UGL?

UGL, the ProShares Ultra Gold ETF, offers investors a unique way to gain exposure to the gold market by aiming to deliver twice the daily performance of the price of gold bullion. Grosso modo, this means that for every 1% movement in the price of gold, UGL is expected to move 2% in the same direction. UGL can be easily traded through most brokers, making it accessible for those looking to leverage their position in gold without the need to trade gold futures or other more complex financial instruments.

As a leveraged ETF, UGL amplifies the movements of gold, providing the potential for greater gains, but also greater losses. However, caution is essential when considering UGL due to its leveraged nature. The double-exposure means that while profits can be significantly higher, the risks are equally elevated, making UGL suitable primarily for investors who are aware of the dynamics of leveraged ETFs and who can tolerate higher levels of volatility.

It's important to understand that UGL is designed for short-term trading rather than long-term holding due to the compounding effects that can erode returns over time if the underlying asset experiences fluctuations.

Currently, UGL may not be the most opportune investment. We feel its potential will shine more brightly if gold retests the broken resistance level. If gold experiences a minor retracement, bringing it back to test a previous resistance level that it has surpassed, UGL could become an attractive vehicle to capitalize on the subsequent rebound. This strategy hinges on timing the market effectively, as the leverage involved requires careful consideration of entry and exit points to maximize potential returns while mitigating the heightened risk.

Zimbabwe’s new gamble

Zimbabwe has a long and troubled history with its currency. After a period of hyperinflation in the early 2000s, the country abandoned its currency in 2009 and switched to a multi-currency system dominated by the US dollar. However, economic woes persisted, leading to the reintroduction of a local currency, the Zimbabwean dollar (ZWL), in 2019. Unfortunately, this attempt backfired, causing renewed inflation.

In April 2024, Zimbabwe took another stab at currency reform with the launch of the ZiG (Zimbabwe Gold). This time, they're hoping a gold-backed currency will be the answer.

The ZiG: A New Approach

Unlike previous currencies, the ZiG is backed by a "basket" of assets, including:

- Foreign currency reserves: US$285 million at launch, raising concerns about its adequacy.

- Gold: 2.5 tonnes of gold currently held by the Reserve Bank of Zimbabwe (RBZ), with plans to increase gold production and channel it into the reserves.

- Other precious metals and minerals: Platinum, lithium, and diamonds mined in Zimbabwe could also contribute to the reserves.

The ZiG's value is tied to the price of gold and a comparison of inflation rates between the ZiG and the US dollar. This, in theory, should provide stability and prevent hyperinflation. Link here.

Can the ZiG Succeed Where Others Failed?

Skeptics abound. Critics point to the following weaknesses:

- Insufficient reserves: The current reserve value is considered too low to provide real import cover or meet regional liquidity recommendations.

- Government mismanagement: Zimbabwe's history of economic troubles raises doubts about the government's ability to manage the ZiG effectively.

- Lack of trust: Years of currency instability have eroded public trust in Zimbabwean currency.

A Glimmer of Hope?

Despite the criticism, there are some potential positives:

- Gold-backing: Gold is a historically stable store of value, and linking the ZiG to it could provide some stability.

- Increased gold production: Zimbabwe's plans to boost gold production could strengthen the ZiG's reserves in the long run.

The Verdict: Too Early to Tell

The success of the ZiG remains to be seen. Only time will tell if it can overcome public skepticism and become a stable and trusted currency.

Portfolio review

As you can see on the right, Portfolio Model, our portfolio is based on hedging risks. It includes stocks, gold and cash or short-term bonds.

In general, the performance is good: last year it returned 7.2% and this current year around 3% so far, basically due to the good behavior of gold.

Our 2 ETFs to track the stock market haven’t been the greatest, but they invest in solid business which pay dividends (DTN 2.7% and DOO 3.9%).

Gold finally decided to move upwards and now it is trading in uncharted territory. We still believe this is just the beginning:

As always, this is not a recommendation at all, but just a theoretical study of how gold and stocks combined can hedge market risks.

