Are You Financially Literate? April is the Month to Find Out

OWNx Team Blog, Money & Finance

April is Financial Literacy Month. It is smart to set aside a time to focus on finances, because money and finances are something that touch each and every one of us nearly every day. To that end, the folks at Money Management International have put together a comprehensive and helpful guide addressing many of the issues to consider when creating a personal financial plan.

While understanding the basics of managing personal finance is important, you also need to be aware that the entire global financial system is changing, and those changes are going to impact your life. In the next few years we will witness:

  • Major changes to global payment systems
  • Increasing disruption to the financial industry via FinTech
  • A possible reorganization of the global monetary system

There is a great deal to stay on top of if you are to successfully navigate the coming changes. That is why OWNx is using our blog and news platform to make 2017 a Year of Financial Literacy. We intend to use our platform to help you understand how these changes will impact you as well as the important role that gold and silver will play in this transition period.

Keep stacking. Keep learning. We will be here to help you with both.


In case you missed it, check out our article earlier this week. The Price of Gold Reaches Multi-Month High

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The Price of Gold Reaches Multi-Month High

OWNx Team Gold & Silver Market, News & Commentary

Gold and silver have had a nice run this week and the price of gold reached a five month high today. There are many factors contributing to the recent sustained strength.

Geopolitical tensions remain on edge with the United States and Russia at odds over recent developments in Syria. Gold is generally seen as geopolitical insurance and there is enough going on in the world to warrant buying a policy.

Additionally, President Trump today said that the US dollar was “too high,” causing a reaction in the currency. At times, gold is inversely correlated to the dollar. However, that correlation had recently broken as geopolitical tensions rose while the dollar continued to strengthen. With the dollar falling, gold’s inverse relationship re-engaged giving it another reason to make a nice run this week.

The question now becomes, is the recent surge sustainable over the short term?

In the recent past, nasty geopolitical incidents involving the United States have calmed down after the initial heated rhetoric becomes more reasoned. Furthermore, capital flows will override any President’s opinion on the strength of the dollar.

Therefore, it is quite possible that soon, strong capital flows to the United States will give renewed support for the dollar and geopolitical tensions will fade somewhat. That will be a catalyst for the price of gold to relax a bit.

However, each surge in the price of gold creates more distance from the December 2016 low of $1,130. Recent price action continues to make the case that a long term bull market has begun and last year’s low is not likely to be penetrated, even on a major pullback.

This is all the more reason to steadily accumulate your gold and silver. The daily and weekly ups and downs do not matter if you have a long term horizon, and helping you realize your long term goals is what the OWNx platform was built for.

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DLT Will Help Rein in Corruption

OWNx Team Blog, Global Finance and Economics, Money & Finance, News & Commentary

Corruption is destructive to any society where it is present. That is a given. Most people are beginning to understand that corruption in general is more widespread than they imagined. The question is, what if anything can be done about it?

By definition, corruption is abuse of power for personal gain. Because it originates from a position of power, it is difficult to dislodge once it has become entrenched. An outside force greater than the entrenched power system must emerge before any meaningful reform can occur.

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M-Pesa – Why Gold Owners Need to Know About It

OWNx Team Global Finance and Economics, News & Commentary

The financial world is changing at a pace that is mind boggling. The problem for those living in the West is – the change is occurring well outside of the “global financial capital of the world,” which we naively consider to be New York City. Nope. It’s happening in of all places – Africa.

To claim that Africa is in any way on par with New York City when it comes to finance is considered laughable by most.  That is because we have become quite arrogant regarding the dominant position in finance that Western banking has attained over the past 70 years. That era however, is coming to an end.

Something interesting happened on the way to the bank.

A financial technological revolution was born. Now, countries like Kenya are ground zero for innovation. With a lack of legacy infrastructure to hold them back, FinTech adoption has flourished. M-Pesa is a revolutionary payment methodology that allows peer-to-peer payments using just your cell phone.

A recent article entitled, “IOT Meets DLT and Blockchain meets M-Pesa in Africa,” highlighted the massive social change that FinTech is bringing to Africa and beyond.

