shimka Investment Blog

As a Japanese who tends to promise a new thing to oneself when a new year came, I also promised myself to start a Blog this year. Mainly on investment and something noticed/thought newly I try to write in this column in my words, however, sometimes stories are not backed up with accurate stuff and therefore my stories would be just a hint for investment. As a policty of this website, I like to write in bilingual attitude and its frequency would not be on regular basis. For any advice or opinions, please send me a note via this page. Any comments from others are always useful.

No.4　[ Dollar of Key Currency, where to go? 04/28/08 ]

The so-called Nixon Shock happened in 1971 and exchange gold with dollar ceased, which led the world to floating exchange system. The gold standard was come off. There seemed to be a direct trigger with inflation in the US society caused by Vietnam War, and it seems to give us with a guidance to understand the current global economy with consideration of indirect reasons of those days. The gold standard was to allow only for dollar to exchange with gold through

(Source; INO.com USD Index)

the world monetary system in the post-WWII era, intending to enhance the value of dollar that I understand. It meant the dollar became the key currency. What dollar is no more able to be exchanged with gold means that its value comes tumbling down.　The US, however, had another move not for dollar value to tumble down. I understand that there was a secret agreement with Saudi Arabia which only dollar could be used for settlement of oil sales. The US guaranteed of security for Saudi Arabia, in return they asked to maintain the dollar value after the gold standard abrogation. As an economic background of those days, there was deterioration of dollar value by inflation and bright forecast for oil throughout the world, which I understand that conversion from gold to oil was very reasonable. There was the other indirect reason, which was the US was in anxiousness concerning to exchange from dollar to gold. This would be easier for everybody to guess, that is, the US had been very anxious to be asked to exchange to gold from the dollars that foreign countries collected.

Now, it appears that the situation is quite similar with those days in regard to global economy and the US actions. I perceived a trigger in the early this month which reported GCC’s challenge to have a unified currency in the future. This doesn’t directly mean to waive dollar pegging system, however, it might be true to become the first step. This means, the US will be gradually away from Arabian oil and of course we have to think about it with the issue of Middle East peace. The reason I think the circumstances of those days is similar to the current is that there is decline of dollar value and fluctuation of the oil standard of this time, which gives me with a feeling of reaching a time for change in direction dramatically. Besides, the US is in anxiousness on inflation to the world which might be blamed by other countries with start of Iraq War, and food crisis come to the front as the result and fear to bigger EU. In addition, renewable energy becomes more feasible, demand for grains might be greater than that on oil, which leads the world to a new era to have it as a basis of national strategy. Anyhow, it is true the US has dropped its power. This is a different situation, and it is important to think about the future. It would be said that conversion from the gold standard to the oil standard was successful with the US intention. Seeking how the US maintains dollar value from now would help us to know where a new global economy goes, however, considering possibility of Euro as an alternative currency broken through the current dollar decline and rise of BRICs economies, it appears that the US does not intend to maintain the dollar value as the key currency, and rather intend to make a multi-currency system, or a region currency system with knowing the current GCC’s move. Given dollar is ending the role of key currency, it would be a little easier to foresee global move, however, without the key currency the US could keep influence on other countries as always. The answer should be “No.” Then, what would be the way? This is my angle to see the next move of the US.

No.3　[ Commodities getting into cautionary zone? 03/12/08 ]

People in stock markets, Japan, frequently say "yet is already and already is yet." When we use this proverb, the market is near peak or bottom. I feel the money in the oil and gold market is possibly getting out or seeking a timing to exit. Especially, in gold marekt, my view is it is

(Source; Reuters/Jefferies CRB Index)

very close to a cautionary zone and likely to peak out. I think the oil prices were intentionally created high, and therefore no surprise whenever it turns to fall. Gold price, $1,000, might be a trigger in my assumption. Nobody could say it when, but it is important to know where the money stayed in these markets to move. If we realise it as earlier, investment performance would be much better. I know many hedgefunds have been already damaged through the subprime loan crisis. If some cannot timely get out, it would be easy to imagine some to lose business. Thinking generally, the funds would be coming back to the stock markets - since I presume a new long-term wave starts in the first half of 2008, it would be a good chance to invest for once per 5 years, and VISA IPO is a big impact and topics. I pay attention on how investing and speculative funds involve in the next huge demands on agricultural products and renewable energies. As both themes are favourable to the US, we could see a stream soon, that I guess.

I will say that investing in oil and gold from now is very risky. In Japan, many ETFs and gold ETF as well are coming available at TSE, but I am afraid that the timing is always a little late and very much worried that some investors would be catching peak prices, again! The above chart is RJ/CRB Index which has already gained back the drop in 2006 and further it seems it extended the same range on it. If it is still going up, to me it is getting into a cautionary zone. The chart looks like having hit a bottom in 1999, I think, there would be a big correction towards 2009 and 2010 which I don't know if the curve is going to be steep or gentle.

