Get my weekly reviews to your mailbox at the end of each week.
You will never have enough education. Here I share my views of the financial market in general, and from time to time, how to profit from it.
If you like the content of this blog, make sure you read Out of the Rat Race, the book as you will find many eye opening facts and stories which I gathered over 25 years of learning.
I have had my fair share of stress and problems in the past few months and years...
This hardship taught me lessons that I had to learn the hard way.
Sometimes I even had to re-learn them again and again as I was either forgetting or ignoring them...
I suppose I am just as human as you are...
However, with age and reason, I start to get closer and closer to truth. Today, I can share with you one of the most important lesson for life.
Things are broken all around, but they are also patched up so fast and so big that we are led to believe there is a kind of normality settling in.
Mind you, people are even starting to book their 2021 summer holiday as if it is a necessity right now.
Yet, I feel that we are just in the eye of the cyclone, a place which feels sheltered from recent devastation, but a place which only exists for a few moments. A few more days, weeks or months. Still, when we get out of the eye, we hit devastation again. It cannot be avoided, can it?
Have you felt recently that there is a bit of a disconnect between price and value?
Have you perceived a kind of hidden inflationary pressure on some everyday goods and services, whilst at the same time witnessed a total deflationary vortex on some larger assets (for example your car or your house)?
In the midst of this crisis, we may be at the beginning of a bigger change. We may be at the beginning of a bigger disconnect between price and value. Inflation? Deflation? Read on...
It's not because the world around us is collapsing that we shall stop dreaming.
Everyday is a new day, and as I wrote more than a year ago now, every day is a new Me.
For this time, we shall forget the problems thrown at us by the new world, because these problems are irrelevant.
Covid is irrelevant, and the way governments have reacted to it is irrelevant too.
Even the money printing, forget it for one moment!
For this time, the only relevance is you. Because at this time, I will give you the secret. The secret to make a success in whatever world we will discover tomorrow...
Well it's been two months of hell non stop so far.
I thought it was my duty to warn and advise, so as I gave you a good insight into hell, I probably filled up your tank of negativity.
What do you want, hell is hell... Cannot put a lipstick on it and pretend it's heaven 🤥.
This week, I would like to look into the little ray of sunshine that pierces through. This week, I would like to give you hope.
I am old enough to have seen a few crisis, those who happen once every 7 years on average.
And I wise enough to know that the price of anything you buy can drop to zero in the worst circumstances.
What my brain was not ready to process however, is that in very stretched circumstances, the price of goods can turn negative.
And as a matter of fact, not just negative, but big time negative.
Welcome to our new world, a world full of risks and surprises. Let's review the short, mid, and longer term consequences of a sudden negative oil price...
The last 10 years of US employment got wiped out in a month.
I am talking about 22 million people who filed for unemployment aid in the past 30 days or so in the US.
It would look like our societies have been built on sand, and whatever comes next, we'd better build it on better foundations.
This pandemic has ripped through the world as we knew it, but let's be clear: the world as we know it was awaiting the pin that would make it explode. It came in the form of a virus. It could have been anything. Our globalised world was too fragile...
This is another post about society 😱.
I promise we will come back to finance very soon.
But during this time of self confinement, everybody has the time to reflect and ask themselves the right questions.
In short, what is of great significance, and what is coming next.
After the health, the economic, and the monetary crisis, welcome to the upcoming fourth crisis!
The world is in quarantine. At least 93% of the world population lives in a country that currently enforces travel restriction.
That impacts 7.2 billion people with at least 2 billion asked to isolate at home and watch the world collapse on 24/7 news feeds.
The balance of 5.2 billion is made of a few million "essential workers" and all those billions who do not have enough home to isolate themselves.
How did we come to this? What on Earth is happening, and what is the end goal? In general, I am not a conspiracy theory kind of guy, but now, I think enough is enough... Let's walk back the trail of Covid19 in search of better explanations.
So we now have these three problems, and they are several orders of magnitude apart (do a x100 each time you move up).
First, we have this Global Health pandemic. Real bad, will give it 100 in scary ranking level!
