Posted on

Property Of The Week: 5 Mitchell Street, North Bondi, NSW

5 Mitchell Street, North Bondi, NSW

The dusty adage of ‘location, location, location’ certainly rings true for this North Bondi residence.

Located within walking distance of the beach and Seven Ways shopping precinct as well as local eateries, this 5-bedroom, 3-bathroom, 2-car parking home is the ideal family offering.

Set on a wide-fronted block offering 251sqm, the free-flowing spaces are split across two floors.

Inside presents a newly refreshed home with polished timber floors and new carpet. The living room and kitchen offers classically high ceilings – the latter fitted with an island connecting to the spacious dining area.

It’s also here that the oversized windows overlook the garden and the lead out to the alfresco dining terrace.

All five double bedrooms offer built-ins while the master bedroom is set with an ensuite, walk-in-robe and private balcony access.

Elsewhere the home offers three bathrooms and an internal laundry.

Further, the home offers a workshop or storage area – with the scope to convert – along with an attic.

Ducted air condition is available in five zones, with ceiling fans throughout the home supplementing the air flow.

The listing is with PPD Real Estate’s Mary Anne Cronin (+61 411 773 646) and Jane Lomax (+61 410 465 277) and is headed to auction February 27. Price guide; $2.9m. 

Ppdre.com.au

Posted on

Brand-New Oceanfront Mansion On Victoria’s Coast Is A ‘Modern-Day Masterpiece’

Peninsula

LISTING OF THE DAY

Location: Flinders, Victoria, Australia

Price: $30 million

Dubbed “Horizon,” this recently completed five-bedroom mansion is perched on a dramatic cliff edge on Australia’s Mornington Peninsula near Flinders township, about 72 kilometres south of Melbourne.

In 2015, the family of legendary Australian rules football coach Jock McHale put the property, which includes a 1920s homestead called Pinnacle Park, up for sale. According to listing agent Rob Curtain of Peninsula Sotheby’s International Realty, developer Brooke Starbuck bought it, along with multiple adjoining titles.

“Unlike all of the other allotments offered, which have restrictive zoning regulations, the five-acre homestead did not fall into the same zoning,” Mr Curtain said. “So he saw an opportunity and subdivided the land into four separate plots while maintaining the original homestead.”

Built on a cliff’s edge, the monolithic home is made of concrete and glass.

Peninsula Sotheby’s International Realty

Starbuck enlisted local craftsmen Williams Group and commercial architect Bruce Henderson to build the home. The process took five years. “He wanted to do the unique position justice and build a generational home that would withstand the harsh environment of living so close to the ocean,” Mr. Curtain said. “He also hired interior designer Mim Design for the internal fit-out based on Miriam Fanning’s renowned coastal work. It’s truly a modern-day masterpiece.”

The interiors feature St. Croix stone complemented by American oak flooring. The home’s elevated first level contains five ocean bedrooms all with en-suite bathrooms and ocean views, as well as a central chef’s kitchen, a fully appointed scullery and three living spaces oriented to maximize the views.

“The main open-plan living, kitchen, dining area is simply spectacular,” Mr. Curtain said. “The 13-foot ceilings with floor-to-ceiling glass windows and a 180-degree ocean view create the most surreal feeling of being suspended over the water. It’s an architectural and engineering triumph set on a truly spectacular landholding with 335 feet of oceanfront and tremendous 270-degree ocean and rural views.”

Ample outdoor terraces provide plenty of room for al fresco dining.

Peninsula Sotheby’s International Realty

Stats

The 2000sqm home sits on a 1.25-acre lot and has five bedrooms and six full bathrooms.

Amenities

The home has the latest in technology with world-class kitchen appliances from Wolf and Sub-Zero, integrated audio-visual by Sonos, zoned hydronic floor heating and VRV heating and cooling throughout. A comprehensive security system includes keyless entry and all home technologies are controlled via Elan. The residence is also 6-star energy rated and includes a solar panel system.

An elevator connects the upper level to the lower one, which has a professional gymnasium, sauna, cinema room, wine room and a garage. There is also a second gourmet kitchen servicing an al fresco spa terrace, where a suspended 20-person spa overlooks the ocean.

