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Money matters: Gold - Onwards and Upwards - Part 1
Graham Macdonald
MBMG International Ltd.
James Turk is the founder of Goldmoney.com and he
pinpointed the start of the current bull market in gold in September
2002. Also, he has been spot-on in continuing to assess the direction of
the metal and the drivers behind its move.
Turk, a longtime authority on gold and other precious metals, started
Goldmoney .com as a company that enables online cross-border commercial
transactions using gold as a currency. He is also a co-author of The
Coming Collapse of the Dollar, published in 2004 by Doubleday. As you
might surmise from the title of the book, Turk sees plenty of room for
gold to climb higher. This is because he thinks there are still problems
with the dollar, and that’s being reflected in a higher gold price. So,
in reality, it is not that gold is going higher - it’s that the dollar
is going lower. An ounce of gold still purchases as much crude oil,
essentially as it did 50 years ago, but that can’t be said about
dollars.
One of the factors that allowed Turk to be so good was that he based his
forecasts on the now non-reported M-3 numbers. He was quite scathing
about this, “They said the motivation for doing that was to save the
time of reporting it, and they’re also going to save a million dollars
in the cost of compiling that data. I find it quite shocking they would
stop reporting M-3, because it is the most important component of money,
revealing the total quantity of dollars in circulation. My guess is they
want to try to hide the amount of inflation that’s in the pipeline”.
He believes that when the US Government stopped reporting M-3, it was
growing at well over 8% per year, and the annual growth trends were
increasing so it was all part of this policy to control inflationary
expectations. However, he thinks it is a big mistake because it will end
up heightening people’s concerns about the dollar. And that’s going to
make gold go up.
He does not believe the US Dollar is in crisis now, as some people do,
but he has stated that if you look at where the dollar has come in the
past few years in terms of loss of purchasing power, “we haven’t reached
a panic point yet. But I still fear we are going to see a panic in the
dollar at some point in the future”.
There are other concerns such as the worries overseas about the
prospects of the US Dollar - particularly from sophisticated investors -
wealthy individuals as well as some money managers. This has been linked
to two specific events. First, Chinese National Offshore Oil Co., or
CNOOC, was not permitted to purchase Unocal. Most people at the time
shrugged it off as just a one-off event. But when the Dubai Ports deal
was blocked, that really changed people’s perceptions, because it made
clear holders of dollars outside the United States are not going to be
allowed to exchange their money for things of tangible value.
Worldwide, there is an increasing desire to convert dollars into such
things as commodities, which dollars can still buy. The boom in
commodities to a large extent is the result of people exiting dollars.
People are looking for alternatives to the U.S. dollar, and the dollar’s
role as the world’s reserve currency is being questioned seriously now.
The Russian finance minister raised the issue in the recent G-7
meetings. This questioning is a critical development. Financing the
growing federal budget deficit and trade deficit requires that a large
amount of dollars be created. These dollars are being created as demand
for the dollar is declining - from all sources. The central banks are
diversifying out of the dollar, as are individuals and corporations.
This could be interpreted as seeing the monetary system as being broken.
It is possible to say this because there is no discipline on U.S. dollar
creation.
The gold standard’s greatest attribute was forcing discipline on the
creation of national currencies; if too much national currency was being
created, gold would flow from one country to another and eliminate and
minimize the impact of the boom- and-bust cycles. The huge trade
imbalances we are seeing now between China and the U.S., and the U.S.
and other countries, never could have existed under the gold standard.
Ultimately, capital controls may have to come to the U.S. as a way for
the government to attempt to deal with these huge trade and
international capital-flow imbalances. Instead of limiting the amount of
dollars in circulation and trying to get back to some kind of a
disciplined basis, we are probably going to move toward capital controls
as the next. The protectionism mentioned above with the Dubai and Unocal
deals is an excellent indication of this, as protectionism and capital
controls are very closely related.
Turk still believes that in the long term gold could reach USD8,000 per
ounce. In the short term, he believes that USD2,000 is not
inconceivable. There are two aspects to what’s driving the gold price:
First, there is strong physical demand around the world. When gold
crossed the $500-an-ounce level, people started buying gold in
anticipation of monetary problems. Second, the physical demand for gold
is causing a huge problem for the gold shorts. There has been a large
gold carry trade in place. It is very possible gold could have a massive
spike in the next six to 12 months to as high as $2,000, driven by these
factors.
