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Money matters: Gold - Onwards and Upwards - Part 2
Graham Macdonald
MBMG International Ltd.
The most important thing that affects gold in terms of
interest rates is real interest rates, or rates adjusted for inflation.
Even though interest rates have risen, real interest rates remain close
to zero, or are negative.
John Williams, an economist, has an interesting Website called
Shadowstats.com. He looks at the CPI and what level it would be at were
it not for all the adjustments in the past 30 years. If the CPI were
still calculated today as it was in the 1970s, the inflation rate would
be about 8%.
Depending on how you measure inflation, real interest rates are no
better than zero and probably are negative. That is very inflationary.
What will be negative for gold is when real interest rates go to 4% or
5%. It took Paul Volcker bringing real interest rates up to 6%, 7%, 8%
in a short period of time before the market was convinced he was going
to save the dollar and it was time to move out of tangible assets into
financial assets.
The main problem lies in the fact that the US Government is trying to
produce a rabbit out of a hat by trying to fund the federal budget
deficits without destroying the dollar, and trying to raise interest
rates to save the dollar without destroying the economy. This is
basically impossible. The dollar will continue to lose purchasing power.
Gold stocks are still relatively cheap. In the past several months, even
as the gold price has gone up, the stocks have been reluctantly
following rather than leading, which is contrary to what normally
happens. If the price of gold eventually goes to four digits, the
earnings of gold companies will be significantly higher. As a
consequence, gold stocks are still cheap.
Another problem for the markets is the new chairman of the Fed. Bernanke
is very different. Greenspan clearly understood gold, and in his Fed
testimony he used to talk about the “automaticity” of the gold standard.
If you go back to Greenspan’s testimonies, you will see him using that
word from time to time. Bernanke doesn’t have the deep understanding
that Greenspan had about gold and perhaps about markets in general.
Greenspan came up from the business world, Bernanke came up through
academics. That makes a difference in terms of one’s outlook and levels
of experiences. Bernanke just does not appreciate the value - in every
sense of the word - of gold. This can be seen from what he has written
in the past and what he said prior to his appointment as Fed chairman.
He has been pretty cautious. He has only been chairman for a short while
but he seems to be focused on the deflation in the 1930s, and this is
quite alarming.
What we don’t need today is a greater supply of dollars. What we need is
a greater demand for dollars. The way you improve demand for dollars is
to take those steps that will give people confidence in the dollar and
its purchasing power for a long period of time. This can be done by
raising interest rates, just as Volcker did, at a pace that is not
measured, but rapid. This will be painful, but it is a cure, almost
everything else will be terminal.
America has to recognise that it has far exceeded its ability to live at
the level at which the country has been living for the past couple of
decades. There is going to be some pain and adjustment. But if the
dollar’s purchasing power is destroyed, as a consequence of not taking
strong action, the pain is going to be much greater.
When Volcker raised interest rates, the US had a severe recession, but
eventually the adjustments led to a period of economic growth, and the
country continued to create new wealth from economic activity. When you
create too many dollars in an environment where the demand for the
dollar is declining, it could lead to a situation similar to Argentina a
few years ago or to one that resembles Weimar Germany - one deflationary
and one inflationary.
In Argentina, the supply of pesos declined by one-third from peak to
trough, but the purchasing power of the peso lost 50%. In Germany,
demand for the Reichsmark was falling and the central bank tried to
offset that by putting more Reichsmarks into circulation. Both
situations ended badly, and the net result was severe economic
dislocations.
The problem is the dollar is the world’s reserve currency. What happens
when you have a flight from the world’s reserve currency? This is the
point of Turk’s book, The Coming Collapse of the Dollar. The flight from
the dollar is going to accelerate. The dollar has only 5% of the
purchasing power it did maybe 50 years ago.