Neighbourhood Notes

“The beauty of this location is the views are all water and rural surroundings as the area is better known for the farming environment,” Mr. Curtain said. “But this home is only a five-minute walk to the Flinders township, golf courses and the Flinders Bay Beach. It’s also only a 60-minute drive to Melbourne’s central business district.”

Listing Agent: Rob Curtain, Peninsula Sotheby’s International Realty

Posted on

Gold Is Way Down. Here’s When To Worry.

Gold

Gold has fallen from its lofty August levels. The precious metal appears to be at a crossroads, but the price likely has to slide more from here in order for investors to get really spooked.

The price of gold ran up 37% between March 15, 2020—roughly when investors were most fearful about the economic damage from the Covid 19 pandemic—and August 2, 2020. That day, gold hit an all-time high of US$2,028, as seen by the Gold Continuous Contract (GC00). Even though stocks rose in that time span, demand for haven assets remained strong, as there weren’t many meaningful signs that the world would soon emerge from the pandemic.

Since hitting a record, the commodity has fallen 9% to date. “The long-term uptrend in gold is teetering on the edge,” wrote Jason Goepfert, founder of Sundial Capital Research in a note.

While gold has been in a concerning downtrend of late, gold-related stocks offer some optimism for the precious metal. Gold mining stocks are typically correlated with the actual commodity price. As an example, Goepfert highlights the VanEck Vectors Gold Miners ETF (GDX), which has largely echoed gold’s moves over the past year. The ETF rose more than twofold between mid-March and early August, before falling 20% from the August level to date.

But now gold mining stocks suggest there could be brighter days ahead for the commodity. Roughly 20% of gold mining stocks have been trading above their 200-day moving averages on most days in the past two weeks, down from more than 85% of those stocks recently, Goepfert said. This cycle has occurred several times in the past few years and usually precedes gains for most gold stocks in the coming three-month period, Goepfert says.

Even if gold price trends cannot reverse themselves, it likely isn’t time to get too bearish yet. The key price level to watch for the contract for the actual metal is US$1780, according to Sevens Report Research. A dip below that would be a negative signal, representing a double-digit percentage drop from the current level. Gold dropped to around that level in late November, but quickly popped back.

Gold may be at a fork in the road, but investors might not want to unload their gold holdings just yet.

Posted on

An Architecture Firm’s Push To Build Net-Zero Apartments—On A Budget

Renewable Apartments

The shiny, onyx-coloured building appears alien in its drab, postindustrial Philadelphia neighbourhood—the love child of a “D-volt battery and the Death Star,” as one local architecture critic put it, admiringly.

Called Front Flats, the four-story building is wrapped on all sides and roof by 492 translucent, double-sided solar panels. The building is airtight and extraordinarily energy-efficient, its developers say.

By driving down consumption and producing electricity from its solar panels, Front Flats is designed to generate its own power. But this isn’t a corporate headquarters where executives can spend lavishly on a showcase edifice. It is 28 apartments, built on a budget for renters who make below the area’s median income. One-bedroom apartments rent for under $1,400, less than the $1,750 average for the neighbourhood, according to rental-listings website Zumper.

Onion Flats, the Philadelphia-based architecture-and-building firm behind Front Flats, is at the forefront of designing low-cost buildings that use design, mechanical equipment and residents’ behaviour to slash fossil fuel consumption.

“As an architect, if I’m not designing buildings that contribute no carbon to the environment then I’m being totally irresponsible,” says Tim McDonald, 56, a principal in Onion Flats. “I might as well be designing buildings that sit on marshmallows.”

Buildings contribute 38% of global greenhouse-gas emissions, including heating, cooling and construction materials, according to the International Energy Agency. The building industry is growing more interested in low-carbon construction, but few architects or contractors have experience with it. Many believe it significantly raises costs. Onion Flats wants to demonstrate that it can be done affordably and at scale, prodding others to follow and policymakers to enact energy-efficient building codes.

Mark Lyles, a project manager at the New Buildings Institute, a nonprofit based in Portland, Ore., that promotes low-carbon construction, says the work by Onion Flats is noteworthy because it ties together on-site renewable energy generation with “deep efficiency.”

Mr McDonald and his partners, he says, are “always asking where can I reduce energy consumption. A lot of his projects are bellwethers for where things are going.”

