Archive for the ‘Uncategorized’ Category

bitcoin and cryptocurrencies

Posted: December 14, 2017 in Uncategorized

(extract from my newsletter)


Bitcoin has been created in 2009, just after the GFC.

There are only 21 million (theoretically) Bitcoin in existence and the smallest size is one hundredth millionth of Bitcoin (Satoshi- the name of Bitcoin founder). But there are over 900 cryptocurrencies (more than the number of normal currencies). As a market cap, if it was a stock, would be 16th company in the world. Within the currency world it is so small it is not funny. And there are more than 900 cryptocurrencies. Adn yes the bubble, in value, surpassed the famous Dutch Tulip bubble.

To buy bitcoin you need to have a wallet or a vault – different level of security (none as secured as a bank).

The recent volatility in the value of cryptocurrencies is a warning. The primary function of any currency, crypto or otherwise, is to be a reliable store of value. With rampant speculation and competition from alternative cryptocurrencies having a large bearing on the setting of value, cryptocurrencies are far from being a reliable store of value.

While it is over $10,000(!!) a few investment companies found a way to short Bitcoin. I am not predicting doom, but I remember in 2007 a few investment professionals found a way to short the US real estate market just before the top. In a Bloomberg article I read that US hedge funds are building capacity in their AI machines for Bitcoin. If you read my previous letter “The rise of the Machines” you should be scared -but the machines probably will start a trap first. It all starts Monday 11 December at 11am AET.

Although I cannot advise on it – due to rules, it can be bought in the SMSF and it is subject to normal ATO taxation.

Any investment should be treated as a “frontier market”. Invest only what you can afford to lose.

In my opinion, you should treat it like Amazon 2000 – in 2000 if you bought the top 10 NASDAQ stock pre-crash you would have remained with just 1 stock by 2002. But that stock was Amazon.

In November 2018 – 80% of crypto-currency transactions occurred in China, Vietnam, South Korea, Taiwan and Japan. Typically these populations behave in a “momentum fashion” (everybody copies everyone). In effects Bitcoin and the rest is behaving much more like a commodity than a currency. If so, what commodity is it? Lack of trust in Government? That would explain why it is so high. But can “lack of trust” be a commodity? Philosophically Interesting.


Finally the Australian politicians are waking up to the silent Chinese invasion.

Sorry mate, you are too late.

It is over 20 years that China is investing (or infiltrating) in every aspect of Australian house.

From commodities to properties. From schools to tourism – the Australian politicians said that they were so good – in reality they just rode the Chinese investments in every part of our society.

And I say this not in a bad manner. The US does the same with Mexico and the South America – and with much worst consequences.

But the politicians created a wealth totally depended on China (1 in the world for dependence on China – even accounting only the minerals China export are 6% of GDP (Forbes 2015).

Now the Chinese have reason you cannot bite the hand that feed you.

Specially in this moment of Australian weakness (especially as personal consumption) the hands that feeds you can easily strangle you.

They should have thought about it 20 years ago at the start of the mining boom..

(un)intended consequences

Posted: December 7, 2017 in Uncategorized

The world is changing very fast.

President Trump recognized Jerusalem as an Israel capital. It does violate the 2002 Arab peace initiative and start another fire in the already inflamed Middle East situation an a potential Syria (Iran)- Israel confrontation.

Egypt, Jordan, Saudi Arabia and Turkey will protest, but are unlikely to do more than talk – the more dangerous of them all is Turkey as it is already aligning with Russia – the other countries have too much to lose (and Jordan as a mutual defense pact with Israel).

But in the long run is introducing a new schism between the US and the Middle East.

The Gulf Cooperation Council that practically created the stability in the Gulf region has practically been dismantled. There is UAE-Saudi Arabia and the others. Qatar is getting more aligned with Iran (and you can see the consequences from the number of missile shot from Yemen to Saudi Arabia and UAE).

North Korea – even if a war does not happen will signify that the US is weak in Asia. As a consequence it lays a future (5 to 10 years away) war between Japan (technology) and India (manpower) against China (which has technology and manpower).

As the US retreats other players are entering the fray.

Russia in the Middle East is becoming the new superpower (Turkey, Iran, Iraq, Egypt) and building alliances all over the world – Russia has always been renown for cheaper, less sophisticated but more reliable weapons than the West.*

*A typical example is the Vietnam War M16 vs AK47 machine guns comparison. While the M16 had better range, better precision and was lighter – the AK47 was cheaper, more reliable (you could leave it for months underwater!), required less cleaning, no training and had more devastating impact – the better weapon for a jungle warfare.

North Korea ICBM

Posted: November 29, 2017 in Uncategorized

If you follow my blog you know that my idea was not that the US tamed Kim. Simply he could not get wrong the next missile.

And it did not. This is an ICBM. On a proper trajectory (depending on payload) can hit New York or Washington or anywhere it chooses with a range of 13,000km.

Moreover for the first time is a rapid deployment one. North Korea learned to refuel horrizontally and so it can deployed fast.