Oh but... now there's this Global Economy recession (well it's probably more like a depression, but nobody will tell you this).
F..in' bad, have to give it level 10,000!!
No, come on! Are you seriously going to fight this by creating this gargantuan debt enslaving us all for several generations? The Monetary and Fiscal shower pouring down from heavens is the real "level-one-million" seismic move which will redefine Earth for decades. That is, unless you believe the story of the Year of the Jubilee...
Oh boy! I hope you are not falling for these charlatans telling you to buy the dip.
I hope you stay smart, and you keep smiling, because you will need a lot of smart and smile in the next few months.
Our world has turned the page. It is not because I say it. It is because it did turn the page. Look at all the evidence, and come to your own conclusion. Then, pretend you know nothing, because in the new world, our anchors have moved. In the new world, we need to tread carefully...
In my book Out of the Rat Race, I compared stock trading to being minified and sent into a washing machine.
An experience I do not wish to anyone 🤢.
This past week, it's not just stock trading which was put in the washing machine at 1,500rpm. No, it's the whole construct of our societies. I talked recently about our fragile world. Well, it was fragile. Now, it's broken. You'd better adapt to the new normal, 'cos old world ain't coming back! Buckle up, it's gonna spin...
Yep, it's the economy, and as I mentioned last week, it's looking rather fragile...
It's not going to take a prediction guru now to say that a recession is coming.
Well, the central bankers will still insist that everything is under control, but hey... we've seen this movie not so long ago.
I even remember the long queues of people at the door of Northern Rock (it used to be a bank in the UK, in 2008...)
So... 🔮 what's up Doc?
The past week has been both a confirmation and a revelation:
we live in a very fragile world, where equilibrium is painfully obtained at the cost of adding more fragility into the mix.
This is the story of mixing an upcoming pandemic with a world on permanent financial injection. Like all stories, the truth comes when the main characters are pushed to the extreme. Are you ready to face the truth?
We all know there will never be a flying pig.
But could there be a flying whale?
I assure you, when big whales start flying, the world will be upside down.
Hey, but the world already is upside down 🙃
Then there must be flying whales somewhere...
Please don't challenge my logic so fast. Join me in the search of the flying whales...
Ten days ago, I took a leap of faith. Savings are earning nothing. Even the capital is not fully protected as it diminishes by the inflation rate. In this world of zero interest return, I made a long due diligence and took the plunge: I invested a good chunk of savings into financing a property developer's project in exchange of high interest rates. This is really out of my normal conservative approach to risk on savings. Extraordinary times require extraordinary decisions. But yesterday, I opened the news and ...Oh my!!!! 😧 Who is safe out there?
I have delayed this too long...
I am writing a blog about finance and money, and here we are, six months in, and I have not yet had a go at the biggest currency on Earth.
This is probably because it is harder to criticise and manipulate 😉
In truth, it does not need a Central Bank, does not need another etalon such as gold or bitcoin to assert its legitimacy, but despite all this and unlike all our manipulated fiat currencies, we can have total confidence of its value and predictability. Every second of your life, it will apply the same rules. Let me introduce you to the mother of all money: ŦIME.
How long do you have to wait before the dead patient has to be pronounced dead for certainty? In the week of the Corona Virus taking world stage, it's a bit of a bad taste question, but I have to raise it, because in the financial world, I see two dead patients, and a line of incoming moribund ones. In the financial world, death can be excruciatingly slow, so in doubt, I preferred to call them Zombies. Let's dig deeper into the zombies who are responsible for creating money.
There is something called Blue Monday, and this year, it hit us on January 20. Mind you, the last 3 weeks, I have done everything in my power to keep you focused, in a good mental state, and plan for the next decade (not just the next 10 days) so that you can avoid Blue Monday, and then the long drag until Easter. So, if you are with me and focused, let's make the most of our good mindset and get some insight into the world financial equation. Errr... if you are already in Blue Monday spirit, I am not sure if what's coming next is the right medicine!
This is the third and last part of my trilogy on the new mindset for the new decade. After the totally new approach of goal setting, the search for our deep values, we are entering the last part. Simple in concept, but not always easy to master, the third part is this: focus on building good habits and delivering good execution!