Onion Flats is one of several firms trying to build very energy-efficient housing. In Manhattan’s East Harlem neighbourhood, a 709-unit affordable housing development called Sendero Verde is under construction; it is intended to be among the most energy-efficient multifamily buildings in the world. In Portland, Ore., a 10-story, 127-apartment retirement community is slated to start construction this spring, and is expected to use up to 60% less energy than a typical multiunit building.

Onion Flats is a family affair. Two of Mr McDonald’s brothers, Patrick and Johnny, are also principals, as is Howard Steinberg, a friend since seventh grade in suburban Philadelphia.

Front Flats is its most ambitious attempt at a “net zero” building—a structure that throughout a year generates as much energy as it consumes. The solar skin—which is 60cm away from the windows and exterior—generates electricity, keeps the building cool in the summer by blocking the sun, and provides privacy to tenants. “You can’t see into people’s apartments, but they can see you,” Mr McDonald says.

The building, which opened in January 2020, doesn’t have a natural gas line and uses electricity for heat and hot water. From January through June, it generated more electricity than it needed and sold the excess onto the local power grid, Mr McDonald says. In July, August and September, it drew more kilowatt-hours than it generated. Overall, it is still ahead, Mr McDonald says, but since the pandemic slowed leasing and the building wasn’t fully occupied until the fall, the true test of whether the building is net zero will come this year with apartments full of people charging their mobile phones and playing on game consoles.

The firm has built several residential buildings in Philadelphia over the years and plans to keep going. The principals have learned that actual energy consumption is often greater than what the models predict. The culprit is “plug load”; people plug in bigger televisions and more electricity gobbling devices than expected.

About a mile south of Front Flats, Onion Flats built another apartment building called the Battery which attempts to tackle this problem. LEDs on the outside of the Battery are connected to particular apartments, although which light connects to which isn’t obvious to passersby or residents. When an apartment is using less electricity than its share of what is being generated, it glows green; otherwise, it glows red. The system, after encountering a software problem, is expected to go online this year.

After building its first government-subsidized, ultra energy-efficient townhouse for low-income residents in 2012, Onion Flats lobbied the Pennsylvania Housing Finance Authority, a state agency that distributes federal low-income tax credits, to consider an energy efficiency standard known as “passive house” construction when determining which builders were awarded the coveted credits. “We said ‘If we can do this, why can’t other developers’?” says Mr McDonald. After one meeting, the state agreed to give developers extra consideration for using a passive house design, beginning in 2015. (Onion Flats didn’t use the credit for Front Flats.)

The passive house projects didn’t cost much more to build than traditional apartment buildings—despite costing considerably less to heat and cool, according to an analysis of construction costs for residential projects over the past five years that the authority performed at the request of The Wall Street Journal.

“Not only is that encouraging, but the end result should be lower utility costs for the life of these passive house apartment buildings,” Robin Wiessmann, executive director of the agency, said in a statement. Tenants at Front Flats pay US$40 a month for utilities. Fifteen states are copying Pennsylvania’s approach and have begun using incentives to encourage more super-efficient apartment buildings.

Mr McDonald says he hopes that buildings that generate their own electricity will become commonplace.

“People don’t say, ‘I want to be known as an architect that has bathrooms in all our buildings.’ No, that’s just a given,” he says. “Being green, being sustainable, being carbon-neutral, should just be what it means to be a good architect.”

Posted on

Face Masks Go High-Tech, But Do You Need One?

Smart Masks

FOR THE PAST few weeks, I’ve been strapping on “smart” masks, a new breed of face-covering you have to plug in to charge each night or pair with a phone app. Their promise: superior, or at least geekier, pandemic protection. The brands behind them back up the claim with a dazzling range of snazzy features.

The AirPop Active+ Halo Sensor mask (above, $190, airpophealth.com), for instance, measures my breathing rate and alerts me when it’s time to change the disposable N99-equivalent filter. With a washable shell and rubber seal that moulds to my face to minimize air leaks, the mask doesn’t feel scratchy like other medical-grade models I’ve tried. People even nerdier than me will like that it tracks your location to let you know the quality of the air and the approximate number of particles it’s protected you against.

Others I tested, like the N95-equipped MaskFone (approx. $80, maskfone.com), have integrated wireless earbuds to prevent dreaded mask-muffle on calls, or mechanical ventilation systems that release heat you generate by exhaling. All are designed, according to their manufacturers, for a world where even getting vaccinated doesn’t obviate the need to wear a face-covering.

