State of the currency markets

Posted on 19th May 2015 by admin in Blog |Finance in Focus

may 2015

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The chart above shows the US$ index, which is a measure of the value of the U.S. dollar relative to majority of its most significant trading partners.

As you can see from the chart the US$ is correcting downwards but this is a normal correction based on the fact the US has been posting some poor economic numbers but the chart is indicating the US$ index may fall to around 90 then turn back up as the US growth numbers, even poor, look better than the rest of the world.

Dollar/Yen

may 2015 2

 

 

 

 

 

 

 

 

 

 

 

Recently we have seen 122 as a high (March 2015) and we have seen 118 (April 2015) as the low. The pair have been stuck in trading range. This reminds me of Jan 2014 to August 2014 when the pair was stuck in a range of 105 to 100.  The BOJ continues to do QQE: the Bank will purchase JGBs so that their amount outstanding will increase at an annual pace of about 50 trillion yen and the BOJ will increase the monetary base at an annual pace of about 60-70 trillion yen. In Addition the Bank will purchase ETFs and Japan real estate investment trusts (J-REITs) so that their amounts outstanding will increase at an annual pace of 1 trillion yen and 30 billion yen respectively. So again we believe the Yen is stair stepping itself higher .. once 125 vs 1$ goes there is little resistance until 147. One should not hold Yen, unless there is a material change in BOJ policy. (Remember a ‘rising’ Yen is a weakening Yen.)

EUR/Dollar

may 2015 3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The fall of the Euro over the last several years from 160 in 2008 to a low of 104 in 2015 — it is only natural to see a bounce but the question is how high can that bounce be 115 or 120?  We doubt anything more than 120 if it can get there — Greece is still a huge issue which leads to Portugal, Spain, Italy and the rest of Europe. These issue have not been resolved and judging by the progress in Greece things can likely only get worse.

GBP

May 2015 4

 

 

 

 

 

 

 

 

 

 

 

The Election in the UK produced a small Conservative majority win – this has given the Pound wind in its sails for now. The question is can Sterling keep these gains longer term.

 

AUD

may 2015 aus

 

 

 

 

 

 

 

 

 

 

 

 

Australia can still cut interest rates. Many believe this will happen especially in the face of falling commodity prices.  However the last rate cut was highly anticipated and factored in as the AUS$ rose after the cut. Australia can take on more debt as the government has low debt levels compared to its peers.  The other wild card for the Aussie is China as any stimulus China does has a direct effect on the Aussie economy of just about 24 million people — about the same as the Shanghai municipality.

Sign posts for 2015

Posted on 16th December 2014 by admin in Blog |Finance in Focus

The US$ is beginning a long term bull run. Why? Several reasons first the US economy is the only country performing and trying to hold up the world economy. Second, fear in Europe and possibly Japan on higher taxes and possible confiscation of wealth. Third, there has been about US$ 3 trillion borrowed around the world and as the USA stopped QE there are now less US$ being put out there and therefore all the borrows are in effect short US$. This is massive. This is what leads to currency crisis, but NOT in US$  but in emerging market currencies as they borrowed US$.  The capital flows are showing massive movement to US$ and this is also propping up the US equity markets – we suspect a pullback in the US markets – that will provide a buying opportunity and the US markets will go higher into 2015.

Commodities will struggle with the strong US$ but as the Sovereign debt crisis grows there will be a point when commodities rise with the US$ we suspect this to begin in 2016 with the full resumption of the sovereign debt crisis.

Gold: It has been a difficult 3 years for gold as it has dropped further than we had thought it would. Does this bother us? No not really, as we still believe the sovereign debt crisis is just beginning. People will start to notice when the US economy starts to turn down in 2015. This will be the kick off for precious metals – we have said to patiently accumulate – many of you have and it will pay off into 2016~20.  But before that we may see gold actually fall to $1,000 or perhaps a bit under, the tree needs to be shaken and the talking heads on TV need to say gold is dead, we are not far now.  That time will come as the Sovereign Debt Crisis hits the USA and that seems likely around the autumn of 2015 when the US economy starts to turn down. We stand by what we said 3 years ago accumulate gold on a regular basis, the longer term strategy will work gold will rise into 2016~2020.

Bonds, especially government bonds, are DEAD, avoid completely, as they have finished their bull run from way back in 1980!