“M-Pesa completed its 10th anniversary this month. It is the firm that revolutionised financial services by providing a simple way of transferring money, and has crossed 30 Million users across 10 African nations (only 10). But the impact it has created has already highlighted it as a model to be used for the emerging world.  In 2016, according to Vodafone, M-Pesa was used in six billion transactions. Research by Digital Frontiers found a 22% drop in female-headed households living in poverty in areas with access to M-Pesa. The same study noted that the source of income for almost 200,000 women in rural areas shifted from the low-income, labour intensive agricultural sector to more prosperous small business creation.”

This article reveals a very important trend that goes well beyond technology in finance. People are awakening to how financial and monetary reform can help their fellow human beings. By simply providing access to financial services, such as a payment system on a phone, the lives of millions are being transformed.

What happens when the money and monetary systems that make up the value exchanged on those systems is dramatically improved?

The cat is out of the bag. The genie has been let out of the bottle. Use whatever metaphor you want.  People are learning by the hundreds of millions that we can do better – a lot better – when it comes to defining what money is and who has access to it.

Gold and silver will always play a role in the global monetary system. They cannot be separated from it. It is largely irrelevant whether they become money themselves again and are freely traded via a cell phone app, or if they are used as a check and balance against abuse of future monetary systems. The fact that they will play an important role is cast in stone by 5000 years of history. It might be a good idea to own some. 

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Gold and Silver Market Update

OWNx Team Blog, Gold & Silver Market, Money & Finance, News & Commentary

Today marked both the month and quarter end closing price for gold and silver. For those who watch technical indicators and moving-day averages, the failure of gold to close above the 200 day moving average at $1,262 indicates that a major upward move in gold may have not yet begun. It is quite possible we will see another period of weakness prior to the main event.

That doesn’t mean gold cannot rise from here. It simply means on a price/time basis, gold has not given the “all clear” signal.  Any upward price movements may be temporary, with continued pullbacks to various support levels – the strongest of which is in the $1,200 range.

Although it is always nice to see your holdings grow in value, those who continue to steadily accumulate gold and silver for the long term see this range bound trading for what it is. A gift.

The world continues to absorb the implications of a rapidly changing financial system. That includes the introduction of cryptocurrencies, which have their own set of problems to contend with. Amidst all the noise and introduction of new technology, it is great to know that you can own the one form of money that has endured for over 5000 years.

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Cryptocurrency Design – Green or Gold?

OWNx Team Global Finance and Economics, News & Commentary

Within the FinTech world, there is a great deal of activity in the cryptocurrency space and there will be for the foreseeable future. Incubator labs around the world are designing new types of currencies. The last thing any of them want is to discover that they missed a variable that could kill the viability of their currency.

It turns out that the leader of the cryptocurrency world – Bitcoin – may have a significant problem in this regard. It is one that could have easily been overlooked. That is – energy consumption.

According to a recent article, in June 2015 the Bitcoin network was consuming enough electricity to power over 170,000 American homes. Less than two years later, that number has grown to over 1 million homes. The Bitcoin system is designed in such a way, that it takes ever increasing amounts of computing power to mine a new coin.

That means, unless there is a significant reduction in the cost of energy, new coins are going to be very expensive to mine.

The author of the article makes the following observation:

“ …if no changes are made to the system, the viability of the currency itself might be challenged because the seigniorage (defined as the difference between the face value of money and what it cost to make it) could be minimal or negative. In other words, the marginal electricity costs could outstrip the value of the newly minted Bitcoin.”

This places Bitcoin in a very interesting position by introducing several free market variables that may or may not be appropriate for a currency.

  • Adoption of Bitcoin in the currency market must increase such that the value of the coin increases enough to support the energy required to create new coins.
  • Alternatively, mining may decrease due to costs that are higher than the cost of production. This creates scarcity of the coins themselves, which would drive up the value (assuming it has enough market acceptance) and draw miners back into production. This is similar to gold and silver production.
  • Will the pace of energy efficiency in computing power overcome the demands of the mining network and make this all a moot point?

These factors introduce questions that must be answered in order to determine whether Bitcoin can emerge as a stable medium of exchange or a long-term store of value.

  • Will excessive energy consumption cause Bitcoin to become just another speculative investment and not a viable currency?
  • Are energy related and other non-monetary free market components appropriate inputs to determine the value of a currency?