But, as buzzy as this wizardry might be, are high-tech masks really worth the fuss compared to their no-brainer counterparts?

Dale Pfriem, principal of Protective Equipment Consulting Services and part of a standards-development working group addressing federal mask guidelines, says he’s in favour of any feature that makes people more likely to wear their masks. As long as the products meet fit and filtration standards, that is. (The AirPop is compliant with EU Committee for Standardization and ASTM International barrier-mask guidelines.)

“For me,” Mr Pfriem said, “the simpler the better.” He opts for disposable N95s which he wears until they become stretched out or smelly. And, no, he doesn’t need a slickly designed app to tell him when that’s the case. “I don’t want to have to think about it too much.”

Pairing my AirPop mask to my phone certainly did not liberate me from thinking. At one point in my trial, I was forced to puzzle out why passersby were suddenly staring at me, their eyes merry. Then I realised I’d somehow triggered a “party mode” feature that makes the AirPop flash rainbow colours. After an attempt to care exactly how many particles the mask had caught, I admitted I was bored. Ultimately, I ignored the app and used the AirPop merely as a particularly protective face mask. The headphones in the MaskFone, though? Those are pretty cool.

Posted on

Future Returns: Investing In The Circular Economy

Australian Fashion Waste

The shift to a global economy based on reusing, repairing, and recycling—instead of making things, using them, and then throwing them away—is gaining traction as a sustainable investing theme.

Today, only 8.6% of the global economy is circular as the world consumes 100 billion tons of materials a year, according to Circle Economy, an Amsterdam-based global impact group.

Closing the loop on how goods are produced and consumed can address the problems created by depleting the Earth’s resources, in addition to the problems of pollution and climate change. According to the U.K.’s Ellen MacArthur Foundation, 45% of global greenhouse-gas emissions are generated by the creation and use of products and food, while the rest is generated by the use of energy.

Rising environmental challenges such as drought, fires, and flooding, in addition to changing consumer preferences and government regulation, are driving companies big and small to break away from a reliance on finite resources and to seek other solutions, says Jessica Matthews, head of sustainable investing at J.P. Morgan Private Bank.

That means, “by 2030, the circular economy could yield up to US$4.5 trillion in economic benefits globally,” she says. The benefits? “Saving 92 million tons of textiles in landfills, 1.3 billion tons of food waste, and 45 trillion gallons of water wasted through food production every year,” she says.

This multi-trillion dollar opportunity is leading growth-oriented, as well as sustainability-minded, investors to pay attention to this growing theme, as the push to create a circular economy drives innovation and new business models.

“Companies are innovating to tackle the challenge,” Matthews says. “That’s why it’s a growth story.”

The private bank currently has about US$12.5 billion in client assets invested in sustainable strategies across 100 funds on its platform, Matthews says. The assets are in all kinds of vehicles, from exchange-traded funds to private equity—and represent a range of investing approaches.

Matthews recently spoke with Penta about the potential for investing in the circular economy today.

The Business Case

What makes the circular economy an investing opportunity is that companies stand to profit more by reusing, refurbishing, and repairing products rather than sourcing virgin materials to make them, Matthews says.

Circular practices already are being used by clothing companies as well as technology and manufacturing companies, the Ellen MacArthur Foundation said in a September report titled “Financing the Circular Economy.”

In 2019, the resale market for fashion, including companies such as the RealReal, grew 25 times faster than the broader retail sector, while Philips, a Dutch conglomerate, reported 13% of revenues resulting from its circular practices.

In addition to major companies that are reforming how they make things—such as Unilever’s pledge to cut its use of virgin plastics in half by 2025—small companies are sprouting up to facilitate the shift, the report said.

Examples include RePack, based in Helsinki, which makes reusable, returnable packaging for products bought online, and Algramo, a Chilean startup, which allows consumers to refill cleaning products made by companies such as Procter & Gamble and Nestlé.

The move away from plastics for packaging is expected to create a US$700 million demand for corrugated cardboard in Europe and the U.S., the foundation said.

Investing Opportunities

According to the Ellen MacArthur Foundation there are 10 public stock funds globally focused on the circular economy, either in full or in part, including BlackRock’s BGF Circular Economy Fund, the Geneva-based Decalia Asset Management’s Decalia Circular Economy fund, and BNP Paribas’s Easy ECPI Circular Economy Leaders UCITS ETF.