Europe – avoid as there will be structural changes which can’t be predicted- many now seem to think buying or holding money in Germany will protect them if there is a breakup of the EU assuming they will get Deutschmarks. Too much risk go to US$.

The UK economy is tracking the US far closer than the EU. However the GBP is weak and we expect this to range trade 1.50 -1.70 depending on electoral outcomes.

Asia – China is it an enormous mess? No one really knows the extent and Chinese growth is slowing perhaps more than most people think.

The Yen and the Nikkei: The Yen has almost reached 122 now it is 117.80. The Nikkei came to life in December 2012 and again in October 2014 as the BOJ implemented aggressive monetary stimulus. The initial strength into May 2013 was a ‘true’ increase when measured in any currency.  However, since then any increase has been a reflection of the weakness in the Yen. The Yen is at an important juncture, we see the 50 week moving average is coming into play — perhaps a test of 115?  Before we have a much larger leg down for the Yen, perhaps 140?  Abe walked away with the election as the voters really do not understand what is happening (Abenomics better work, or the Japanese Pensions are toast).  The Bank of Japan now owns bonds worth 60% of the value of the Japans’ GDP and is buying 17% more each year in just over two years they will own more than the annual GDP of Japan — that can’t be good.

Currently there is exhaustion in the Nikkei — all weak Yen driven — a monthly close of under 16,300 would imply more downside in 2015.

So in 2015 continue to accumulate Gold, Commodities and the US Equity markets. Please get it touch if we can assist with your investments.

The Coming Pension Crisis

Posted on 22nd October 2014 by admin in Blog |Finance in Focus

There are very few government exceptions within Western Society that are without serious trouble with their pensions. While politicians conveniently focus on tax compliance and cross border information exchange, and create yet more bureaucracy to shore up tax revenue, they have done an incredible job of distracting from their mismanagement of tax payers’ funds at best, and committing massive fraud at worst. They need to focus on Spending and come to terms with the fact the problem is politicians and government spending. Not a revenue problem like they are trying to tell us. Public unions are simply demanding that governments raise taxes and extort money from other sectors to hand to them.

Government pension funds are a joke. Even in Britain, pensions will run out of cash next year: Amount handed out to future generations will be disastrous. Those under 35 should not expect anything for their taxes.

The 25 largest U.S. public pensions face about $2 trillion in unfunded liabilities, showing that investment returns can’t keep up with ballooning obligations, according to Moody’s Investors Service.

The Times noted that one major pension plan, the Teamsters’ Central States plan, pays out $2.8 billion per year in retirement funds, but only takes in about $700 million from corporations. The plan’s director said he expects the plan to run out of money in 10 to 15 years.

Last year, the Pension Benefit Guaranty Corporation posted a record deficit of $35.7 billion. “Within the next 10 years, more and more plans are going to run out of money,” said Joshua Gotbaum, director of the Pension Benefit Guaranty Corp, in a November report.

On average, the top-20 pension funds in the world invested on average 40.6 percent of their assets in fixed income securities and 42.7 percent in equities.  The average return on Fixed income with the benchmark ten-year Treasury bond paying under 2.9%. The bull run that started in the 1980’s is over, bonds are the bubble and will become toxic.

In New York City, over the past 12 years our pension costs have gone from $1.5 billion to $8.2 billion. That’s almost a 500 percent increase — when inflation totaled only 35 percent. The $7 billion additional that taxpayers are forced to spend on pensions every year is $7 billion more that cannot be invested in our schools and our parks and our social safety net, or our mass transit system, or our climate resiliency work, or our affordable housing efforts, or our tax-relief for working families.

Think about it this way: During our administration’s time in office, we’ve spent $68 billion in taxpayer money on pensions, compared to $5.3 billion on affordable housing. So taxpayers spent about 13 dollars on pensions for every one dollar that they invest in affordable housing.

Pension consultant Girard Miller recently told California’s Little Hoover Commission that state and local government bodies in the state of California have $325 billion in combined unfunded pension liabilities.  When you break that down, it comes to $22,000 for every single working adult in California.

http://video.foxbusiness.com/v/2924368890001/ravitch-pension-crisis-crowding-out-public-services/#sp=show-clips

State pension liabilities

 

 

 

 

 

 

 

 

 

 

 

Despite the UK’s looming pensions crisis, over a third of Britons says they will never save or invest for their retirement.
So how is your planning going?   Do you have a private personal portable pension?