Business opportunities in Kazakhstan

Kazakhstan, the largest landlocked country in the world, has been steadily attracting attention from international investors due to its abundant natural resources, strategic location, and efforts to bolster its economic infrastructure. As the nation continues to enhance its global presence, with increased international flights and growing traction on the global stage, let's delve into the strengths, weaknesses, and emerging trends that shape investment opportunities in Kazakhstan.

Strengths

- Rich Natural Resources: Kazakhstan boasts significant reserves of oil, natural gas, minerals, and metals, positioning itself as a key player in the global energy and mining sectors. Investors eyeing opportunities in these industries find Kazakhstan particularly appealing due to its vast resource potential.

- Geopolitical Importance: Situated at the crossroads of Europe and Asia, Kazakhstan serves as a crucial link in the Belt and Road Initiative (BRI), China's ambitious infrastructure and economic development project. This strategic location offers immense opportunities for trade, investment, and regional cooperation.

- Economic Diversification Efforts: Recognizing the need to reduce reliance on extractive industries, Kazakhstan has been actively diversifying its economy. Initiatives such as the "Nurly Zhol" infrastructure program and the "Digital Kazakhstan" strategy aim to foster innovation, entrepreneurship, and modernization across various sectors.

- Political Stability: Kazakhstan has maintained political stability since gaining independence in 1991, providing a favorable environment for business and investment. The government's commitment to economic reforms and attracting foreign investment further bolsters investor confidence.

- Growing International Connectivity: The expansion of international flights to and from Kazakhstan's major cities, including Nur-Sultan and Almaty, reflects the country's increasing integration into the global economy. Improved air connectivity facilitates business travel, tourism, and trade, enhancing Kazakhstan's appeal to international investors.

Weaknesses

- Bureaucratic Hurdles: Despite efforts to streamline regulations and improve the ease of doing business, bureaucratic red tape remains a challenge for investors in Kazakhstan. Complex administrative procedures and inconsistent enforcement of laws can impede business operations and investment decisions.

- Infrastructure Development: While Kazakhstan has made significant investments in infrastructure, particularly in urban centers, there is still room for improvement, especially in rural areas. Issues such as inadequate transportation networks and outdated facilities may hinder long-term economic growth and development.

- Dependence on Commodity Prices: The Kazakh economy remains vulnerable to fluctuations in global commodity prices, given its heavy reliance on extractive industries. Diversification efforts are underway, but reducing this dependency remains a pressing challenge for sustainable economic development.

 

- Corruption Concerns: Corruption, although declining, continues to pose risks to businesses operating in Kazakhstan. Transparency International's Corruption Perceptions Index highlights ongoing challenges related to corruption, which could deter some investors despite governmental efforts to address this issue.

- Human Capital Development: Investing in education and skill development is crucial for nurturing a competitive workforce and fostering innovation. While Kazakhstan has made strides in this area, there is still a need for further investment in education, training, and research to meet the demands of a modern economy.

Emerging Trends

- Renewable Energy: Kazakhstan is increasingly focusing on renewable energy sources such as wind and solar power to diversify its energy mix and reduce greenhouse gas emissions. Investors keen on sustainability and green technologies are exploring opportunities in this burgeoning sector.

- Technology and Innovation: As mentioned above, the government's "Digital Kazakhstan" initiative aims to promote technological innovation and digitalization across various industries. This presents opportunities for investors in sectors such as information technology, telecommunications, and e-commerce.

- Tourism Development: Kazakhstan's rich cultural heritage, stunning landscapes, and emerging tourism infrastructure are attracting attention from international travelers and investors alike. Investments in hospitality, leisure, and ecotourism are expected to grow as the country promotes itself as a tourist destination.

- Logistics and Transportation: With its strategic location and growing trade volumes, Kazakhstan is investing in transportation infrastructure, including roads, railways, and logistics hubs. This presents opportunities for investors in transportation, warehousing, and supply chain management services.