There were also at least 10 corporate bonds issued globally with the assistance of major investment banks such as Goldman Sachs, HSBC, and Morgan Stanley, with proceeds either in full or in part dedicated to circular practices, the foundation said. Issuers include Alphabet’s US$5.75 billion sustainability bond (with a circular economy component), Daiken Corp.’s JPY5 billion (US$46 million) bond, and Owens Corning’s US$450 million bond.

Private market equity, debt, and venture capital funds are also on the rise—there were 30 funds as of the first half of last year, up from three in 2016, the foundation said.

At J.P. Morgan, Matthews is evaluating the available public mutual funds and is looking to bring one on its platform. Since many of the companies involved in the circular economy today are in niche businesses, “you have to be careful about how limiting you are in your universe,” she says.

Public funds focused broadly on companies with the best environmental, social, and governance practices also buy stocks of corporations on the leading edge of the circular economy, even if these companies—such as Unilever, Adidas, and Nike —don’t represent a distinct circular economy story.

J.P. Morgan is also looking at private markets. Similarly, the bank has found more opportunities to invest in the circular economy through funds that look at sustainability broadly, Matthews says. For instance, the bank has invested with a private venture firm focused on sustainability and climate solutions that has invested in a company working to create cold-pack packaging with less Styrofoam.

“Where [the circular economy] becomes more widely adopted and seen is in being favoured in broader sustainability portfolios,” Matthews says, adding that ESG managers doing fundamental research today will find themselves looking at some of the trends around circular, because “they are still underappreciated by the market.”

Posted on

Apple’s Electric-Vehicle Talks With Hyundai Break Down

Hyundai and Apple

Apple Inc.’s talks with Hyundai Motor Group have broken down without an agreement for the South Korean auto giant to assemble vehicles for the iPhone company, Hyundai affiliates said Monday.

In regulatory filings, Hyundai Motor Co. and Kia Corp. said they are “not in talks with Apple over developing an autonomous vehicle.” The two auto makers have fielded multiple requests from other firms to jointly develop autonomous electric vehicles, though no initial steps have been determined, according to the regulatory filings.

The companies had held talks with the Cupertino, Calif. technology giant about a deal for Hyundai subsidiary Kia to build vehicles for Apple in Georgia, The Wall Street Journal reported last week. The prospect of an auto partnership had sent the Korean companies’ stocks soaring this year, igniting investor enthusiasm after both Kia and Hyundai had suffered years of slumping car sales.

Shares sank 6% for Hyundai Motor following Monday’s regulatory-filing disclosures, while Kia plunged by more than 13%.

Apple began seeking potential automotive partners late last year as it considers whether it can begin production of a vehicle as soon as 2024. In a rare move for a potential Apple partner, Hyundai in January said it was talking to Apple about a potential cooperation around electric, driverless vehicles. No sooner than it had said so, Seoul-based Hyundai tried to backtrack on the statement.

Kia had begun reaching out to potential partners in recent weeks about making an electric car for the iPhone maker, even without a deal having been locked down, the Journal previously reported.

Apple has flirted with other automotive companies over the years, but without reaching a partnership. Word of its secret car program broke in 2015, stoking excitement for the potential of what new possibilities Apple might bring to the auto market. The interest raised fears among traditional car makers that they’d soon be surpassed—like Nokia Corp. or BlackBerry Ltd. had been after the iPhone’s debut in 2007.

Instead, Apple’s auto effort has been largely unrealized as it has struggled to decide which path it will choose. It has gone through different leadership and approaches since beginning in 2014.

Posted on

Tesla Buys $1.5 Billion In Bitcoin

Elon Musk As Tesla Buys Bitcoin

Tesla Inc. said Monday that it bought $1.5 billion in bitcoin, a disclosure that follows Chief Executive Elon Musk’s promotion of the cryptocurrency and other digital-currency alternatives on Twitter.

The electric-vehicle company also said it expects to start accepting bitcoin as payment for its products soon. Bitcoin prices jumped more than 10% after the announcement, according to cryptocurrency research and news site CoinDesk.

Tesla disclosed its bitcoin purchase in its latest annual report, saying the move aims to “diversify and maximize returns on our cash that is not required to maintain adequate operating liquidity.” Tesla said a board committee had approved changes to company rules on investments, adding that it can also invest cash in gold bullion and gold exchange-traded funds among other assets.

