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.

Fleet Street Letter Review

Read the Fleet Street Letter Review here.

Gold is a Risky Investment

I have not updated this blog in a while, but thought it was worth reminding people of something that has not been true for many years - Gold is a Risky Investment. Now, this might seem ridiculous, especially considering I will further quantify it by saying I believe in the long-term fundamentals, international inflation prospects of Western nations and the will of government to do all it can to save it’s own skin at the expense of your life savings. Given that last factor, especially, nothing will do as well in the next 10 years as gold…except maybe silver…and food…but that is for another day.

However, look at where the price of gold is now. No-one should be surprised to invest and see it fall, even short term, by 40-50% back to the 900$ level. What am I basing this on? It is exactly what happened in 1976, when it fell from 200$ to 100$, even as the long term trend was for gold to move another 5 times higher in 4 years. 1976 must have been a very hard year to sit there and talk to your friends about gold and reconcile the long term belief with what was really happening in the market.

The point I want to make is that anything is a risk, but gold is much more of a risk at 1800$ than it was at 400$, when it really could not have fallen much further at all.

What can you do about it, even if you want to invest in gold or silver now? Invest monthly in small amounts, via physical bullion ETFs or the internet gold sites such as BullionVault or Goldmoney and promise within yourself to keep those monthly savings going, after all, falling prices mean you actually buy more ounces each month!

lulu.com Discount Code for this book or one on gold and silver investing

SUCCESSFUL TAX-FREE ISA INVESTING / HOW TO INVEST IN GOLD AND SILVER
Purchase SUCCESSFUL TAX-FREE ISA INVESTING or HOW TO INVEST IN GOLD AND SILVER with 30% off with coupon code FEBRUARYCART305GBP.
Valid until 19th Feb 2012. Great offer from a great website.

QE III

No no, not some new luxury cruise liner, just observing that something weird is going on when the day the Bank of England announces it is going to devalue all existing money in circulation by creating £50bn out of thin air, the financial markets celebrate by increasing the value of the pound against every other currency.

So why is that exactly? Was £50bn less than the markets expected to be created out of nothing, or is the UK creating less new money than every other nation? I have no idea.

Think I will go and buy some silver.

Selftrade ISA Offering - £175 ISA bonus act before 30th April

Selftrade are offering a pretty impressive ISA deal this year, whereby if you invest the full £10,500 in their ISA account by 30th April 2010, you get 10 free trades worth a total of £125 to use during May.

Not only that, but you can boost that by a further £50 by getting me to recommend you. Obviously, I'm more than happy to do this. You can do that by emailing me at alan@doityourselfisa.co.uk using the mail address matching that you want to apply for the account in.

All I can say is, if you're interested act as soon possible. This great offer dies on 1st May 2010. Best ISA offer I've seen so far this new tax year, for sure. In the interests of disclosure I'm happy to reveal that this is where my new ISA money is headed this year, for sure.

The AIGA saga

One of my key recommendations in my ISA Book is the diverse range of stockmarket-listed ETFs run by ETFSecurities. Reason being, that these inventive ETFs allow you to invest in the indexes tracking a wide range of commodities not normally accessible to normal investors such as ourselves. That includes such common staples as Corn, Wheat, Sugar, Cotton, Oil, Gold and Silver.

Long-term, as governments pump more money into the economy, the price of commodities in these devalued national currencies can only rise. And before you think it's only me saying this, then perhaps you'll listen to the opinion of uber-investor Jim Rogers, in his book Hot Commodities.

Well, shock, horror, this week, as AIG, the huge US insurance company faced financial problems of its own. Ah, but what's this got to do with the price of wheat, you may ask? Unfortunately, AIG manages the ETF soft commodity (Wheat, Livestock, etc.) ETFs on behalf of ETF Securites. A complex arrangement that is hard to follow, and created much uncertainty as to whether we'd even get our money back if AIG went under.

When they resume trading, we can probably expect mass redemptions of these ETFs. Here's a contrarian opportunity of ever I saw it. Funds at the ready, because with so many eager sellers, it could be worth taking a punt, because the US Government has already shown an intense desire not to let AIG fail, and anyway, there is guarantee that we would even lose our money if they did. With any luck, we'll see these ETFs trading at huge discounts to NAV. I think it's worth taking a risk, especially since the alternative is British pounds (for me), or exposing myself to the vagaries and fluctuations of our ailing economy through stocks.

Time to put a bit back in?

I was surprised to receive a letter recently for a tender offer for up to 40% of my holding in Fidelity Asian Values Investment Trust. While I'm used to this kind of thing happening, I've never seen it happen to Fidelity before, which probably says a lot about the kind of bear market we are experiencing. While I'm not exactly bullish on the future of the developed western world economies, I'm becoming steadily convinced, especially after the Olympics, that, to twist a metaphor slightly, the economic torch for the new century was passed from the USA to China, just as the UK passed it to the USA at the beginning of the 20th century.

