The New Normal Abnormal – Negative Rates

The New Normal Abnormal – Negative Rates

Source : https://app.hedgeye.com/insights/49038-crash-boom-bang-global-central-planners-can-t-stop-the-selloff

With Bank of Japan being the latest country joining the Negative Rate group, there are a total of 5 countries having the “normal” rates. And i just wonder which country will be next to follow?

Source A: http://www.bloomberg.com/news/articles/2016-02-02/rates-less-than-zero-is-bank-stress-fed-wants-to-test-in-2016
Source B : http://www.cnbc.com/2016/02/12/next-country-with-negative-rates-could-be-canada.html

Central banks that have gone negative: (Source B)

  • Bank of Japan: Rate is minus-0.1 percent for some reserves
  • Danish National Bank: Deposit rate is minus-0.65 percent
  • European Central Bank: Deposit rate is minus-0.3 percent
  • Swedish National Bank: Main interest rate is minus-0.5 percent
  • Swiss National Bank: Main interest rate is minus-0.75 percent

Start of abnormal being the normal?

Only US has raised the rate back last year. And in my view, there is a worrying trend where more and more countries adopted negative rate. They are competing with each other on driving down their rate! As such the FED said that in 2016, it will assess each big banks’ resilience, on what if when the three-month U.S. Treasury bill stays below zero for a prolonged period!

Impact of BOJ’s negative rate

BOJ’s negative rate has only intensified the already volatile currency market and set to kick up more of it. Her intention was to devalue it’s currency, increase inflation and to make export more attractive, but it has backfired on her!

After 29 Jan 2016, it dropped from 121 to the lowest of 111 on 11 Feb 2016. It was just another example of the currency wars that we are in, where negative rate driving currency wild.

Wild Ride USDJPY Feb2016

Wild Ride USDJPY Feb2016

 

 

Bubbles bubbles bubbles of Bond markets

Photo : http://hdwpics.com/images/046451906A53/Bubbles-High-Resolution.jpg

One of the articles from ChannelNewsAsia, have caught my attention. It on one of the Singapore corporate bonds by PT Trikomsel Oke(Sing-dollar) that could faces default. If it really happen, it will be the first in Singapore Corporate Bonds overpast 6 years.

Standard & Poor’s Asia Pacific Director of Corporate Ratings Xavier Jean, said : “Between 2010 and today, companies across the region, whether it’s Malaysia, Indonesia, or even Singapore, have taken the opportunity to raise so much debt, because it was so cheap. When things slow down, as a result, they have to service bigger debt amounts.”

Besides that, Credit Suisse AG announced that they will stop being a market maker for government bonds across Europe since last week, due to a higher cost of wholesaling debt resulting from a tighter regulations.

“This could be the beginning of a wider trend,” said Gianluca Minieri, head of trading at Pioneer in Dublin, which oversees $242 billion. “Banks stay in a business only if it’s profitable, but the regulations expected in coming years are not envisaged to loosen capital requirements for banks. It could be the opposite.”

In my view, there is way too much easy money out in the Bond Market due to various governments carry out QE, First from USA, follow by Japan, China(China have a different approach with their QE), and with EU joining the “Fun Party” in March of this Year. Government issue bond and in return buy up bond with the printed money that they injected. There is no real demand for bond. And what all these easy money really meant is that a certain level of bubble are building up in Bond Market. Open out both your eye and ear for tell tale sign!

Photo : http://www.bbc.com/news/business-30933515

 

Links :
http://www.channelnewsasia.com/news/business/singapore/sing-dollar-corporate/2228564.html

http://www.businesstimes.com.sg/banking-finance/credit-suisse-exiting-dealer-role-rings-alarm-in-debt-market

http://www.bbc.com/news/business-30933515

Casualties From Swiss Shock Spread From New York to New Zealand

EuroVsSwissFrancHow it started

Pending announcement from European Central Bank (ECB) to launch a full-scale quantitative easing program (QE) on 22 Jan 2015, has lead to Swiss National Bank (SNB) to abandon the capping of franc at 1.20 to the euro, introduced since September 2011.

Besides they also have their key interest rate cut from -0.25% to -0.75%, raising the amount investors pay to hold Swiss deposits.

And such action have caused massive impact by trigger massive automatic and painful cut loss due to leverage call (If you look at the chart on the left). Watch out if you have fund in oversea trading house.

 

Article : Casualties From Swiss Shock Spread From New York to New Zealand

Losses mounted from the Swiss currency shock as the largest U.S. retail foreign-exchange brokerage said client debts threatened its compliance with capital rules and a New Zealand-based dealer went out of business.