The bitcoin purchase, likely among the largest by a public company, comes after a rally in 2020 when the price more than quadrupled. Tesla is joining a handful of other companies that have disclosed bitcoin holdings. Software developer MicroStrategy Inc. acquired about $425 million worth of bitcoin last summer, and its CEO, Michael Saylor, has become an outspoken proponent.

Companies holding bitcoin in their treasuries face an accounting risk: Because bitcoin and other digital assets are considered “indefinite-lived intangible assets,” rather than currencies, any decrease in their value below what the company paid for them—even a temporary one—can force a company to write down the value, taking an impairment charge. MicroStrategy posted a net loss in the third quarter of 2020 because the price of bitcoin dropped temporarily in September.

Tesla said it would analyze its holdings in the cryptocurrency each quarter to see whether impairments are warranted based on bitcoin prices. “If we hold digital assets and their values decrease relative to our purchase prices, our financial condition may be harmed,” the company said.

Sharp changes in the digital currency’s valuation might be why companies have acquired millions, rather than billions, of dollars’ worth of the cryptocurrency, said Michel Rauchs, founder of Luxembourg-based digital-assets consulting firm Paradigma Sarl: “It is definitely greater risk but greater reward there.”

Bitcoin recently traded Monday at $43,602.68, according to CoinDesk. Its price averaged $34,730.12 in January and is currently more than eight times higher than bitcoin’s 2020 low of a little under $5,000.

Mr. Musk has shown growing interest in bitcoin in recent years, after tweeting in 2018 that the only cryptocurrency he owned was one-quarter of a bitcoin a friend had given him—which today would be worth more than $10,000. Around Jan. 29 the Tesla chief changed his Twitter biography to “#bitcoin,” which sent prices for it higher, before removing that reference.

“I think bitcoin is really on the verge of getting broad acceptance by sort of the conventional finance people,” he said last week on the social-networking app Clubhouse. Mr. Musk said he needed to be cautious with his public statements about cryptocurrencies because “some of these things can really move the market.”

Tesla didn’t respond to a request for comment. The company said in its report that it updated its investment policy in January but didn’t disclose the exact timing of either its board decision or its bitcoin purchase.

“He’s already telegraphed it to the market,” said Meltem Demirors, chief strategy officer at London-based asset management firm CoinShares, referring to Mr. Musk’s mentioning bitcoin in his Twitter biography. “One of the world’s largest corporations doing this—I think it opens the floodgates.”

Recently, Mr. Musk’s tweets about dogecoin, a cryptocurrency started as a joke in 2013, have helped drive up that virtual currency’s price.

Tesla has struggled to maintain cash while ramping up vehicle production, but its shares soared some 480% in the year ended Friday as investors piled into electric-vehicle makers and the company reported a string of quarterly profits. Tesla took advantage of that surge by selling billions of dollars in new stock, shoring up its cash position. The company’s cash holdings totalled around $19.4 billion at the end of last year, up from around $6.3 billion at the end of 2019.

Mr. Musk’s tweets have drawn regulatory scrutiny, including from the Securities and Exchange Commission over a 2018 post in which the CEO said he had secured funding to take Tesla private. Mr. Musk and the SEC later settled in a deal requiring the company to sign off on any written statements he made that could be deemed material. He has since mocked the regulator on Twitter.

The SEC is unlikely to challenge Mr. Musk over his bitcoin tweets, said John Coffee Jr., a Columbia University law professor who specializes in securities law, especially after a federal judge rebuked the commission when it sought to hold the CEO in contempt in 2019. Tesla didn’t respond to a request for comment about whether Mr. Musk had sought approval for his bitcoin commentary.

Mr. Musk’s online remarks can move markets. After touting online shopping site Etsy Inc. in January, the stock rose more than 8% on the open. Shares in CD Projekt SA, the maker of the troubled Cyberpunk 2077 game, rose more than 15% after Mr. Musk praised the game. Both stocks retreated later. Last year, Mr. Musk tweeted that he thought Tesla’s share price was too high. The market agreed, and the stock fell before recovering.