Talk to Banner and we can help you start or review and enhance what you have – get in touch today on the various options. info@bannerjapan.com  03 5724 5100

InterGlobal and Aetna Healthcare Insurance

Posted on 11th September 2014 by admin in Finance in Focus

UK based InterGlobal have over 65,000 medical members worldwide and specialize in international private medical insurance for groups and individuals in Europe, the Middle East, Africa and Asia-Pacific. They insure individuals and families, corporate and affinity groups, diplomatic staff, and teachers of international schools. The company has approx. 300 employees primarily based in its operation centers in the UK, Dubai and Singapore. They also have a support office in Japan, located in Osaka, with many years of experience in assisting Japan and overseas based members in Japanese and English.

In April this year, InterGlobal became part of Aetna. Please find a link to the press release of 23rd April 2014 here:

http://www.interglobalpmi.com/news/aetna-completes-acquisition-interglobal-group/

We believe this acquisition will combine two worlds, i.e. the strength of a US$30bn company with a variety of networks, especially in the US, with the highly personal and flexible approach of an innovative company that tailors its products and services to accommodate clients and their specific geographical and cultural needs wherever they may be.

There are 3 levels of cover for the Teachers School Plans, the Gold plan offering the highest & most comprehensive level of cover. For other professions there are 4 UltraCare plans, the Elite plan offering the highest & most comprehensive level of cover. 

It is noteworthy that all plans offer full cancer care, please find a leaflet for this benefit below. There are also add-on plans available for Maternity, Travel and Personal Accident, plus the exclusive service of red24, a leading specialist provider of international crisis management assistance services.

Group policies are tailor made, they take into consideration the group’s specific requirements. For group quotations InterGlobal require the full member census, including dates of birth, number of employees and dependents to be covered, the level of cover, including any additional requirements, e.g. MHD (Medical History Disregarded), Area of cover, increased dental benefit, optical, etc.

Please don’t hesitate to let us know if you need further details or have any questions, we will be happy to assist and look forward to hearing from you.

InFocus_Cancer care benefit explained 2014

2014 TOB_UltraCare_USD

2014 TOB_International Schools_USD

More details — http://www.bannerjapan.com/insurance/

 

Singapore and the DOW

Posted on 21st May 2014 by admin in Blog |Finance in Focus

Why I believe one should have exposure to these two.

The U.S. monthly international trade deficit decreased in March 2014 according to the U.S. Bureau of Economic Analysis and the U.S. Census Bureau. The deficit actually  decreased from $41.9 billion in February (revised) to $40.4 billion in March as exports increased more than imports. This recovery in the US economy is showing signs of shifting trends that are rather significant for the rest of the world. The goods deficit decreased $0.6 billion from February to $60.7 billion in March; the services surplus increased $0.9 billion from February to $20.4 billion in March. This is reflecting the capital shifts on a global basis as services are now rising.    Source; http://www.bea.gov/newsreleases/international/trade/tradnewsrelease.htm

This is the emerging real trend; however, capital is still confused. There is more than $25 trillion globally in bonds (short/long) and that is a huge reservoir of capital to shift. This idea that government debt is “quality” will give way to reality.  The Central banks of the world have tilted reality, for now… That means we will see tangible assets rise precisely as we see during a hyperinflation within a peripheral economy.

The daunting question is formulating when the cycle will fully flip from Public to Private.

We are entering this phase now slowly.

Just as I think the United States will become a magnet for frightened capital coming out of Europe, Japan and Russia.  In Asia the magnet will be Singapore.

Perhaps the strongest economy in Asia right now is Singapore. Year-over-year, its manufacturing sector grew by 8.0 percent, compared to the 7.0 percent expansion in Q4 last year. The construction sector grew by 6.5 percent on a year-on-year basis in the first quarter, an improvement from the 4.8 percent growth recorded in the previous quarter.

The Singapore government reiterated its forecast for the economy to expand 2 percent to 4 percent this year, and for non-oil domestic exports to increase between 1 percent and 3 percent.  The island’s manufacturing grew 11.9 percent in the first quarter from the previous three months, compared with an April estimate of a 4.5 percent expansion. Services rose 0.4 percent in the same period, while construction increased 0.6 percent.

