Month: March 2018

Nine Reasons Why Globalization Can’t Be Permanent

We spoke about globalization in an earlier post on some general terms – citing that it has taken a different shape or evolved. This article below however, delves deeper and highlights on nine reasons why this evolution will be forced to happen.

It is so well written, it covers all salient points and asks all the right questions – such as what we have pondered on the validity of GDP as a measure of success. The Intelligence Quotient (IQ) has of late been questioned as the main determinant of intelligence in the advent of Emotional Intelligence (EQ) and soon Artificial Intelligence (AI). Likewise, we must question the accuracy in the way the success (or disguised failures) of a nation is presented, and what we are told is required for this success to materialize.

We especially loved this analogy of the current world situation and if anything is to be taken from this article, this is it:

Again kudos to the author Gail Tverberg for this in-depth piece (featured on her website on 31 Jan 2018). In it, Gail touches on issues such as a population growth, a growing wage-disparity, heavy energy consumption, and the demand for cheaper alternative energy:

Read about the 9 reasons here: https://wp.me/p3dRG-b4w

Also read more on how Globalization has evolved here

Hope you enjoy it as much as we did, and that it has the same effect it had – getting one to think outside the box and look at the big picture.

31 March 2018
Piggybacking on company shares

It is clear that the business of share trading and its intricacies still create a dark cloud for many of you. This is, however, a rather unnecessary element of sophistication.

It is only fair to, therefore, delve in and break it down by discussing not just the way to trade, but the whole point of it.

While trading may seem like something only smart people engage in, this is, however, not the case.

What are shares?

The first thing to understand is that shares (referred to as stocks) entitle the holder to have part ownership in a company.

So, if you own a share in, Amazon, Manchester United, or a Cryptocurrency company like Ripple – you literally OWN a part of that company.

You are basically co-owning with other stakeholders of the company. This with the hopes that the people who run it will increase the monetary value of your shareholding by making the company a success.

Now your share will determine what level of control (decision-making) you have when it comes to the company’s operations.

Naturally, owning just one, ten, or even 1000 shares of Amazon (a hefty $1400 each today), still does not entitle you to have a say in how it is run.

As the majority shareholder, you would probably be the company owner (chairman/founder) or one of its board of directors. To gain such a majority shareholding and full control of a company, the minimum number of shares you would need would be 51% of all shares issued. Good luck obtaining that many!

The rationale for issuing shares

But let’s take a further step back and unravel why shares are issued in the first place. Your company (hopefully) has value because of its ability to generate revenue. This makes it a constant target for investors in a capitalistic market. Wealthy individuals carefully monitor its value to brace for a potential takeover or for just a piece of the pie.

To get listed on a stock exchange your company will decide how much of its equity to publicly issue as shares. You can even issue shares to raise more capital to help grow your business.

This form of equity will be backed against your total assets (and its debts) on the balance sheet. So hypothetically, a company with 100 Euros worth of assets and liabilities has 100 Euros worth of (owners) equity.

This basically enables you to determine its net worth at a given point in time.

The easiest way to remember this is through this basic accountant’s formula:

Total Owner’s Equity (OE) = Assets (A) + liabilities (L).

The shares are accounted for in the OE and are issued in denominations based on various factors. This helps to provide you with an indication of the relative strength (or weakness), or potential growth rate of the company.

What do they tell us?

The (snapshot) total value of the company is thus determined by its share price multiplied by total number issued. This is referred to as its market capitalization. There are several other measures and tools to evaluate the general health of a company.

Rising share prices, though always good, does not always necessarily mean that the company is great value for money. This is because share prices can also be undervalued or overvalued.

Shares for large companies are naturally offered in millions and via an initial public offering (IPO) from as little as one cent (penny stock), or much more (depending on its valuation). Thereon, it can rise astronomically to what was quoted for Amazon earlier.

Where to get them

The open market or local bourse is where you can buy and sell shares at specific times depending on side of the world it is located.

Obtaining shares come with additional costs (brokerage fees, commission, interest payments in cases of leverage buying, etc.). Depending on the terms and conditions in the overall market (regulations), but more specifically, on the company or broker offering you access to shares.

A good company share will also give you a return on an annual dividend. This is basically a share of the company’s profits over and above its share price.

It is a good idea to include high dividend-yielding shares like Coca-Cola, in your trading portfolio – if you can afford them.

Influencers

Once you purchase your stake in the company, you will naturally, even if you don’t have a controlling say in how the company is operated, take a keen interest in the company’s activities.