An affinity for bitcoin seems a natural fit for Mr. Musk, who has bristled at government constraints. Last year he battled local authorities in California that ordered his lone U.S. car plant closed as part of broader measures to curb the pandemic. Mr. Musk reopened the facility after several weeks, daring authorities to arrest him. They didn’t.

Part of bitcoin’s appeal for some holders is that it isn’t circulated or controlled by a government or nation. Unlike opening up a bank account to store dollars, euros or yen, starting a bitcoin account doesn’t require providing identifying information. Bitcoin is effectively anonymous, and law enforcement can’t freeze a bitcoin account as they could a bank account.

Payments company Square Inc., which shares bitcoin advocate Jack Dorsey as its CEO with Twitter Inc., acquired about $50 million worth for its corporate treasury in October. Massachusetts Mutual Life Insurance Co. acquired $100 million worth in December to hold in its general investment account.

Companies might have grown more optimistic about bitcoin after the March 2020 selloff, when it recovered faster than the broader stock market, said Joel Kruger, a currency strategist at LMAX Group.

The added wrinkle with Tesla is the plan to accept bitcoin from customers. Few companies now accept bitcoin directly as payment; Overstock.com Inc. is among the few that do. Some large companies experimented with bitcoin payments in 2014 and 2015, like Dell Technologies Inc. and Expedia Group Inc., but most later dropped it for lack of use.

While Tesla’s move would be high profile, a more substantial development is expected later this year, when PayPal Holdings Inc. plans to allow its customers to use their bitcoin holdings for payments.

Mr. Musk’s ties to the financial-services industry date to the 1990s, when he invested most of the $22 million he earned from the sale of an internet business into a new startup, X.com, that became PayPal. EBay Inc. bought PayPal for $1.4 billion in 2002.

As the largest shareholder, a 31-year-old Mr. Musk collected more than $100 million. He used the money to start Tesla and Space Exploration Technologies Corp., the rocket company he also runs, as well as solar-cell company SolarCity, now part of Tesla.

Posted on

The Risks and Rewards of Diversifying Your Bond Funds

Bonds

Baby boomers investing for retirement back in the ’80s, ’90s and ’00s rarely had to worry about the bonds in their nest eggs.

Bonds back then mainly served as risk-reducing ballast for when stocks tanked. And they weren’t that much of a sacrifice because they often paid healthy interest yields of 5% or more.

But now, when boomers are supposed to have increased bond weightings in their portfolios—40% or more of a nest egg, according to the conventional wisdom—rates have fallen to the floor. Interest yields on a bond index fund are as low as 1.1%. As a result, retirees and other index bond investors are left staring at tiny interest coupons and a greater risk of rising rates, and thus of lost principal.

“With interest rates near their historic lows, so close to zero, there’s generally only one direction they can go,” says Steve Kane, a manager of the $90 billion MetWest Total Return Bond fund (MWTRX).

In response, investors might want to consider adding to their fixed-income portfolios some bond funds that can offer higher yields than U.S. bond index funds and offer varying degrees of protection from the risk of rising rates. At the moment, commonly used bond-market calculations suggest that for every percentage-point rise in rates, a U.S. bond index fund will lose about 6% in price, wiping out years of interest receipts.

The main reason bond index funds are likely to get hit so hard is because of a feature in the index funds’ most widely used benchmark, the Bloomberg Barclays U.S. Aggregate. The “Agg,” as it’s known, is heavily weighted to the most conservative U.S. government bonds.

This investment-grade-only index is thus more vulnerable to rising rates because it doesn’t include some riskier categories of bonds such as high-yield, or “junk,” bonds, or floating-rate loans that pay higher interest and are often found in actively managed bond funds.

Indeed, sponsors of some actively managed target-date mutual funds—multiasset funds whose mix of investments grows more conservative as investors age—take action to serve retirees’ need for extra income by adding “diversifying buckets” of funds that aren’t part of the Agg index.

T. Rowe Price Group Inc., for example, puts about one-sixth of the bonds in its target-date fund for 70-year-olds in high-yield (or junk-bond), emerging markets and floating-rate funds. JPMorgan Chase & Co. puts one-fifth of retirees’ bonds in high-yield and emerging markets.

A series of retiree investment models designed by Morningstar personal-finance director Christine Benz allocates 14% to 22% of bonds to such categories, depending on investors’ risk appetites. Such bonds can “bump up yields and provide extra diversity,” Ms. Benz says.

