🌝 Is it a crash?

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Good morning investors! Yesterday was a very scary day as the market started all red but recovered as the day progressed, still closing lower but better than the start of the day.

Today we cover:

• A look at Yen.

• Stocks crash?

• Crypto falls as well.

📊 Economy and News 

Is it the Yen effect?

Turmoil in Japan’s financial markets boiled over Monday as the yen extended its rebound against the dollar to about 13% from July’s low and stocks tumbled into a bear market. Yields on benchmark Japanese government bonds slid by the most in more than two decades.

Japan’s Nikkei logged worst day since 1987 Black Monday crash and global markets also suffered.

The important thing in the financial markets world today is the Japanese Yen vs the USD. Why is it so important?

• For 30 years, Japan has 0% interest on their currency.

• As a result for 30 years investor borrowed YEN at no cost and invested it globally. They invested in T-Bills abroad and a basket of risk assets including the Nasdaq.

• For the first time in many years, the BOJ increased interest rates this week by 0.25%. This was almost unprecedented.

• As a result of the increased interest rates and the signal to the market, investors are now concerned that the money they borrowed for free is no longer free and therefore they are unwinding their trades and sending the funds back to Japan.

• The estimated quantum of this trade is over $4 trillion.

Global hits:

• Wall Street’s ‘fear gauge’ - the VIX - rose to the highest since the pandemic market plunge in 2020.

• China Evergrande’s EV arm units to enter bankruptcy, reorganization proceedings. On the other hand, the US is expected to propose barring Chinese software in autonomous vehicles.

• Federal Reserve to cut by 50bps in September and November:, which means lower mortgage rates may be coming.

Surprising: U.S. crude oil falls below $72 per barrel, hits six-month low as market sells off.

📈 Stocks

S&P 500 5,186.33 (-3.01%)
DJIA 38,703.27 (-2.60%)
NASDAQ 16,200.08 (-3.43%)
BRENT CRUDE 76.30 (-0.66%)
* Prices as of Aug 6th, 12:20 AM UTC

S&P 500 posts worst day since 2022

Stocks fell sharply on Monday, with the Dow Jones Industrial Average posting its worst day in nearly two years, as worries over the health of the U.S. economy sparked a global market sell-off.

Investors are continuing to sell off megacap tech stocks and the once-hot artificial intelligence trade. Tech shares were among the worst performers Monday:

• Nvidia tumbled -6.4% Monday, bringing its decline from its 52-week high to nearly -29%. The company shed more than $300 billion in market cap at the opening bell, though it quickly recovered about half of its loss.

• Apple cratered -4.8% after Warren Buffett’s Berkshire Hathaway cut its stake in the iPhone maker in half. Amazon also suffered -4.1% with the valuation plummeting $109 billion. On the other hand, Apple lost $224 billion, at the market open.

• Other losers included Tesla, down -4.2%, and Super Micro Computer, down -2.5%.

The seven most-valuable U.S. tech companies lost a combined $1 trillion in market value at the start of trading on Monday.

Investors seem to be losing confidence in AI. It is a sharp change from a few months ago, when investors cheered as Meta CEO Mark Zuckerberg and Google CEO Sundar Pichai both said their companies were spending heavily to build out their artificial intelligence infrastructure.

A widely read Goldman Sachs note from June warned that the biggest-spending companies had little to show for their AI expenditures. Elliott Management, one of the largest hedge funds in the world, reportedly told clients that Nvidia was in a “bubble” and the AI frenzy was “overhyped.”

In Asia overnight, Japan stocks confirmed a bear market as Asia-Pacific investors had their first chance to react to the sour jobs figures in the U.S. from Friday.

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🔐 Crypto

Bitcoin $54,538 (-6.19%)
Ether $2,445 (-9.04%)
Solana $131 (-4.53%)
Total market cap $1.93T (-5.88%)
* Prices as of Aug 6th, 12:20 AM UTC

Bitcoin, ether hit multi-month lows

The cryptocurrency market plunged on Monday, shedding around $367 billion in value over a 24-hour period.

Bitcoin’s price has reached its lowest level since February and briefly fell below the $50,000 price threshold to $49,111.10. The world’s largest cryptocurrency is trading just below $51,000. It’s still up almost 17% this year.

Other leading cryptocurrencies have suffered even greater losses, with Ethereum (ETH), Binance Coin (BNB), Cardano (ADA) and Solana (SOL) all falling by around 15 per cent over the last 24 hours.

The overall crypto market has fallen below $2 trillion to $1.85 trillion, having decreased by 13 per cent over the last day. Combined with losses over the previous week, bitcoin has lost nearly a quarter of its value in just seven days.

The slide comes after the Nasdaq wrapped up its worst three-week stretch in two years. Investors are also looking out for new trade data from China and Taiwan this week, as well as central bank decisions in both India and Australia.

On Friday, CNBC reported that Morgan Stanley would soon allow its 15,000 financial advisors to pitch bitcoin ETFs to its clients, a first for Wall Street.

💵 Personal Finance

How to invest in gold

Investors should consider holding around 2% of their portfolio in gold, according to experts. However, most agree that this might be worth increasing depending on one’s perception of the global outlook.

Between 5% and 10% is generally recommended as the upper limit of allocation to gold, with many viewing it as a key way of diversifying a portfolio. 

There are several ways to get exposure to gold, including investing in the physical product, buying gold-related stocks such as mining companies, or choosing exchange traded funds (ETFs).

Owning gold coins or bars has a certain cache for some — and there are benefits of buying the physical product, especially if you’re particularly nervous about geopolitical events and the macroeconomic outlook, according to Price. For some people, “all they want to do is own the actual metal, because they have a very specific reason, it’s about inflation protection, end of the world protection, that sort of thing.”

There are sometimes significant tax implications to consider, however.

U.K. investors are lucky, with bullion coins from U.K.’s Royal Mint exempt from capital gains tax, a levy charged on profit made when goods are sold, and free of value-added tax (or VAT, usually 20%). In the U.S., however, gold is classed as a collectible, and both the physical bars and ETFs attract up to 28% capital gains tax.

💰 Be a Better Investor

Resources:

• Retirement Calculator

• Make Money in Retirement

• Side Hustle Ideas

• Stock Deep Dives

• Investing 101 videos

👩🏽‍⚖️ Legal Stuff
Nothing in this newsletter is financial advice. Always do your own research and think for yourself.

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