Everything it does whether internal operations or outside for that matter, will have an impact on its valuation.

Naturally, investors follow the age-long rule of common sense: buy when the price is low. If you missed the IPO and the price dips, you can always get in at a good (low) price. The stock market runs like a rollercoaster – you just need the right time to hop on!

“Unless a company goes belly-up, a share-stock price that is going down is actually going up – in the long run.”

Obviously, the price (trend) is not always upward and one must be prepared to weather such storms. You shouldn’t have to be continuously focusing on the price after thorough due diligence on your chosen company.

Read more about Due Diligence here

Choosing a good stock and leaving it to work is the best advice you will get. This is because you can become emotionally attached to the performance of the shares and that can affect your mood.

There are also a lot of trading tools to help prevent a total meltdown if the company folds-up. This can be due to external factors like fraudulent scandals or government intervention. Keep tags now and then – this is important.

The recent events and scandal faced by Facebook saw it lose a significant amount (billions of dollars) in it the value of its share price.

Read more about investing here.

Short-selling of shares/stocks

There are also ways to “have your bread buttered both ways” in investing. This is where the concept of short-selling comes in.

So, while we all inclined to bet on a company’s stock to go up – there are groups of investors who bet the other way. They have the hopes (based on indicators) that the price will rather drop.

This seemingly dubious form of trading is perfectly legit but comes, naturally, with an even higher level of risk. If the price increases in favour of all ‘normal’ long-term investors – the short position starts losing money. You may even have to fork out more to cover the amount borrowed to make the short-sell in the first place.

Short-selling is, therefore, if you are inexperienced and ill-informed!

So, you “buy” or rather borrow (leverage) the future value of the share/stock price usually at its apparent peak and hope that it will drop. You will continue to profit from the bet by as much as the share price continues to drop.

Earlier in the year, one such investor dubbed “50 Cent” bagged 200-million-dollars in a major shorting stint.

Shorting a stock is a complex, risky but highly lucrative method of balancing out a portfolio. A seasoned trader will, therefore, have several positions including some “buy” and “sell” positions on their chosen shares.

You should have various mechanisms (take profits and stop losses) set in place to execute their trades based on those positions.

Naturally, you wouldn’t just short a stock if you didn’t know something about what factors were to lead to a sharp/large drop in the share price.

But getting this right is often an exercise that straddles a fine line between being well-informed and intuitive and blatant insider trading.

The bigger picture

So, in summary, shareholding generally occurs when you acquire a stake in a business. You can own intellectual capital, founding rights, or be s a funder/seed investor to help start the business.

So why do companies issue out shares to the public again you might still ask?

Think of share listing as a way for your company to hold itself publicly accountable. is the ultimate branding weaponry in its arsenal and quest to exponentially increase its profits.

24 March 2018
Piggybacking on company success

After having several conversations which clearly highlight the fact that the business of share trading and its intricacies still create a dark cloud to many, and an unnecessary element of sophistication at that, it is only fair to (in true debunqed.com fashion) take a step back, delve in and break it down by discussing not just the way to trade – but the whole point of it. It can seem like something only smart people engage in. This is, however, not the case.

The first thing to understand is that shares (referred to in the US as stocks) entitle the holder to have part ownership in a company. So, if you own a share in, Amazon, Deutsche Bank, Coca-Cola, Manchester United or a Cryptocurrency company like Ripple – you OWN a part of the company. You are basically co-owning with other stakeholders of the company with the hopes that the people who run it will increase the monetary value of your shareholding by making the company a success.

Now your share/ownership will determine what level of control (decision-making powers) you have when it comes to the company’s operations. Naturally, owning just 10 or even 1000 shares of Amazon (which cost around a hefty $1400 each today), still does not entitle the owner to have a say in how it is run. The majority shareholder – which would probably be the company owner (chairman/founder) or its board of directors, depending on how the company is structured, will still have the overall say.

To gain a majority shareholding and therefore full control of a company, the minimum number of shares one would need would be 51% of the total issued…good luck obtaining that many!

But let’s take a further step back and unravel why shares are issued in the first place. A company has a value and within that context will always keep tags on the capitalistic market and carefully monitors its value to brace for a potential takeover or a consideration to sell.

So, to get listed on a stock exchange a company will decide how much of its equity to publically issue as shares and might even use it to raise more capital to help grow the business.

This form of equity will be backed against its total assets (and its debts) on its balance sheet. So hypothetically, a company with 100 Euros worth of assets and liabilities has 100 Euros worth of (owners) equity – which basically enables one to determine its worth at a given point in time.

