Will the rally in commodities eventually weigh on the market? Part 1

Chart 1

Chart 2

Chart 3

Chart 4

Chart 5

Chart 6

Oil prices are on the march again! Crude oil was up by 5.8% in one week in June. Seven days tend to be more of a blip than a trend but 1800% annualised inflation ought to grab everyone’s attention and should prompt the question, “Will the rally in commodities such as crude oil eventually weigh on the market?”
Cobus Kellerman from MitonOptimal asks, “Is that what bonds are telling us (as well)…?”
Bill Gross stated last week that he had turned bearish on bond prices for the first time in more than twenty years. Given that he runs the world’s biggest bond fund at PIMCO, I thought I’d show you why he may be right. The 1st chart plots the price of the 30-year T-Bond since it bottomed in 1981. Bond prices have been on a major bull market for the twenty-six years since then. But that may be about to end. Bond prices are now threatening their long-term trendline. In addition, bond prices are dangerously close to breaking support levels (previous lows) for the first time in more than two decades. That danger can be seen more closely in the 2nd chart. Bond prices peaked in 2003 and have been trading sideways since then. A drop below the 2006 low near 105 would not only break an important support level, it would also break the twenty-six year support line.
When bond prices fall, yields rise. Chart 3 shows the 10-Year Treasury Note Yield which is close to being a mirror image of bond prices in Chart 2. The key level to watch in Chart 4 is the peak formed in the spring of 2006 near 5.25%. A decisive close above that level would continue the pattern of rising peaks and troughs that started in 2003 and would put bond yields at the highest level in five years. The major significance of an upside breakout in bond yields is seen in Chart 4. A close over 5.25% would break a down trendline in bond yields connecting the highs of 1994 and 2000. That trendline spans thirteen years. An upside penetration of that trendline would leave little doubt that the period of low rates has ended.
One of the principles of inter-market analysis is that bond prices act as leading indicators for stocks. In other words, bond prices peak and trough ahead of the stock market. Take a look at Chart 5 the comparison of bond prices (price bars) and the S&P 500 (solid line) during the 1980s. Bond prices bottomed in 1981. Stocks bottomed one year later in 1982. Two stock bear markets occurred in the ten years following that bottom - in 1987 and 1990. In both cases, bond prices peaked several months earlier.
Chart 6 compares bond and stock prices over the last ten years. The chart shows that bond prices peaked in 1998, which was more than a year before stocks peaked in 2000. The jump in rates during 1999 was one of the factors leading to the stock market drop in 2000. Bond prices rose throughout the three-year bear market in stocks lasting from 2000 to the end of 2002. That was largely due to aggressive Fed easing due to fears of deflation. During deflation, bond prices rise while stocks fall. Which brings us to the present. Bond prices peaked in 2003 as stocks bottomed. That was the result of asset switching out of bonds and back into stocks. Since then, bond prices have just treaded water as stocks have continued to rise. Two things on the chart worry me at the moment. One is a potential breakdown in bond prices. The other is the fact that the S&P 500 (red line) is testing potential resistance at its 2000 high. Falling bond prices (rising bond yields) may not be an immediate threat to the stock market. However, a significant breakdown in bond prices (upside breakout in yields) would suggest that the bull market in stocks has entered a more dangerous stage.
To be continued…

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]@mbmg-international.com.com

