The great cryptocurrency crash of 20**

There were many charts talking about the bubble in cryptocurrencies towards the end of 2017. The peak of ‘Bitcoin Bubble’ on Google Trends was 7th December 2017, and the ‘peak’ of Bitcoin to the USD was reached nine days later at close to USD 20,000 per bitcoin.

fullsizeoutput_5105

 

‘It’s not a currency’ – ‘it isn’t a store of wealth’ – ‘it can’t be used to pay for anything’ – ‘can it buy a Mars bar?’

So much misunderstanding, fear, and pessimism about something as dynamic as distributed trust.

When surviving crew members of the 2008 financial crisis decry it as worthless and a fraud, one must suspect something interesting is happening. Which it is. Sometimes one must look further to isolate the Dimon in the Rough.

There is so much more to cryptocurrency than Bitcoin. There are hundreds of alternative currencies, or AltCoins, possibly thousands.

There is real money invested in these currencies – young money mostly, not anchored in the history of a financial crisis, traditional banks, traditional investment products, or fiat-backed assets. Is it all naive – possibly – but it is a tremendous force for innovation and achievement. Of course, the rapid rise in the price of cryptocurrencies and associated tokens has been amazing and has captured the attention of speculators, scam-artists, and regulators.

How will a wealth management arm of a bank sell a Millenial a bland fixed income saving product, with a ‘targetted’ yield of 4% and an upfront fee of 5%, when with no upfront fee, she can buy Neo – a Chinese backed AltCoin – that has an inherent 4% yield at today’s price, and who knows what level of upside once the 100 million coins are issued.

Of course, everything in moderation, but this generation of investors will have more risk appetite and an expected return on equity higher than the traditional market players of today. This is the cold-brewed coffee, avocado and poached eggs with cracked Kampot Pepper generation, that will be paying, or not, for your pension. Let’s hope they are successful in the adventures they are leading us into, even if/after the euphoria of Bitcoin fades.

 

 

Myanmar has Jaded Western eyes – now China’s opportunity?

Myanmar is a complex country at the geographic crossroads of India and China and the temporal crossroads of a frontier economy and a failed state. After several years of being wide-open to Western admirers, there is now a potential pivot to China.

In Pakistan, as an example, China has agreed to invest around $70 billion in infrastructure development in recent years, in Myanmar only $15 billion has been invested by China over the past three decades. In 2012 when Myanmar opened up more, it was in part to pivot towards the West, and not become dependent on China. The West eagerly pounced on the opportunity, with Hillary Clinton and President Obama, welcoming the reforms and putting Aung San Su Kyi on a very high pedestal.

The November 2015 elections initially appeared to be a milestone for Myanmar’s reform, and a legacy for the then President Thein Sein, with a sweeping win for Aung San Su Kyi’s party, but the fact that the Generals retained a key 25% block in Parliament quickly started to cast a shadow. Despite that, Billions of dollars of aid and investment flowed into the country, with dramatic impact seen in several areas. Land prices sky-rocketed, and everybody looked at putting a toe in the water.

The shine came off the Golden Land very quickly in 2017 when the problems in Rakhine state illuminated more issues than the West was really keen to know. Firstly, the Military is very good at reacting swiftly and fiercely to any challenge on its borders, as it has been hardened for many years in its battles with Ethnic groups in the northern Shan states. Secondly, the ruling party has little visible power, particularly as it has to contend with the blocking 25% stake held by the Military. Thirdly, Aung San Su Kyi has disappointed many in her apparent inability to act decisively, being the politician first and Nobel Laureate and icon of hope second. Lastly, perhaps more worryingly, is the attitude of the general population themselves to the Rohingya issue.

The Rohingya have little support among Myanmar’s 135 distinct ethnic groups, across the spectrum of religious, economic or educational levels. They are not valued as citizens of Myanmar. Their land sits in an important geographical area which promises access to resources for foreign investors, particularly the Chinese. They do, of course, have different religious beliefs to the majority of the predominantly Buddhist Myanmar people, but the problem is not only about religion.

The refugee crisis that is emerging as a result of the clearing of the Rohingya is possibly the worst in the world, on par with Syria. The world is unprepared. Bangladesh, the recipient of much of the recent influx, possibly numbering close to one million displaced people, is unable to cope and contain these starving and maltreated people.

The pressure on Myanmar will almost certainly increase. Its golden shine has been indelibly tarnished, and the next few years will bring domestic political change, possibly a coalition, or worst still a more pro-Military led parliament, once more, but almost certainly consigning the legacy of Aung San Su Kyi to disgrace. What this means for investors is unknown. There have been some positive improvements for Myanmar’s 60 million people, in particular, a dramatic improvement in its connectivity – now more than 80% of the population have access to a data-enabled phone. Information is more free-flowing, at least for now, for as long as the Military does not interfere too much (It controls one of the four mobile telecoms company, MPT, and is friendly to the fourth, controlled by Vietnam’s military.)

fullsizeoutput_4af8

The Chinese are willing to protect Myanmar’s Generals and may become the source of financing for infrastructure development that is much needed, and which Japan and some of the multilateral agencies may be unwilling or unable to provide if targetted sanctions are re-imposed.

 

 

 

 

 

Myanmar Motors On

0+VSt4UUQ8a+cqPQ3dZVxAFor a large city in ASEAN, one thing is striking about Yangon: there are no motorbikes. Having lived for several years in Vietnam, I got used to the gentle ebb and flow of motorbike traffic, which you can walk through like Moses parting the Red Sea. Yangon is markedly different, The story is that a general/government official was assassinated by someone driving a motorbike, therefore a ban was initiated. The only people allowed to drive motorbikes are policemen and electrical repair-men. I figure that a good business idea would be to buy and electrical repair business and use it as a front for a pizza delivery operation.

The consequence of this is an abundance of cars. Motor Mania in Myanmar.

In the mid-1990s I was involved in a business in Myanmar importing brand new Land Rovers and BMWs and repairing the 3000 odd existing Land Rovers in the country. The business was sold to Astra of Indonesia in the late 1990s not long before the Asian Financial Crisis hit. Astra is now owned by Jardine Cycle & Carriage, a stock I hold today.

There are approximately 430,000 auto-mobiles registered in Yangon, including 57,000 taxis, out of a total of 640,000 vehicles in Myanmar as a whole.

The problems are obvious to visitors to Yangon, pavement parked cars, and slow-moving traffic. Other issues are an increase in road traffic accidents, with almost nine accidents a day leading to two deaths per day in vehicle-related accidents.

Some of the causes problems are subtle – a mixture of left hand and right-hand drive cars, all driving on the right side of the road, and the lack of car-parks or adequate basement parking in buildings. As the economy continues to grow, and as the affluence increases from a low-base, the problem will only get worse in the next few years.