Oil is interesting because there are two dynamics. The oil producers
seemingly are less and less willing to take dollars, because dollars are
being depreciated. The Russians are questioning the dollar’s role as the
reserve currency. And in Venezuela, when President Hugo Chavez takes a
swipe at the U.S., he is taking a swipe at America’s ability to create
dollars out of thin air.
The second dynamic is Matt Simmon’s argument that we are running out of
easy-to-produce light, sweet crude. If the supply of easily refinable
crude oil is diminishing, all the more reason for the price of crude oil
to rise. So, we have a weakening dollar and a declining supply of the
best-quality crude which could translate into USD100-a-barrel crude oil
before too long.
There is a close historical relationship between crude oil and gold.
Throughout the last sixty years, the price of crude in grams has,
basically, remained unchanged. The USD price of crude has broken out of
a 30 year range. Normally it takes about 2.2 grams of gold to buy one
barrel of crude oil. Now it takes about 3.4 grams to purchase one barrel
of crude oil. Either oil is relatively overvalued at the moment or gold
is very undervalued. Most believe that gold is undervalued and that oil
is properly valued. So as oil goes higher in dollar terms, gold is going
to continue to go higher as well.
One other question on people’s lips at the moment is what value
Exchange-Traded Funds are for gold. They are positive in the sense that
people are looking at gold and coming up with new products. But I do not
recommend people buy the ETF. If you want to speculate on the gold
price, the ETF is one way to do that. Futures contracts are another way.
But owning the physical metal in your own name is something entirely
different. There are too many parties between you and the gold in the
ETF. And they don’t audit the gold to prove it really exists. This is
the only type of fund the SEC has ever approved for the retail level
that isn’t required to audit the assets supposedly backing the fund. It
is a great way to speculate on gold’s spot price, just as futures
contracts are a great way to speculate on gold’s future price. But
neither should be viewed as an alternative to owning the physical metal.
If your garage is a bit small for this then you can always look at
bullion funds.
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The above data and research was compiled from sources believed to be
reliable. However, neither MBMG International Ltd nor its officers can accept
any liability for any errors or omissions in the above article nor bear any
responsibility for any losses achieved as a result of any actions taken or not
taken as a consequence of reading the above article. For more information please
contact Graham Macdonald on [email protected]
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Snap Shots: Photo project can be communal fun
by Harry Flashman
I have written before about personal photo projects as a way to improve
your photographic techniques. Once you start to look at how you can
present a subject photographically, you are on your way to thinking like
a photo pro, and not someone who is just snapping pictures.
 One
of my Miss Piggy “bus art” shots
I was reminded of this the other day when a chap I only know (Mac)
through an email connection sent me a photo of a bus he had taken in
Thailand. He also said how difficult it was to take the shot while the
bus was moving, and getting this large object to fit in the viewing
screen.
Now, I have always loved Thai busses. Wonderfully painted, gaudy bucolic
beasts that roar along the highways almost blowing small vehicles from
their paths as they thunder through. I had even started a small photo
project of my own, to record some of the incredible paintings on the
sides and tails of these busses. 100,000 baht busses with million baht
paintwork.
 So
I replied by sending him one of my Miss Piggy “bus art” shots, never
imagining what might happen next. Mac had in turn sent my photograph to
his email circle, and this started a deluge, and we all started to be
bombarded by shots taken all over the world, of weird and wonderful
busses and cars. (So it is with thanks that I have included some of
their shots here, as well as my own this week.)
In addition, the various respondents began to enumerate their
difficulties in getting their shots, but the common thread was that
there were plenty of photo opportunities; however, you had to have a
camera with you and ready. This has also been one of the subjects I have
covered before, calling it “Be Prepared” (with apologies to the Boy
Scouts Association).
Mac even writing in his email, “I’m going to start carrying my camera a
little bit more handily so I can catch some of these. I can tell from
the 1/5th (bus) I’ve got to do better driving one handed with camera and
view finder in the other hand while milling along with the traffic going
my way, and the odds and ends of drivers going the opposite way on my
side of the road!”