The problems lie in the fact that central banks loaned a lot of gold
from their reserves. It was borrowed by various banks and others for the
carry trade. You borrow gold at very low interest rates and sell it at
the spot price. Then you invest the proceeds in higher-yielding dollars
and other currencies. As long as the gold price doesn’t rise, you are
going to make a lot of money on the spread. But in a rising gold-price
environment, you are stuck. You have to buy that gold back or suffer the
consequences of ultimately having to deliver the gold at a much higher
price than what you are earning from your assets. The bullion banks and
others who borrowed it are short. What’s happening in gold is probably
even worse in silver, in the sense that the short position in silver
looks even bigger than gold’s. Recently, silver has risen more rapidly
than gold.
Turk thinks it was a mistake for people to get out of the gold market
when they did because they were expecting a correction which often
happens at the start of a bull market. “In December, when gold went over
$500 an ounce, I said gold is never going back below $500, ever. Now we
have to think about the possibility that gold is never going to go back
below $600, ever”.
He states that gold is too cheap and undervalued. It is easy to draw a
comparison to the 1970s when gold went through $50 and never looked
back. After Nixon closed the gold window in August 1971, gold went from
$40 to $120 an ounce in the next two years. Adjusting for inflation, it
can be argued that $500 today is like $42 in 1971. Multiply $120 by 11
times in order to get the inflation-adjusted dollar equivalent, and you
get a potential target of more than $1,300 an ounce.
To be continued next week…
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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: How to beat red eye
by Harry Flashman
 There
are many causes for ‘red eye’. There is late nights with excessive
alcohol and scratchy contact lenses or the highly contagious medical
‘red eye’, and then photographic ‘red eye’ which is a condition often
seen with many flash photographs these days. And unfortunately, it can
spoil what is otherwise a great portrait.
The photographic cause of ‘red eye’ is the flash burst illuminating the
back of the eyeball! This is also particularly a problem with most
cameras that have their own in-built flash. And that’s about most of
them these days. It also happens just as much with digital images, so
it’s not a “film” problem.
The reason for the red eye is that the beam of light from the flash is
very close to and parallel with the optical axis of the lens, so the
lens “looks” directly into the back surface of the eyeball illuminated
by the flash beam. Another reason for the prevalence of ‘red eye’ is
that in low light situations (and that’s the times when you have to use
flash illumination) the subject’s pupils are also dilated and so it
becomes even easier to see into the eye.
Now the observant ones amongst you will have noted that you don’t get
‘red eye’ when you photograph the family dog! You get ‘white eye’ or
‘green eye’. You see, the red color comes from light that reflects off
the blood vessels in the retina of our eyes. However, in many animals,
including dogs, cats and reindeer, the retina has a special reflective
layer called the Tapetum Lucidum that acts almost like a mirror at the
back of their eyes. If you shine a flashlight or headlights into their
eyes at night, their eyes shine back at you with bright, white light.
The flash burst is reflected in the same way.
The way to get around the problem is actually quite difficult. Pro
shooters will use a flash gun mounted to the side of the camera, so the
flash burst actually goes across the eyeball at an angle and does not
light up the back of the eyeball, where the camera lens is “looking” at.
I use an ancient Metz 45 CT1, mainly just for that reason.
However, not everyone wants a large flash gun hanging off their camera,
so some of the camera manufacturers have produced a ‘pre-flash’ mode
(sometimes called ‘red eye’ mode). The “pre-flash” mode gives a short
burst of light before the main flash fires to make the pupil contract,
so it is less likely that you will see inside the eyeball. The only
problem here is that many people imagine that the “pre-flash” going off
means picture taking is over and move away. Best to warn the subject
that there will be two flashes, with the real one being the last one!
Countless numbers of good shots have been ruined by the subject walking
off before the shutter had fired, thinking that the pre-flash was the
right one!
Another trick is to turn on all the room lights, if you are
photographing indoors. If the ambient light levels are quite high, this
again causes the pupil to constrict. It is the dilated pupil that lets
just so much light into the back of the eye, which also explains why
photographs of people at parties have even more ‘red eye’. (Alcohol
dilates the pupil!)
Of course, if you still end up with ‘red eye’, there are other ways of
now correcting the situation. All these involve the use of digitizing
the image (scanning or using a digital camera) and then using an image
manipulating program.
One of the simplest is to use Paint Brush, put it on a nice green, lower
the opacity, and paint over the red using your zoom tool. Green, for
these purposes, is opposite red on the colour wheel, so it’s the
complementary colour, and they will cancel each other out. This method
will work for any version. You will just have to vary the opacity,
depending on how red the eye is. The other digital method is to use
Paint Shop Pro version 7 which has Choose Effects, Enhance Photo, and
then click on Red-eye Removal.