No.2 [ Microsoft propose to buy Yahoo! 02/02/08 ]

(Update 05/06/08 WSJ) Tech titans: Before and After the Boom

The last weekend, big news was announced. At this moment, any response from Yahoo! to this proposal is not yet disclosed. I am very interested in how Yahoo! responds, but my personal view is Yahoo! should accept this proposal. Yahoo! has contributed to Internet development very much, however, now this company seems to be challenged if it can continue to operate for another years, such as many ventures had disappeared after the so-called dot.com boom. Needless to say, Google’s remarkable advance has cornered Yahoo!, however, eventually we would say that Yahoo! made a fatal delay. Reportedly, Microsoft might buy Yahoo! even using TOB, which means crisis atmosphere in Microsoft against Google was bigger than Yahoo!.

I guess if Google moves to buy Yahoo!, it means “game over” to Microsoft and Internet market will be completely dominated by Google. This meant a crisis to Microsoft. In the other news source, Microsoft contacted to Yahoo! about acquisition over one year and great advance of Google drove Microsoft to buy Yahoo!. Also given the recent financial results of Yahoo!, Microsoft knew a downtrend of Yahoo!’s profits where the management must show any future plan to the public. Taking this timing Microsoft has presented the proposal before Google moves, that I guess. This really meant Microsoft needed to suggest TOB unless the proposal is accepted. If Yahoo! doesn’t accept this proposal, the management must show clearly any future plan to the market and the shareholders, however, I don’t imagine there is. That’s why the stock price surged for 48% on the day, and also means, the market understood Yahoo! doesn’t have any powerful plan for the stake holders. Yahoo! reluctantly needs to accept it, and therefore the stock price went up close to the price of the proposal. If Yahoo! has any plan to survive with their own efforts and the market knows it a bit, the market will wait for a while until the plan is fully evaluated, in this case the surge wouldn’t happen on that day. In another words, the market favoured the news which means the management of Yahoo! should accept this reaction as public opinion. Big shareholders and the management remain to respond.

I presume it has passed for about 15 years after Yahoo! started to contribute to Internet development. When I first used the service, I felt a big surprise on customer-interface and innovation which expanded to the world very quickly, that I still remember. In Japan even now it still expands and grows. I don’t know how Yahoo! is managed, but there might have been another way to survive against Google. The time for decision, however, has come and Microsoft cannot wait even if Yahoo! doesn’t want. I know the future of Internet may be expanding to Mobile world and even in this field Yahoo! doesn’t seem to be the leading player. There are too many aspects to make big decision to go advance in spite of “no time.” My view is that Yahoo! should accept the proposal of Microsoft.

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No.1 [ US presidential race - Iowa caucus 01/05/08 ]

As reportedly for the last several days, Mr Obama obtained the first position and a great step towards the presidential nominee of the Democrats. It looks to be not a big impact to the world, however, I noticed a significant element through his campaign and want to write here today.

At first Mr Obama raised his hand to become the presidential nominee of the Democrats, however, after that Sen. Clinton joined the race as everybody imagined and she was successful to overcome Mr Obama in supporting rate, and then the subprime turmoil had occurred.

As I remember this issue was reported early in 2007, and it became a big issue from around the summer. Please see WSJ to understand easily, the supporting rate for Mr Obama was steadily going up from the summer just like commodities prices and brought him to Iowa caucus.

I like to write on the subprime issue on the other day. The important thing is that due to this problem tens of thousands people had lost their homes and it was repeatedly reported day after day, even now. Being given this situation I thought Mr Obama would get more supporters (perhaps unexpectedly), then it has become real. I think this issue is not easy to solve and the US would need fairly long term to absorb, that is to say, as far as this issue is on the newspapers or reported frequently, supports for Mr Obama would not drop.

On the other side, the image of Sen. Clinton, in my view, is an epoch, however, she has already appeared on TV etc too much when her husband was the President, therefore she wouldn't be "fresh" any more. Also I guess her image would a little give us with a kind of establishment which is not easy to collect supporters in such a situation that I mentioned before. Furthermore I also heard that the female might not like to support a female candidate, but this wouldn't be approved, however, this is true that the Americans like young candidates and as a fact reportedly Mr Obama collected many votes from the young.

As I heard / read these things, thinking Mr Obama as the new President or with very high probability the Democrats would control the next administration, how the global economy, especially to Japanese, is going to be affected that I like to think about from now. There is a chance to write about my idea, which is coming very soon.

Still we have one year to know who is the new President, however, if many people become to know it, even before the election in many areas something starts to happen or change. Right now, I don't know when but I like to notice and watch any small changes to reflect it, especially, in Middle East, China and Russia I would pay close attention in 2008.

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