The results of this emailed photo project exercise was something I had
not thought of before. Photo projects, as I have said previously, are a
good idea to stimulate your creative self, but by then expanding this
project to include friends, relatives and acquaintances, you can pool
thoughts and techniques to improve your own results. Thanks Mac!
1/5th of a bus
Modern Medicine: I think I’ll have a blood test
by Dr. Iain Corness, Consultant
Very often, when discussing blood tests with a patient, I
will be asked, “What were my AIDS results?” or “What is my blood group?” or
similar. In most instances I have to disappoint them, because unless the
specific test for HIV antibodies, or blood group, was requested, there will
be no record of it, even though the initial test was called a “complete
blood count”.
The reason for this is simple. There are so many tests that can be done,
that testing would go on for weeks if you wanted “everything” checked. For
example, the Australian Royal College of Pathologist’s Manual of Use and
Interpretation of Pathology Tests that sits on my desk lists 150 pages of
tests that can be carried out. These include such items as a Reptilase Time,
something I have never requested in 40 years of practice, or a red cell
Galactokinase, ditto.
No, when we send you off for a blood test, we have to try and be reasonably
specific, and often give the pathologists a clue as to where we are heading,
and be guided by them as to some specific testing.
However, many times we are just casting a ‘wide net’ to see what
abnormalities we can turn up to use to find the definitive diagnosis. One of
the commonest is the “Complete Blood Count”, usually called a CBC, since we
medico’s love acronyms, but remember this testing is in reality very far
from “complete”.
The CBC does provide important information about the kinds and numbers of
cells in the blood: red blood cells, white blood cells, and platelets. A CBC
can help us evaluate symptoms such as weakness, fatigue, or bruising and
even directly diagnose conditions such as anemia, infection, and many other
disorders.
The CBC test usually includes the white blood cell (WBC) count as these
cells protect the body against infection. If an infection develops, white
blood cells attack and destroy the bacteria, virus, or other organism
causing it. White blood cells are bigger than red blood cells and normally
fewer in number. When a person has a bacterial infection, the number of
white cells can increase dramatically. There are five major kinds of white
blood cells: neutrophils, lymphocytes, monocytes, eosinophils, and
basophils. The numbers of each one of these types of white blood cells give
important information about the immune system. An increase or decrease in
the numbers of the different types of white blood cells can help identify
infection, an allergic or toxic reaction to certain medications or
chemicals, and many conditions (such as leukemia).
The red blood cell (RBC) count is also part of the CBC. Red blood cells
carry oxygen from the lungs to the rest of the body. They also help carry
carbon dioxide back to the lungs. If the RBC count is low, the body may not
be getting the oxygen it needs. If the count is too high (a condition called
polycythemia), there is a risk that the red blood cells will clump together
and block blood vessels (thrombosis).
Another test is Hematocrit. This test measures the amount of space (volume)
the red blood cells occupy in the blood. The value is given as a percentage
of red blood cells in a volume of blood. For example, a hematocrit of 38
means that 38 percent of the blood’s volume is composed of red cells.
Hemoglobin (Hb) is the substance in a red blood cell that carries the
oxygen. The hemoglobin level is a good indication of the blood’s ability to
carry oxygen throughout the body.
There is also the platelet (thrombocyte) count, which is an important part
of the CBC. Platelets are the smallest type of blood cell and play a major
role in blood clotting. If there are too few platelets, uncontrolled
bleeding may be a problem, such as occurs in Dengue Hemorrhagic Fever.
So even though the CBC does test for many factors, there are still another
149 pages of tests that can be done! If you want to know your blood group,
or your HIV status, you have to ask!
 Heart to Heart with Hillary
Dear Hillary,
You get so many letters from foreigners complaining about being cheated here
in Thailand, that even you cannot ignore them surely. There is a saying
there’s no smoke without fire, and I believe that is what the situation is
here. The letters you get are the smoke and the fire is behind it. Not
everyone is a dummy, so these people who cheat are real, just like the
people who get cheated. You should remember this.
