Superstorm Sandy will cost Millions but USD will go up!

Now that November is just around the corner we can feel the rain all around with the cold breeze of Winter heading with such an Intensity, that makes me feel relieved, once again time goes by and the purpose of the Million Euros in less than 5 years is meant to happen. All over the news we have the wrath of super storm Sandy which killed at least 33 people in seven states and left more than 8 million people without power.

In New York, the U.S. financial markets closed for a second day today, an unprecedented move for the stock exchange. In Lower Manhattan, the home of the financial district, a blowout at a Con Edison substation cut power to thousands of customers. 

Today after a brief chat at work I was asked to foresee the direction of the USD and I was prompt to assess that the USD will go up. There is logic behind my perspective which is that after a natural disaster in the immediate term or short term currency will go down but as soon as the damage is quantified more Investment is needed to rebuild and assess the reconstruction so by forces of nature local currencies will go up.

Throughout history, natural disasters have caused depreciation short/immediate term (and even appreciation long term) of currency because of a jolted economy. If you take part in currency investing then it’s imperative that you learn how to leverage your investments in uncertain times. 

Usually, currencies weaken right after a natural disaster because of uncertainty about how much economic damage was actually done, according to Barclays Wealth. However, currencies can strengthen again once other countries start funding relief efforts, but the currency can then weaken once internal banks try to alleviate economic hardship (by doing things like lowering the world interest rates).

It all depends on the specific country’s situation, so there are a number of different scenarios. The following examples illustrate what has happened in the last decade.

Earthquake and Tsunami in Japan – Yen

Japan recently suffered two major blows when it was hit by an 8.9-magnitute earthquake followed by a massive tsunami. According to Businessweek.com, the Japanese currency fell right after the disasters, weakening up to 0.4% against the dollar. However, the Yen generally benefits from the uncertainty natural disasters leave behind, and repatriation (when assets overseas are turned back into Yen) could strengthen the currency.

The Yen did end up faring well and actually strengthened dramatically, and other than repatriation being a possibility, an Investopedia article suggests another reason could be that the Japanese “might have to liquidate part of their large non-Yen denominated investment portfolio to fund relief and reconstruction efforts in Japan.”

Regardless of the reason, in August of 2011, Japan tried to combat the surging strength of its currency that had not weakened much since the disasters in March.  According to Reuters, Japan had been warned that the Yen was so appreciated that it could possibly hinder Japan’s recovery efforts.  As a result, Japan sold 1 trillion Yen and got the Yen down to 80.20 per US Dollar from 77.10.

Earthquake in Haiti – Gourde

The Haitian Gourde experienced a surge right after Port-Au-Prince was hit with a7.0-magnitude earthquake in January 2010. According to The New York Times, Haiti’s currency strengthened by more than 25%, and for some purchases, the rate would be about 30 Gourds to the Dollar. There are a couple of explanations for this appreciation.

One, which comes from the same New York Times article and suggested by a former governor of the Central Bank, is that the decrease in oil imports was keeping more money in Haiti, thus preventing any drastic appreciation. Another contributing factor was reported by a different New York Times article a couple of months after the disaster, which mentions how an increase in money from abroad helped the Gourde resist depreciation.

Earthquake in New Zealand – New Zealand Dollar

In February 2011, a 6.3-magnitude earthquake impacting New Zealand killed at least 75 people and left the economy struggling. Following the disaster, the New Zealand dollar (nicknamed “the kiwi”) fell about 2% against the U.S. Dollar, according to CNBC. Bloomberg reported that at one point, the kiwi fell to 74.55 U.S. cents, which was its lowest level since late December. As can be seen, New Zealand did not experience an immediate strengthening of the currency that some other countries did after a natural disaster.

In fact, early and mid-March didn't bring much relief, as the country was still lowering its main interest rate to fight the economic problems it was facing. Late March did indicate some better signs for the currency, when it starting gaining due to the possibility of a construction boom. This could point to the potential that circulating more money within a country has for its currency.

Shall we buy USD?

It’s probably safe to say that every natural disaster has an effect not only on a nation’s general economy, but also on its currency making it even stronger.  This influence doesn't just impact the specific country’s currency; either — other countries tend to feel the effects, as currencies’ strength is measured against one another. Countries around the world have experienced similar phenomena, therefore It is to my regret to say that the main engine of any economy unfortunately comes from a natural disaster or war, I will test this idea by Investing promptly tomorrow on some newly made USD. 

Meanwhile keep positive, keep Investing it is just about to happen… 

Appetite for Investing Millions

Now that Fall is here and we are all trying to make the best out of it I have to say that the road has more curves than ever... this 2012 is giving me more headaches than I was expecting, but still when the rain goes the sun comes and that is when I come in.

With full force training almost everyday and living a life that fulfills my needs another article again and on the search of 5 Million Euro in less than 5 years that´s why we are all here right? I want to share the experience of one of my youth heroes Mr. Duff McKagan In 1994, Duff McKagan's pancreas exploded. The former Guns N' Roses bass player says years of drug and alcohol abuse caused the rupture, which left him sidelined for months. As he recovered from the incident at home and sobered up, he found himself with hours of free time and little to do. 

