|
Money matters: Commodity investing - As good as it gets? – Part 1
Graham Macdonald
MBMG International Ltd.
It is awfully tempting to cut back on one’s commodity
exposure, especially after the spectacular run we have seen over the last few
months. The rally in mining equities, in particular, is now 35 months in
duration and relative to the previous cycles since 1972, is the longest in
duration.
We would argue, however, that the cycle has still much further to go and that we
could see another strong year from commodity investments. The market has been
focusing on demand factors, but it’s our belief that investors will increasingly
shift their focus on the supply side of the equation in 2006.
Over the last couple of years mining companies have been loathe to spend money
on Greenfield developments (iron ore and coal excluded), despite the significant
demand from China and other emerging market economies. This is not surprising
when one considers that experienced mining executives have long memories of the
‘old days’ in the industry, when commodity markets were characterised by short
upward shifts in commodity prices and long down-cycles.
Mining executives, today, are too focused on returns and do not have incentives
to take on risk to build new mines or smelters. Share buybacks, higher dividends
and M&A are a lower risk strategy than developing a mine, with four-year lead
times and the uncertainty of where prices will be once the project is finished.
The other factor influencing companies’ decisions is the inertia within the
industry to raise long term commodity assumptions, which were dragged down
during the 1998 Asian crisis. Credit Suisse First Boston argue that they are far
too low, especially given the rising costs of building new mines and smelters,
with them estimating that costs have jumped between 20% and 50% over the past
five years.
In just one example, CSFB argue that to justify a return in investment on a new
copper mine, the long term copper price needs to be close to $1.50 per pound,
compared with current industry thinking of $0.90 per pound. Similar outcomes are
true for nickel, zinc and platinum.
Most producers believe that current high prices will be short-lived, hence
producing assets are being run very hot, with capacity utilisation kept higher
for longer. This increases production risks. In addition, high commodity prices
encourage labour groups to push through wage increases (at a time when companies
are already focusing on minimizing cost pressures), thus increasing the
likelihood of work stoppages.
In a recent project update, BHP Billiton wrote the following: “Industry wide,
the supply side response to continued strong global demand for raw materials
remains constrained by a shortage of people, equipment and supplies. This has
led to tight labour markets and difficulty in sourcing construction and drilling
plant and machinery, which in turn has led to rising input costs. Currency
strength against the US dollar is also adding further pressure.”
Caterpillar, the mining equipment supplier, has also made similar comments, as
can be seen by a recent FT report in which they had the following to say,
“Mining equipment is sold out through 2007 and that the cycle has legs and looks
stronger than upturns in the 1980s and 1990s.” However, Caterpillar also said
that they “are cautious about creating overcapacity and that they have had
difficulty in obtaining some supplies, such as tyres, restricting their own
production, which is being felt by their customers in the mining industry.”
In yet another reason why the industry has been slow to build new capacity has
been US Dollar weakness. With the onset of this weakness in 2002, commodity
currencies began to strengthen and strengthened even more as the physical
commodity prices themselves began to rise in 2004. Currencies such as the Rand,
Chilean peso, and the Australian and Canadian dollars have appreciated by
between 25% and 50% since 2002.
The strength of these currencies has created additional cost pressures on local
producers and discouraged new projects, despite rising commodity prices.
The chart above shows there has been a sharp decline in metal discoveries over
the past 25 years. Whilst there has been increased spending in exploration, the
lack of new discoveries is apparent and is indicative of the fact that companies
are going to have to aggressively increase their spending budgets.
Continued next week…
|
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]
|
Snap Shots: What camera?
by Harry Flashman
One of the commonest questions put to professional photographer is “what
camera should I buy?” The answer is almost as varied as the numbers of
cameras available. Really, it is not an easy call. And now with the
choice of film or digital, the question is even more vexed.
Forgetting price constraints and imagining that you want a camera to
take “good” photographs of general interest; you know the sort of
things, family, holidays, grandchildren and pets, then there is
basically only two choices – Compact or SLR (Single Lens Reflex).
Let’s look at the relative advantages and disadvantages of both.
Firstly, the Compact. This group of cameras has really brought the fun
of photography to many people. In most instances, they are small, easy
to use – basically ‘point and shoot’. Initially they only had one fixed
lens of generally around 35 mm focal length, but these days, the more
up-market models have a “zoom” capability covering the 28 mm to 100 mm
range.