Snap Shots: by Harry Flashman

Photographic Physical abuse

Has your camera become just one of the goods and chattels that make up your inventory? No longer something to be cherished? No longer loved and cared for? If so, you can start to expect poorer pictures any time now.
A camera is a highly sophisticated instrument, encompassing both physics and electronic technology. It does not like disuse and it certainly does not take kindly to physical abuse.
The first, and often the most common, is dropping the camera. Cameras are very complex devices. The shutter on even the cheapest camera can open and close in 1/500th of a second. You can imagine that it doesn’t take much to knock the delicate shutter around.
The camera is also a lightproof box, dropping it and distorting the case will soon let light in. And that goes for both film and digital cameras.
So what should be done beforehand? First is to have a decent padded camera bag. It has to keep the camera safe in the situation of it falling out of the car or slipping from the shoulder. Throw the silly leather case, that many cameras come with, as far as you can, or feed it to a goat.
OK, so you have the camera hanging on the strap around your neck, ready for action. What can go wrong here? Well the strap can slip or the eyelet rings can break, and the whole lot hits the floor unless you have lightning reflexes. Answer? Check and make sure that everything is correctly attached and not worn, especially the eyelet rings. When did you check last? Replace regularly.
So it did hit the floor, what now? Turn it on. Is it still electrically OK? If no power, take the batteries out and then put them back in - they may just be jolted out of position. Unscrew the lens and put it back on. Look through the viewfinder - if it looks normal, then try to take several shots at different shutter speeds and apertures and rush to the closest 1 hour processor or to the computer if it was a digital. Pray a lot. You may be lucky.
After dropping, the next disaster is water. Cameras are not like children, you cannot “drown proof” them. They stay drowned. If you are going out to photograph in wet (or Songkran) weather, then you must take precautions. A plastic bag wrapped around the camera with just the end of the lens poking through, and held on with rubber bands is one way to “safe photography”. Even then, as soon as possible you should take the camera inside and dry the outside of the case thoroughly. Take the lens off and dry carefully around the lens mount too, making sure you do not touch the mirror. Take the batteries out and thoroughly dry the battery compartment and the contacts. Batteries and moisture do not go well together.
Now we should think about the great shots you can get on board the speedboat and similar situations. Resist the temptation to take your good camera - you can buy a waterproof Kodak or Fuji for very little money and you can relax with peace of mind. Do not take your good one!
So what do you do when you have ignored the above advice and drop the whole camera in the drink? If it is a modern electronic camera you have probably just lost your investment - especially if it is salt water you drop it into. One camera technician’s advice under that circumstance was, “Leave it there!” However, you can try flushing the camera in running tap water for at least an hour, then drying it and taking it to the repair shop. An audience with the Pope would be a good move as well.
Drowning the camera in fresh water is not quite so bad, but you have to pull it apart as much as you can and then dry it out as thoroughly as you can - a hair dryer set on “No Heat” can help, but again your chances are slim. This time it’s three Hail Mary’s and hope a lot.
First Aid is possible, but preventive maintenance is much better!

Modern Medicine: by Dr. Iain Corness, Consultant

Love your work and live longer

Love your work and live longer? For many people that sounds impossible. Why? Because so many people just do not enjoy their work.
I am sure you have heard the old adage - “when you enjoy your work, you never have to work again”. And while that all sounds just a little trite, it is actually based upon a well established medical fact.
As far as your overall health is concerned, is work important? Well, if you take a look at statistics, then work is very important. Did you know, for example, that more heart attacks and strokes occur on Monday mornings? But that is for the working population only. Those who do not have to go to work on Mondays do not share the same chilling statistics. Likewise, there is a reduced incidence of cardiovascular calamities over the weekend. Interesting!
So what should we do, other than all retire immediately? Well, that’s not really practical, for one, and we need to make the dough to buy the bread, or some other bakery simile. What we have to do is work out why Mondays are so bad for our collective health.
What has been well documented is that following major catastrophes like earthquakes, there is a significant increase in the number of heart attacks for many days afterwards. The pundits say this is because of major stress, and anyone who has lived through such a disaster would agree on the stress side of it.
Now Mondays can hardly be called major stress, but for many people Mondays do represent a chronic, recurrent stressor. So stressors do appear to be the culprit. So what should we do about it?
Like all stressors, they are of two basic types, either “real” or “imagined”. Unfortunately, no matter which type, they have the same effect on us. By “real” stress I mean when the bank heavies are actually knocking on your door and it’s pay up time on the arrears on the house payments or eviction. “Imagined” stress is when you spend many hours worrying about what would happen if you fell behind with the house payments, even though you never have.
So to the dangerous Mondays. What do you stress about? The job itself? Is it too difficult, too boring, too much high pressure? This is where you have to sit down and look critically at yourself in relationship to your own work and workplace. For many people, it is your own attitude that might have to be modified. Change from being an unwilling worker to someone being a willing worker, and work becomes totally different!
Remember the adage again “if you enjoy what are doing, you never have to work again”. So if you really detest the job you are in, and it is just not “you” then perhaps it is time to work out just what you really like doing and start moving in that direction.
Of course, you must be a realist. Rome was not built in a day, and you are not going to get the best paid, most fantastic job in the world tomorrow. You move towards it - after you have worked out the field you want to be in.
The key to handling stress is first to admit that you are under it, then following that, work out what the stressors are and then modify them, or your attitude towards them. Taking charge of your own life, controlling it yourself is the stepping stone towards good health and no unhealthy Mondays.
But then, perhaps all we need to do is get rid of Mondays altogether. In fact, remove Monday from the calendar and you have a six day week - five days on and one day off. This means you will get 52 “extra” days off every year and never have Mondayitis again! That’s the answer!

