Dear Kris, I was so very wrong…
- Kris Sayce calls it months before Soros
- Bitcoin ain’t gold…maybe it’s better?
- Another brick in the wall
Today, is kick-it-to-the-mainstream day.
There are so many squabbles to address. But there’s a word count limit, so I’ll have to go with my top three today.
I’m going to start with the most important.
Tomorrow marks the one year anniversary of the Brexit vote. I remember it well. Few thought the ‘Leave’ would win. There was no way the Brits would vote out.
Then, as the votes were being counted, you could tell how unprepared mainstream newspapers were for the result. There were rambling headlines about the ‘shock’ Brexit outcome. Short and sharp editorial. The mainstream hadn’t prepared for the idea that the masses would want to leave the EU.
In days after the Brexit vote Kris Sayce, the publisher around here — and my boss — started yabbering on about how it was never going to happen. No way would the elites let something as big as this slip through, Kris would say. He argued they’d find any reason and excuse to make sure the UK and EU remained tied. I’m pretty sure I laughed at him. Because, you know, the people voted. Of course the pollies would carry out the peoples’ wishes. Would they risk riots and dissent by ignoring the voters’ decision? No. No government likes civil unrest.
Over the past year, Kris hasn’t changed his view. He has repeatedly said — ad nauseam perhaps — there will be no Brexit.
Anyhoo, there I was on my web travels yesterday, and found this in The Age.
‘George Soros, the billionaire who earned fame by successfully betting against the pound in 1992, said Britain was approaching a tipping point that would see the economy slow to such an extent that Brexit might even be reversed.’
12 months after the ‘Leave’ vote, and Soros — the man famous for ‘breaking the Bank of England’ — suggests there will be no Brexit. Soros has a fearsome reputation for labelling the market mood for what it is. Or alternatively, it’s because he’s one of the elites in society that has much to lose from the Brexit ‘Leave’ vote going through.
Kris has said since the day of the Brexit vote that it will never happen. Now the big wigs of the financial world may start coming out and agreeing with him.
Hmmm. Has Kris, antagonist of the mainstream media, been right all along? Was I wrong to laugh at him? Watch this space.
And before you ask, no, I’m not due to have my salary reviewed for another six months.
Now, with my very public and humble admission out of the way, let’s look at the markets.
Overnight, the Dow Jones Industrial Average was down 57.11 points, or 0.27%.
The S&P 500 fell 1.42 points, or a 0.06%.
In Europe, the Euro Stoxx 50 was down 6.31 points, or 0.18%. Meanwhile, the FTSE 100 dropped 0.33%, and Germany’s DAX index was down 0.32%.
In Asian markets, Japan’s Nikkei 225 is up 4.99 points, or 0.02%. China’s CSI 300 is up 1.22%.
In Australia, the S&P/ASX 200 is up 55.10 points, or 0.97%.
On the commodities markets, West Texas Intermediate crude oil is US$42.56 per barrel. Brent crude is US$44.84 per barrel.
Gold is trading for US$1,253.41 (AU$1,658.52) per troy ounce. Silver is US$16.62 (AU$22.00) per troy ounce.
The Aussie dollar is worth 75.58 US cents.
Thinking like an anti-establishment anarchist
A picture says a thousand words, right?
Well, here’s one for you…
Bitcoin has dominated the news for the past two weeks. I’m sure its incredible 22.9% rise, US$2,197 to US$2,700.22, from 29 May to today has helped. Oh, and bitcoin peaking to a new high of US$3,018 back on 11 June most definitely drew a few more punters to the crypto currency.
Throughout this never-ending bitcoin coverage, from the mainstream to alternative news sites, most places are using the same old stock photos. Similar to what’s above. The photos accompanying articles on bitcoin almost always show a bitcoin looking like a solid gold coin.
Why does everyone keep doing this?! The mainstream doesn’t even think gold is money. Almost all editorial from financial experts slams gold as an investment product in the popular rags. It doesn’t pay yield, there are storage costs…it’s something old people refusing to accept modern economics like….blah, blah, blah.
Well, I’m an out n’ proud gold fan, refusing to accept modern economic jargon, and I believe gold has a place in a modern monetary system.
Yet I can’t understand why the mainstream would continue to correlate gold with bitcoin. This is where I turned to Sam Volkering, our tech expert and editor of Revolutionary Tech Investor. The gold = bitcoin stock photo coloration has riled Sam up for years. I emailed him yesterday to ask him if he still felt the same…and this is what Sam sent me:
‘Here’s the problem with thinking bitcoin is like gold:
- It’s clearly not.
- See point #1.
‘The problem with “traditional” thinking about bitcoin is that you’re thinking traditionally. It’s based on concepts of finance and economics decades, centuries, millennia old. But you can’t apply that kind of thinking, because this isn’t like anything else before.
