Sep 14

Is the Euro safe? Are we safe? (Advanced)

cash is kingEvery day it would seem we are bombarded with images of war, terror, destruction, chaos and challenged with ideas that the Euro is in danger and that the end of the European project is around the corner. Well – turn off the news – throw out those newspapers, and just give yourself a little reality check. Will anything I see in the media affect me now, today or tomorrow? Will ISIS invade Berlin and bomb my local S-Bahn train on my way to work? Is there anything to really stop me from being really safe and afraid?

I am sure you will come to realise that NO is the most rational answer to the questions above. And no, Russia is not invading either. Why? Well for one, global economies (apart from Germany and China) are mostly insolvent and broke. Not only can they not afford large new wars, they are also short on public support to expand or continue endless wars on terror.

We also have pretty much always had problems in the middle east, the Balkans and the Ukraine. War is never a solution to such problems. War is simply the failure of diplomacy and cooler heads to prevail. I define all war as theft i.e. somebody is trying to steal something from someone else. Unfortunately, it is the local people that suffer through the destruction of their land and property. Rarely are those that make the decision to go to war affected but I do know that history is littered with examples of those that try to control the world, usually end up controlling nothing. Putin and Obama are two sides of the same coin.

Although we should not stand by and do nothing, we should be careful to do too much. We can offer aid, assistance, resources, training, development help and consultation, but at the end of the day, these regions need to speak with their neighbours and develop their own solutions, which after a period of pointless wasteful war – I believe they will. Vietnam was a huge problem just 40 years ago and today it is a thriving socialist economy, and became so once all the foreign powers stopped intervening.

So what then is the future of the Euro in such an environment of economic malaise and global terror?

I have heard many people say that you should buy property, you should buy gold, you should buy this, this and that to protect your Euro wealth. I have to ask myself if any of these people have really thought it through. The idea for example that the dollar is about to collapse is both absurd and rather shortsighted. The problem is not the dollar per se, but worldwide debt levels.The dollar still is and will remain a safe haven, simply by geography alone and despite whatever agreements the BRICS enter into. Money isn’t going away any time soon and neither is the dollar. Purchases of US treasuries by foreign companies actually increased last month, which is the opposite of what we are told by gold bugs and dollar bears alike.

Back to the Euro, ask yourself which is the bigger problem? The 800 trillion dollar global asset market or the 5-10 trillion dollars of money printing the federal reserve, the ECB and other central banks have embarked on in the past five years? The global asset market was valued at around 111 trillion in 2001 and rose to as much as 710-800 trillion in 2013, an almost 530-620% jump, whilst global GDP over the same period rose from 32 trillion to 82 trillion, up 156%.

All money printing or QE does is keep this massive asset bubble afloat, but when it pops, assets such as the USD and Euro will actually rise as debt is defaulted on and interest rates are slowly raised to some level of normalcy. The exit of troubled economies such as Greece would also be bullish for the Euro as debt levels again would be eliminated and asset prices written down. The risk therefore is not with the EU but with bank assets, gold and or other highly debt leveraged products such as real estate. In an environment such as deflation and debt destruction, cash is king.

 

Aug 17

Bitcoin is here to stay and it’s growing fast!

bitcoinWhat is Bitcoin and is it here to last?

Bitcoin is a digital currency that exists on the internet, and in the form of ATM machines, it is increasingly finding its way into shopping centres in Australia, malls in America – as well as downtown bars, restaurants and even the Grand Prix in Japan.

So what’s the fuss about bitcoin and how does it work?

Essentially, people in the Bitcoin network exchange official government dollars, euro and yen for fractions of the worldwide virtual Bitcoin currency, which can be used by any person on the entire planet to buy anything from anywhere that accepts Bitcoin. In some countries (and once you have setup your virtual wallet) you can deposit cash into a machine and buy Bitcoins, which you can spend anywhere that supports Bitcoin transactions. You can also take money out of the ATM machine by selling Bitcoins (see video below).

With problems in the Eurozone, some believe Bitcoin will become more valuable in the future. Especially if the European Central Bank does money printing like America’s Federal Reserve. Bitcoin is therefore a bit like gold and can be used to store wealth, buy goods and services, and protect against inflation. The downside risks include security, regulation and technical complexity, but all of these issues are currently being addressed a mountainous rush of innovation in both hardware and software.

There are now over 13 million Bitcoins in circulation, and analysts predict that there will be 8 million users wallets by the end of the year. According to the Telegraph, Bitcoin could reach US $2000 by year end.