FXCM Inc., which handled a record $1.4 trillion of trades by individuals last quarter, said clients owe $225 million on their accounts after the Swiss National Bank’s decision to abandon the franc’s cap against the euro roiled markets worldwide. Global Brokers NZ Ltd. said losses from the franc’s surge are forcing it to shut down. IG Group Holdings Plc estimated an impact of as much as 30 million British pounds ($45.5 million) and Swissquote Group Holdings SA set aside 25 million francs ($28.4 million).

“I would be astonished if we did not see more casualties,” Nick Parsons, the London-based head of research for the U.K. and Europe at National Australia Bank Ltd., said by phone from Sydney. “This was a 180-degree about turn by the SNB. People feel hurt and betrayed.”

The franc surged as much as 41 percent versus the euro on Thursday, the biggest gain on record, and climbed more than 15 percent against all of the more than 150 currencies tracked by Bloomberg. Dealers in London at banks including Deutsche Bank AG, UBS Group AG and Goldman Sachs Group Inc. battled to process orders yesterday when the SNB surprised markets with its announcement in Zurich.

Unprecedented Volatility

Market turmoil from the move extended into a second day as Asian shares dropped with U.S. index futures, while Japanese and Australian government bond yields plunged to records as investors sought haven assets.

“Clients experienced significant losses” after the franc’s surge, FXCM said in a statement dated Jan. 15. That “generated negative equity balances owed to FXCM of approximately $225 million.”

The brokerage dropped 15 percent in New York trading yesterday to an almost two-year low of $12.63, leaving the company valued at about $596 million. The shares were cut to sell from neutral by Citigroup Inc., which lowered its price target to $5 from $17.

Spokeswoman Jaclyn Klein didn’t immediately respond to calls to her mobile and office phones.

The U.S. Commodity Futures Trading Commission allows investors to put down as little as 2 percent of the value of their foreign-exchange bets. Brokers may get stuck with the balance of losses suffered by clients who used leverage, borrowed on credit cards, or did both to bet against the franc.

Leveraged Trades

Drew Niv, FXCM’s chief executive officer, said that individual currency traders are enticed by the chance to control large positions with little money down, in remarks that were published in Bloomberg Markets magazine’s December issue.

“Currencies don’t move that much,” he said. “So if you had no leverage, nobody would trade.”

The company warned investors in a regulatory filing last March that its risk controls were imperfect. FXCM had 230,579 retail customers on Dec. 31. They traded $439 billion of currency in December, with an average of 595,126 trades a day.

“Some of our methods for managing risk are discretionary by nature and are based on internally developed controls and observed historical market behavior,” the company said in the regulatory filing. “These methods may not adequately prevent losses, particularly as they relate to extreme market movements.”

Swiss Surprise

Most of FXCM’s retail clients lost money in 2014, according to the company’s disclosures mandated by the CFTC. The percentage of losing accounts climbed from 67 percent in the first and second quarters to 68 percent in the third quarter and 70 percent in the fourth quarter.

The SNB ended its three-year policy of capping the franc at 1.20 per euro a week before the European Central Bank meets to discuss government bond purchases to boost the euro-area economy. Such a policy, known as quantitative easing, could spur pressure on the franc to appreciate against the euro. The SNB spent billions defending the currency cap after introducing it in September 2011.

“Many clients were following the confirmed longstanding strategy from the SNB and were anticipating a weakening of the Swiss franc against the euro,” Swissquote said in its statement. The drop “left the clients with a negative balance and has prompted the bank to activate a provision of 25 million francs.”

Deutsche Bank was among dealers to suffer disruptions to electronic trading, with its Autobahn platform temporarily ceasing to provide quotes, according to a dealer from outside the bank. Auckland-based Global Brokers NZ said the market for francs was disrupted for hours.

HSBC Customers

“The majority of clients in a franc position were on the losing side and sustained losses amounting to far greater than their account equity,” Global Brokers NZ director David Johnson said in a statement dated Jan. 15 and posted on the website of affiliated company Excel Markets. All of the firm’s client funds are in segregated accounts and “100 percent of positive client equity or balance is safe and withdrawable immediately,” Johnson said.

HSBC Holdings Plc is investigating reports that customers in Hong Kong bought the Swiss franc below market rates when an online banking system failed to keep up with the currency’s gains after the removal of the cap.

Apple Daily and the Hong Kong Economic Journal cited unidentified bank customers as saying that they took advantage of the mistake yesterday evening. HSBC spokeswoman Maggie Cheung said in an e-mail that the lender was looking into the reports.