Modern Medicine: Beware of the Black Snake?
by Dr. Iain Corness, Consultant
The workings of the human mind have always fascinated me. We
can put such an importance on things that are really inconsequential, but at
the same time, ignore items that are important.
As an example of the former, I read the other day that we have developed a
new credit card that can cut down our time at the cash register by a whole
nine seconds. Instead of 24 seconds at the checkout, you can pay for the
weekly groceries in only 15 seconds of your precious time for the
transaction. Now isn’t that wonderful? We have another nine seconds each
week, to do with which whatever we want! That’s just over half a minute per
month! Six minutes a year. An hour in every decade! I hope you use it
wisely.
Yet we can ignore symptoms of ill health and refuse to look at potentially
life-saving technologies, because we do not make it of high enough
importance, or use the old “haven’t got the time” excuse. An excuse you can
use no longer if you use your Visa card and the extra nine seconds it gives
you.
One of the procedures we tend to overlook is a Colonoscopy, sometimes
referred to outside the hospital environs as the ‘black snake’. This is a
procedure by which the doctor can look directly at the inside of your entire
colon. Not by X-Ray, not CT, not Ultrasound, but look directly at the inside
of your insides using a fibre-optic camera.
Colonoscopy is an alternative examination to assess the colon instead of the
barium enema which leaves you laying foundation stones for days afterwards.
CT scans of the abdomen and pelvis are useful but do not always provide
sufficient information about the colon itself. CT scans are also expensive,
especially the 64-slice variety. They are, however, excellent tests for
looking at structures surrounding the colon and intestines.
Colonoscopy is indicated for patients with many conditions, including
inflammatory bowel disease, GI haemorrhage, polyp removal, evaluation of
abnormal x-rays of the GI tract and screening for colon cancer.
It is the latter situation that I want to devote a little time to today.
Cancer of the colon is a frequent form of cancer, and one that is difficult
to cure, often requiring extensive abdominal operations and sometimes ending
up with a permanent colostomy bag.
So what is involved? Before the procedure, an oral laxative solution is
given the day before. This will cleanse the faeces from the colon. It is
important that the preparation be followed completely. If faeces are
retained, or the preparation is inadequate, areas of the colon that may be
of importance to your health may be missed or misinterpreted. Please also
make sure that your physician knows well beforehand if you are taking any
blood thinners.
In general, this procedure takes approximately 30 to 45 minutes to perform
when done by a trained gastroenterologist. The procedure may take longer
depending upon any intervention that may be required for any individual
patient.
During the procedure, a fibre optic endoscope (the black snake) will be
inserted into the anus. The scope will then be advanced through the inside
of the colon to the caecum (the last part of the colon). Inspection and
removal of polyps usually is done during withdrawal of the endoscope.
Patients usually receive a combination of intravenous anaesthetics and the
dose and frequency of each of these are individualized for each patient. In
most cases, patients do not remember their procedure or are adequately
sedated such that the discomfort is well tolerated.
During the procedure, the nurse assisting your physician with the procedure
will continuously monitor your heart rate, oxygen saturation and blood
pressure. Thus, should any difficulties occur, your physician and his team
will be aware of the change quickly. As you will still have some sedation at
the end of the procedure, it is important that someone else drives you home.
How often should you have this procedure? This is something you should
discuss with your doctor. If you have a bad family history, then it should
be sooner, rather than later, but you will be generally looking at something
between five to ten years.
And do spare the time for it! It may save your life.
 Heart to Heart with Hillary
Dear Hillary,
I thank you very much for your answer to my letter two weeks ago, and I also
thank you much for helping me with my bad englisch (sic). It is correct what
you are saying: 1. This was straight from my heart, and 2. my native tongue
is also right because I come from Scandinavia and in Scandinavia we have
Danich (sic), Norway and Swidich (sic) but most of us understand all three.
I have readed in your fantastic newspaper that you like chookolate (sic) and
Champagne and maybe I one day went to you office and give you this but sorry
I don’t know were to find Belgian Chocolate-but never mind - I can buy 1
dark choockolate (sic, at least you are consistent) and one light brown and
one bottle of Champagne (price in the middle?) I think you will be happy.
I hope you can believe me when I say following during my stay in Thailand I
have never had one big problem with Thai people but believe me the big
problems I have head have coming from Farangs and especially people from the
country I come from in Scandinavia.
