Discover more from Nicholas Vardy's The Global Guru
Land of the Rising Stocks; Icahn’s $9 billion loss; Silver’s Shiny Future
Silicon Valley’s Blood Money; The Roaring Twenties
Today at a Glance:
· One Market: The Land of the Rising Stocks
· One Quote: Icahn’s $9 billion Loss
· One Commodity: Silver’s Shiny Future
· One Documentary: Blood Money
· One Book: The Roaring Twenties
Japan’s Rising Sun Trumps China’s Fading Star
Japan's stock market hit a 33-year high last week as investors bet that corporate governance reforms will continue to support a soaring market.
Several factors, including expectations of corporate governance reform, have driven the rally.
Some of the key reforms include:
Requiring companies to have independent directors on their boards.
Requiring companies to hold regular shareholder meetings and allow shareholders to vote on important matters.
Requiring companies to disclose more information about their financial performance and operations.
Then there is the "not-China" trade.
Some investors are betting Japan is a safe way to gain exposure to Chinese growth without China's risk. Trend drivers include:
The trade war between the United States and China.
China's slowing economic growth.
China's increasing authoritarianism.
Finally, there is the Warren Buffett effect.
Buffett visited Japan last month. There he met with several Japanese companies and came away impressed. Buffett's visit suggests that he sees Japan as a good investment destination. As a result, he may be upping his investments in Japanese trading companies he has already invested in.
iShares Currency Hedged MSCI Japan ETF (HEWJ) hedges out the currency risk of a falling yen.
Icahn’s $9 Billion Loss
“I’ve always told people there is nobody who can really pick the market on a short-term or an intermediate-term basis. Maybe I made the mistake of not adhering to my own advice in recent years.”
Last week, legendary investor Carl Icahn revealed that over the past 15 years, he had lost $9 billion, betting the market would crash.
He started shorting the market in 2008 after the financial crisis. He bet against broad market indices, individual companies, commercial mortgages, and debt securities.
At times, Icahn's notional exposure exceeded $15 billion.
Icahn's short bets drained billions of dollars from his investment company.
He plowed nearly $4 billion into his publicly listed vehicle to keep the investment portfolio value relatively stable.
Icahn's bearish bets are the main reason his investment portfolio has lost money every year since 2014.
The 87-year-old Icahn has said he is committed to turning things around at Icahn Enterprises.
Think Icahn has learned his lesson?
Look at Icahn Enterprises L.P. (IEP). It’s down 78.5% from its peak and 36.39% year to date.
Silver's Shining Future
Silver has a lot of fans.
Some of the smartest people in the world prefer gold’s less glittering cousin:
· "Silver is the new gold." - Jim Rogers
· "Silver is the best investment of the 21st century." - Eric Sprott
· "Silver is the ultimate hedge against inflation." - Ron Paul
The price of silver has been on a bull run in recent years, with prices more than doubling from their lows in 2015.
Several factors driving are driving the rally.
First, silver is a versatile metal used in electronics, from solar panels to jewelry.
Second, supply is falling. The closure of many silver mines has led to a decline in the silver supply.
Third, silver is a hedge against inflation.
There are several reasons to be bullish on silver in the years to come:
Silver is critical in many green technologies, such as solar panels and electric vehicles. In addition, as the world transitions to a more sustainable energy future, silver demand will explode.
Silver is attracting both individual and institutional investors. Its unique properties include limited supply and its ability to hedge against inflation.
Historically, silver has outperformed gold during bull markets. This is because silver is more industrially used and has a lower market capitalization than gold.
Want to bet on the boom?
The iShares Silver Trust (SLV) is an excellent way to get started.
Another option is to buy the precious metal directly from a dealer like Asset Strategies International-a trustworthy precious metals dealer of 40+ years.
As CEO Rich Checkan points out, ASI offers:
2.25% premium to Spot
NO ongoing storage fees
A government guarantee
100% backed unique metal
NO short positions
NO derivatives exposure
NO leasing to third parties
100% insurance at full market value at all times
The Inventor: Out for Blood in Silicon Valley
Elizabeth Holmes was a brilliant student who dropped out of Stanford at 19 to start Theranos.
Holmes claimed that Theranos could test for multiple diseases with a single drop of blood.
She attracted high-profile investors, including Rupert Murdoch, Henry Kissinger, and George Shultz. She made the cover of magazines like Forbes and Fortune.
By 2015, Elizabeth Holmes was the world's youngest self-made billionaire and hailed as the next Steve Jobs.
However, Theranos' technology was a fraud. The company's machines were never able to accurately test for multiple diseases. They were often unreliable. Holmes also misled investors about the company's finances.
The Inventor: Out for Blood in Silicon Valley is a documentary about the story of Holmes and Theranos.
In 2015, the U.S. Securities and Exchange Commission (SEC) investigated Theranos and charged Holmes with fraud. She paid a fine of $500,000.
On May 30th, Holmes- now a mother of two small children as well as a convicted fraud- is set to enter a California Prison to serve out a sentence of 11 years.
America's Roaring Twenties were all about new technologies, flappers, and the Great Crash of 1929.
Frederick Lewis Allen's book "Only Yesterday" explores the era through a keen eye of a journalist. Its blog post style of anecdote after anecdote captures even today's short attention spans.
The First World War had ended. The Florida land boom, the automobile, radio, and the ticker tape changed how Americans dreamed, lived, and invested.
The stock market was a giant casino, and everyone played to win. People were buying stocks on margin. The prices of stocks were rising to fantastic heights. There was a feeling that the boom would never end.
Of course, it all came crashing down in 1929. Millions of people lost everything. And the Great Depression that followed could not have been more different.
Allen's book is a funny, sad, and thought-provoking book. It will give you a new understanding of this critical period in American history.