Fund Pain

IG Group shares fell 4.4 percent yesterday. The U.K. spread-betting firm said the financial impact from the surge in the Swiss franc was partially dependent on its ability to recover client debts.

The market turmoil turned the $1.9 billion John Hancock Absolute Return Currency Fund into the biggest loser among U.S. peers. It tumbled 8.7 percent yesterday, the steepest drop on record and the most among more than 2,000 U.S.-domiciled funds tracked by Bloomberg with at least $1 billion under management. The fund had its second-biggest short position in the franc at the end of November, according to the latest fact sheet on John Hancock’s website.

“When they pulled the rug under the market, the Swiss franc rallied against everything,” said Chris Weston, chief market strategist at IG Markets Ltd. in Melbourne. Many funds “would have been in a lot of pain last night,” Weston said.

 

Article from http://www.bloomberg.com/news/2015-01-15/new-zealand-currency-broker-closes-on-losses-after-swiss-shock.html

 

More homeowners look to refinance loans as SIBOR inches up

SIBOR inches up

SINGAPORE: More homeowners who took housing loans from banks are now looking for refinancing options. Loan specialists said they have been getting more inquiries since the recent spike in SIBOR (Singapore Interbank Offered Rate).

Homeowners – whose mortgages are tied to SIBOR – are now facing higher monthly payments. One of those affected is 30-year-old engineer Lai Ming Kwan, who bought an executive condominium with his wife two years ago and he opted for a bank loan that is tied to SIBOR.

With the benchmark rising sharply in recent days, Mr Lai is concerned about how it will affect him. He said: “They predicted that it will stay at 0.3 per cent to 0.4 per cent for a few years. I did not expect it would go up to so high … SIBOR is increasing so fast that my pay cannot catch up with the financing rates.”

Both Mr Lai and his wife are working and have a 16-month-old child. “Expenses, lifestyles will have to change a bit because I have to save up more to contribute to the housing loan … so there’ll definitely be an impact, maybe less shopping. With the child coming up, there is also school fees, childcare fees, so the depletion will come from my savings. Having a second child will also mean more expenses,” he added.

Some homeowners, like Mr Lai, cannot look into other financing options yet because their loan deal has a lock-in period, which requires them to stick to the same bank for a couple of years. However, loan specialists said that those whose lock-in periods are up are already starting to look at refinancing options. This can include looking for a housing loan with fixed interest rates instead of being tied to one with variable rates.

One mortgage consultancy said that it has received many inquiries on refinancing in recent days, about 30 per cent more when compared to last year. Mr Sean Lim, the mortgage consultant head at iMoney, said: “They want to know what is happening in the market … So they are taking time to digest and understand what is happening in the market.

“The pace of increment did catch me by surprise. But it is also half-expected. The trend has been going up slowly over the last six months. Looking at the market trend, it will continue to go up.”

With interest rates rising, banks can be expected to review their mortgage rates and plans. Analysts said that potential home buyers or those who are hoping to refinance their housing loans should choose a package that best suits their financial needs.

 

House owner must be aware of the increasing SIBOR and dont be caught by surprise, by this Refinance Loan Comparison tool to compare and shop around for their next Refinance Loan. Happy hunting!

 

Article from http://www.channelnewsasia.com/news/singapore/more-homeowners-look-to/1575034.html?cid=FBSG

Gold Investment – Gold as Your Financial Insurance

Gold

With Markets becoming so dangerous due to manipulation by the World Banker that gold can be considered as insurance against systemic risk

Introduction

In this article, we will be touching on the following points, which are

  • on the overall picture of GOLD’s past till now,
  • discuss on the future of GOLD
  • Type of GOLD Investment
  • and plus the role of GOLD in your Financial Portfolio.

GOLD’s Ghosty Past

They say that GOLD is a geopolitical metal and i will say GOLD have no boundary where almost all human being in this world will fight and safeguard this geopolitical metal as some sacred metal.

Alan Greenspan, spoken to the US Congress in 1999 on GOLD. And he said: “Gold still represents the ultimate form of payment in the world. Fiat money, in extremis, is accepted by nobody. Gold is always accepted.”  That can be largely understood of why gold is part of most central banks’ reserves. It is the only reserve that is not of any debt nature. And most importantly, it cannot be devalued by inflation, as compare with fiat currencies.

GOLD has always occupy the center stage in geopolitics. From History we could tells that GOLD is the war fund of any strong country. The Roman Empire invaded Dacia (Romania today) during 2nd century B.C. just to seize control of its’ rich gold mines.  During the Second World War, GOLD was an important weapon in Hitler’s economic arsenal (GOLD stolen from occupied countries’ central banks between 1939 and 1942) for Nazi Germany to continue its hugh war machine.

