest if you don’t understand the market, the country, the company and the processes.


What do you do?

Education and information are going to be key to navigating your way through the minefield of global economies.  Thorough research of an investment along with really understanding the process of the industry will be a necessity not a luxury.

Management of the risk associated with any investment will be essential and will have to be built into the cost of the investment.

Plan for your own financial needs rather than depending on a government pension will be absolutely essential.

 

Coaching

I have a variety of coaching programs in Business Investing, Property Investing, Shares & Bonds and Bullion Investing.  These are educational programs which can be customised to meet your current educational knowledge, experience and finances. Coaching be in a group environment or 1-2-1 basic.  Contact me on info@2pound73club.co.uk and see how my team and I can help you.

 

Summary

Robert Kiyosaki is a visionary genius who understands the impact government policies and decisions have on future markets.  It is worth taking note of what he says and being prudent.  But don’t be alarmist as there are always things which might change the economic destiny. There are always opportunities in turbulent times.  Robert Kiyosaki wrote the book Prophecy in 2003 where he predicted a major economic crash in 2016.  As Robert will say – his theories were right and still are, he just didn’t count on Donald Trump becoming President and putting in strategies to prevent the crash.

One thing is certain, we are in turbulent times where education and knowledge will be key to navigating the economic minefield.  You owe it to yourself to become as fluent in the markets as possible so you can take advantage of the opportunities that will arise.

Market Report 22nd June 2020
6/22/2020 8:48:56 AM

Market Report 22nd June 2020

A round up of the markets since lockdown in the 4 investment categories of Business, Property, Shares and Bullion

Business – With many countries now able to open shops attracting shoppers back onto the streets is proving difficult.  The fear culture that kept many home during the lockdown is the same fear preventing many from going back into the shopping centres and high street.  A string of well known brands went into administration during the lockdown which means many favourites and reasons to hit the high street no longer exist.  Shop capacity is having an impact with many shops operating within 50% - 75% of normal capacity for shoppers.  Online shopping is in a boom time and likely to continue for some time.

Whenever there are difficult times there tends to be a growth in network marketing businesses and cottage industries.  This crisis has been no different with both these industries growing over the past few weeks.

Property – will traditionally drop during difficult markets but the past week has seen property rise in many countries.  UK has been stunned at the demand for property as Estate Agents and Rental Agencies are permitted to open.  The low interest rate at 0.1% in UK offers good opportunities to get into the property market.

In Spain, property prices have varied depending on where the virus was most active.  In regions such as Madrid, heavily affected property prices have dropped on average 1.8% but in regions such as Murcia, one of the least affected by the virus property prices have increase with properties rising in value between 6% - 13%

 Shares – remain very volatile with some of the gains initially recovered, following lockdown, starting to ease back again as fears of a second wave affect confidence.  The impact on shopping has affected the prices of retail shops.  The market is favourable for Value Investors with many undervalued companies.  Dividend investors have had dividends affected with some companies delaying payout of completely missing payments.  The current markets are still more favourable to Traders rather than Investors.

Bullion – The past 3 months of lockdown has seen money flow into gold and silver.  Gold has risen 9.73% and silver is up 33.33%.  Silver tends to lag behind gold in activity but traditionally will outperform Gold in value.  The current gold:silver ratio is 97.78 down from 120.48 a 3 months ago.  This indicates silver is still the commodity to purchase.


 

General

Bonds - Central Banks have been issuing bonds at zero/negative interest rates to raise funds for the huge expenditure during lockdown

Quantitative Easing - still remains in force with many central banks as they pump liquidity into banks who will hopefully pass some of the funding on to support businesses.

Oil – prices are recovering following the shock drop and negative prices at the start of the lockdown.  Iran shut down fields which helped to increase the price.  Stock piling ready for the winter months has also helped increase the price.  Prices still remain volatile offering good trading opportunities.

Interest Rates – Central Banks are indicating they want their buying programs to stop and reduce their asset holdings before increasing interest rates.  However, the level of support through quantitative easing is still needed so it is likely to be a while before interest rates are increased providing inflation remains low.