Some of these questions can also be applied to gold and silver. They too require energy consumption. The value of energy inputs has a direct impact on the willingness of companies to mine them.

However, there are significant differences as well.

  • Gold and silver are tangible, physical assets.
  • The infrastructure and energy costs to mine gold and silver are well established.
  • They have a 5000 year history as being a central component to most monetary systems.
  • The energy required to purchase, trade, and sell gold and silver is minimal due to their using an already existing financial infrastructure.

One thing is certain. What money is and what it should be is being reconsidered around the world. While these important questions get sorted out, we can be confident that the enduring track record of gold and silver will ensure that they will maintain a place in whatever new monetary paradigm emerges.

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Gold and Silver Market Update 3/24/17

OWNx Team Blog, Gold & Silver Market

Gold and silver appear to be taking a pause after a strong two week run. During that time, the price of gold rose from $1,200 to about $1,250 at the close of this week. The price of silver had fallen to $17 but has risen to $17.83 at the time of this writing.

Both have posted solid gains and it is no surprise that they are now taking a breather.  The broader stock markets are also digesting recent gains. There is a great deal of geopolitical and economic activity, which introduces enough uncertainty to cause strong movements in either direction to take a pause while trends are re-evaluated.

We continue to see wisdom in an appropriate gold and silver accumulation strategy. As mentioned last week, there are plenty of reasons to see a strong gold and silver market in the months and years ahead.

In case you missed our article earlier this week, we drew a link between large retailers closing their doors and the price of gold. The massive changes to our economy due to an antiquated monetary system and the introduction of new technology touches all markets and industries, including gold and silver.

Enjoy our weekend,

The OWNx Team

 

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14 Large Retailers Closing Stores and Its Link to Gold

OWNx Team Global Finance and Economics, News & Commentary

It was announced today that fourteen large retailers besides J.C. Penney are closing many of their brick-and-mortar stores. What does that have to do with the future spot price of gold and silver? A lot. It comes down to one word.

Technology.

The world is undergoing nothing short of a major wave of technological innovation. Online retailing is literally eating up the traditional retail experience. Browsing online has replaced browsing the store aisle for everything from motor oil to designer jeans. The overhead associated with maintaining a physical infrastructure has reached a tipping point.

This phenomenon was foreseen in a book written in late 2013 called “Too Different for Comfort” (free PDF download). In it, Louis-Vincent Gave told of a coming “Robolution” that would transform the world economy and vastly disrupt the traditional employment structure. Following are some of the more interesting chapters in the book.  

Chapter 2 The Rise of the Robots – Or Pricing ‘Cheap Labor’ Out of the Market
Chapter 4 Will the Robolution End Up Eating Its Own Children?
Chapter 6 The asset-price centric monetary system
Chapter 11 The Dollar-Debt Standard
Chapter 17 Adapting

These are provocative to say the least. The one that will be our focus is, “The asset-price centric monetary system.”  A few excerpts from that chapter are very interesting:

“We have now moved from a world where money was at the center of the system and asset prices at the periphery, to a world where some specific asset prices are at the core of the system, while money has moved to its borders.”

“Economic thought has thus moved from the horizon of the labor theory of value, to the theory of subjective value, to the theory of never falling prices.”

“And this is where the next problem for investors may find its source as, if anything, the various central bank interventionist policies have probably had their biggest impact not on prices, but on the volatility of almost all assets.”

Gave’s contention is that price discovery of assets was due to money finding its way through the economy into those assets that the market valued.  Now, the monetary system is managed in a way to prop up certain asset classes so that they may never fall in price.

It seems logical then that the asset classes that are in most need of protection are those that are highly leveraged by debt, including global sovereign bond markets. After all, when push comes to shove, governments and their central banks will ultimately move to protect their assets from default over all others.

The question is, “Is this strategy sustainable?”

The role technology is playing in hastening the coming reform of the global monetary system cannot be underestimated. It is not only disrupting retail industries and the entire banking industry (via FinTech). Technology is also enabling (perhaps requiring) that we rethink how a future monetary system should be designed in order to accommodate massive changes to the very structure of the economy and labor markets.

