Can Turtles Fly?

Bitcoin You Say? Still not sure what to think of Bitcoin (for those not familiar, it is the original and most popular cryptocurrency ). It has the potential to change financial transactions as we know it. Numerous authorities are against it and have been trying to regulate it for years. Some private investors are bullish--most notable are the Winklevoss twins from Facebook lore who suggest it is the gold for the modern age . Wall Street and some Main Street banks have been trying to get into the action. Matt Levine of Bloomberg, one of the top business journalists I have come across (that is freely accessible), isn't sold on the idea yet . Whatever it is, you definitely need stronger, more secure, and more professional Bitcoin financial institutions before the public will get involved to any large degree ( the $400M+ loss at Mt Gox a few years ago probably set back Bitcoin by years--who the hell would want to get involved in such an amateurish operation (and that was the top B...

Interesting Facts about the US Currency I ran across a good Dallas Federal Reserve publication (" Money " from 2013) that explained the basics of money. It is one of those government propaganda-type publications aimed at the general population but, surprisingly, it does a good job of going over almost all the major concepts related to money including inflation, expansion of the money supply due to multiplier effect of reserve banking, and even highlights the major events (such as Bretton Woods, FDR banning ownership of gold, etc). Anyway, it had some interesting historical facts that very few, including Americans, know about the US currency and I thought I would post it here. I certainly didn't know about them. For instance, I knew about the era when banks issued their currencies but didn't know there were 30,000(!) distinct currencies in USA at one point. This implies that there were maybe 20,000 banks (another 10k could be other entities) and that surprises me...

The following is a graph, courtesy stockcharts.com , of three key indicators I like to look at: stocks, US treasuries, and the US$.

Here are two radically contrarian views. Of course, as always, what is contrarian depends on the crowd you hang out with. I measure it against the mainstream masses (i.e. institutional investors and Wall Street as a whole.) The views I present below aren't that new to me but they go against the Street. US$ To Remain Dominant This is a very long-term call so it's not really actionable for most of us (unless you are willing to invest for 20 years and not touch your money.) Ambrose-Evans Pritchard, a journalist at The Telegraph, makes a widly bullish call on the US$ : The dollar will still be the world’s dominant reserve currency in 2030, sharing a degree of leadership in uneasy condominium with the Chinese yuan. It will then regain much of its hegemonic status as the 21st century unfolds. It may indeed end the century even stronger than it was at the start. Why, you might wonder, could someone say the US$ would be stronger in 20 years: The aging crisis in Asia — and indeed the o...

US$ Index (source: Barchart.com)

I don't usually quote, or indeed follow, Robert Prechter. For those not familiar, he runs a trading advisory firm, Elliott Wave International , which, as the name implies, uses technical analysis based on Elliott Waves. His strategies have little to do with anything I do. However, if I see him in a newspaper article or a video interview on the Internet, I pay attention. The reason is not so much because he is good—he supposedly called the 1987 crash but seems to have a debatable record, with good calls between 2000 and 2002 and poor strategy from 2003 to 2007—but because he is one of the few deflationists out there. He has been considered a perma-bear but, given how he is a trader, he may be trading both ways (without following his trading strategies, I have no idea.) Other than Robert Prechter, Gary Shilling, and possibly Hugh Hendry, I don't see too many deflationists out there (there are also a few bloggers such as Mike Shedlock.) In the last few months, I had been looking...

Bloomberg has a nice article on the return of the carry-trade: The carry trade is making a comeback after its longest losing streak in three decades. Stimulus plans and near-zero interest rates in developed economies are boosting investor confidence in emerging markets and commodity-rich nations with interest rates as much as 12.9 percentage points higher. Using dollars, euros and yen to buy the currencies of Brazil, Hungary, Indonesia, South Africa, New Zealand and Australia earned 8 percent from March 20 to April 10, that trade’s biggest three-week gain since at least 1999, data compiled by Bloomberg show. It's still too early but I would be really careful with countries undergoing capital inflows due to currency carry-trades. The problem isn't that they are bad per se; rather it is the fact that carry-trades can unwind rapidly and crush non-speculators. Carry trades were profitable for most of the past three decades. They produced average annual returns of 21 percent in the...

Over the last year I have been wrong--big time--regarding the US$. I paid for my incorrect decision by losing around 10% of my portfolio last year due to the US$ decline against the Canadian dollar. However, I am maintaining my mildly bullish view of the US$. The US$ will likely fall while its economy weakenes and the Federal Reserve cuts rates, but I believe it has declined sufficiently against the Canadian dollar. My feeling is that the US$ will mostly fall against the strong Asian currencies and the Yen. I am also strongly bullish on the Japanese Yen. The Yen has increased quite a bit in the last few months but I believe it has further to go (but this can take years). I am planning to increase my exposure to the US$ and Yen. Ideally, I would like to hold 50% of my portfolio in Yen-denominated assets (such as Japanese stocks). The Japanese stock market has been selling off like crazy so I'm not sure if I should just convert some money to Yen and wait, or to plunge headfirst while...