The Fireman
Dear Fireman,
I think that the smoke got in your eyes, my Petal. When have I ever ignored
the claims of foreigners who say they have been cheated here in Thailand? I
faithfully print their letters, just like I have printed yours, but by
publishing the letters does not mean that I necessarily agree with them, or
fully accept a one-sided story. Undoubtedly there are confidence tricksters
out there, masquerading as innocent young ladies who just happen to be
resting on a bar stool while somebody else shouted “Hello sexy man, come in
please!” However, the number of innocent young ladies resting momentarily on
bar stools is very small, compared to those not-so-innocents who use bar
stools as their workplace. There is an old Chinese proverb which says, “If
you want to find apples, you don’t look in an orange orchard.” What I have
said for many years is that if you are seeking a fresh young lady, you don’t
look for them in beer bars, but in places of more regular employment. It is
not impossible to find an apple in an orange orchard, but they are very
rare. Make that very, very rare. There are books and books and books written
on this subject, all warning the visitors to this country of the dangers of
falling in love with the first lady they meet. It is this group of people
who end up writing angry letters, but the anger they express they should
turn on themselves. They were the ones who went to the orange orchard,
didn’t they?
Dear Hillary,
One of the women in my office has a problem with body odor. She does not
seem to realize this, but it is now getting to the stage that nobody wants
to sit downwind from her, and she always turns the fan on which is at the
top of the office. Have you any suggestions Hillary that can help us through
this difficult problem. The woman in question is also higher in the company
than we are, so there is another problem, as you can imagine.
Odoriferous
Dear Odoriferous,
Tread very softly my Petal. This is a very difficult situation. Whichever
course of action you take, you could end up in a confrontation situation
very easily, and you would be the one to lose. If everyone agrees that there
is a problem, get everyone in the office to have a small incense burner
going on their desk. When she is the only person without one, she might ask
you why, which is the time when you have to wriggle around a little and tell
her that someone in the office has bad body odor, but nobody is sure who it
is, so you are masking the smell. Then retire gracefully stage left. By the
way, you began your letter by saying, “One of the women in my office has a
problem with body odor”, but that is not strictly correct. One of the women
in your office has body odor, which you find a problem. Subtle difference.
Hope you still have a job on Monday!
Dear Hillary,
My wife tells me every night that she is going to divorce me. There are too
many, and very numerous reasons stretching back over a long time (five years
or more), none of which can’t be gotten over, but my problem is not the
thought of impending divorce, it is the fact that she never gets any further
than saying it is going to happen. How can I get her to either stop the
threats, or just go ahead and do it? There must be other things that
husbands and wives talk about, not just threatening divorce. Or is this
“martial” bliss after all? What is your advice, wise Hillary?
Tired of it all
Dear Tired of it all,
A few weeks ago, one writer was asking about communication and I wrote that
for some people they think that the art of good communication is to shout
louder. I think one of you needs to shout louder as there is something awry
here with your relationship (if you haven’t guessed by now). Have you
thought that it really is time to talk? Not only really time, but long
overdue at five years. Perhaps you could try talking to her next time when
she threatens divorce, and say, “Right then, let’s see what the reasons for
the divorce will be when we go to the courts.” If she won’t rise to that
bait and opportunity to begin dialogue, then as per the art of good
communication, shout louder and tell her to either get on with it or give up
talking about it. If that doesn’t work, you can always get divorce papers
drawn up and the next time when she threatens divorce, whip out the papers
and say, “Sign here!” Lots of luck my Petal, I think you’re going to need
it.
