Early retirement, we are awfully sorry but...

...what we have heard about the 4% rule doesn't work anymore. Another way of seeing the 4% rule is "you can retire when you save 25 times your annual expenses" (link). For instance, if you think you need 4000 USD (or euros or pounds...) a month, you need 1.2M USD.

However, according to our updated simulations, the number is not 25x but 55x. We know, much worse. For instance, in the previous case we would need 2.6M USD.

Early retirement is a fair dream, however we cannot wishful think and fool ourselves. The amount of money we need if we don't have a pension is much higher than what we have been told. Remember: inflation exists and in the long run it matters a great deal.

Hipotecas a tipo fijo

En el diario El Mundo, aparecía este interesante artículo sobre el fin de los tipos baratos: enlace. El futuro no está escrito, pero en ocasiones las personas tendemos a tomar como estructural lo que solo es coyuntural. Muchos no han vivido tipos de interés del 15% habituales en las hipotecas de nuestros mayores y se creen que los intereses SIEMPRE van a estar baratos. 

Aquí les adjuntamos la tabla del artículo:

Realmente 20 años al 2 y pico por ciento es un propuesta de financiación poco mejorable. 

¿Recuerdan que hace unos meses escribíamos un artículo titulado Nos han dado aire..., aprovechémoslo? Una de las formas de hacerlo, especialmente para los hipotecandos con hipotecas más altas que el precio de la vivienda (tanto por la bajada de precio de la vivienda, el uso de hipotecas multidivisas o ambas), es blindando el pago mensual. El banco, que no está aflorando estos agujeros negros pues no se ha dejado de pagar la mensualidad, sabe que si los tipos subieran a un 4 o 5%, habría serias posibilidades de impago ante lo límite de la situación, por lo que el paso a una hipoteca fija podría en el futuro aliviar la situación, aunque ahora resulte más duro.

El timo de la gasolina

Llevamos unos últimos años con precios de petróleo bajos históricamente - también de gas natural del que ya hablaremos, posible origen de las tensiones en Oriente Medio. Sin embargo, como vamos a intentar demostrar, los precios que pagamos los consumidores no son en absoluto proporcionales.

Ya sabemos que un gran porcentaje del precio corresponde a impuestos, sin embargo, con las bajadas tan abruptas NO ES EN ABSOLUTO JUSTIFICABLE el gran diferencial.

Aquí tienen el gráfico histórico del precio del petróleo en amarillo, donde pueden observar una bajada desde 121 en el 2012 a 27 en el 2016, 4 veces menos (-77%). Sin embargo, la gasolina en ese mismo período se movió de 1.5 a 1.1 (-27%).

Además, ya es bastante obvio el gran ensanchamiento entre la línea amarilla y las otras dos, no "capturando" el precio de la gasolina la bajada del petróleo.

Cryptomator

Each day it is more common to find storage "in the cloud". The idea is to outsource the storage of our files, photos, etc... and leave it to a trusted third party such as Dropbox, Google Drive, Onedrive, Box, etc. To upload and download the files we use internet. To make sure nobody except us and our designated people has access to our content, we sign in with our passwords. Until here, everything is normal. But what if someone hacks the passwords or if someone cracks the cloud we are using?

We have 2 solutions for the above. For the first problem, we add another layer of safety, what is usually known as 2nd Verification Step or 2 Factor Authentication. The idea is that we have to have something physical with us to enter into our cloud, such as a token sent to our mobile through SMS or a number linked to our Google Authenticator App. For the second problem, we can locally encrypt the files we upload, so, even in the unlikely event of hackers copying our files, they wouldn't be able to read then.

Cloudfogger used to be a good option, but now it is not available anymore. Another possible option could be Cryptomator, very compatible and extremely easy to use. You can find their web here.

Uranium

Uranium may be an interesting investment because the demand of electricity is going to increase in the next years and the world still bets on nuclear power. There is a nice balance between the production of uranium and its use right now, but a sharp increase in the number of nuclear plants must lead to higher prices for this commodity.