 As
far as focussing is concerned, most Compacts these days are fully
Autofocus, though there are still some ‘fixed’ focus lenses around on
the very cheapest models. The better ones these days have innumerable
steps in the focussing process and are very accurate too.
As far as shutter speed range goes, the modern compacts will go to
around 1/400th of a second which is enough to stop most action and they
will go as slow as around a 1 to 2 second exposure.
Size does matter, with cameras at least, and most compacts are small
enough to slip into a handbag or pocket which is another decided
advantage over the SLR brigade.
On paper then, it looks as if the compact has everything going for it.
Why even consider an SLR? Well, there are some areas where
unfortunately, the compact falls short. The first is the restriction in
lenses. A compact will not do you much good if you want to do wildlife
photography, with only around 100 mm telephoto ability. You need to be
able to get ‘close-up’ without being too close to the man eating tigers.
Another area where the compact is limited, is in the use of filters. To
get those really rich and vibrant colours, it is necessary to use such
devices as polarizing filters – there is no provision for the use of
filters with compacts.
Most compacts also come with their own inbuilt flash and while it is
adequate for most night or low light level shots, it does have
limitations. Adequate is the operative word.
So what about the SLR group? With this type of camera, you actually look
through the camera’s lens when composing the shot. What you see is what
you get. You have a huge range of lenses to choose from, both original
equipment and after market brands, to take you from ultra-wide (16 mm)
through to huge telephoto lenses of around 600 mm which you can use to
photograph the tigers eating, without getting so close to the action you
end up on the dinner menu as well.
SLR’s also have greater ranges of shutter speeds, from time exposures of
any time you like, through to 1/4000th of a second. The range of
aperture settings in the lens are also greater in the SLR group – and,
even more importantly, you can dictate the settings you want.
That is where the principle differences lie – with the compact, there is
little you can fiddle with to experiment or manipulate – with SLR’s the
sky’s the limit.
With all these creative possibilities in one camera, why would you ever
bother thinking about a compact? Well, the SLR does have some
disadvantages too. Size and weight are two principal ones. An SLR is not
the camera you put in your handbag unless you have a very large
receptacle and a couple of porters to carry it. By the time you add up
camera, three lenses and a flash you are looking at quite some weight,
especially with the semi-pro equipment.
And as far as the digital versus film question, if you are just entering
the fascinating world of photography, it is digital, as the days of film
are numbered.
Modern Medicine: So how do you test for “sugar”?
by Dr. Iain Corness, Consultant
Diabetes is a serious ailment, which can arise for many
reasons, and can affect many systems in the human body. Diabetes, often
called “sugar” by some patients, is diagnosed and monitored mainly through a
simple blood test – the Blood Glucose level.
Glucose is a type of sugar found in fruits and many other foods (this
includes lactose and fructose). It is the main source of energy used by the
body. Most of the carbohydrates that people eat are also turned into
glucose, which can be used for energy or stored in the liver and kidneys as
glycogen.
To stop the sugar levels just increasing daily, a balance is achieved
through a hormone called Insulin which helps the body use and control the
amount of glucose in the blood. Insulin is produced in areas of the pancreas
called ‘islets’ and released into the blood when the level of glucose in the
blood rises. In simple terms, people who do not produce enough insulin
develop Diabetes. People can also develop diabetes if they do not respond
normally to the insulin their bodies produce. This occurs most commonly when
a person is overweight, and since obesity is on the rise, so are various
types of Diabetes.
Normally, blood glucose levels increase slightly after a person eats a meal.
This increase causes the pancreas to release insulin so that blood glucose
levels do not get too high. Blood glucose levels that remain high over time
can cause damage to the eyes, kidneys, nerves, and blood vessels, which
explains why good glucose control is important.
There are many ways to carry out blood glucose tests, including fasting
blood sugar (FBS). This is a measurement of blood glucose after fasting for
12 to 14 hours. For an accurate fasting blood sugar test, do not eat or
drink for 12 to 14 hours before the blood sample is taken; however, water
can be freely taken, as otherwise hemoconcentration occurs to give a falsely
high reading. This is often the first test done to detect diabetes, and
explains why fasting blood tests are usually done when having a medical
check-up.