While retails sales and the service sectors show some signs of slowing, Singapore’s economy is a bastion of stability and moderate growth, a stable and strong currency, and an economy that is not overly dependent upon foreign debt.  http://www.bloomberg.com/news/2014-05-20/singapore-gdp-grew-more-than-previously-estimated-last-quarter.html

This ETF offers you exposure to Singapore’s large and mid-sized companies and seeks to cover most of Singapore’s stock market, with holdings such as Singapore Telecommunications, DBS Group, CapitaLand, Jardine Group and more.

I suggest you have some exposure to Singapore and an easy way to do this is with iShares MSCI Singapore (EWS) (I would wait and hopefully buy in on a dip around $13.5)also the DOW using DIA SPDR Dow Jones Industrial Average ETF (I would wait and hopefully buy in on a dip around $155)

Interesting fact

Posted on 26th March 2014 by admin in Finance in Focus

Did you know the total US interest payments in Fiscal Year 2013 were a whopping $415 billion, roughly 17% of total tax revenue.  

Here’s the thing, though– it’s inappropriate to look at total tax revenue when we’re talking about making interest payments.

The IRS collected $2.49 trillion in taxes last year (net of refunds). But of this amount, $891 billion was from payroll tax.

According to FICA and the Social Security Act of 1935, however, this amount is tied directly to funding Social Security and Medicare. It is not to be used for interest payments.

Based on this data, the amount of tax revenue that the US government had available to pay for its operations was $1.599 trillion in FY2013.

This means they actually spent approximately 26% of their available tax revenue just to pay interest last year… a much higher number than 17%.

This is an unbelievable figure. The only thing more unbelievable is how masterfully they understate reality… and the level of deception they employ to conceal the truth.

One should always keep money outside their home country….. and in various currencies

Feb 2014: Finance in Focus

Posted on 7th February 2014 by admin in Finance in Focus

 

Well a lot has happened in the last month.  The Yen stopped depreciating and guess what the Nikkei lost about 2,000 points and it has seen Foreigners selling the most Japanese stocks last week since 2010 and before that since the credit crisis started to implode…

n 225 feb 2014

 

 

 

 

 

 

 

 

So what is next?  As said before whatever happens Japan is unlikely the place to be longer term due to the debt, demographic and political sinkhole that the “powers at be” have placed themselves into. Money invested outside Japan is likely to be more dependable than money invested inside Japan.

General corruption is causing places like Turkey, Thailand and the Ukraine to erupt into protests and riots. It will be interesting to see if these develop in to greater conflicts.  One question concerning the Ukraine is what will Russia do?  As they have been very quiet mainly due to the Sochi winter Olympics, I believe. Once this end (hopefully terror free) will President Putin is more perhaps much more forceful?  Bearing in mind about half of the Ukraine speaks Russian as the Eastern part of Ukraine was historically once Russia. We will have to wait and see what happens here.

Gold; stable but disappointing it has not been able to rise above $1,300 – my worry here is if we do not see a rise above it soon we may very well have to go back and test the lows once again …A month or two will give us the answer here. So far we have a double bottom at 1,140 and wait to see if that holds should gold dip lower.

The Dollar index has been flat but what this is really telling us is  base is being formed and the Dollar is about to show us strength.  The emerging markets are beginning to stress and this could cause more stress on the European banking system as they have over 3 Trillion loaned out to yes you guessed it, Emerging markets….if there is a European liquidity crunch like 2008 that will bring everything down (gold too) in the short term.  Just like in 2008-9 the dollar was the go to place.  One difference this time is the Yen is not so we should see much greater dollar strength going forward.

n dx feb 2014

 

 

 

 

 

 

 

 

 

 

Gold as stated earlier will find its bottom in 2014 and we believe it will rally to $3,000 or more in the next 5 years.

US markets — yes they too are falling but I believe they will stop, just have a look the S&P chart and note the channel it has popped out of unless the S&P falls below 1550 this is just a normal correction. We are watching for a sign to enter back into the Major US markets.

n sp feb 2014

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Banner Japan 03 5724 5100

2014 what’s ahead?

Posted on 8th January 2014 by admin in Blog |Finance in Focus

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Our general view is Japan is likely to go higher as the currency weakens, however without any serious reform Japan will hit the wall and stagnate (unlikely the place to be longer term).  Europe will continue to experience deflation and more social unrest as the policies of government continue to drag the economy to its knees.  Emerging markets with will low debt will perform better than others. The US dollar is very oversold and is due for a rally (the world’s core economy has never seen hyperinflation in any period of history)  As interest rates rise this will bring on more fear of government and their ability to pay interest on Debt.  This is when you will see gold rally to new all time highs in the next 3~5 years.