Demand side

Nuclear power capacity worldwide is increasing steadily, with over 60 reactors under construction in 15 countries (mainly in Asia and Russia), several plants increasing their capacity and others implementing life extension programs. The WNA 2015 Nuclear Fuel Report reference scenario (post Fukushima accident) shows a 26% increase in uranium demand over 2015-25. Demand thereafter will depend on new plant being built market. However, with electricity demand by 2040 expected (by the OECD's International Energy Agency in its World Energy Outlook 2015 report) to increase 70% from that of 2013, there is plenty of scope for growth in nuclear capacity.

Supply side

Right now it is felt a nice equilibrium between the supply and demand sides with 90% of production coming from mines and the rest from recycling weapons. In any case, it is very common to use long-term contracts for uranium and, as we see on the chart, there is a premium of around 10 USD/lb between the spot price and the long-term price. Some countries such as Russia and China have bypassed the market buying directly Canadian and African mines to avoid any shortage of uranium in the future.

Ethereum

It is the "new thing", the new bitcoin? Not exactly. Ethereum is a platform based on blockchain, but while the bitcoin blockchain is used to track ownership of precisely the digital currency called bitcoin, the Ethereum blockchain focuses on running the programming code of any decentralized application. While all blockchains have the ability to process code, most are severely limited. Ethereum improves this. Instead of giving a set of limited operations, Ethereum allows developers to create whatever operations they want. This means developers can build thousands of different applications that go way beyond anything we have seen before (smart contracts):

Ether is a form of payment made by the clients of the platform to the machines executing the desired transactions. Ether can be trade independently.

In search of cashflow: perpetual bonds

A perpetual bond is a bond that only pays coupon, it will never return the principal. Some people call them "perps". As it has no maturity date, you can consider it equity.

There are 3 main considerations when we consider buying a perp:

1. How safe is the issuer. Government bonds from important countries should theoretically be safe (not so sure anymore). Also big reliable companies in defensive sectors. Beware of banks, though. Under the Basel-III requirement, an international capital standard, perpetual bonds or AT1 securities are more of a quasi-equity obligation. If an issuing bank incurs losses in a financial year, it cannot make coupon payment to its bondholders even if it has enough cash. Moreover, if the equity capital of the issuer falls below 6.125%, the entire investment of bondholders would be either written down or converted to equity.

2. Currency. You want to receive the payments in the strongest currency possible. Avoid emerging market currencies.

3. Interest rates. The price of these bonds strongly depends on interest rates. To calculate the price we just divide the annual coupon by a discount rate. For example, if a bond has a coupon of 8000 USD a year and we use a discount rate of 4%, the price of the bond should be 200000 USD. However if interest rates go up to 8%, the bond price is half the previous one.

It seems a very risky investment, but it doesn't have to be. If the coupon is high enough and the issuer is a reliable company that pays in dollars, in a few years the coupons will pay for the initial investment, and after that the investor and his inheritors  just receive some nice cashflow forever.

A little bit of macro. Countries

Which countries are cheaper to invest in the stock market? And sectors? Thanks to StarCapital we can rank countries and sectors. In the long term and in general, the lower the entry price, the higher the future returns. Check out the following:

We can see that Russia is extremely cheap, so it might make sense to place some small amount of our investing money in a Russian ETF, such as RSX. As you can see this ETF as biased towards the energy sector. Another option could be RSXJ (Small caps) and less oil and gas, obviously. 

Russia is a risky country and its currency has suffered a huge decline in the latest years, therefore only expert investors who know how to manage their risks should think of this market. But also, remember, that buying stocks of a "safe" country at desorbitan prices can be as risky, if not more, as Russia.

Japanese yen or gold, the same?

Check the following chart, gold in yen terms:

Since 2011, the chart moves in a horizontal range, which, taking into account the huge volatility of both products, is very curious.

