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“And how will you be paying?”

Black Monday Headlines The New Your Times

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October 19th marked the thirtieth year since that famous day in 1987, when the US S&P 500 Index declined over 20% in one day. It’s known as Black Monday. I was just starting my career in financial services. I remember the news coverage and the total panic. This definitely wasn’t what I had signed up for, but it was a valuable lesson in the power of investor psychology.

If you want to learn more about that prominent day in the history of investing, see the New York Times article by Robert Schiller who studied investors’ behaviour following Black Monday. (Schiller won a Nobel Memorial Prize in Economic Sciences in 2013.)

Much has changed in finance in those thirty years since Black Monday.

We now have financial technology (FinTech) automating and accelerating the pace of money flows in the capital markets. There are thousands of publicly traded individual securities and managed portfolios (mutual funds, segregated funds, private investment pools, exchange traded funds), and a plethora of other hybrid investment vehicles that are competing for your attention.

FinTech has literally transformed our day-to-day banking experience. Remember when you saw your first automated banking machine? Pay bills online, take a picture of a cheque and send it electronically to your bank account? Really?? Now these activities are commonplace, part of our banking routine.

If you take a look at the industry updates we’ve posted this year (we only post a few of those most relevant), you can see that FinTech along with regulatory reform are causing enormous disruption in the financial services sector. With the invention of cryptocurrencies FinTech promises even more dramatic change aheadThese virtual currencies have the potential to replace the currencies of individual countries — and the banking system as we know it!

BitcoinThe first such digital currency was Bitcoin, invented in 2008 as a global means of payment. Transactions are done through peer to peer networks without the need of a bank, making it the first decentralized digital currency. In spite of the graphic, this isn’t a physical coin that you can put in your pocket. Bitcoin is virtual.

Speculators have been captivated by this innovation. With high volatility in the price of a Bitcoin (in USD up this year from $967.07 on Jan 1 to $6,400 Oct 31/17), you can imagine that fortunes have been made and lost already trading on this financial technology. Bitcoin could become the cyber equivalent of gold. It could also be a perfect example of a FinTech mania and go the way of the tulip bulbs in Holland (Tulip Mania).

Maybe other competing cryptocurrencies will prevail – Ethereum, or Dream, or Ripple… We’ll keep you posted on developments. For now Bitcoin is in the lead.

“And how will you be paying?” Someday, maybe sooner than you think, your reply just might be … “in Bitcoin please”.

As we move into the final weeks of 2017, take the time to review your current financial picture. Make sure everything is organized before year-end. Even if it’s not bitcoin, you’ll need some kind of coin to keep ahead of your taxes and everything else that goes into the business of life.

If you have any questions on your overall life plan, your portfolio or tax position, please call us. We’d be glad to hear from you.

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