I believe that gold will bottom in 2014. In a Fed tightening cycle, gold tends to go down. Financial players in this cycle have been impatient to kick gold down as hard as possible. They short gold producers first and then gold. The gold stocks are much bigger in value than gold market per se. Hence, the trading strategy of shorting gold stocks and then gold could be lucrative. As more and more people pursue the same trade, the gold is kicked down way beyond its fundamentals.

Gold demand is from emerging economies. The latter have been experiencing high inflation. The demand for gold has been strong despite the weak gold price in 2013. The current gold price is already below the production cost of some of the biggest mines in the world. I suspect that, in 2014, some mines may be shut. The reduction in supply will become a counterforce against the Fed’s tightening.

I want to repeat my long term bullish call on gold. Its price is likely to top US$ 3,000 in five years. The currency market instability and the likely global stagflation will strengthen gold demand for wealth preservation in emerging economies. As supply is unable to grow, the price has to rise to balance the market.

Overall there will be a move from Public to Private assets and this may very surprise everyone with the short term gains we will see in the USA markets, there will be corrections and one should buy when the markets have a downdraft, perhaps this first quarter.

 

A concise video on the gold price

Posted on 16th December 2013 by admin in Blog |Finance in Focus

http://youtu.be/CM9UUJojzN4

 

Once again we see the Yen bouncing around 100….

Posted on 6th September 2013 by admin in Finance in Focus |Uncategorized

There is still a lot of complacency worldwide. For example, car sales have been outstanding and our guess has been that a surge of better economic reports would be part of the final surge in the stock markets.

In early July, things started to deteriorate as regions from Turkey to Brazil to China and Indonesia were “getting hit by a brutal combination of events, as economies slow, investors pull out cash, commodity prices tumble and protesters take to the streets”. That’s how the Wall Street Journal wrote it up on July 2nd.

The news reminded of early July 1997 when the “Asian Crisis” roiled the Thai baht. It denied establishment boasts that the problem could be “isolated”. After traveling around Asia, eventually it fetched up in New York in that fateful September when the corporate bond market suffered its worst month in a decade.

This time around, the “Asian” problem started in early-July and on August 29th Bloomberg reported “Stocks in Southeast Asia are tumbling at the fastest pace in 12 years relative to global equities”.

A chart of the Indonesian Stock Market

 

This has been accompanied by continued weakness in Emerging Market bonds (EMB), which makes sense. US Munis (MUB) also continue to decline and the Spanish Ten-Year yield is turning up. At the close it was up to 4.62%. Rising above 4.48% is a breakout. Lower-grade corporates (HYG and JNK) became oversold a couple of weeks ago and have rallied to resistance.

In Japan, the government has indebted itself to the tune of 230% of GDP… a total exceeding ONE QUADRILLION yen.

That’s a “1 with 15 zer000000000000000‘s after it.  1,000,000,000,000,000

And according to the Japanese government’s own figures, they spent a mind-boggling 24.3% of their entire national tax revenue just to pay interest on the debt last year!

 

Remember this adds a minimum 25 trillion more debt each year just on interest!  Not to mention the other (again at minimum) 30 trillion in deficit spending to keep the wheels on Japan. The net minimum increase in annual debt is about 55 Trillion! At least!

Slowly, somewhere between this untenable fiscal position and the radiation leak at Fukushima, a few Japanese people realized that their confidence in the system was misguided.

We are helping an increasing number Japanese residents send some funds offshore.

Why? If the government defaults on its debts or ignites a currency crisis (both likely scenarios given the raw numbers), then those folks will at least preserve a portion of their savings intact. But if nothing happens and Japan limps along, they won’t be worse off for having some cash in a strong, stable, well-capitalized offshore banking jurisdiction. Where their funds are allocated and separated from bank assets, with no liens or encumbrances.

For Japan, the smart people who see the writing on the wall just want to be prepared with a sensible solution. They’re taking action before anything financially disastrous happens.

So what can you do?

  • Open accounts in various jurisdictions and currencies.
  • Invest in some physical assets outside your home country.
  • Make sure gold / silver funds are fully backed by allocated bullion with no liens or encumbrances.

Don’t be complacent, be prepared.