- Regional Integration: Kazakhstan's participation in regional economic blocs such as the Eurasian Economic Union (EAEU) and the Shanghai Cooperation Organization (SCO) enhances its economic integration with neighboring countries. Investors can leverage Kazakhstan's position as a gateway to markets in Central Asia and beyond.

Kazakhstan offers a compelling investment landscape characterized by abundant natural resources, strategic positioning, and ongoing efforts to diversify its economy. While challenges such as bureaucratic hurdles and dependence on commodity prices persist, emerging trends in renewable energy, technology, tourism, and regional integration present exciting opportunities for forward-thinking investors seeking to capitalize on Kazakhstan's potential for growth and development. As the country continues to garner international traction and enhance its connectivity, it remains poised to attract investment across various sectors in the years to come.

Loss aversion. Flip for it

In the realm of wealth and extravagance, few tales rival the legendary stories of Kerry Packer, the media magnate and influential force in Australia. His journey, marked by a net worth of $6.5 billion and unparalleled broadcast rights, was one of opulence and audacity, leaving an indelible mark on the world of finance. This narrative isn't about triumphing over adversities like polio, dyslexia, or a challenging upbringing under Sir Frank Packer. Nor is it a detailed account of business strategies leading to the transformation of a $100 million family estate into a media empire. Instead, it's an exploration of the essence of money and the often-unseen force that influences our financial decisions—loss aversion.

In the annals of Kerry Packer's escapades, one particular incident stands out—a clash with a boastful Texan that demonstrated Packer's mastery over the game of wealth. Mirage Resorts boss Bobby Baldwin recounted an encounter where Packer, seeking solitude at a gambling table, was confronted by the Texan, determined to join the game. "I'm a big player too. I'm worth $100 million," declared the Texan. Without hesitation, Packer pulled out a coin and proposed, "I'll flip you for it."

In a single audacious move, Packer encapsulated a mindset that transcends financial gamesmanship—a fearless approach to risk, embracing uncertainty rather than succumbing to it. This story offers a unique lens to delve into the psychology of loss aversion, a powerful human instinct that often leads us to cling to losing stocks or overpay for insurance premiums.

Loss aversion, the instinct to avoid losses at all costs, can cloud our judgment and hinder our financial decisions. It's a phenomenon that compels us to hold on to depreciating assets and investments, fearing the regret of potential losses. However, the story of Kerry Packer suggests an alternative perspective—a realization that, in the grand scheme, we don't truly own anything. Packer's willingness to flip a coin for a high-stakes decision mirrors a mindset that acknowledges the impermanence of wealth.

Perhaps the antidote to loss aversion lies in understanding that possessions and financial gains are fleeting. Embracing this realization allows us to navigate the game of money with a clearer perspective, making decisions based on calculated risk rather than fear. In the end, Kerry Packer's legacy extends beyond his financial empire; it's a testament to the mindset that transcends the fear of loss. As we navigate the complex landscape of wealth, let us draw inspiration from the audacity of Packer's coin flip and approach our financial decisions with a balanced understanding of risk and impermanence.

How global distress drives up gold prices

Throughout history, gold has held a special place as a safe haven for investors during times of global distress. When political tensions escalate, conflicts erupt, or economic uncertainties loom, gold tends to shine as a valuable asset, leading to a surge in its price. This article explores the intricate relationship between global distress, especially during wars and other turbulent times, and the rise of gold prices, with real-world examples from history.

1. The Gold Rush During World War II

World War II serves as a prime example of how global distress can significantly impact gold prices. As the war escalated and governments sought to finance their military efforts, they printed more money, leading to inflation. In such times, investors and individuals turned to gold as a reliable store of value. The price of gold skyrocketed from $20.67 per ounce in 1939 to $35 per ounce by 1944, mainly due to its role as a hedge against currency devaluation.

2. The Oil Crisis and the Iranian Revolution

In the 1970s, the world witnessed a surge in gold prices following the oil crisis and the Iranian Revolution. Oil prices skyrocketed, and political turmoil in the Middle East created uncertainty in the global economy. As a result, gold's value soared, reaching an all-time high of around $850 per ounce in 1980. Investors flocked to gold as a safe asset during these turbulent times.

