Aug 102017
 

It seems like every month the stock market is reaching new highs. Stock investors like myself have benefited greatly from the second longest bull run in history. 🙂 But it’s becoming very difficult to find value in traditional asset classes such as stocks, bonds, and real estate. So I’ve been looking at cryptocurrencies recently. As with any potential asset class my goal is to measure the future potential benefits of an investment and compare it with the risks.

Anyone can create a cryptocurrency as long as there’s a community backing it. That’s why there are over 1,000 digital currencies in the world today. According to Coin Market Cap, the 3 most popular ones are Bitcoin, Ethereum, and Ripple, in order of market capitalization. There are many smart people supporting these digital currencies built on blockchains, which is essentially a public record of transactions. For example I’ve been following investor Brock Pierce on Twitter. He used to be a child actor in many Disney movies lol, but what Brock Pierce is doing today is very promising for the cryptocurrency market. According to his crunchbase profile, he’s been in the venture capital space for over a decade now and is trying to make Bitcoins more mainstream. In an interview last month with The Guardian, he predicts that the “underlying technology of blockchain is going to impact our world more than the internet has.” And he’s not alone. Patrick Byrne, the CEO of e-commerce giant overstock.com, firmly believes that Wall Street will be forced to accept Bitcoin technology faster than most people think. Byrne’s company was the first major retailer to accept bitcoin as payment starting in 2014, long before competitors like Microsoft and Dell.

One major barrier to entry with bitcoin has been the lack of acceptance among merchants. From a consumer point of view, there’s not much point in holding an asset that hardly anyone recognizes. But if cryptocurrencies really catch on with mainstream consumers then now may be a good time to buy and hold some digital coins for diversification purposes. The price of bitcoin has risen 500% in the last 12 months, according to coindesk. And the price of Ethereum has gone up over 2500%. Wow! 🙂 I don’t have any digital currencies yet but I’m tempted to put a small amount of money into either Bitcoin or Ethereum and hold it for the long term. One problem is that buying cryptocurrency can be difficult for Canadians. Both the established banking system as well as the government really don’t like blockchain technology because it’s decentralized and not easy to tax or control.

For anyone interested to gain exposure to the price of bitcoin without actually buying any, there’s a fund for that. 🙂 Investor Barry Silbert has been one of the most active angel investors in Bitcoin. He has funded over 40 bitcoin-related startups such as BitGo, BitPay, Coinbase, Gyft, Kraken, and TradeBlock. He also launched the Bitcoin Investment Trust, which is publicly traded under the symbol GBTC in the United States. This trust solely invests in and derives value from the price of bitcoin. This gives investors the chance to benefit from bitcoin price movement through a traditional investment vehicle, without the hassle of buying, storing, and safekeeping bitcoins. But personally I would rather own a digital currency directly so not to pay management fees, especially when I plan to hold for a long time.

When it comes to investing in alternative asset classes, it’s worth looking at digital currencies. I don’t intend on investing in Bitcoins right now. I will continue to do more research on it first. Even if I decide to purchase some in the near future I will keep my cryptocurrency exposure to less than 1% of my net worth. Bitcoin may outperform stocks over the next 10 years, but it also carries a lot of liquidity and volatility risk.

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Random Useless Fact

Potato chip bags are not full of air, but of nitrogen gas. This is done to prevent the chips from oxidizing and going stale in the bag.

 

Mar 302017
 

Recent Purchase – Yellow Media Ltd

Although most of my investments are in blue-chip dividend paying companies, it can be fun sometimes to speculate on smaller companies as well. It’s kind of a risky play, but I recently picked up 120 shares of Yellow Media (TSE:Y.) I paid on average $8.14 per share, plus commission.

The stock is trading at 0.61 Price/Book ratio, so its net assets are worth more than the company. The forward P/E ratio of 11.8 is also quite attractive. The phone book industry is dying, but Yellow Media is transitioning into the digital world. The reason I decided to buy now is because the company just hired a new CFO and the stock has started to go up again. 🙂 It has greatly reduced its debt over the past several years. Although its print business is suffering, it plans to organically grow its digital revenue between 5% to 8% a year. Yellow Media already owns a lot of online content and gets tons of internet traffic. 🙂

I first came across Yellow Media when I read Nelson’s post on The Fool last month. He analysis appears to be sound. I believe (Y) has potential to come back from its current lows. But it’s far from a guarantee. The stock currently trades at about $8/share. In 1 year from now, Yellow Media stock will either grow to over $12/share (50% gain) or drop to something like $6/share. I’m investing because the upside potential outweighs the possible downside for me.

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May 192016
 

Triple Digit Returns on Currency Investment

There are lots of ways to make money in the world. It’s up to us investors to find them. 😉 A couple of years ago I blogged about my investment in Zimbabwean dollars. I purchased some uncirculated $100 trillion Zimbabwean banknotes on the internet and paid CAD $5 for each one. 🙂

16-05-bank-notes-purchase

Back then I even made a prediction that these notes would be worth $25 each in 2016. Boy was I wrong, lol. It’s now been about 3 years since I purchased my investment. Here are some recent ones that actually sold on eBay within the last day!