Debt based and central government managed money on its own simply will not be able to support or adapt to the emerging economy. A value based currency system will. Such a system would naturally include gold and silver. The question is whether or not we will have the political will to consider, let alone implement, such a system. It’s a question we all need to be aware of, because if we do not adapt, our future may indeed be too different for comfort.

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Real Interest Rates and the Gold Price

OWNx Team Blog, Global Finance and Economics, Gold & Silver Market, News & Commentary

An interesting development has occurred in the markets that would suggest a sustained, multi-year rise in gold and silver prices is indeed around the corner. This week Fed chair Janet Yellen signaled what the FOMC’s intentions are on future interest rates

Prior to the meeting, some analysts were looking for a more hawkish stance due to recent strength in economic data. This left the markets fixed on rising nominal rates (the stated rate charged on loans). However, a more dovish tone combined with a simultaneous uptick in inflation caused the focus to shift to “real” interest rates (stated rate minus the inflation rate). The price of gold and silver jumped this week on this shift in focus.

After languishing in March, the price of gold and silver jumped on this shift in focus. This increased volatility is to be expected. Many markets, including interest rates and gold, are undergoing a long term transition phase. Supporting this view is the February producer price index, which rose .3% after posting a surprising .6% gain in January.

Increasing inflationary pressures along with the Fed’s promise to keep monetary policy “accommodative” sets up a real possibility of sustained negative real interest rates for the foreseeable future. All of this has positive implications for gold according to UBS’s Wayne Gordon.

“That means real interest rates go deeper into negative territory in the U.S., that means a weaker U.S. dollar and it means a better gold price.”

  • Rising inflation expectations.
  • Negative interest rates.
  • Rising commodity prices.

All of these provide a backdrop that would support a sustained, multi-year rise in gold and silver prices. Transition periods are the best time to dollar cost average into the asset class that is preparing to make a turn.

The evidence continues to mount that gold and silver prices today are in an attractive range for long term investors. You may want to consider setting some aside in an IRA. It’s not too late to make your annual contribution, and the technology behind our OWNx IRA makes it a cost effective alternative.

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DLT/Blockchain, the BIS and the Link to Gold as Money

OWNx Team Global Finance and Economics, News & Commentary

Some of the largest global institutions are beginning to catch on that DLT (distributed ledger technology) is going to have an enormous impact on banking and payment systems. DLT has been around for years, primarily in the form of the Bitcoin blockchain. It’s stated benefits have been around nearly as long.

In one important development, the Bank for International Settlements (BIS) is officially acknowledging that those benefits are more than just potential. We find the following interesting admission disclosed in a paper released by the BIS last week entitled: Distributed ledger technology in payment, clearing and settlement: an analytical framework:

DLT may radically change how assets are maintained and stored, obligations are discharged, contracts are enforced, and risks are managed. Proponents of the technology highlight its ability to transform financial services and markets by: (i) reducing complexity; (ii) improving end-to-end processing speed and thus availability of assets and funds; (iii) decreasing the need for reconciliation across multiple record-keeping infrastructures; (iv) increasing transparency and immutability in transaction record keeping; (v) improving network resilience through distributed data management; and (vi) reducing operational and financial risks.1 DLT may also enhance market transparency if information contained on the ledger is shared broadly with participants, authorities and other stakeholders.”

Yes, DLT can provide those benefits, and more. Not only does it have the capacity to  change how banking and payments are conducted by you and me, it also enables us to re-imagine what a monetary system should be, who should be in charge of it, and what type of money is used within the system.

The BIS undoubtedly understands this. However, for them to discuss the use of DLT as a means to change the actual money we use is a bridge too far – at least for now. Bitcoin let that proverbial cat-out-of-the-bag. But what is not well known is that little labs of innovative financial thinking have popped up all around the world. They are not just focused on how to make the existing banking system better. They are thinking about how to make money itself better.

That’s a big deal.

Many people think there is no better money in the world than gold and silver. This belief makes it likely that at some point, organizations like the BIS are going to have to deal with the impact that distributed ledger technology will have on the very money we use.

We’ll keep an eye out for a white paper from the BIS on the the role silver and gold bullion may have in such a future monetary system. Although it is likely to come at some point in the future, we won’t hold our breath waiting for it. In the meantime, we will work to keep you ahead of the BIS in understanding just how DLT might change the world for all of us in the years to come.

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