Dividend & Compounding Investing
6/19/2020 5:16:26 PM

Dividend and Compounding Investing

There are many different types of strategies you can use in share investing. 

Often the first image that comes to mind is sitting in front of a computer screen and watching numbers ticking over at a rapid pace hearing buy, sell, sell, buy. That tends to be trading and is a strategy best left until you are more skilled with shares and investing.

Some will think of mega share investor, Warren Buffett, whose strategy is based around value investing.  Analysing companies and looking for ones that are undervalued, have monopolies and exceptional prospects.

But, for the new to shares investor the simplest and less risky form of investing is buying dividend shares and using the compounding effect to accelerate returns and income.

 

What is dividend investing?

Dividends are the interest received from an company in exchange for holding their shares.  Companies will pay dividends once a year, twice a year, 3 times a year, 4 times a year or 12 times a year.  There are some companies who pay no dividend at all.  For dividend investing, look at companies that pay either 4 times a year or 12 times a year.

When companies pay dividends more frequently you can accelerate the yield return through reinvesting the dividends.  For example, one of my favourite shares has a fairly stable yield average around 7.17%.  It pays dividends on a monthly basis.  By reinvesting the dividend every month, this allows more shares to be bought each month and subsequently more dividends to be paid.  Calculating the yield over 12 months produces a return of 8.12%.

This strategy works particularly well when the dividend is paid on a monthly basis.

Quarterly dividend paying shares also offer higher returns but not as spectacular as monthly dividends.  With the above example the yield would be 7.4% based on the return for this particular share if paid quarterly rather than monthly.

Dividend investing is a simple strategy which with patience can provide exceptional returns.


 

Compounding Effect

Imagine a hockey stick.  It is flat on the ground level, curves gently, then goes almost straight up to the handle.  The hockey stick is a perfect example of what a compounding effect chart would look like.

When investing in shares the return is low to start with.  Then returns increase and create the gentle curve.  Finally, returns grow exponentially creating the handle effect.

Albert Einstein described compounding interest as the 8th wonder of the world.  He said “he who understands it, earns it. He who doesn’t, pays it” sadly very few have the patience to allow the compounding effect to grow to the exponential returns possible and earn financial wealth.


 

Combining dividend investing with the compounding effect and you build a powerful combination of strategies which can produce incredible results in the shortest possible time.

 

10 Minute Shares Book Review
6/12/2020 1:47:13 PM

 10 Minute Shares – Simple Strategies to Make Money on the Share Market – Karen Newton

This book review is about my own book which is available on amazon at
https://www.amazon.co.uk/10-Minute-Shares-Simple-Strategies-ebook/dp/B07V38BYJM is a beginners guide to investing in the share market with some very simple strategies to get you going.


Compounding Interest

Einstein described compounding interest as the 8th wonder of the world and very few people understand how powerful it can be.  In 10 Minute Shares it forms a basis for regular investing which when dividends are reinvested makes it possible to generate incredible wealth within a 10 – 15 year time span.

2 charts are included in the book which show an initial investment of £2000 followed by £100 monthly investments with the compounding effect taking 15 years to become a millionaire.  In the second chart an initial investment of £3000 is used again investing £100 per month.  This time the investment gets to £1 million only 6 months sooner. 

Starting with an investment of just £100 per month and every month thereafter will take just 8 months longer than the first chart to become a millionaire.

The benefit of the compounding effect shows that it is consistent investing which produces the best results.

 

Dividend Investing

With dividend investing the book show which are the best investment strategies to get the best returns.  Monthly dividend shares using auto invest, can produce a much higher return than the traditional one or twice a year dividend.

Using a monthly dividend share with a yield of 7.7%, reinvesting the dividend over 12 months the return is 8.12%.  The effect of reinvesting the dividend each month and earning dividends on dividends produces the higher return and shows how the combination of dividend investing with the compounding effect and explode results.