3. The Global Financial Crisis of 2008

The 2008 global financial crisis is a modern example of how gold responds to distress. As banks collapsed, stock markets tumbled, and economies faced turmoil, gold prices surged. During this period, gold prices reached new heights, peaking at over $1,900 per ounce in 2011. Investors sought the stability and security that gold provided during uncertain economic times.

4. Recent Turbulence and Gold's Resilience

The 2020 COVID-19 pandemic and its subsequent economic fallout also highlighted gold's enduring appeal. As stock markets experienced extreme volatility and governments implemented massive economic stimulus packages, investors turned to gold as a hedge against the devaluation of fiat currencies. Gold prices hit record highs, exceeding $2,000 per ounce in August 2020.

Throughout history, the price of gold has consistently shown an upward trajectory during times of global distress, including wars, economic crises, and political upheavals. Gold's remarkable performance during these tumultuous periods underscores its role as a proxy for the perception of the importance of negative events. When the world faces uncertainty and instability, gold's value tends to surge, reflecting the collective sentiment of investors seeking a safe haven for their wealth.

As the world becomes more interconnected and vulnerable to various forms of unrest, gold continues to be a valuable asset for those seeking stability and a refuge for their investments. While gold prices can be influenced by a variety of factors, its role as a store of value during turbulent times remains a testament to its enduring appeal in an uncertain world.

Shrinkflation: when less is hidden in more

In the world of consumer goods, appearances can often be deceiving. One such deceptive trend that has been garnering attention is the phenomenon known as "shrinkflation." At first glance, the term might seem like a playful linguistic invention, but its implications are far from harmless. Shrinkflation is a cunning practice employed by manufacturers to maintain profit margins while discreetly reducing the size or quantity of a product, all while keeping the price constant. This crafty maneuver leaves consumers paying the same amount for less product, sparking concerns not only about financial fairness but also its environmental consequences.Imagine the scenario: a long-beloved chocolate bar that used to satisfy your sweet tooth suddenly feels disappointingly small, yet its price remains unchanged. Or a bag of chips that once overflowed now barely manages to fill your palm, but your wallet feels just as light as before. This is shrinkflation at work. Manufacturers resort to this strategy as a way to tackle rising production costs, such as raw materials, transportation, and labor. Rather than raising the price outright, they downsize the product, hoping consumers won't immediately notice the difference.

Shrinkflation doesn't only affect our wallets; it also contributes to an increase in waste and packaging materials. As containers remain the same size while the contents shrink, a concerning gap between perception and reality emerges. This mismatch often leads consumers to purchase more than they need, believing they are getting the same quantity as before. Consequently, more goods are consumed and more waste is generated, resulting in a negative impact on the environment.

The link between shrinkflation and waste is rooted in psychology. Known as the "size-contrast illusion," our brains tend to judge the quantity of a product based on the package's size rather than the actual contents. When these packages appear unchanged, we unconsciously assume they contain the same amount as before. However, this optical illusion doesn't just affect our purchasing decisions; it also fuels overconsumption and unnecessary waste generation.

In light of these practices, consumers are encouraged to adopt a vigilant approach. While it may be challenging to spot shrinkflation immediately, there are steps one can take to make more informed choices. One strategy is to verify the price per unit, weight, or volume. Focusing on these metrics allows consumers to compare products more accurately and gauge whether the product's value has genuinely changed. Additionally, it's essential to remain skeptical of drastic changes in packaging design or brand positioning. These may signal an attempt to divert attention from the actual reduction in content. Staying informed about the products you regularly purchase and their typical sizes can also help you quickly recognize any subtle alterations.

Navigating the changing World order

Allow us to provide a brief overview of the projected changes in country rankings by 2050, based on various sources including PwC's "The World in 2050" report. According to these projections, China is expected to ascend to the position of the world's largest economy by 2050, surpassing the United States. This shift is driven by China's ongoing economic growth, population size, and increasing productivity. India is also anticipated to rise significantly and potentially become the third-largest economy globally, following China and the United States.