In 1944, the United States imposed a monetary system based on the dollar, with GOLD as backing, at the Bretton Woods Conference. But in 1971 GOLD backing of the dollar was abandoned, and US dollar has become the international monetary standard, without any GOLD backing(fiat currencies).

With the end of the Cold War in the 90’s, it started an era of peace and prosperity. And during this optimistic period, GOLD fell from $850 to $250 an ounce. But the optimistic period was a short lived with the September 11 terrorist attack, the war in Afghanistan, the invasion of Iraq, the 2008 financial crisis.

During the 2008 crisis, the entire international monetary system was almost falling apart , and GOLD made a impressive comeback. As GOLD became the only accepted guarantee in order to get liquidity and it demonstrated clearly of role of gold in supporting the commercial banks.

So what’s next for GOLD

Since 2008 till now, there are major confidence crisis being ignited between countries, especially between emerging countries and the United States. No doubt of it that we are now in a transition period in geopolitics, economic shift and transfer of wealth (especially GOLD) from West to East. The new wealth owners in the West with their strong economic and GOLD backing are fighting for their accrued internationally political power.

In order to protect the actual monetary system based on the US dollar(with no GOLD backing) and it international monetary standard, the United States with its hidden agenda, may try to manipulates the gold price, the possible alternative if the dollar were to be replaced and at same time, to buy in more GOLD. The only effective method that The United States has been printing more fiat money to resuscitate it economy but it will only inflate the massive debt. Let us not forget that 40% to 60% of the US dollars circulate outside the United States. For the same reason, emerging countries are worried, and rightly so, that their reserves, mainly in dollars, may or likely to be confiscated by way of devaluation of the dollar. When dollar being heavy devalued, there is a possibility that their gold reserves stored in the U.S. will be confiscated for so-called “force majeure” political reasons, in the interest of the “nation”.

The United States has been a nation of strong innovation and technology and their latest breakthrough with shale oil and other new finding could been their life saver over the next years. But the speed and depth of their debt may prove a bit too much for their breakthrough and new finding to catch up on. The musical chair just have to end somewhere. what do you think?

What about the chart? Based on the 10 year GOLD chart, it look like GOLD is flirting around the support resistance price of 1191.82. If that is to break, we will be looking 1076 and 990 as the next line of support. And if you are looking into GOLD investment, it will be good to break your entry into 3, respectively 1191, 1076 and 990.

Gold Price

Chart from http://goldprice.org/

 

Type of GOLD Investment

There are mainly 3 types of GOLD investments that available for us to look into.

  • The physical GOLD
    I favor the physical GOLD the most among 3 type of investments. Reason being nothing is safer than that owning the GOLD physically. But it do have it disadvantage that it may not be liquidity enough for you to convert into money, as compared with the other 2 types in normal day, except for another financial crisis similar to 2008.
    (Note : You could purchase the Physical GOLD locally in Singapore from UOB, and check out the UOB gold price.)
  • Gold Index or ETF
    This form of investment or the Paper GOLD, is purely exist in the electronic form, where investment is just based on the GOLD Index instead of owning the physical GOLD. Some ETF may stated that your ETF ownership can be converted into physical GOLD, but it will be subjected to availability of the GOLD. There is limited physical GOLD, but there unlimited shares/contract that you could created for GOLD index/ETF.
  • Or invest in the shares of the company that is related to GOLD, for example a GOLD mining company
    Another form will be investing into the company that is related to GOLD, where you need to perform additional research into the company financial report and strength.

Physical GOLD as Insurance for your Financial Portfolio

It is common for people to get their self covered by getting an Insurance which act as an equitable transfer of the risk of a loss, from one entity to another in exchange for payment. (As defined by http://en.wikipedia.org/wiki/Insurance). With Markets becoming so dangerous due to manipulation by the World Banker that gold can be considered as insurance against systemic risk instead of a punt. And you can think GOLD as an Insurance class of asset to preserve your Financial Portfolio. A important Wealth Preservation Asset to be included in your Portfolio.

Even thought it is a a Wealth Preservation Asset, but you should not have your Portfolio based on GOLD entirely. Holding of 10-20% GOLD in your portfolio will be sufficient. Hope this article has provided you with sufficient information to let you make a judgement call on GOLD and get you started!

 

Disclaimer:

All analysis are based on my own personal point of view and experience and it should not be used as a decision to solicit buy/sell activity.