‘The whole point and purpose of bitcoin is it’s a decentralised financial system, which at the moment is a store of value and later will be a unit of exchange. It’s free from central authority intervention and control. It isn’t ‘backed’ by anything and doesn’t need to be.
‘It’s not physical, it’s lines of code — but so is Microsoft’s operating system, and they’ve done pretty well out of that.
‘Look if you really want to know what bitcoin is, how disruptive it is and how much real world potential it has, then shake free any traditional concept of finance you have. Old thinking does not apply here.
‘Think about it like an anti-establishment anarchist. Think about it like a person who’s seen their wealth eroded by erroneous government and central banks. Think about it like the non-financial elite busting their ass trying to get ahead in life while those in ivory towers control the existing financial world for their own benefit and to that of no other.
‘The reason bitcoin is growing in popularity as a financial instrument is because it’s everything the traditional system isn’t.
‘That why it was created, and that’s why people like it. And as it gets bigger, as the network grows, as the blockchain increases in network value, then so will bitcoin. And it will enable a generation (or several) to build wealth who otherwise would never have a hope in hell of fighting their way through a complex financial system we’ve been stuck with, which has failed too many.
‘This is a genuine alternative financial system that anyone can use, and that is revolutionary.’
This is what the mainstream don’t get. Bitcoin is like nothing we’ve ever seen before. This cryptocurrency is seven years old. Yet many financial analysts can’t break away from old world thinking — the same old world thinking that’s demonising gold, mind you.
Next time you see an article on bitcoin with a stock photo showing a ‘bitcoin’ as a gold coin, don’t read it. Walk away. Instead, read what Sam has to say…
Another brick in the wall
Have Aussie house prices hit their peak yet? If you ask Phil Anderson, he’ll tell you no way. House prices are all part of a much bigger cycle.
I’ve moved on from the property-will-pop-soon camp. Partly because if the entire mainstream press is calling property a bubble, it just ain’t a bubble. But Phil’s research has been the most compelling argument.
However, there are things happening in the property space that suggest these crazy house prices haven’t got much longer to run.
One of those caught my eye during the week. The Australian says Australia’s high house prices are ‘creating opportunities for disruptive businesses to address the frustrations of buyers and vendors’.
In ten years from now, we will look back at this moment and say, ‘Yes, that’s the very moment when desperate investors lost their grip on reality and decided they must have a house at any cost.’
Even if it is a just a brick.
First there was fractional reserving banking, now we have fractional housing.
Enter a ‘fractional investment’ platform called BRICKX.
They’ve come up with the very clever idea of buying houses, but then breaking up the house into 10,000 bricks, and then re selling those to investors. This way, people can invest as little as $100 at a time in the property market, and slowly build their ‘brick’ portfolio.
Along the way, you receive your distribution of yield if it’s a rental property. Or a capital gain if the brick is part of a property that’s sold.
I’ll be honest, this is clearly a clever idea. I’m slightly green with envy that I didn’t think of such a good way to capitalise on people’s fear of never owning a property. You’re probably not surprised to learn the creators say they’ve seen overwhelming interest from the under-35 bracket.
However, is this really what the Aussie market needs? A derivative on housing?
Because that’s what this is.
Most people only became familiar with the term ‘derivative’ when the US subprime market collapsed in 2007/08. Suddenly, parents on the school run were talking about a financial instrument that, prior to the market panic, had enjoyed anonymity amongst the broader public.
Now, at the risk of nasty letters from lawyers ending up on my desk, let me clarify the meaning of ‘derivative’.
A derivative is a ‘contract’ that derives its value based on the performance of an underlying market. And that underlying market can be anything. Stocks, indices, commodities, interest rates, precious metals etc. A financial instrument becomes a ‘derivative’ once it draws its value from an ‘underlying’ product.
Furthermore, let me point out that I’m not saying derivatives are evil products. I use them myself in my own trading. If you do your research and understand the risks, they can be useful tools. But not for a novice, or the fainthearted.
What bothers me about this concept of buying a brick to start your housing investments, is that it further removes housing away from what it is at the core. Shelter. Some of us have slightly fancier shelters. But since the early 90s — when tax incentives were offered to mum and dad investors — housing has shifted from a basic need to a commodity.
When you commoditise something, speculators take over the product. That’s what the Aussie housing market has been becoming for nearly three decades. Investors are chasing capital gains to offset the low yields they receive through rent.
Already housing mortgage debt is repackaged and sold up to other investors through mortgage backed securities. Now we have another layer in the housing market. Is this a clever idea? You betcha.
But does the under-35 age group really need to enter the property market, buying virtual bricks? Perhaps they could put their money in bitcoins and gold instead.