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Market Report 14th September 2020
9/14/2020 10:56:28 AM



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.  

 

Share Markets

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.

 

Commodities

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 is you are in the Forex Market
9/10/2020 9:21:29 AM

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 info@2pound73club.co.uk

 

Market Report 7th September 2020
9/7/2020 10:29:38 AM
 
 
 

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 info@2pound73club.co.uk)

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.

 

Commodities

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.

 
 
 
For more information about investing in Business, Property, Shares, Bonds and Bullions visit https://www.facebook.com/groups/karennewtoninternational
Whats in Your Cupboard?
9/3/2020 10:36:21 AM

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 info@2pound73club.co.uk 



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