Beyond the Beach: Anthony Moncrieff,
the “Man from the Beeb”
Caspian Pike
I must say I laughed a lot during the first show of the Andrew Watson’s new
series, ‘Beyond the Beach,’ an interview with Gerry Rasmus, a one-man ‘pollution
solution’. It was an easy going, pithy ride, laced with humour both in dialogue
and post production, yet there was a strong moral message which kept the show on
high ground. There were at least a couple of outstanding moments, one an
unexpected visual effect that turned the host’s head into the size of a beach
ball and then a subtle little piece of audio chicanery, almost an after-thought,
which comes right after the final credits. Watch and listen out for it! All in
all a great start, perhaps predictably, consistent with all the talk of a
fertile and creative team down at Pattaya Mail TV.
“Beyond the Beach” this week features Anthony Moncrieff, the “Man from the Beeb”
sharing the secrets of Suez, fifty years on.
Next week, Andrew’s travelling back in time half a century. Fifty years ago,
the British Empire came to an unceremonious end. Caught up the Nile without
a felucca, the campaign to ‘liberate’ the Suez canal from the Egyptians, led
by their hero, General Abdul Nasser, came an ignominious cropper. Andrew’s
guest on ‘Beyond the Beach’ is in a position to shed new light on the Suez
fiasco. Working as a senior reporter for the BBC at the time, Anthony
Moncrieff had access to all the main players and an in-depth understanding
of the overt and covert and sometimes sinister diplomatic and military
machinations involving British Prime Minister Anthony Eden, Israel’s first
prime minister David Ben-Gurion, American President Eisenhower and General
Nasser. Anthony, like Andrew an alumnus of Cambridge University, lives in
splendid and well-earned retirement in Pattaya, with his wife Lumporn and
their child Kate and grandchild Pim. He’s as bright as a beacon and like the
quality journalist he is, he knows how to tell a story.
Over perhaps the one undisputed contribution of the English to world cuisine
- afternoon tea - in the unassailable luxury of the Marriot in Pattaya,
Anthony talks eloquently about the Suez crisis marking the end of the
British Empire. He reminisces about spending time with the great world
leaders of the time, revealing via some captivating anecdotes, something of
the qualities which shaped their personalities and relationships, and the
global political ramifications of their interaction.
Fifty years on, Anthony retains a journalist’s sense for detail. As a former
member of the Panorama team, I wasn’t surprised to learn that he smelled a
rat then. Now, it appears that he has every reason to be pretty convinced of
some extraordinary events surrounding Suez, hitherto hidden from public
consciousness. Whisper the word, “collusion” with care.
Later in the programme, in the company of an oversized sandwich (not Andrew
Watson), Anthony smiles as he reflects on life at the BBC during the
fifties, through twenty five years of almost constant change.
Catch it if you can: ‘Beyond the Beach’, an interview with Anthony
Moncrieff, the “Man from the Beeb” at the following times:
Sophon at 8:00am - Midday- 4:00pm- 8:pm and Midnight.
Chonburi 9:40am- 2:00pm - 8:40pm and 40 minutes after midnight.
Jomtien 9:00am- 12:30pm - and 9:00pm
Sattahip 8:00am - 1:30pm - 5:00pm- 8:00pm and 11:00pm
A Female Perspective: Why would you want
to go to Bangkok?
with Sharona Watson
Oh no! It’s happened! It’s here! The next
month or so is going to be purgatory for me. ‘World cup this’ and ‘world cup
that’. Even in the sleepy fishing village where I live I expect the locals
will be glued to the box. Fish will be rotting where they lay. I’d go to
Bangkok on one of my days off to get away from it all, but it will most
likely be worse up there. The only team I enjoyed watching a little bit was
Brazil. They seem to play with rhythm and style. For what it’s worth, I hope
they win again.
It’s been interesting thinking about the psyche of men, in light of some of
their revelations about relationships. For instance, it took me quite a
while to convince Andy of my need to take some ‘time off’ and I’ve noticed
that his initial reluctance has been reflected in more than one other
respondee. The typical clichéd answer that men give is; “A day off from
what?” I’m kind of tempted to ignore that rather derogatory reply but it can
be more fun to add, “From being with you”. That more or less shuts them up,
at least for a while.