The other common test is called the random blood sugar (RBS). A random blood
sugar measurement may also be called a casual blood glucose test. This is a
measurement of blood glucose that is taken regardless of when the person
last ate a meal. Sometimes several random measurements are taken throughout
a day. Random testing is useful because glucose levels in healthy people do
not vary widely throughout the day, so wild swings may indicate a metabolic
problem.
Glocose Tolerance Testing can also be done, usually to confirm a condition
known as Gestational Diabetes, which can occur during pregnancy. An oral
glucose tolerance test is simply a series of blood glucose measurements
taken after a person drinks a liquid containing a specific amount of
glucose; however, this test is not used to diagnose diabetes.
To monitor the treatment of diabetes, there are another couple of tests
which can be carried out. The commonest is Glycated Hemoglobin, otherwise
referred to as HbA1c. This test actually is an indicator of the average
glucose concentration over the life of the red blood cells (which is taken
as over the previous three months).
Another is the Serum C-Peptide which is used to investigate low blood sugar
levels, done by measuring the C-Peptide which is produced by the Beta cells
in the pancreas.
“Normal” levels may vary from lab to lab, but generally the range taken for
FBS is that the level should be less than 110 milligrams per deciliter
(mg/dL).
Diagnosis of diabetes needs a fasting blood glucose level higher than 125
mg/dL on two separate days.
A fasting glucose level below 40 mg/dL in women or below 50 mg/dL in men
that is accompanied by symptoms of hypoglycemia (low blood sugar) may
indicate an insulinoma, a tumor that produces abnormally high amounts of
insulin. Lower than expected glucose levels can also indicate Addison’s
disease, an underactive thyroid gland or pituitary gland, liver disease
(such as cirrhosis), malnutrition, or a problem that prevents the intestines
from absorbing the nutrients in food.
 Heart to Heart with Hillary
Dear Hillary,
Your reply to my letter was so vitriolic! In the movie “Easy Rider” Peter
Fonda, Dennis Hopper and a young Jack Nicholson did not “show” us anything
except a great fictitious movie, that’s all it was Hill! You didn’t believe
it did you? We tried to play some Steppenwolf but it was drowned out by the
revving of (Prats on Bikes) POBs! And we are not trying to stop people
living their 1969 fantasies, we just reserve the right to not take them as
seriously as they would like to be taken. By the way what bike do you ride
Hillary?
EasyRider
Dear EasyRider,
Me? Vitriolic? Never, my Petal! However, you still do not grasp the thrust
of my reply. The people who you say are “living their 1969 fantasies” are
not asking you to take them seriously or otherwise. They are happily doing
their “thing” and don’t need your approval in any way whatsoever. They are
not pointing the finger of scorn at you, but that is certainly what you are
doing to them, would you not concede me that little fact? There is enough
room on this planet for all of us, and just because some are different, for
any reason you like, including ethnicity, does not give others the right to
mock. And as far as what bike do I ride, I don’t own a bike, Petal, because
you can’t ride side-saddle and control an HD (Highly Dangerous) all at the
same time. Finally, please go to the DVD shop and rent out the movie again.
There was a message in there, but it seems as though you didn’t grasp it
either. Play it back at half speed, it seems you have trouble assimilating
things.
Dear Hills,
Glad to see you are alive and kicking, and haven’t lost any of your bitchy
nature. You certainly let EasyRider have it right between the eyes, both
barrels. I don’t know what he is trying to achieve with his group of
voyeurs. Live and let live is my motto, but that wasn’t the theme of the
movie. Mind you I wouldn’t be too happy if a bunch of them were revving
their motors under my bedroom window, but that’s not what EasyRider was
complaining of. He and his mates just sit in the pub and find something to
complain about it seems.
Nack Jickolson
Dear Nack,
Where did you get “Hills” from? Please, Petal, my name is Hillary. However,
you certainly seem to have the knack of hitting the nail on the head. Live
and let live was the message I was trying to get through as well, but
apparently without much success. Glad you saw something else in the movie,
other than revving motorcycles.
Dear Hillary,
What do you do about house guests that keep on arriving from the old
country? I’ve had five sets this year and it looks like there are more
coming for Xmas. If I had nothing else to do other than entertain old
friends then it would be fine, but I have work I have to do as well. I don’t
want to give old friends the cold shoulder, but I’m at my wits end,
honestly! What should I do?
