Correspondence: Capturing the resources windfall, buying Bitcoins, market volatility

Capturing the impending resource windfall

I recently came across this report that I believe makes compelling reading for long-term investors, with regard to Australian and world resources, infrastructure, value chains, and individual companies. I would be very interested to hear your comments on it.

The report says that in 20 years, almost half of the world’s countries could depend on their resource endowments for growth. A new model could help governments capture the coming resource windfall instead of squandering it. In a related podcast, MGI’s Fraser Thompson discusses the development model and what countries – and companies – should do.

Tim Treadgold’s response: It looks very interesting but I believe it’s just a fresh way of looking at a problem known as the “resources curse” or “easy come, easy go” which certainly effects a lot of third world countries. Australia has avoided the curse, so far, but it is a reminder that we could go the same way if we don’t manage the industry more competently.

Where to buy Bitcoins?

I was interested in the Bitcoin article and wondered if you can suggest a reputable dealer to buy them from. The online websites are a bit confusing and I don’t know if they are safe? I would really appreciate your feedback.

FB

Editor’s response: Buying Bitcoins can be tricky as each of the exchanges does carry some risk. For beginners, Localbitcoins.com may be a good choice. It is an online marketplace that enables people to buy and sell Bitcoins between each other, either through various online payments or by cash over the counter.

Another way you can purchase Bitcoins is through btradeaustralia.com, a registered private company operating out of Sydney that accepts over-the-counter cash deposits. The company acts on your behalf to buy and sell Bitcoins with other buyers and sellers, for which it charges a small commission.

You also need a Bitcoin wallet before you can begin purchasing the online currency. You can buy a cloud wallet, like through Blockchain.com, or download an application to store the wallet on your computer.

Be aware, though, that you are buying into a currency that is highly volatile, and as such, is a speculative investment. For example, Bitcoin recently plunged 20% after the Chinese government banned its financial institutions from trading it.

Volatility in the Australian market

Greetings Alan and crew, my question (and hopefully you can answer) is why is the market raising a little then crashing down so quickly?

Your report always has something for everyone.

One last thing: Alan there has been no mention of your pets in recent Saturday notes.

Bill Morris

Editor’s response: Thanks for your letter. Because the market has risen so much over the past year, there is a tendency at the moment for investors to take their profits – especially considering the reduction in US stimulus could begin as early as next week. This can result in the market movements you are describing.

However, it is important to highlight the fundamentals in the market are still there: the sell-off in the market is not being driven by a poorer outlook for Australia’s companies.

No dividends for Drillsearch

Thanks for your article ‘Drillsearch’s positive energy flow‘. Your assertion that Drillsearch is unlikely to pay dividends for three years is quite upsetting! Senex is in the same position ... in their AGM this year, none of the motions were related to paying shareholders dividends. The rest of us can stay out of the income stream! Bugger the concept of the ‘social contract’. Australian companies should take a leaf out of New Zealand Oil Gas’s book – they pay two dividends a year now.

NB

Refreshing take on the market

What a great courageous article by Adam Carr 'Our market’s still in value territory'. Very refreshing thinking. I couldn’t agree more.

Kelvin Dangerfield

Taxing short-term traders

Hi Alan. I read your article in latest ASA mag: ‘Is the sharemarket rigged’. You bemoaned the advantage dark pool traders had. There is a simple solution in that the share market is designed for investment and not trading. Investment implies holding shares for a reasonable length of time – not a day or two or even a month. The solution is to tax the short termers out of the market. A tax rate on very short term gains of say 60-70% would tidy this up. It would also clean up many other problems that the short term traders cause – the major one being volatility. I think this would be politically positive as the percentage of traders to the population would not be great. I would appreciate you giving this some thought and I wonder if you could progress this concept further in the correct forum.

Robert Dyson