And purpose of this article is written in mind for main purpose of knowledge sharing & discussion, never to induce or promote any insider trading or manipulation activities.

The owner will not be liable for any errors or omissions in this information nor for the availability of this information.

The owner will not be liable for any losses, injuries, or damages from the display or use of this information.

 

Gold Investment – Dirty Secrets of Gold

In Gold We Trust, but do you still dare to place your trust?

In Gold We Trust, but do you still dare to place your trust?

Recap of Previous Article

In the previous article on Gold Investment – History of Gold , we talks about the history of Gold as summarize as the following;

  • Wars have been fought over GOLD, as GOLD funded Wars.
  • GOLD is incredibly rare, with its properties make it an obvious choice for use as currency.
  • GOLD Standards where paper currency fixed to a weight of GOLD.

Part2 of Gold Investment – Dirty Secrets of Gold

And for this week, we shall dig up and talk more on the Secrets of GOLD. And it will be the Dirty Secret that we be looking at. Are you ready for it? Is yes, click on the following youtube.com to get your self dirty.

 

What’s for next week

For next week article, we will pin up the overall picture that we discuss in part 1 and 2 of GOLD, and discuss in detail of the future of GOLD. So stay tuned by subscribed to your BigFatPillar Newsletter!

What is BigFatPillar all about?

Question on BigFatPillar

Last week, one of my friend came up to me and asked me this question on my recent effort on blogging “Fredrick, what is bigfatpillar.com all about? Your articles varies from topics to topics.

And here is my answer. BigFatPillar is all about sharing of ideas, experience among us on building up strength in Financial, Health, Family, Spiritual in view of Wealth Creation, Preservation & Improvement.

I have created BigFatPillar Google + Community page at http://plus.google.com/+Bigfatpillar , and looking forward to your ideas, experience or discussion.

Your own Wealth Preservation Insurance Safety Net

Insurance as part of your Wealth Preserve Safety Net

Insurance as part of your Wealth Preserve Safety Net

What is Insurance?

I love the definition being given by http://en.wikipedia.org/wiki/Insurance on Insurance that go as this “Insurance is the equitable transfer of the risk of a loss, from one entity to another in exchange for payment. It is a form of risk management primarily used to hedge (protect) against the risk of a contingent, uncertain loss.

 

What type of Insurance should i get first?

There are so many different class of Insurance out there in the market. Hospitalization, Death, Total & Permanent Disability, Monthly Disability Income, Accident, Early Critical Illness and the list can just go on, but these should be the main different classes of Insurance out there.

And if you have sufficient or ample of this resource called Money, you could simply just purchase all these Insurance and have they built into your Wealth Preserve Safety Net.

But this is one tough question to answer if you have limited Money resource. What class of Insurance will be the highest priority for me to have, for my Wealth Preservation Safety Net, as to protect against risk of uncertain monetary losses? Read on for the type of desired Wealth Preservation Insurance to get!

 

2 Wealth Preserve Insurance to get – Hospitalization & Monthly Disability Income Protection

The main role of Insurance is to protect our self in events that will caused unforeseen monetary losses. First of all, we need to identify our source of income. It can be in the form of Direct or Indirect Income;

  1. Direct Income
    • Salary for Employee
    • Freelancer Fee/Salary for Self Employed
    • Director Fee/Salary for Business Owner
  2. Indirect Income
    • Dividend/Rental for Investor

Especially for those that depend on Direct Income(Salary) as the main and only source of income. It is criterial for us to have and to maintain a healthy body, in order to operate our job. But once we lose this main criteria, we may lose our  income. Imagine this situation where a cleaner whom lose one of his leg to diabetic. He most probably will lose his job and end up in a hugh monetary  liability due to loss of income and plus a heavy hospitalize bill.

Even for those with Indirect Income, it also important to have some form of Insurance for Hospitalization, to protect against the possible hugh hospitalize bill that may eat into their wealth.

Generally speaking, everyone should at least get Insurance for Hospitalization Protection, as to minimize the possible monetary lose against hospitalize bill. And it applied to everyone out in the world. For those living in Singapore, we are consider fortunate to have MediaShield Life coming in end of 2015, (Click here @ http://www.moh.gov.sg/content/moh_web/medishield-life/8-things-to-know.html to know more about it) that cover the basic of Hospitalize Protection.

Secondly, it pay to have some Monthly Disability Income Protection, as that will act to cover the period after hospitalize, as trying to rest and nurse back to pink of health. Knowing that you are covered during that period, you will be in a better mental state to rest, than to worry  about make both end meet.

 

Click here to know more about me or visit http://bigfatpillar.com for more articles!