Friday, 17 June 2016

Welcome to the bizarre world of money printing

When central bankers print money, strange things can and will happen.

Just a few random, recent examples:

"Why Uber’s Chinese nemesis Didi Chuxing just raised $7 billion more"

Didi Chuxing, the company that is beating Uber in China, just landed an incredible $7.3 billion in fresh financing.

Seven billion U.S. dollars!

But there’s more. Four-year-old Didi said it already has billions in the bank from its previous fundraising — which amounts to more than $10 billion — and this fresh influx takes it to more than $10 billion of cash in hand.

In case the reader is wondering, Didi does not actually own any vehicle, it is just a platform, most likely a money losing one. Agreed, far away in the future the network might be quite valuable, but on the other side, who can predict the future say five or ten years out? I definitely not.

Which Country’s Bonds Most Likely to Join Germany in Negative-Yield Club?

With yields on 10-year German sovereign bonds going subzero for the first time in recorded history, investors are asking which country’s bonds could cross into negative territory next.

Austria and the Netherlands appear the most natural candidates.

Indeed, as German 10-year government yields hit minus 0.032% Tuesday .....

In other words, one buys these 10-year German bonds, waits for 10 years and gets back less money than one invested.

Many bonds are being managed, for instance in bond funds or pension funds, we can safely assume that on top of the negative yield another say one percent is added in costs. That does not sound very attractive.

The Decline of the Coal Industry in One Chart

.... the market cap of four of the largest coal companies was more than $35 billion in 2011. After a flurry of regulation, it’s now a smudge on the graph below, a decline of 99 percent. Behold, the steep decline of coal in one chart:

I am not a big fan of coal due to the pollution it causes, but one would expect a slow and steady phasing out of this commodity, not a 99% plunge in three years time of the market cap of four big players in this industry. I have no idea if this has to do with money printing, just the speed of decline is mind blowing.

Marc Faber has often warned against the effects of money printing. What the central bankers want is a gradual rise in all asset classes, but that will not happen, some will rise or fall a lot. The only way to deal with this is to diversify in different asset classes. And forget about market timing, that will be very tough to do.


  1. Regarding coal, Peabody and Arch Coal have filed for chapter 11. The central banks policy may have encourage major coal players to take too much debt; but the link seem tenuous at best.

  2. Thanks for your comment and link. Yes, probably not much of a direct link