The Future of Money

Just completed writing a view on The Future of Money.  I foresee big changes in the way we conduct business in the coming years, with a mix of the old, through the use of gold and silver as backing, with the new of the internet.  Interesting times are ahead and the people who see it coming and get the call right could make a lot of money these coming years while others fail to prosper.  Yes, The Future of Money is something that affects us all.  Let me know what you think!

Market Update

For the first time in years, sentiment in the markets seems overwhelmingly bullish.  While I've participated, to some extent in this bullishness since December 2012, I really can't share that overwhelming optimism that seems to exist.  In fact, I think I can pinpoint where this has happened before.

First the good news, I made major investments in some investment trusts on big discounts last year and it has paid off ultra-handsomely.  The JP Morgan trio of UK Smaller, European Smaller and Japanese smaller were all on 18%+ discounts in the summer and autumn of last year, which helped me think counter-intuitively and let the discount help me realise I must be getting a fair deal, despite all the negative sentiment.  Now, Japan Smaller is up an amazing 50% since then, with Euro and Uk managing 30-40%.  Couple that with picking up Henderson Opportunities on a 25% discount and the share portion of my portfolio has zoomed away.

Now the for the not so good news...

Gold is down and the miners have got slammed.  GPM (Golden Prospect Precious Metals) has been a dog.  So there's some of the gains elsewhere gone.  My mistake is I reckon I was too early with that one.  I'll continue the monthly investment because gold will have it's day again, which brings me nicely to the point in history this reminds me of.  In 1977-78, world stock markets flew away exactly the same as they are now.  Furthermore, gold and silver experienced falls and stagnation, many even sold out, so I read, believing the economy was fixed and the boom was over.

It wasn't.  In 1979-80 gold and silver flew into the stratosphere and the miners followed suit.  Shares tanked and remained low until 1982 when someone finally did what needed to be done to restore faith in the financial system.  Right now, I don't see any such person with the same convictions on the horizon.  In fact, all I see are inflationists, Keynesians and a load of gold-diggers in it for themselves.

That's why I think this "recovery" is fake.  Also, where are the dividends to back up this growth in share prices?  The ultimate irony of this must be that a lot of the high payers in the oil and minerals sector are the ones underperforming.  Hence the FTSE has not boomed as it might.

So, don't sell your precious metals.  I won't be selling my shares yet either.  Investment trust discounts on my selections are not narrow enough yet to indicate a market top.  Ok it's never a perfect signal, but it's the best one to go on...

Bitcoin

I'm currently watching Bitcoin from afar, but I do see the rise of digital currencies, independent of government as a thing of the future. In fact, Bernard Lietauer talked about community currencies existing alongside gold in his book many years ago and that's what got me interested in this whole thing in the first place. I guess Bitcoin does fulfill many of the criteria defining true money, such as limited quantity and infinite divisibility but it is lacking one thing....(call me a traditionalist here)...asset backing. Long term, my money (now there's a paradox..!) is on the rise of one or more online digital currencies backed by gold and silver. Bitgold and BitSilver, anyone?

Sadly, governments and whoever else benefits from controlling the national currencies will do anything they can to maintain the status quo. So until it becomes mainstream expect many more stories about people using Bitcoin to buy guns or drugs and evade their "social responsibility" via taxes. Conveniently neglecting to mention that one of the most common ways to buy guns or drugs is a suitcase of dollar bills!

Diversifying Your Portfolio

Sometimes it's worth diversifying your portfolio outside the world of ISAs.  After all, some things can't be held within these accounts : physical gold, silver, property, a lot of foreign shares and...domain names.

Yep, I've been feeling for some years domain names are the ultimate virtual landgrab (more on virtual money such as Bitcoin another day!), but to give you an insight into the kind of domain name portfolio I feel might perform well the next ten years, check this domain name portfolio out.

Unit Cost Averaging into Physical Gold with Bullionvault

For years, I have wanted to be able to set up a fixed monthly saving into physical gold (and silver, take please, Goldmoney and Bullionvault), but it's never been possible. Also galling is the fact that with Goldmoney it is possible if you are a US citizen.

However, Bullionvault just sent me this :-

You can now build up regular savings in gold without needing to place orders yourself or deal directly on BullionVault's online market.

BullionVault's new Automatic Gold Investment Plan allows you to buy gold regularly with minimum effort.

Simply enable the new feature in your account settings and arrange for a monthly deposit into your BullionVault account from your bank. Each payment will then be used to buy gold automatically at the price set at the next London Fix, the global benchmark used in the professional wholesale markets.

A dealing charge of 0.8% applies. Your gold will be stored at the usual costs in the Zurich vault. You can stop making deposits or sell your bullion and withdraw your funds at any time, without notice or penalty.

Find out more about the Automatic Gold Investment Plan and get started today.

The great thing is, you can also make your payments in Dollars, Euros or Pounds!

Dow Jones and FTSE Climb to New Highs

Or so goes the BBC headline today.

And so great eh, the world is saved?  Hmm I very much doubt that it is.  What has fundamentally changed?  Nothing, except the worldwide currency creation continues.  That more than anything else - oh and some money probably exiting the bond market early before it crashes too.

I'll be the first to admit that I actually took advantage of some favourable investment trust discounts during December, especially for my pension (for disclosure, some of those trusts and their prevailing discounts when bought : JP Morgan UK Smaller 25%, Japanese Smaller 18%, European Smaller 18%, Henderson Opportunities 25%).  So, yes, I am counting the paper gains too.  Nice.  Or it will be if I find the right time to exit.  I don't think it's quite yet, as the aforementioned trusts are all now on 15% discounts, so still feels to me like there is some gain up to May.

Sell in May and Go Away

If the stock market hasn't tanked by then and the trust discounts have narrowed to sub-10%, I will definitely cash out of a lot of these.  I really feel this rise is unexpected (to me, but there again I don't go to Davos or Devil's island).

What to Buy Instead?

Obviously, top up on your gold and silver holdings.  I will start buying gold again soon after a 3 year pause.  Especially to minimise my exposure to the British Pound.  I figure I can convert back later now and make a profit on that too.

Golden Prospect Investment Trust is my favourite.  This invests in gold and silver miners and has plummeted from a premium to a 14% discount in about 2-3 months.  What amazing value!

Fidelity Japanese Investment trust also sits on a 16% discount.  Yes, that's quite a way out there, but in a world of such financial uncertainty, it might make weird sense to have the most stock market exposure to the very market that has least participated in the rallies.  especially when the Yen is still, weirdly considered a sound currency.

Precious Metal Mining Shares to Watch

Fresnillo is the world's largest silver producer and has two things going for it as far as I can see (1) It is in Mexico, the only country left in the world that still uses silver in it's currency and (2) It's next to the USA, which is still a huge consumer of silver and where a lot of the world's silver, both paper and the real stuff is transacted, through COMEX.