Learn to Live to Learn: with Andrew Watson

Courage: the first of human qualities

Churchill said; “Courage is the first of human qualities because it is the quality which guarantees all others,” and I reckon he was right. At the heart of every action there is a decision to be made and more often than not, courage is required to take it. Courage enables wisdom and judgment and effects change. Of course, it should be noted that Churchill’s personal brand of courage isn’t to everybody’s liking, insofar as he is viewed by more than one nation as something less than a hero. But this isn’t about Churchill, it’s about the quality that defeats fear.
I suppose at some time or another during everybody’s life, we arrive at a situation where recognising the need to demonstrate courage is necessary to overcome the obstacle in front of us. I suspect also that everybody knows what it feels like to discover that their reserves of courage are empty. For a plethora of reasons, sometimes people do not rise to the challenge and suffer a very personal kind of defeat, which manifests itself in many kinds of ways. I shan’t ever forget the brazen, bulky, bloke-ish, tattooed English bruiser who upon reaching the front of the bungee jump queue, quailed, cowered and finally refused, like a show-jumping horse, to make the leap. You just knew that somewhere in Normandy that evening, he would be making a beer-soaked attempt to reassert his masculinity.
It’s a very human instinct of course, to revert to self-preservation when our equilibrium is threatened, but it’s nonetheless fascinating to observe how this instinct manifests itself and how it can contort an individual, producing an effect which can then easily spread to a group. “Cowardice” has a bad name, perhaps for good reason, but there is no doubt that in certain circumstances, “cowardice” is the right decision and in fact represents a courageous choice. Two examples follow which perhaps illustrate that courage can take many different forms; one personal, the other a well known conundrum.
I was twelve years old and was “bunking off” school for the afternoon (I think there was an international soccer match I wanted to watch). I made myself a cup of tea and settled down in front of the television. After a couple of minutes I heard the unmistakeable reverberations of rumblings on the stairs. I opened the kitchen door in time to see four sets of boot-clad feet moving swiftly towards the hall. In retrospect I realize that they had heard me come in. For some reason, I thought they must be friends of my elder brother’s. I didn’t twig they were burglars at all. It was only seeing the shock in their eyes that alerted to me to the possibility of something different. I was standing by the front door as they approached me, dressed unusually for the time of year (it was a hot May day) in sheepskin coats and leather jackets. The leader of the group spoke; “Have you been on the phone, then?” indicating the telephone sitting next to me on a table. I hadn’t, but instinctively I responded, “Yes”. Threateningly, this true vulgarian passed this on to the others, “He’s been on the phone”. Turning back to me, he announced, “We’ll be going then,” and he reached past me to open the door. “Yes, you will,” I thought, saying nothing and watching them break into a run as soon as they were outside, and they disappeared down the street.
I remember my feelings very clearly. I felt angry and guilty that I hadn’t done something to stop them. I wished I was bigger, stronger, braver, cleverer. I felt so guilty that I didn’t even relate the truth of the encounter to either the police or my parents. I consoled myself that at least they hadn’t got away with anything, which proved an almost comically false assumption. The heavy coats they had been wearing as they brushed past me turned out to be my father’s and brother’s and their pockets had been stuffed full of my mother’s jewellery. From memory, I had drawn pictures of them all after they had scarpered and hilariously, I had them wearing these coats!
Looking back, I feel two things about this event. Firstly, that more by luck than by judgment, I did the right thing and the inadvertent lie about using the phone (an example of doing the wrong thing for the right reasons), might very well have brought the encounter to a swifter close than otherwise would have been the case. Secondly, I feel utter disdain for the four individuals who violated our home. Their actions bred in me a lifelong contempt for burglars, who are in my view, the absolute epitome of cowardice. How brave, to break into somebody’s home and steal the fruits of another’s labour? I’m quite looking forward to the next encounter.
The second example is one with which we are all no doubt familiar, at least from our history lessons; “going over the top” in the First World War. Surely no-one can seriously doubt the raw courage of those sent to their inevitable and terrible end. And what of those in Gallipoli, who recognised the futility of their position to such an extent, that they left their weapons behind in the trenches as they charged towards their death? “Death smiles at as all; all we can do is smile back” (Gladiator). But what of those who deserted, who saw the horror ahead and chose life instead, at least until they were shot, with appalling irony, for “cowardice”? What would we have done in their situation? Would we have believed the old lie; Dulce et Decorum est, Pro patria mori?
It has always fascinated me that courage seems to be a necessary condition in good judgment and that one part of courage at least, involves putting the welfare of others before oneself. Sometimes this involves detaching one’s personal interests from the issue at hand and defying rational and emotional impulse. A pity then, to have witnessed so many examples of great teachers, decried for doing just that.
Next week: Death smiles at us all.