 

PCA

PCA is a beginner’s strategy producing capital growth and stands for Price Cost Averaging.  Using PCA involves buying shares at the same time each month regardless of the price.  Throughout a period of 12-18 months it produces a steady return of 5% capital growth. 

Compounding the dividend yield of 8% and capital growth of 5% the investor has a growth of 13% per year.

 

Charts

The use of charts has long been a strategy for analysing shares and the book shows different types of charts which could be used include Line Charts; Candlestick Charts; Area Charts and OHLC Charts and when to use them.

Part of charting are the overlay tools which provide much more information on which to base a decision.  The tools covered in the book are the use of Moving Averages and RSI (Resistance and Support Indicator)

The 10 Minute Shares book offers the absolute beginner a way to start investing in shares with some simple strategies which over time using the compounding effect together with dividend investing will provide the investor with a stable investment strategy to build wealth.  

  


If you would like to learn more about 10 Minutes Shares - Simple Strategies to Make Money on the Share Market.  The link will take you to YouTube where you can hear more about 10 Minute Shares from the author.

 

Turning Dreams into Reality
6/1/2020 10:04:54 AM

Turning Dreams into Reality

“Dreams are nothing more than wishes and a wish is just a dream you wish to come true.” Sang David Cassidy.  Sadly, too many people give up on their dreams when they could make them a reality simply because they don’t know where to start.

Focus on It

Visualisation is the first step to making a dream a reality.  By visualising your dream, you are getting your brain to think about the reality of the dream coming true. Your subconscious mind will then set to work to finding a way to make the dream come true.  Visualisation is simply creating the vision of the dream becoming a reality. In your mind you think it, see it, feel it as if it is happening right now.

One of the best ways I found to create the atmosphere for visualisation is to associate a piece of music to your vision.  I have different songs for different visions.  Most songs last for 3-5 minutes put the song on and build your vision in your mind.  Walk yourself through the vision.  Then each time the song plays your mind will automatically associate with your vision.

You only need to spend 3-5 minutes a day, while the song plays, building your dream, then you will start to see the opportunities around you.

 

Plan It

Putting a plan together scares a lot of people.  There are fears that it is unrealistic, or I’m being stupid for wanting this.  When the opposite is true. If you have the dream then it is your right to achieve anything you deserve.

The first step is to write down what the end result will look like.  Work backwards until you have come up with a stepping stone to get from where you are to where you want to be.  For example, if you want to learn to drive a car the end result is you have a driver’s license.  Working backward you have to pass a test.  Before that you will need driving lessons but you can’t start your lessons until you have a learner’s license. To get a learner’s license you need to apply for it.  What is the first step to take to apply for your license?

Now, you have just created a plan.

 

Take Action.

You’ve just created a plan and for it to become a reality you need to take action.  Only when you have something committed to paper and take regular action will the dream become a reality.

Think of a cake recipe.  The recipe is the plan to bake a cake.  However, cakes don’t bake themselves, you have to follow the plan and take action to bake it.  Your dreams are exactly the same.  Once you have a plan, commit to it by taking an action.  Write it in your diary and make time for yourself to take the action step.  Make sure you do something everyday or every week until you achieve it.

 

Building Wealth and Dream Lifestyle.

So, now you are wondering what dreams have to do with Investing.  I help clients build the wealth they need to create their dream lifestyles.  The first step is to know what sort of lifestyle they want and how much it will cost.  Each meeting we review what action they have taken towards achieving their dreams.  Anyone can make money once they know how.  It’s a simple process.  The problem is not how to make the money but how to maintain the momentum of making money as the process can be very boring.  To keep you motivated you need to have a dream.  A dream that creates enough passion in you that you will focus on it, plan it and take action until you achieve it.  Then move onto the next dream and the next until you no long recognise the old life and instead you have your dream lifesyle.

Your lifestyle is the reward for doing the same dull boring process over and over so you can make your dreams come true.

As David Cassidy sang “Dreams are nothing more than wishes and a wish is just a dream you wish to come true” unless you focus on it, plan it and take action until you achieve it.


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