Furthermore, other emerging economies such as Indonesia, Brazil, and Mexico are expected to experience substantial growth and climb the rankings. Meanwhile, developed economies like Japan and those in Western Europe may see a relative decline in their positions. It is important to note that these projections are subject to various factors and uncertainties, and future outcomes may differ from these estimates.

Nevertheless, recognizing the potential changes in country rankings provides retail investors with valuable insights for identifying investment opportunities and adjusting their strategies accordingly. In this article, we will explore practical ideas for retail investors seeking to profit in the stock market amidst the changing world order.

1. Embrace Emerging Markets:

With the projected rise of emerging economies like China, India, and Indonesia, retail investors can consider diversifying their portfolios by investing in Exchange-Traded Funds (ETFs) that focus on these growing markets. These countries boast substantial consumer bases and expanding middle classes, offering investment opportunities in various sectors.

2. Technology and Innovation:

Technological advancements continue to disrupt industries worldwide. Investors can focus on companies at the forefront of innovation, particularly in sectors like artificial intelligence, renewable energy, biotechnology, and fintech. Investing in technology-focused ETFs or individual stocks within these sectors can offer opportunities for substantial growth and profitability.

3. Infrastructure Development:

As countries invest in infrastructure projects to drive economic growth, retail investors can explore opportunities in construction, engineering, and related sectors. Investing in ETFs that track infrastructure indices or individual companies involved in large-scale infrastructure projects can potentially yield favorable returns as governments allocate resources to develop vital transportation, energy, and communication networks.

4. Diversification through Global ETFs:

In an increasingly interconnected world, diversification remains crucial for mitigating risks. Retail investors can consider investing in globally diversified ETFs that provide exposure to a broad range of international markets. These ETFs can help balance portfolios and capture opportunities across different regions and sectors.

5. Long-Term Focus:

Given the projected changes in the world order, it is essential for retail investors to maintain a long-term perspective. Rather than succumbing to short-term market fluctuations, adopting a disciplined investment approach and staying informed about global trends can help navigate the evolving landscape successfully.

Property, an alternative to university education

In today's rapidly changing world, it is essential to explore alternative paths to traditional higher education. One such alternative that holds tremendous potential is redirecting the substantial funds typically allocated towards university tuition fees towards purchasing a small, well-located flat as an investment. This article aims to shed light on the advantages of this approach, highlighting the benefits it offers to both students and their families.

1. Long-Term Financial Investment:

By opting to invest in a small, well-located flat, parents can make a sound long-term financial decision on behalf of their children. Instead of spending a significant sum on tuition fees that may not guarantee future financial security, investing in property can provide a tangible asset that has the potential to appreciate over time. Property investment offers the opportunity for steady rental income and capital growth, making it a financially prudent choice.

2. Rental Income and Return on Investment:

A well-chosen flat, strategically located in a high-demand area, can generate a steady rental income. This income can be utilized to cover expenses such as rent, living costs, and potentially even mortgage payments. Over time, as the property market appreciates, the investment can yield a favorable return on investment, providing a solid financial foundation for the student's future.

3. Flexibility and Diversification:

Investing in property offers flexibility and diversification compared to the more linear trajectory of university education. While a university education offers a specific set of skills and qualifications, owning an investment property opens up opportunities for multiple income streams and potential business ventures. It provides the student with a wider range of options and the ability to adapt to the changing needs of the job market.

4. Real-World Experience and Practical Skills:

Instead of spending years solely focused on academic pursuits, investing in property allows students to gain practical experience in the real estate industry. Managing a property involves learning essential skills such as financial management, property maintenance, tenant relations, and negotiation. These experiences contribute to a well-rounded education and can enhance the student's professional development and employability.

5. Potential for Future Education Funding:

Should the student decide to pursue further education in the future, the property investment can serve as a potential source of funding. It can be used as collateral to secure loans or as a means to generate additional income for education-related expenses. The property investment offers flexibility and the ability to adapt to changing circumstances and aspirations.