 Bangkok
– for the peace and quiet…
But then, their brains start whirring (you can here it if you listen
carefully) and their little warning sign starts flashing with a word in big
red lights, “Suspicious!” They clumsily try and camouflage their increasing
sense of mistrust; “What are you going up there for?” they ask. You see
that’s it! For men, there has to be a reason. For women, there doesn’t! My
answer to the last question is simple and direct, leaving no room for
misinterpretation; “To be on my own.” Then what happens? The man manages to
manufacture some kind of misinterpretation.
When I put this particular point to one guy, he said, “Why would she want to
go to Bangkok? She can be on her own here! I’ll just live on a different
floor. I don’t see the point in a woman going to Bangkok to be on her own.
For no reason. I just think it’s strange. There’s a hotel right here. Why
would she have to go to Bangkok?”
Brilliant. How is it possible to be so obtuse? Another man continued in this
one’s place; “It’s like me. I want to go fishing on my own and I don’t want
people to pester me when I’m fishing. Nice and peaceful. If she told me that
she wanted to go all the way to Bangkok because she wants to be nice and
peaceful I’d think she was weird. I mean, I have no restriction on where she
goes… “ And his words trailed off into the night sky.
I have ruminated on these various replies a lot and I think I may have
rediscovered something that so many other women have found out the hard way
before; men are basically insecure. Otherwise, why would they concern
themselves that their partner in life taking a couple of days off to be
alone is anything other than something to be celebrated and enjoyed? I mean,
if it worries them, then they must have a very unhealthy kind of paranoia,
mustn’t they?
Maybe that’s why men tend to bring up possible barriers to stop women going;
like logic (“there’s no reason to go”), cost (“what a waste of money”),
emotional blackmail (“I wanted to be with you”), and a few more besides.
Basically, they’re cowards because they don’t just come out and say what
they feel, which if they did, I hope might sound something like this;
“Darling. I love you. I want you to go and spend a couple of days on your
own because you need it and you deserve it. Yet I feel strange saying that
because somewhere in my darkest nightmares you are going to find someone
else and run away with them and leave me.” Andy once said to me, “Present
fears are less than horrible imaginings,” (Shakespeare apparently) which
seems like it means the same kind of thing.
It’s only fair that it can happen the other way around. A lot depends on the
culture of the couple. I come from an independent background and found it
hard to adapt to the reality of being a wife and a mother. I give Andy as
much freedom as I expect for myself, although he continually disagrees with
that, claiming a continuing imbalance in my favour. I’ve seen some women who
are really clingy but I’m definitely not like that. I don’t think men like
clingy women on the whole. They suffocate and nag. I think they demean
themselves.
Mind you, I think that wherever there’s inequality there’s also often a
strong element of humiliation. I saw a pair of cross cultural couples the
other day shopping and it was quite funny, although I felt sorry for the
men, strangely. There were an English guy and his Australian wife and an
Australian guy and his English wife. Both the guys were cowering under a
barrage of abuse from their wives about the smallest things. The wrong
choice of stationery, apparently. Good gracious, I thought, I hope Andy
leaves me if I ever become like that.
I was speaking to a psychologist the other day, who was describing to me
‘clingy’ personality traits. Apparently, some claim to be ‘perfectionists’
but don’t really understand what this means in reality. Their lives become a
pursuit of self-interest; things like ethics and morals go out of the window
and instead of achieving ‘perfection’, they become absolutely average.
Self-satisfaction is a veil which hides self-delusion. When their men don’t
measure up to their ideas and refuse to go beyond a certain point, that’s
it, they’re off! Suddenly they become incredibly busy at work and they
refuse to be dragged into an argument and will just say, “Yes, dear.” Well,
when this happens, I’m told, you better start looking out for the other
woman and maybe you’ll have cause for concern when your man says, “I’m off
to Bangkok to be on my own”.
Next week: Stability and security
[email protected]
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