David
Dear David,
Thank you too for this second letter, which you can see, I did have to
shorten somewhat. I would not worry too much about the spelling, as you can
get your message across quite well, and yes, any chocolate and champagne is
fine! Do they make chocolate in Scandinavia? It would be a little cold for
the grapes, I am sure.
Dear Hillary,
I wonder if you can help us? We are the “Pratathology Society” here in
lovely Prattaya and we meet weekly at the Dusit Resort. Our hobby is
“POB”(Prats on bikes) watching and we are looking for amateur POB spotters
to join our society.
We welcome people of all ages and from all walks of life to join us in our
regular “POB Watch”. These outings are both educational and entertaining and
a constant source of hilarity for our members.
We are on the lookout for “POBs (the most common both local and introduced)
POBWITs (Prats on bikes with tattoos, also fairly common), POBWITERs (Prats
on bikes with tattoos and earring(s) less common but on the increase) and
the most elusive but ultimately the most spectacular POBWITERPITs (Prats on
bikes with tattoos, earring(s)and ponytail). These specimens can be spotted
all over Pattaya on the Beach Road, Sukhumvit and Pattaya Tai, Klang and Nua
and also increasingly on Soi Siam Country Club and as far east as
Mabprachan. They invariably ride bikes that are too heavy, too powerful and
too young for them and when they flock together with their females they can
be seen and heard revving up their phallic symbols like the petrol price was
still B. 15 per litre! Many thanks for a great publication,
EasyRider
Dear EasyRider,
You certainly did pick the right nom de plume, didn’t you, my Petal.
Reviewer Tom Dirks a few years ago described Easy Rider as an extremely
successful, low-budget (under $400,000), counter-cultural, independent film
for the alternative youth/cult market, with sex, drugs, casual violence, a
sacrificial tale (with a shocking, unhappy ending), and a pulsating rock and
roll soundtrack reinforcing or commenting on the film’s themes. Just for
interest, groups that participated musically included Steppenwolf, Jimi
Hendrix, The Band and Bob Dylan.
However, Middle America’s hatred for the long-haired motorcyclists is shown
in the film’s famous ending. Death seems to be the only freedom or means to
escape from the system in America where alternative lifestyles and idealism
are despised as too challenging or free. And all that was 1969, and here we
all are, 37 years later, and you are having problems letting some folk
wishing to express an alternative lifestyle just be themselves. The Middle
America syndrome is alive and well. What is wrong with being a POB? Your
group of voyeurs who meet weekly are just as much deviates from the central
thread of society, if you really want to sit down there in your Dusit easy
chairs and contemplate life, its meaning and your navel.
At your next weekly meeting, play Steppenwolf’s Born To Be Wild and remember
the days when you too thought you could be free and just motor off into an
idyllic future.
“Get your motor runnin’
Head out on the highway
Lookin’ for adventure
And whatever comes our way
Chorus 1
Yeah, darlin’ gonna make it happen
Take the world in a love embrace
Fire all of the guns at once and
Explode into space.”
Unfortunately, that didn’t happen, did it, EasyRider? You found that you
couldn’t be free either. As the slogans on promotional posters in 1969
proclaimed, they were on a search: “A man went looking for America and
couldn’t find it anywhere.” What is it that you and your “Pratathology
Society” is really looking for? Poking fun at the tattooed bikers, which you
describe as “invariably ride bikes that are too heavy, too powerful and too
young for them” will not get you anywhere either. As Peter Fonda and Dennis
Hopper showed in the movie, discrimination by what one wears, what one does
and how one appears has no real value in this world. It didn’t in 1969, and
it doesn’t in 2006.
A Female Perspective: Once bitten, twice bitten
with Sharona Watson
Joe MacFadden is a man twice bitten, or
perhaps I should say, ‘twice smitten’. There’s little doubt that marriage is
just about the biggest decision of our lives and sometimes, for a variety of
reasons, some of us have to make the decision more than once. Joe is such a
man. He’s got a big voice for such a small man, his height barely equalling
even my definitely diminutive size. Two marriages then, not an easy subject
to talk about, but I don’t think I’m known for my subtlety.
 Some
women take it all!
“You had two marriages, right, Joe?” I asked. “Yes, unfortunately,” replied
Joe. No point messing around, I thought. “Let’s start with your divorce.