Top to bottom

 

Check New Zealand, Canada, Australia…, but also India, Indonesia, Saudi, China.

If we had to invest in their stock market, which countries should we choose?

USDJPY

 

What you see here is a point-and-figure chart. I love these charts because they remove the noise and time other charts show so that you can focus on the break of support and resistance levels. Volume can be displayed as well.

The one above shows the evolution of the USD/JPY from the 70s till today. Why are we writing about the Japanese yen? We have received many questions about this pair. Some asked us because they were thinking of moving there, and others in relation to buying real estate in Japan.

The most important aspect of the chart is marked with a square: a powerful bear trap. After that we can see the beginning of bullish movement that will very likely continue. Our target prices are first 160 and then 180.

Gold 2023

Gold has long been considered a safe haven asset, a reliable store of value in times of economic uncertainty. And with the global economy facing a number of headwinds in the coming year, many experts are bullish on the outlook for #gold prices in 2023.

One of the main drivers of this bullish forecast is the ongoing COVID-19 pandemic and its impact on the global economy. The pandemic has caused widespread economic disruption, with governments around the world implementing lockdowns and other measures to slow the spread of the virus. This has led to a sharp decline in economic activity, with many businesses shutting their doors and millions of people losing their jobs.

In response to this economic turmoil, central banks around the world have implemented a range of monetary stimulus measures, including low interest rates and quantitative easing. These measures have helped to prop up the global economy, but they have also led to concerns about #inflation and currency devaluation. As investors seek to protect themselves from these risks, many are turning to gold as a #safehaven asset.

Gold has a long history of maintaining its value in times of economic uncertainty, and it is not subject to the same inflationary pressures as fiat currencies. As a result, many experts believe that gold prices will rise in the coming year as investors flock to the precious metal as a hedge against inflation and currency devaluation.

Another factor that is driving the bullish forecast for gold prices in 2023 is the growing demand for the metal from central banks and other institutional investors. Central banks around the world have been increasing their gold reserves in recent years as a way to diversify their #portfolios and protect themselves from currency devaluation. This trend is expected to continue in the coming year, as more and more central banks look to gold as a safe haven asset.

There are also other factors that are expected to boost gold prices, such as rising geopolitical tensions.

Overall, the outlook for gold prices in 2023 is highly bullish, with many experts forecasting that the metal will reach new highs in the coming year. Whether you are an individual investor looking to protect your wealth or an institution looking to diversify your portfolio, gold is an asset that is well worth considering.

Take into account that gold prices fluctuate frequently and are affected by a wide range of factors. This article should not be considered as financial advice, it is important to do your own research, consult with a financial advisor and consider your own risk tolerance before making any investment decisions.

EURUSD forecast

Remember this post? November 2021. Under parity happened this year, but as we always say, big movements have drawbacks. Our perception for the coming year is the rebound might not be finished, perhaps reaching around 1.1, but eventually the dollar is going to keep on strengthening and target 0.8.

We will see if we are right…, meanwhile have a beautiful 2023.

Follow the hedge funds

We, mortals, have some tools to track what hedge fund managers do. Have you ever wondered how Bill Ackman is investing? Would you love to track a mix of trendy stocks in the hedge fund community?

Let us give you a couple o tips in case you are interested in tracking these famous managers:

1. Web hedgefollow.com It is still beta, but it works beautifully. Here you can track managers, stocks… with a very easy intertace.

2. ETF: GURU directly invests in highest conviction ideas from a select group of hedge funds.

Super dollar, till when?

DXY is the common reference for USD against the rest of the currencies.

Historically, we have seen a movement from around 165 in the 80’s to 70 (A to C) stopping at B. The natural target now would be B, 120. If you want to change USD to EUR, for instance, it makes sense to start changing there.

Some colleagues think the target should be 150, however. Currencies are complicated and they can be moved by governments’ hidden agreements.

In any case, if you are not sure, just do partial purchases of other currencies if you need them. USD will probably continue behaving upwards. Small weak currencies will suffer (check Turkish lira, for instance, or even the British pound).