The explanation many analysts have found is that yen and gold are considered safe havens. However yen has not proven to be good at keeping value over the years. Other analysts think the reason JPY and gold move together is because both depend on real interest rates in USA. And that might be true if no other factors are involved. When the oil prices shake, gold moves, but not necessarily the yen. Same thing happens when a big collapse or a war is foreseen beyond the horizon.

If the above is true, that doesn't mean that we can take practical advantage of this correlation, unless we happen to understand the driving forces of gold besides interest rates.

EURUSD, window dressing

At the end of 2016, the euro fell to 1.04, breaking the last support. However this downward pressure remitted fast and started a recovery to 1.09 today. Some traders see here what they call "window dressing" o technical trap, in this case a bullish signal.

We agree for the short term. The EURUSD is probably going to go up during this year and beginning of next one. However, the situation for the euro some analysts think might be doomed. Fiat currencies are going to suffer, but what matters is the order of the fall. We think the euro goes first.

Peter Sloterdijk

German philosopher who rejects the existence of dualisms, but believes in spaces of coexistence. He has written about the main issues our society cares about: globalization, sex, taxes...

In The Revolution of the Giving Hand (Part 1, Part 2) and in Kleptocracy of the State, he states: Left ideology defines property as theft, but the biggest taker is modern taxation. We live in a massmedially animated, tax taking semi-socialism - and nobody is calling for a fiscal civil war.

One of his solutions is to encourage voluntary taxation which amazingly has been proven successful through philanthropists all over the world.

Floating cities, again.

In 2014 we wrote an article about Seasteading (link here), the future of cities over the sea, spaces of freedom, efficiency and innovation. In 2015 it was organized a Floating City Project-Architectural Design Contest. You can check the most interesting projects on seasteading.org, but just as an appetizer, see the best two:

Protection against storms, solar power, water treatment... and freedom.

Edipo, Thomas y la profecía autocumplida

Edipo, tras consultar al Oráculo de Delfos que le previene de que matará a su padre y se casará con su madre, marcha de su casa para evitar la tragedia sin saber que era adoptado y que precisamente por partir hará que la profecía se cumpla (aquí tienen un enlace a la historia completa).

El sociólogo de origen polaco, W. I. Thomas, formuló el teorema que lleva su nombre de la siguiente manera: Si las personas definen las situaciones como reales, estas son reales en sus consecuencias. Esto quiere decir que las personas actuamos en base a percepciones no necesariamente realidades. El financiero Soros definió su teoría de la falacia fértil (ya expuesta en nuestra web en el 2008: enlace) basándose en el mismo principio. El teorema también explica el gran interés por controlar los medios de comunicación.

Abundando en la misma idea, el brillante sociólogo, Robert Merton, desarrolló el concepto de la profecía autocumplida por la cual, aunque un acción se base en un postulado erróneo, el hecho de creer en él, hace que a la postre el postulado inicial termine siendo cierto. El clásico ejemplo es el de la quiebra de un banco sano por rumores infundados sobre su solidez que hace que los clientes comiencen a retirar sus depósitos hasta, al final, efectivamente, hacer quebrar el banco.

Our benchmarks

We track a portfolio that combines gold and stocks. But what are our benchmarks? 

Following the principles set in our book Against the Tide:

- For the gold part we have 1/3 GDX + 2/3 GLD (GDX tracks the big gold miners such as Barrick, Newmont or Goldcorp, and GLD the spot price of gold).

- For the shares, the benchmark is 1/2 DTN + 1/2 DOO (DTN is an ETF which gives exposure to U.S. large cap equity with high dividend excluding the financial sector, DOO is a similar one but focused on international stocks).

These benchmarks can be perfectly use to create the portfolio.

For the first time...

...there is a negative flow in the purchase of Eurozone debt from foreign investors since the start of the euro. The total net outflows of investment capital from the Eurozone debt securities amounted to €192 billion in 2016, up from €30 billion in purchases during 2015.

Most of the net sales have been government debt (116 billion euros). The non-euro area investors still invested in euro-equities but much less than in 2015 (from 268B to 126B).