Given all this, it's certainly not time to cash in my holdings in this trust at such a depressed price and also a 6.5% discount on the tender under the Net asset value of the trusts' assets. In fact, there may be some uplift in the share price to reflect the departure of less committed shareholders and a lift in the NAV.

Therefore, I'm recommending this trust as a long term BUY, as long as the discount is ten percent or greater. Even better, Fidelity are one of the trust providers that allow you to invest monthly in their trusts free of any brokerage fees, from an amount as low as £50 a month. Highly recommended.

The Hosuebuilders continue falling

As an aside of yesterday's post, I notice that today Barratt and Redrow have fallen another 16 and 9 percent respectively so far this morning. I don't claim anyone reacted on the basis of my post, as really you should be checking the figures and anybody can see where the UK economy is headed.

I just wish I'd been doing a bit of spreadbetting on the prices falling still further. At 76p, how much further can Barratt fall? The answer could be zero? Is there some major bad news in the offing?

UK Property Price falls

Funny how most of the City fund managers right now have turned "contrarian", and mostly seem to be calling the bottom for housebuilding stocks such as Barratts and Redrow right now. Even stranger still, since you'd expect them to be investing in these stocks, why do the daily prices continue to fall so much? Or are they waiting for others to take the bait first?

In my opinion, these share price drops indicate that reported earnings are going to fall through the floor, possibly coupled with asset value writedowns, as various sites, mainly brownfield have their planned developments deferred. I'm currently staying in a 1-bed flat near Bristol while I work short-term there, and out of my block of 4, 2 are completely empty, and one is up for sale, although at £180,000, reality obviously will take some years to settle in in the second-hand market. How long before the likes of Barratt and Redrow have to do 50% off deals (or buy-one-get-one-free?), simply to shift their current stock of city apartments?

Given the number of years reality may take a long time to set in to the mindset of Joe Public. My guess is 2017 might be the year I'll take the plunge on UK property again. Alternatively, the government might manage to stave off a crash, but if so, don't be surprised if your £180,000 is still worth £180,000, but a loaf of bread costs £50.

If that happens, you'll be wishing you'd invested in Gold and Silver instead!

SUCCESSFUL TAX FREE ISA INVESTING

Time for a sneak inside look at what's covered by the new book SUCCESSFUL TAX FREE ISA INVESTING, by ALAN DUNWIDDIE. Here's the contents page, to give you some idea what it covers :-

• Introduction
• About Isas
• Financial Advisors
• Isas and the Tax-free Myth
• Inflation
• Cash Isas
• Investing in Shares
• Choosing a Broker
• Unit Trust Isas
• Investment Trust Isas
• Exchange-Traded Fund Isas
• Commodity Isas
• Gold Isas
• Bond Isas
• Property Isas
• With-Profits Isas
• Isa Mortgages
• The Future Of Isas
• Summary
• Recommended Resources
• Official Inland Revenue Guidance on Isas

Selftrade mismanage Freedom4 tender

To Update People on the Pipex/Freedom 4 situation, Halifax did their bit and tendered 85% of my shares, Selftrade on the other hand, mismanaged it and only did 58%, despite me knowing a huge number of their nominee shareholders didn't put their tenders in in time.

I complained about the fact they only tendered 58% when I specifically said tender ALL or as much as possible. The official written reply is :-

"Unfortunately we do not have direct access to the Halifax to substantiate your claim that they tendered 85%..."

Not impressed.

Should Britain Join the Euro

I used to be strongly in favour of a single European currency, and my partner is from the continent, but after living over there for 3 years, I've completely revised my opinion.

Culturally, Europe is much more socialist and controlling, when compared with the historic British attitude of an island nation based on international trade and financial freedoms, as evidenced by our reputation as one of the best places to conduct international business, and our base as the world's leading financial centre.

Using the old dictum that "he who controls the currency controls the nation", by giving up the national currency, you are also giving up much of the control and handing it to another power, with vested interests of its own.

Fortunately, at this point in time, most Britons realise this and are opposed to the single currency. We all know this, so why even bother going to the expense and hassle of a referendum?

iWebsharedealing

I set up iwebsharedealing.blogspot.com with the intent of discussing the service (good and bad), provided by iwebsharedealing. I have an account there myself, and now they'd started offering PEPs, I'd been considering switching, but waiting for a good offer.

In the meantime, Google have blocked the blog iwebsharedealing as a potential spam blog. oh well. can only see what they hit upon in the end....