McKagan wandered into his basement one day and came across a file cabinet containing GnR's financials from the previous six years. While thumbing through the reports, he realized he had no idea what they meant. Then, he panicked.

"I couldn't make sense of it. I didn't know how much we had made or lost on the tour," McKagan recalls. "As a 30 year-old millionaire, how do I admit to somebody that I don't know what the fuck I'm doing?"

Now, 17 years later, McKagan is starting his own wealth management firm for musicians. The company, called Meridian Rock, will be headed by McKagan and Andy Bottomley, a British investor. Their goal is to educate rockers about their finances instead of pandering or lying to them -- no small feat in the music world, where businessmen, a.k.a. "suits," are often seen as the enemy.

McKagan, 47, says his epiphany in 1994 was a wakeup call. He enrolled in a basic finance course at Santa Monica Community College, which he says gave him a hunger for academia. McKagan moved to Seattle four years later and signed up for more classes at a local community college. "It took me twice as long as an 18- or 19-year old just out of high school to do the homework, but I got through it," he says. By the time he was accepted into in Seattle University's Albers School of Business, McKagan had become actively involved in managing his portfolio, which included everything from stocks and mutual funds to property.

A few months into his last year of business school, McKagan, who had left Guns N' Roses in the late 90's, formed a new rock supergroup, called Velvet Revolver. The band -- which also included GnR's Slash and Scott Weiland, the singer from the Stone Temple Pilots -- was a surprise hit. Velvet Revolver's album debuted at No. 1, and McKagan took a hiatus from business school to go on tour (he is still one semester short of graduating). When Velvet Revolver broke up a few years later, he played a short stint with the band Jane's Addiction, and then fronted his own outfit, Duff McKagan's Loaded.

It was around that time, McKagan says, that word started spreading that he knew something about managing money. He began getting regular calls from musician friends with questions about everything from whether to buy a house to where they should invest their money.Though McKagan has spoken publicly about the business of music and authored a column in Playboy on finance ("Duffonomics"), he is quick to downplay his investing expertise.

"I'm not a financial planner -- I was just trying to figure this out for myself," he says. "I didn't want to be 60 years old and broke, having made all this money in my twenties...that was my simple goal."

How to be a Rocker and a Money Manager

But the mere fact that his friends were looking for advice from a guy with just a few years of schooling under his belt led him to have another epiphany. Most rock stars know nothing about their finances. Some don't want to know -- but others are kept in the dark, or are too self-conscious to ask simple questions. And yet, they were comfortable talking about money matters with McKagan, who was one of their own -- so what if he could bridge the gap between the musicians and stocks?

About a year and a half ago, McKagan met Andy Bottomley, a former banker who says his early stage venture firm, Imprimatur Capital, counts investors like Paul Tudor Jones' Tudor Investment Corp. Bottomley is a music aficionado (he counts indie acts Sonic Youth and Sebadoh among his favorites) and the two hit it off immediately, so much so that they decided to form Meridian Rock together. Though the company is still in its early stages -- McKagan and Bottomley are currently interviewing money managers in both Europe and the U.S. -- it has won industry backers like Peter Asher, the former A&R man for the Beatles' Apple Records and producer of several James Taylor records.

There are already scores of wealth managers, both at small boutique firms and large bulge bracket banks, who cater to high net worth individuals like musicians. What makes Meridian Rock different, McKagan says, is its understanding of the industry.

For example, he says, most bankers overestimate the "window" in which music acts are guaranteed income, which he places at three to five years. The musicians themselves are equally clueless, he adds. "You think the money is going to keep coming," he says. "When you get that big contract, or your record goes platinum and you're selling out concerts, you don't see that it's going to end."Anyone who's ever seen Behind the Music or Cribs knows that rock stars aren't generally frugal creatures. But they are rarely told, in blunt terms, when they need to cut back, which is one reason why so many go into debt.

"A lot of business managers and attorneys are nurturing that, saying, 'You're the greatest, this is never going to end, the next album is going to be greater,'" says Rick Canny, who manages McKagan's band. "A manager's responsibility is not to tell you, 'In a couple years, you're done.' That's the best way to lose a client."

Musicians tend to surround themselves with intermediaries who make their financial decisions for them. McKagan says Meridian Rock's advisers will talk directly to the talent, in plain and simple terms. The company's three tenets, he notes, are righteousness (i.e., not screwing people over), transparency, and education.

While he admits that not all rockers will be interested in the service, he believes that many want to learn more about finance, but are afraid to admit how little they understand."If they're anything like me when I was thirty, they're too embarrassed to ask," he says. "I didn't know what a stock was, what a bond was." Today, McKagan knows a great deal -- and he has an appetite for Investing just like me so welcome to the Jungle baby it´s time to Invest!