The easiest way to remember this is through this basic accountant’s formula:

Total Owners Equity (OE) = Assets (A) + liabilities (L).

The shares are accounted for in the OE and are issued in denominations based on various factors to provide an indication of the relative strength (or weakness), or potential growth of the company. The (snapshot) total value of the company is thus determined by its share price plus number issued and referred to as its market capitalization. There are several other measures and tools to evaluate the general health of a company.

Rising shares, though always good will not always necessarily mean the company is great value for money as share prices can also be under- or overvalued. Shares for large companies are naturally offered in millions and via an initial public offering (IPO) from as little as one cent or more (depending on its valuation upon listing on the market) and rise to what was quoted for Amazon earlier – which along with the price of certain commodities are one of the highest per share currently available in the open market.

The open market of local bourse is where shares can be bought and sold at specific times depending on side of the world it is located – just like in a traditional marketplace.

Obtaining shares may come with an additional cost (brokerage fees, commission, interest payments in cases of leverage buying etc.) depending on the terms and conditions of the market but more specifically, on the company or broker offering access to the shares.

A good company share will also offer its holders in return an annual dividend – which is basically a share of the company’s profits over and above the share price. So, it is a good idea to include dividend-yielding shares in your trading portfolio if you can afford them.

Once you purchase your stake in the company, you will naturally, even if you don’t have a controlling say in how the company is operated, take a keen interest in the company’s activities as everything it does within its operations or outside ops for that matter will have an impact on its valuation, and therefore, the price of the share you own.

Naturally, investors follow the age-long rule of common sense and buy when the price is low. If you missed the IPO and dip in, the price is always a good time to even top-up for the long and eventual rise.

“Unless a company goes belly-up, a share-stock price that is going down is actually going up – in the long run.”

But the price as we know does not always go up and one must be prepared to weather such storms by not continuously focusing on the shares once you have done your due-diligence and purchased for the long haul. Playing blissful ignorance is the best advice you will get as one can become emotionally attached to the performance of the shares and have it affect your mood.

There are also a lot of trading tools to help prevent a total meltdown if the company folds-up due to external factors such as fraudulent scandals or government intervention – so keeping tags now and then is still required. The recent events and scandal faced by Facebook saw it lose a significant amount (billions of dollars within weeks) in it the value of its share price.

Read more about investing here.

There are also ways to “have ones’ bread buttered both ways” and this is where the concept of short-selling comes in. So, while we all would bet on a company’s stock to go up – there are groups of investors who bet the other way with the hopes that the price will rather drop.

This seemingly dubious form of trading is perfectly legit and comes, naturally, with a higher level of risk – that is if the price increases in favour of all ‘normal’ long-term investors – the short starts to lose money and will even have to fork out more for the amount borrowed to make the short-sell in the first place – not for the inexperienced and ill-informed!

So, you “buy” or rather borrow (with leverage) the future value of the share/stock price usually at its apparent peak (or bubble bursting price level) and hope that it will drop for you to profit from the bet by as much as it continues to drop. Earlier in the year, one such investor dubbed “50 Cent” bagged 200-million-dollars in a major shorting maneuver.

Shorting a stock is a complex, risky but highly lucrative method of balancing out a portfolio. A seasoned trader will, therefore, have several positions including some “buy” and “sell” positions on their shares for long and short terms with the various mechanisms set in place to execute their trades based on those positions.

One wouldn’t just short a stock if one didn’t know something about what was to come or what factors were to lead to a sharp and large drop in the share price. But getting this right is often an exercise that straddles a fine line between being well-informed and intuitive and blatant insider trading.

So, in summary, shareholding happens naturally when you acquire a stake in a business through ownership of its intellectual capital, founding rights, or status as a funder or initial investor to help start the business.

So why do companies issue out shares to the public again you might still ask… think of share listing as a way for a company to hold itself publicly accountable and thus is the ultimate branding weaponry in its arsenal and quest to exponentially increase its profits.

24 March 2018
Rare tangible coins

With all the talk of digital (altcoins) and Bitcoin, it is hard to even fathom the value or point of holding physical coins.

They are still nevertheless being minted so it will be quite a while before the clunky things are done away with.
Some coins, however, though not very publicized, still hold significant value – even as much as Bitcoins!
It reminds me of a time way back in 2006 while routinely wandering through the pages of a local magazine, I paused at an advertisement that caught my eye.
An institution dubbed the South African Coin Corporation was offering R100 000 (the present-day equivalent of $8400) for a 5 Rand coin with the face of Nelson Mandela engraved on the back.
Unable to contain my excitement at the prospect of being a couple of hundred thousand Rands richer, I rang up the number supplied at the bottom of the advert to claim my bounty. I had five of the coins.
Unfortunately, the coins were worth little more than their intended 5 Rand in value because they were ‘used’.