There are even places where you can exchange Bitcoins for cash. You can buy Bitcoins from different sellers and exchanges—where you transfer money in, by bank transfer or other funds transfer, so that you can buy Bitcoins that have already been generated. – See more at: http://verdict.justia.com/2014/02/25/bitcoin-cant-ban-regulate#sthash.5DzHibjm.dpuf
There are even places where you can exchange Bitcoins for cash. You can buy Bitcoins from different sellers and exchanges—where you transfer money in, by bank transfer or other funds transfer, so that you can buy Bitcoins that have already been generated. – See more at: http://verdict.justia.com/2014/02/25/bitcoin-cant-ban-regulate#sthash.5DzHibjm.dpuf
There are even places where you can exchange Bitcoins for cash. You can buy Bitcoins from different sellers and exchanges—where you transfer money in, by bank transfer or other funds transfer, so that you can buy Bitcoins that have already been generated. – See more at: http://verdict.justia.com/2014/02/25/bitcoin-cant-ban-regulate#sthash.5DzHibjm.dpuf
People are willing to give you goods or services in order to get your coins. – See more at: http://verdict.justia.com/2014/02/25/bitcoin-cant-ban-regulate#sthash.5DzHibjm.dpuf
People are willing to give you goods or services in order to get your coins. – See more at: http://verdict.justia.com/2014/02/25/bitcoin-cant-ban-regulate#sthash.5DzHibjm.dpuf


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Mar 10

Berlin Property Prices May Peak (Advanced)

Berlin Tent Areas

Property prices may finally be starting to ease up a little for those looking to buy or for Berliners trying to cope with rising rental prices. Higher property prices usually translate into higher rental prices, however recent trends indicate that prices may be peaking and could stabilize over the near term.

In all major cities, property and rental price developments tend to follow a similar trend. If you think of a city and its outer lying areas as something like a big round tent, this is basically what prices do over time. They go up more and more in areas of high demand, such as in city centres (in Berlin that’s not so easy to define), and rise slower over time in outer lying areas.

During a property boom prices in the city centre tend to rise first and outer lying areas play catch up by rising later. When prices for new developments in the city centre start to peak or even fall, this may indicate that prices for outer lying areas are close to peaking as well.

Increase of (existing property) outer lying areas since Q1, 2010 (3 years)*

Aldershof (Treptow) +14.78% – (last 12 months +8%)
Lichtenrade (Templehof) +32.28% – (last 12 months +25.9%)
Niederschöneweide (Treptow) +5.24% – (last 12 months +8.3%)
Neukölln +47.36% – (last 12 months +40.7%)
Wittenau (Reinickendorf) +19.34% – (last 12 months +11.5%)
Reinickendorf +5.24% – (last 12 months +8.7%)
Spandau +28.57% – (last 12 months +12.5%)
Lankwitz (Steglitz) +23.04% – (last 12 months +3.2%)
Oberschöneweide (Köpenick) +75.43% – (last 12 months +51.9%)
Lichterfelde (Steglitz) +33.53% – (last 12 months +12.8%)
Lichtenburg +26.45% – (last 12 months +8.3%)
Weißensee +52.17% – (last 12 months -4.3%)

Increase of (existing property) inner lying areas since Q1, 2010 (3 years)*

Mitte +31.63% – (last 12 months -2.7%)
Schöneberg +43.29% – (last 12 months +29.7%… flat the last 6 months)
Prenzlauer Berg +20.33% – (last 12 months +5.6%)
Friedrichshain +28.94% – (last 12 months +14%)
Kreuzberg +21.87% – (last 12 months +10%)
Wedding +39% – (last 12 months +21.7%… flat last 6 months)

Increase of (new property) inner lying areas since Q1, 2010 (3 years)*

Mitte +23.38% – (last 12 months +11.3%)
Schöneberg +29% – (last 12 months +28.1%… flat the last 6 months)
Prenzlauer Berg +10% – (last 12 months -4.3%)
Friedrichshain +36.8% – (last 12 months +16.7%)
Kreuzberg +21.42% – (last 12 months +4.6%)

* data source – Immobilien Scout

Some of the signs that prices are beginning to peak include slowing, single digit or even negative growth for new and existing property in the city centres, such as the areas of Mitte, Prenzlauer Berg and Kreuzberg show.

According to Bloomberg, a NY Company called Blackstone is looking to sell 8000 Berlin apartments that they bought post to the credit crisis in 2012. This may soak up a lot of demand for property in Berlin at a time when Italy and its financial disposition may become a cause of greater concern. Sellers may find it tougher with weaker demand later in the year but tenants renting property might enjoy a reprieve.

For buyers however, interest rates are still low and may go lower and prices are still relatively low when compared to other European cities. Some questions remain though as to how sustainable further price increases are given the low income levels in Berlin and the ability of local residents to pay higher rent. Berlin’s industrial and economic base pales in comparison to other German cities and there also remains the risk of legislation to lower rental price increase allowances from 20% every three years to a maximum of 15%.

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