Hello my Friend!
It's only week 2 of the year, and the decade is going to feel like a succession of marathons...
Therefore, for your own sake: clear your mind! 😇
Clarity is essential. Clarity of thoughts, clarity of goals, and clarity of purpose. Without this, you walk like a one-legged duck 🦆. And I can tell you this, it's not pretty!! So if you thought I was done with the new year's reboot and Change Program, you are in for a surprise. Not only I am not finished, but I have prepared some work activity for you. Yes, this week, you have to go beyond the reading and start working to discover our own Clear Self, the one who will cut through the upcoming decade on two legs and two brains...
The King of US has just bombed the highest military commander of Iran, and I will not even start commenting...
We are post new year's resolutions, and the new Me is in full control!
I hope you enjoyed the year-end break and you are refreshed and ready for the new decade. As for me, I just got lots of time to read and think... This has led me to the most profound and possibly life changing resolutions ever, as the usual top three resolutions of the year landed in the bin!
Yes, the new Me has decided to drive a big Change Program...
Ahhh, this is so annoying!!! Yes, two weeks ago I wrote that it's time to get 100% positive, and get the uplift as the Fed is pumping the financial assets in the US, with worldwide repercussions. Yes, it's party time again, a party like this one we got at the turn of the Millenium. Party! Party! Everybody is joining, and as a company got even valued $2 trillion last week, why would you stay on the side? Party! Party! 100% positive!
So much is happening this week, it's hard to pick the most influential of these events... With Brexit on the way to being done as fast as New Blue England can command the rest of the UK... With the US/Chinese apparently finally agreeing on stage one of "The Deal" (whatever it is, nobody really knows yet)... With the Fed now admitting pumping half a trillion USD in what they call "repo" (giving cash to the friendly banks)... And with the Climate Change / save the planet week... What is the biggest event that will define the next decade? I chose none of these. Let me tell you how a company sold 1.5% of its shares this past week.
This time I got it wrong. I bet against Mr Market and the Fed. It's never a good idea to bet against these monsters... I am probably not the only one who got it wrong, but nevertheless... it pisses me off! All signals except one or two are saying that a recession is coming, and that it's time to go risk-off. But the remaining one or two are stubborn and powerful. They have all the money in the world: they print it! So what's next? I'm going to open the crystal ball up to end 2020...
As we know, commercial banks are in the business of issuing promises.
These promises are nothing else than debt (your debt to the bank) in exchange of a contribution towards your home purchase.
Your debt is then immediately recycled into the economy as the previous owners receive real money in exchange of selling their home.
They pay their own debt, tax, fees, and the rest becomes real money which got created by this ingenious system (and the invisible man 😉).
Now, with each year going by, this business model is looking more and more dated and past century than ever.
What does this mean for us?
With QE and the race to the bottom, there is so much money all around us, that it looks like it is worth nothing. Well, to be exact, in some quarters it is worth nothing, in others it is still costly. One would expect that after the 2008-2018 Greek debacle, at a time when the country had to pay up to 37% interest to borrow money, it would still be very costly for Greece to raise money in 2019. Mind you, they have been in austerity mode for a decade and still have debt repayment scheduled until 2060. And who knows if they will not default a few more times before? Well well, the world has changed: Greece is a safe bet! Time to assess if I am safe too...
As its name badly indicates, the S&P 500 Energy index contains... not 500 but 28 companies. Still, you find in there the largest US listed companies providing energy to more than 300 million people, such as Chevron, Exxon Mobil, and another 26 peers. Why bother you ask? Well, this week, one company alone got worth more than the entire energy sector in the US. This company is called Apple.
In the past week, my total running distance since 1st January this year reached 4 digits. As a consequence, my third and last main goal for 2019 got ticked. It’s important to set goals. It helps keep you on track and motivated. Although it is a bit early for end-of-year goal setting, there is never a bad moment to review and improve the process. Here we go!