Doc English, the Language Doctor: Buying the right books for your child

Do you have, or are you expecting to have children in Thailand? Are they struggling to learn two (or more) languages at the same time? Are they bored and de-motivated with learning English? If the answer to any of these questions is an emphatic ‘Yes!’ , then this column is especially for you.
Perhaps you don’t have children, but may also have a partner or friend whose first language is not English. If so, you may also find this column useful.
Every week we will provide tips and techniques for teaching and learning English at home. We hope you find them useful.
If you have any suggestions or questions about teaching English at home, you can also write in to the Pattaya Mail, or email me at: [email protected] and I will try to answer all your questions, either by email or via this column.
This week, we go shopping for English books for your child! Happy shopping!
Buying The Right Books For Your Child
Take your child to the book store and give them a budget for books. You can also use books as a reward for good behaviour at the end of the month. You will need to choose an even selection of fiction and non-fiction books and you will need to find books that separate into these categories:
1. Books that you want your child to read by themselves
2. Books that you want to read to your child
The books that you will read to your child can be slightly harder (and a little more exciting), allowing your child to develop their listening skills as well as their reading skills. However, the books you want your child to read by themselves should contain text and stories that are not too difficult for them to read and understand.
You should guide your children to books that you feel meet their language level, but you should also allow them some choice. It is better if you can find a Reading Scheme. A ‘Reading Scheme’ is a series of books (usually stories) arranged in levels of increasing difficulty. Stage 1 usually has few or even no words, stage two has more words of one or two syllables, stage 3 has more words, words with more syllables, more grammar patterns, etc. Each Reading Scheme story may contain similar characters, or stories on a similar theme, which makes it easier for your child to relate to and means they don’t have to learn about a load of new characters or situations each time they read.
I find the ‘Oxford Reading Tree’ Reading Scheme very good as children seem to enjoy the characters and stories (no I’m not on commission!). It also contains many ‘high frequency’, or common words that children need to learn in order to progress in English. However, any other reading scheme that roughly follows an English, American or Australian curriculum will do. Books printed in Asia are great because they are much cheaper and you can afford to buy a lot; however, beware of buying books with nice covers that contain dull stories and text. They may appear child-friendly but in reality may be way too difficult for your child (containing long, uncommon words, technical words, etc.).
When buying books specifically to read to your child, these can be above their reading level. At first, try to find books that reflect your child’s interests and your situation. For example, books that contain lots of references to people, places or situations not found in Thailand will be harder for your child to understand and the stories harder to relate to.
Try to find books that appeal to you also, as your child may reflect your taste in books. It’s important to talk about the story during and after you read, so you want a story that appeals to you both, otherwise you’ll have nothing to talk about!
Finally, buy books, talking books, magazines and newspapers (such as the Pattaya Mail!) regularly for yourself also. You should keep lots of books and magazines on display around the home and be seen by your child to be reading regularly, so that they maintain a positive image of books and reading.
Next week - reading for the first time with your child.
Happy Reading!
Doc English