All this means that a real nuclear ICBM could be deployed in the second half of 2018.

If Trump wants to take care of NK as he says – the safer window is beween now and September 2018.

Sanctions and pressure will not work.

The market will not care until it is too late. Be warned.

Australian real estate

Posted: November 21, 2017 in Uncategorized

The Reserve bank of Australia said that the Chinese residential property demand (3/4 of all foreign sales) has started to peter out as a consequence of the stricter Chinese capital controls.

And automatically the price of the Australian real estate is starting to be softer. So much for our government assertion that Chinese buy only new dwelling (which is correct, if the law wasn’t so easy to circumvent).

This is not the market crash that some people are hoping for, but a first sign.

The other signs will be

-when rising rates (and our banks get their money from the US – so rising rates in the US) will rise

-if prices (eg fuel) will start to go signal inflation – without wage growth.

So let’s say the next 6 to 9 months will be interesting for the housing market and at least I will not hear anymore the Australian catch phrase – houses double in value every 7 years.

End of the real Estate Boom. After the end of the mining one, after the  end of manufacturing.

The Government says that the new infrastructure spending (75bn over 10 year) will save Australia. As PM Turnbull will last at the most one year, he really does not care ( to be fair, not even Bill Shorten wills ave you – actually he will be worse for real estate).

But a real estate end-of- bubble will not be all bad. It will be a good wake up call.

Unspoken News of world

Posted: November 17, 2017 in Uncategorized

This is a quick update as I have been really busy.

  • North Korea

It is still there. The absence of exercises from Kim (plenty from trump) is more due to a classic pattern of the North Korean Army. During the fall usually the army workforce is used for agricultural purposes. There has always been a lull into March. So a normal pattern. I still think Kim is working hard in a sub-orbital hydrogen bomb test – but he needs to make sure it does not fail.

The interesting development is that -first in the last two year – an official Chinese envoy went to North Korea. And China is building a 6 lanes highway to North Korea.

Secondary voices say that there has been a pact China- US during the US tour. Trump gave a free hand to China in the South China Sea in exchange of a serious effort against North Korea. So the envoy is bringing an ultimatum to Kim.

I do not know if he will listen. Three years ago Kim killed all the ally of China – including his own uncle.

  • Saudi Arabia

It has been reported that the condition of release of the jailed prices up their wealth (some up to 70%!) – close to a USD trillion dollar. So, aside the power consolidation, this as a pure money grabbing exercise as the Saudi Reserves were down from USD700bn to USD400bn. This also could come handy in the next war Israel/Saudi versus Hezbollah/Iran.

Iran has been very restrained (from an historically point of view), but definitely preparing for the worst.

Everyone is trying to tame this scenario as it would be really cataclysmic. Hezbollah probably could not fight alone versus the power of Israel and Saudi Arabia – so iran would be dragged in and all the Middle East would go up in flame. Oil would spike to over USD100 starting a new financial crisis that would be exacerbated by Exchange Traded Fund and Robo trading. You understand why everyone wants to stop it.

  • US

The House passed the first step of tax reform. It is a great achievement. It still needs to pass the Senate. It will be a close call – but it could happen as the Republican – after the loss of two states – now they are sure that by Mid Term Nov 2018 election their majority will be evaporated.

A report from BBC showed the US let escape over 4,000 angry IS fighter from Raqqa with truckloads of weapon. Most of them disappeared in thin air to Turkey – there were a lot of foreign fighters heading back to Europe ( a lot from France). In the next IS attack you know who to blame.

A Game of Saud Throne

Posted: November 12, 2017 in Uncategorized

Saudia Arabia is in complete turmoil

The kingdom was ruled by consensus.

The Saud family boasts 15,000 person of which 4,000 of power. Always intriguing, fighting and vying for power.

Now the Crown Prince eliminated this structure with a Games of Thrones textbook operation.

Arrested a number of ultra powerful families and killed 2 princes (one directly, one unknown helicopter crash).

Meanwhile they put in house arrest the Lebanese PM and the Yemeni PM.

It accused Lebanon of waving war against them (as Lebanon is practically governed by Hizbollah).

Also via a leaked Israeli cable, they are allied to Israel.

Saudi Arabia and UAE demanded their citizens to leave Lebanon.

Yemen launched a ballistic missile (US and Saudi accused Iran of it. Definitely Iran produced the rocket. Nobody knows if the Houthis obeywd an order- quite a few time they disobeyed). Baharain just accused Iran to blowing up a gas pipeline.

Israel just had its greatest wargames evee and developed a new technology that enables them to see tunnels (used a lot by Hizbollah in 2006). And a general said that the next war against Hizbollah is just a “when” not an if.

And this is just the surface as in the client newsletter I dig a bit deeper.

Iran answer, on the surface, has been quite restrained for now. They even closed for 2 days one of the most warmongering newspaper. But definitely the Iran hawks are gaining ground.

As Cersei Lannister of Games of Thrones put it. In a game of thrones you either win or die. There is no middle ground.

Naturally the largest repercussions will be felt on oil and gold.