The interest rates on these three kinds of funds may be double or triple that of a bond index fund. And funds that focus on some bonds, like high-yield and emerging markets, often outperform the index over a full market cycle. Funds of both types beat the index in the past decade, according to Morningstar.

These types of investments do make retirees’ portfolios riskier, however. All three categories got hit twice as hard as the safer index early last year, falling more than 20% in price while bond index funds fell just 8.6%, Morningstar says. Stocks fell 35% during the same period. Most of the losses have since been regained.

Still, seeking to avoid such swings is why some target-date fund sponsors, especially index managers like Vanguard Group, tend to avoid emerging-markets, junk and floating-rate bond funds.

Bogus boosts?

Maria Bruno, head of U.S. wealth-planning research at Vanguard, says trying to boost bonds’ return this way is misguided. Ms. Bruno agrees with those who say bonds should be “ballast” for times when stocks tank. “They shouldn’t be seen as a return-generating investment,” she says.

Dan Oldroyd, head of target-date strategies at J.P. Morgan Asset Management, disagrees. Mr. Oldroyd says that with stock valuations “stretched,” adding risk in a bond bucket with high-yield and emerging markets is a reasonable step. Similarly, Kim DeDominicis, a target-date portfolio manager for T. Rowe, says high-yield and emerging-markets funds can offer possible higher returns and guard against rising rates with “modest increases to expected volatility.”

The target-date funds discussed earlier, including similar Vanguard funds, and the Morningstar buckets all include inflation-protected-bond allocations of 7% to 15% of total assets. While those bonds have yields near zero, they can help protect purchasing power if inflation kicks up.

Riskier, higher-yielding assets are common in actively managed bond funds. A majority of the dozen largest report holding more than 5% of assets in high-yield bonds; five say they have more than 5% in emerging-markets debt.

The $70 billion Bond Fund of America has 6.9% in high-yield and emerging markets. Margaret Steinbach, a fixed-income director for the fund, says higher doses of these kinds of riskier allocations “could potentially compromise the downside protection” of bonds.

But others are more gung-ho. “We’ve been adding high-yield and emerging-markets bonds,” says Mike Collins, co-manager of the $64 billion PGIM Total Return Bond Fund, which holds 14.8% in the two categories. He says individuals could hold as much as half of their bonds in such riskier buckets, depending on their time horizon and risk tolerance.

DIY choices

For do-it-yourself index investors who want to add such exposure, Ms. Benz suggests Vanguard High-Yield Corporate fund (VWEHX), iShares J.P. Morgan USD Emerging Markets Bond (EMB) exchange-traded fund and Fidelity Floating Rate High Income fund (FFRHX).

Less-daring options include bumping up the yield only slightly with an investment-grade corporate bond fund, or moving some bond assets to lower-yielding money-market funds or short-term bonds to reduce interest-rate risk.

Morningstar bond-fund analyst Eric Jacobson says retired bond investors can also try to boost returns more safely by choosing an active manager from among top core-plus bond funds—which typically allocate 15% to 20% of their assets to riskier debt—such as Mr. Kane’s MetWest Total Return Bond fund, Dodge & Cox Income (DODIX) or Fidelity Total Bond ETF (FBND).

While that requires paying a much higher fee on one’s entire bond bucket than for a bond index fund, Mr. Jacobson notes that active bond managers have generally outperformed the index, thanks partly to the riskier assets.

Posted on

Zip Co Seeks U.S. Investment

Zip Co

Zip Co is working to bridge the valuation gap between its rival Afterpay.

It is understood Zip Co management is lobbying for U.S. investment hoping to highlight its buy now, pay later platform and shine a light on its potential for growth in the world’s biggest economy where it owns Quadpay.

Also, Zip wants to consider the possibility of a U.S. listing with the company weighing up the value in issuing American Depository Receipts that would give it the ability to trade in the U.S.,  simultaneously giving the company greater access to U.S. capital markets.

This would also allow Zip to keep its primary listing on the Australian Securities Exchange while having a secondary listing for investors who would prefer to stick with the Nasdaq or NYSE.

If Zip was to attempt the (albeit nascent) American Depository Receipts plan, other Australian tech success would see it as a valuable inroad to higher market valuations. The move would also help Zip bridge the gap between main competitor Afterpay, which currently holds a $35 billion valuation advantage.