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Holy mackerel! 😀 Each of my Zimbabwean banknotes is worth over CAD $60 today. That’s at least 1,200% return on investment in just 3 short years. Financial independence – here I come! 😀 If the people who read my previous blog post purchased 15 or 20 of these notes, then they could sell their investments today and be thousandaires! 🙂

Due to runaway hyperinflation what you can buy for a Zimbabwean dollar these days is absolute non-cents. Around the year 2000 the government enacted a policy to redistribute land and resources. Foreign capital stopped flowing into the country. As a result the Reserve Bank of Zimbabwe printed huge amounts of money to pay for labor and services. The value of the Zimbabwean dollar dropped due to an oversupply of currency and prices began to rise. By 2008 prices of food and other goods were literally doubling every 24 hours! At its highest point the annual inflation rate was 230,000,000%. Savers were wiped out. And businesses didn’t know how much to pay their employees or charge customers because there was no price stability, including for labor. All this turmoil caused the country’s GDP to fall 18% in 2008. By 2011, about 72% of the country’s population lived below the poverty line. If the first president of Zimbabwe, President Banana, was still alive today, he would probably be very upset by all damage his successors have done to the nation’s economy. (yes, that’s his real name)

The Zimbabwe currency was abandoned by most people in 2009. Since then the country has stopped printing the currency, and consumers have been using the U.S. dollar and the South African Rand to conduct financial transactions. Last year the government decommissioned the Zimbabwean dollar completely and anyone who still had some could exchange it for American dollars at the official exchange rate set by the government: $1 USD = $35,000,000,000,000,000 ZWD, lol.

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Apr 062016
 

The following post was written by staff writer, Peter.

Have you been keen on developing a sustainable means of wealth management? Are you tired of waiting for long-term profits? If so, the Forex markets are certainly worth a closer look. It is nonetheless a fact that 2016 has proven to be a rather turbulent year (so far) in terms of market indices in general. In order to capitalise on the opportunities that await, it is critical to understand how such fluidity can be used to your advantage. In other words, what basic principles should you keep in mind to succeed within what can only be called a changeable marketplace?

Appreciating Risk

Much like any investment, there is always a level of risk associated with the Forex markets. Due to the liquid nature of currency pairs, this risk is seen as being more substantial when compared to other sectors such as commodities or blue-chip equities. So, it is first important to realise that you will need to be exposed to a certain level of risk in order to accrue profits. The key here is to determine this exposure and never exceed your set financial threshold during any given trading session.

Appreciating the Potential Role of the “Brexit”

Speculation is rife that the United Kingdom may decide to leave the European Union. Whether or not this comes to pass is yet to be seen. The concept to appreciate here is that even talks about this scenario will lead to swings in value between the pound and the euro. Once again, volatility can prove to be beneficial for those who hope to capitalise on short-term knee-jerk reactions. It is therefore prudent to keep one eye tuned into the latest news. Whether or not any “Brexit” comes to pass, there are still profits to be made.

Taking Advantage of Volatile Times

Many astute Forex traders will wait until rather volatile times to enter into a position. This arises from the fact that profits can be realised quicker when compared to more stable trading periods. As 2016 has already seen massive currency swings, those who adopt this technique could very well enjoy higher profit margins. However, the levels of risk involved should nonetheless be mentioned. There is a massive difference between executing a well-informed position and simply relying upon “gut” instinct or a “sure-fire” tip.

Professional Trading Platforms

Any trader with even a moderate amount of experience will attest to the fact that the choice of a trading platform can make the ultimate difference between a successful wealth management strategy and one which is obtuse and uninformed. This is why a growing number of investors from all walks of life have taken advantage of the tools offered only through CMC Markets. With such cutting-edge instruments at your disposal, much of the guesswork can be taken out of the entire process.

Forex trading involves experience, prudence and adapting to changes as they occur. These simple tips will help to ensure that you create a firm foundation from which a successful wealth management strategy can be enacted.

Mar 072016
 

Canada Says Farewell to Gold

One upon a time most currencies were backed by gold. But in 1971 president Richard Nixon took the U.S. off the gold standard switching to a floating currency instead so its Central Bank can exert more influence over the currency, and other countries followed suit. Today, everyone uses fiat currency and gold is no longer relevant on the world’s financial stage.

Canada use to have more than 1,000 tons of gold in the 1960’s as part of our foreign exchange reserves. But Ottawa has long forsaken the notion that gold can be a useful diversification tool for a country’s monetary interest. For decades Canada has been slowly selling off its gold reserves, and according to the Finance Department, it only has 77 ounces of gold coins remaining today, which is worth about US $100,000. That’s nothing more than a rounding error compared to the US $80,000,000,000 of total foreign exchange reserves we have.

As Canada gets out of the gold game, others are buying more. According to the World Gold Council, central banks around the world added a net of 336 tons to their reserves in the second half of 2015, representing a 25% increase from the previous year. Russia and India have increased their holdings. And since the start of this century China has bolstered its gold reserves by 350% from 400 tons in 2000 to nearly 1,800 tons today. Even individual investors have helped take gold off the Bank of Canada’s hands. A couple years ago I blogged about buying a 1 ounce limited edition gold coin for CAD $1,389. It’s easily worth 20% more today given the current spot price of gold. 🙂

Here’s a look at the biggest holders of gold by country. (source)

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Based on the chart above, we can see that the U.S. central bank holds the most gold by a wide margin. The 8,133 tons of gold held by the U.S. make up 72% of its foreign exchange reserves. The next 3 countries in the list, Germany, Italy, and France also holds more than half of their reserves in gold.

It’s interesting how other central banks seem to be holding or even increasing their gold reserves while Canada has done the exact opposite, lol. I’ll write about the possible reasoning behind these two diverging ideologies around gold in a future post, but it has to do with the nature and purpose of Foreign Exchange Reserves, which requires a rather lengthy explanation.

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