During this last month, I talked about the failed IPO of We Work. Well, this week, their founder-CEO got politely asked to leave the company. As SoftBank, the private investment fund who put in £10b into We Work, was adamant they wanted to take back control, they removed the ex-CEO from the board and took all his voting rights. Well, this removal of rights happened to be in exchange of a departure fee... of $1.7b 🤑. In the corporate world, that is called a parachute... Time for us all to assess if we have any in case of a freefall...
You do not need to trade to take an interest in this. Let me tell you that this battle for avoiding the upcoming recession will have repercussions into your daily lives for the next decade. If the Central Banks and powerful Kings-aka-Governments win, there will be asset inflation for years to come making the rich richer and the middle class will have the priviledge of having job security in exchange of not being able to afford the cost of living (mostly the cost of buying a home). If they loose... there will be asset deflation for at least a couple of years making everybody poorer, except the 0.01% few. In any case, the game is rigged, but in any case... you are in the game, so everyday, you have to play your hand.
Brexit got delayed again today, for what seems to be the 1000th time... As a Frenchman having made my home and life in the UK (nearly 20 years now), one would think I would be pro-Europe. In principle, I am. Had I been allowed to vote, I would have voted remain. But as we can see, politics are more and more un-principled. Bloody hell, get done with it and sign this Brexit divorce now!
Looks like one trillion dollar does not buy much these days. I am not talking about Zimbabwe dollars, but King of all currencies, the USD. Yes, this is another inflation, deflation and manipulation story. But how could it be different? The Fed just announced a $60b per month repurchase program. That level of money printing would pay the Brexit divorce bill in 2 weeks... For the first time, I am going to start using emojis... 🤦
This week is about property. With asset inflation to infinity and beyond, nobody seems to have enough capital to buy anything anymore. We do not buy cars anymore (check on the car industry to get a flavour) but we take a Uber when needed. We Pay as we Go and we "Whatever" as a Service. To give an example, I recently saw a new one: "Brain as a Service". Oh well... why not! So it's probably logical that the new landlords of the 21st Century do not buy properties. Instead, they rent them to sublet them at a profit. And there is even a fancy name for this: Rent to Rent!
With so much big news this week (process of impeachment in the US, the Supreme Court ruling the U.K. government acted unlawfully, Thomas getting cooked...), I was very unsure what this weekly review should be about. Until I dug further... I'm sure you have heard about We Work (who has not?). Well, their IPO attempt failed. No big deal you may think. I thought this too. Until I dug under the carpet... Oh there's a potential time bomb here!
I learned two new concepts this week. The first one: we are in an earning recession, which means that the average of the most powerful public US companies (SPX again!) have seen their profit go down for two quarters in a row. The second one: the FED mandate, which until now was known to be "to promote effectively the goals of maximum employment, stable prices, and moderate long term interest rates" seems to have wobbled. The FED did lower the interest rates (by 0.25%) this week, announcing that it did so because of the big companies earning recession... Hello???
This week, the European Central Bank lowered its interest rate. Again... From previously -0.4% to now -0.5%. Those on a variable mortgage indexed on Euribor are having a laugh and a free mortgage... What more? The ECB also gave guidance that until probably at least mid-2020, the rates will stay the same or be lower... Meanwhile, the King of USA is wondering why the FED does not compete on this race to the bottom...
This past week was everything about invalidation of risky events. No deal Brexit? Invalidated... Italians having to go back to the polling stations and elect a new far right government? Well, invalidated too... Chinese trade war? Invalidated, at least for now... SPX going down the hole. Yes you guessed it. Another one which got invalidated!
One one side, you have the powerful Central Bankers who print money like there is no future consequence. In 8 years at the head of the European Central Bank, Mario Draghi never ever raised interest rates, having for consequence the abnormal 30 years german bond paying negative 0.11%. Yes, you have to pay the German state to lend them money over 30 years. Or the negative mortgage in Denmark as we saw recently. On another side, you have the powerful Kings of their competing empires...
A bank in Denmark is offering negative rate mortgages. What does it mean? You take up a 10 year fix rate mortgage with them, and they pay you 0.5% per year for the privilege of asking them money. They also have in store a 20 years mortgage for 0% interest. Yes, free money over 20 years...