Japan is hot. Crypto is not.

This week the UK regulator introduced a 24 hour ‘cooling off period’ for cryptocurrency purchases, and over in the US, the US watchdog – the SEC – issued two lawsuits against the two largest crypto exchanges, Binance and Coinbase. Charges include misleading investors and there are all sorts of wordy arguments about whether crypto assets are ‘securities’ or not. And which rules apply to them.

The crypto markets seem to have taken this on this chin so far. Valuations remain pretty stable and people are still investing in the sector. Recently, ‘Meanwhile’ - a ‘bitcoin-focussed life insurer’ - raised $19 million at a $100 million valuation.

A 35 year old man in average health can buy a death benefit of 25 bitcoins for 10 bitcoins of premium. Could everyone keen to take out life insurance in bitcoin please form an orderly queue?! Amazingly enough, they have a button to ‘Join Waitlist’ on their website. Gulp.

Konnichiwa!

Heading East, and Japan’s stock market has been having a fantastic year. The Nikkei 225 is up about 25%. On Tuesday it hit its highest level in 33 years. I think it’s because I went there over Easter and spent a small fortune on sushi, comedy dog outfits and Nintendo. (I saw a dog in a bikini being pushed around in a pram in Tokyo. And I swear it wasn’t cos I’d been on the sake).

The popular way for investors to see Japan for the last 20 years has been to almost ignore a market of stagflation, with an expensive ageing population and sleepy corporate giants. But suddenly inflation is back giving everything a little tickle, corporate profits are rising, policy makers are pushing through reforms, and foreign investors are piling back in, as other markets like China suffer from geopolitical tensions.

Some say this is more of a false dawn than a rising sun, but it’s worth investigating if you’ve overlooked this region. I have a small amount in the JP Morgan Japanese Investment Trust which is up 7% over a year – but down 19% over 2 years, so it’s not a smooth ride. iShares Japan Index is a low-cost ETF, and Baillie Gifford Japanese and Jupiter Japan Income are other well-regarded funds.

If you don’t want to ignore the compelling numbers of China but have the heebie-jeebies about global politics, have a read of Martin Currie’s thoughts on how to invest in China, without investing in China.

Interest rate pain

More storm clouds ahead as HSBC pulled its mortgages for new customers yesterday and more banks are pricing in higher rates for future deals. As I write, the average 2 year fix is about 5.8%. And the average 5 year rate is 5.5%. That’s an increase of about half a percent over the last 2 weeks.

When anything moves this quickly, it’s easy to panic. But we have to see interest rates as a tool in a much bigger financial pie. Several experts are talking about recessions, others are looking at the vulnerability of the banking sector, and others are noting that in the US, the 10 year Treasury bonds (money we lend to the Government) are paying LESS than very short-term money market funds. Which means people think that things will head south and rates will fall.

I understand the desire for certainty. But I wouldn’t be locking in anything for more than 2 years max right now. That’s just an opinion folks – it’s pretty hard to try and call things and date them precisely. But I really don’t think interest rates will be anywhere near where they are today in one year’s time.

And if they are, I’ll put my dog in a bikini.

Have a great weekend everyone – enjoy the sun!

Holly

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