When you got married for the first time, what were you looking for in a
wife?” Fair question, I think? “Well it was a long time ago… someone to tend
the house, look after the kids and bring the kids up right. And that’s what
I got.” Excellent. A straight talker. None of this deception I have to deal
with in some walks of life.
SW: “Were you happy, Jo?”
JM: “Oh yeah, very.” (you know what’s coming soon!)
SW: “Were you looking for an equal partner for life?”
JM: “Yes.” (He knows what’s coming too.)
SW: “So why did you get divorced?” (there it is!)
JM: “It just went wrong. We both had different pathways to follow.
One of the reasons was that I couldn’t settle in the UK and she wanted to be
totally static. I just didn’t like living in England and I couldn’t settle
enough to keep a stable life. I wanted to get into a different line of work
and that necessitated me moving abroad for various reasons at that time. I
had to move abroad and living apart under those conditions just didn’t work
and so we decided to split up. And that’s the only reason. We couldn’t live
together because I wanted something different and she wanted something which
to me was very unusual. Selfish reasons, I suppose.”
SW: “Do you think that being selfish is an inevitable part of being
married, or is it more to do with ‘give and take’?”
JM: “The ideal is ‘give and take’ but it never works out quite like
that because we’re a selfish animal, aren’t we? (I don’t know. I hope not.)
Sometimes when we don’t get our own way we throw ‘teddy in the corner’. I
don’t think my situation had much to do with money; it was to do with my
long term planning. I wanted to keep travelling.”
SW: “And you couldn’t sacrifice your ambition to travel?”
JM: “No, and she couldn’t sacrifice her ambition to have a two-up,
two-down and live in England for the rest of her life.”
SW: “Did you finish on good terms?”
JM: “Yes but it turned sour. She was heavily influenced by an evil
woman not from this planet (I think I must have met her!) who had obviously
gone through something similar and who wanted to clean me for everything I
had, even though I was giving everything I had! But she wanted more.”
SW: “Are you saying it wasn’t in her nature to ask for more?”
JM: “She was heavily influenced by someone else.”
SW: “You got married again about two years ago. Were you at all
worried, second time around?”
JM: “No. When I got divorced I said to myself, ‘That’s it. That was
my one planned marriage, I’m not having anything to do with marriage ever
again.’ I stayed like that for a while and then I met Jennifer and she
convinced me to get married! I mean, it wasn’t verbal, it was just the way
she was. She was very free and easy to live with. There’s no pressure, no
constraints; she moans a bit but … so do I! In many ways, I’m living a
single life; I can do what I want, when I want and so can she and we’re both
quite happy with that. That doesn’t mean there’s any promiscuity or anything
involved because neither of us is like that. If I want to have a beer at
nine o’clock in the morning, I can have a beer. If she wants to play the
piano at two o’clock in the morning, she can! So it’s very even, it’s very
fair.”
SW: “You have children from your first marriage but not your second?”
JM: “That’s right. We’re too busy. We’re both professionals. We don’t
get the time to practice!”
SW: “What do you do to make your second wife happy?”
JM: “I don’t go out of my way to do that. Everything’s natural, we
try to make each other happy. We get on very well together. I don’t have to
do anything to make her happy.”
SW: “Do you not do anything out of the ordinary to show your love?”
JM: “No. I think we take it for granted.”
SW: “Why do we do that?
JM: “That’s the way I am. I’m not a very passionate sort of person. I
don’t show my feelings easily and I don’t say things like ‘I love you’
everyday, or even every week, or every month! But I think that the way my
relationship is with my wife means she can see it and she knows she can see
it.”
SW: “Do you think sometimes women need reassurance of a man’s love?”
JM: “Yes. My first wife did.”
SW: “And what did you do?”
JM: “I was totally false and I reassured her.”
SW: “In what way?”
JM: “I’d tell her that I loved her.”
SW: “Did you ever give flowers or something like that to enhance what
you had?”
JM: “Sometimes. But it was for something that was quite unique and I
still do. For Christmas, birthdays, that sort of thing. It’s not just ‘give
her that message’ by giving her a bunch of flowers. If I see something nice
or I feel like doing something nice, I’ll just do it but I don’t go out of
my way to make her feel special. If I did, maybe it would start to be
expected, and then when it doesn’t happen maybe I’d get moaned at? I’ve
never wanted to be in that situation, not with my first wife, not with my
second and I won’t be with my third. Only joking, Jennifer. (She’s right
there). ‘Definitely never again’. That’s what I said the first time!”
Next week: Why would you want to go to Bangkok?
[email protected]
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