Coin dealers

The company required rare coins that had been untouched and uncirculated. The South African Mint in 2000/2001 minted and encapsulated a few of the 5 Rand Mandela coins and sold them to a few collectors. They are now valuable and had a high demand from overseas collectors.
The South African Coin Corporation was one of the many coin dealers in the country that dealt exclusively in graded, encapsulated rare (uncommon)South African coins.
For the past 18 years prior to my visit, the company traded in rare coins ranging from the Veld pond, the 1892 one penny to Krugerrands. All these coins come with (often) dramatic and important historical backgrounds.
“Roman emperors were printed on their coins and that’s how one could tell who ruled and through which period,” a senior broker and spokesman for the corporation explained.
“The coins encompass historical periods in time from the Anglo-Boer war to Paul Kruger, and the gold mines – the stories are all in the coins.”
The coins are graded on an internationally guaranteed system by two recognized American firms namely NGC and PCGS. They work on a grading system ranging from categories such as ‘good’, ‘fine’ and ‘uncirculated’.
The grading system helps to determine authenticity and originality of the coins – eliminating counterfeits and circulated coins. A ‘proof 70’ coin is basically a flawless coin and is worth a small fortune.
Lower and medium coins on average collect growth levels of 8% to 15%. Low-grade coins are basically coins that have been in circulation or ‘used’.
Therefore, a 5 Rand coin obtained from banks and shops (such as the ones I had at the time) are deemed as heavily circulated. Therefore it is only worth the printed value.

Point of interest

The industry was briefly brought into the spotlight about a decade ago with the record sale of the single fine ‘proof 69’ Mandela 5 Rand coin. It sold for a whooping 100 000 Rands (worth $13, 300 at the time).
A senior broker at the Coin Corporation carried out the record sale. “That specific coin was bought by an overseas investor,” he said.
The near flawless coin according to the company is earmarked to break the $100 000-mark in years to come when it becomes rarer. “And we are yet to see a ‘proof 70’ coin,” he added.
If that sounds impressive you will be further astounded to know that even lower grades of the coin such as the proof 66 5 Rand Mandela cost 735 Rands ($62) in 2006. It then commanded growth of over an astonishing 900%.
And like our digital friend Bitcoin, it shot up to 8500 Rands ($715) within a year in that year – spurred by speculation and the knowledge of its existence and intrinsic value.
Some of the lower grades (Proof ‘62s and ‘64s) are now currently worth about $200 – $300 today and can be bought off private investors via online marketplaces. Some banks like this German-based Bank called Netbank offers the option to invest directly in Krugerrands.

The US market has the largest rare coin markets in the world valued at billions and billions of dollars.

For those that are looking for something more secure and long term, there is only one trend with this type of investment – and it’s upwards. It does however, take a long time. A lot longer than holding shares/stock or the digital variation.

Market research is key

As with any trading instrument, industry experts caution investors about the use of the coins as investment vehicles.
It is advised that the coins were subjected to various grading tests and you have to ensure that you are getting the right price for the value of your coins.
As a potential investor in a coins, you need to have them valued professionally – preferably with any of the accredited coin makers.
The market for rare coins is also highly subjected to supply and demand factors. There is always a shortage of rare coins with a steady demand from collectors – so naturally, prices are generally always going up albeit slowly.
External factors (albeit not heavily) can also affect the value of your rare coin. Aspects such as the economic or even political climate of the country can corrode or improve your coin’s value.
So, just as we advised about researching Cryptocurrency for their intrinsic value, it is key to learn about the coins you plan to invest in. Furthermore, it is of greater value to have a collection of rare coins than just having one or two.
Many people, for instance, do not know that there are two types of Krugerrands because they look the same. One is mass produced – making it less rare and therefore less valuable.

Concluding

The main impetus behind investing in rare coins besides the diversification of your portfolio includes the fact that they add to your personal assets as it is free of capital gains tax.
It, therefore, serves as collateral or surety for bigger investments.
There are also perks such as the absence of hidden costs, administration costs and commission deductions – which are paramount ingredients of other forms of investments.
Once you purchase the coin, it is yours for the keeping – we are still holding on to ours! 😊

5 March 2018

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