Guest house Gertrude
Dear Gertie,
This is a very common problem when you live in a place that other people
save for 11 months to come and visit. You actually have the answer already
when you called yourself “Guest house” Gertrude. Run the home more on the
guest house lines. Tell your friends that as you have other work to do, you
will leave everything out for them for their breakfast and then you will
meet them for dinner at 7 p.m. and do things together from there. I am sure
your friends will appreciate that even though they are on holidays, you are
not. They need time to themselves too and will be grateful for the chances
to explore on their own. Have some brochures in their room with suggested
trips and other touristy treats and let them take it from there. Just think
about it, you can even get one of those nice wooden signs with “Gerties
Guest House” carved into it.
Dear Hillary,
My wife and I are both getting on a bit and are forced to use reading
glasses. This would be fine if we both used the same strength – we could
share, but this cannot happen because of two reasons. The first is that she
needs weaker ones than me, so she can use mine, but I cannot use hers.
Second is that she is a most forgetful woman and loses hers. I carefully
look after mine, to find that she has lost hers, taken mine and lost them as
well! What do you suggest Hillary?
Myopic Mike
Dear Mike,
Wear your glasses around your neck at all times and refuse to let her borrow
them. If you are in a restaurant then still don’t pass over your spectacles
either, but order for her – of course it will be something she doesn’t
particularly like! Anyone who keeps on losing things is either doing it
deliberately to annoy or is truly dopey. You work out which one.
Beyond the Beach: “Spencer Roberts - A Man Living his Dream”
Caspian Pike
Well, hats off to Pattaya Mail TV and the “Beyond the Beach” production
team. Last week’s show, “The Man from the Beeb” continued a cracking start to a
new series which is setting new benchmarks for regional television programming.
Original, informative and classy, the last programme featured Anthony Moncrieff,
who was working as a senior reporter for the BBC at the time of the Suez crisis
and was thus afforded a ‘Grandstand view’ of it. His testimony was as revealing
as it was relevant. Fifty years on, it was possible to reconsider the Suez
fiasco with retrospective vision enhanced, thanks to fresh analysis of evidence,
hitherto restricted.
‘Beyond the Beach” this week sees Andrew Watson meet Spencer Roberts – A man living
his dream here in Thailand.
This week Andrew drives down to Ban Sare to meet Spencer Roberts, Chief
Executive Officer of BelleVue properties and an influential figure in the
current real-estate boom along the Eastern Seaboard. One of the real
pleasures of watching “Beyond the Beach” is that like Forrest Gump’s
chocolate box, you never know what you’re going to get next. One week a
journalist, the next an ambassador, and so on. Spreading the net far and
wide, as promised.
Perhaps unsurprisingly, Andrew opens “A Man Living his Dream” from the
beach, before moving inland to discover some of the most impressive and
ambitious developments being built along the Eastern Seaboard. Five years
ago, Andrew notes, people were still talking about the ‘crash’ of 1997. In
Pattaya at that time and up and down the country for that matter, things had
gone a bit quiet (although it’s sometimes difficult to imagine Pattaya
quiet). But the last two years or so have brought a massive resurgence to
the economy, with investor faith renewed. Much of this new lease of life,
Andrew conjectures, is down to the property market and people like Spencer
Roberts.
In the luxurious comfort of one of the villas nearing completion, Andrew
chats to Spencer about the economic climate and the reasons why there’s no
shortage of people from all around the world wanting to take up residency in
the Pattaya area. The views from Belle Vue Heights are predictably
stupendous and Spencer takes Andrew to a vantage point looking down to the
bay at Ban Sare, as the sun begins to set. It’s beautiful. Born and bred in
London, Spencer has seen and done it all when it comes to property, on a
global scale, but he seems to have settled in Thailand. “Beyond the Beach”
tries to find out why.
Next week, in the midst of World Cup hysteria, I’ll be previewing “Beyond
the Beach” as Andrew Watson travels to Europe “In search of real England”.
What is it we are really supporting? Did you ever wonder?
Catch Andrew Watson’s interview with Spencer Roberts, “A Man Living his
Dream” on “Beyond the Beach”, Sunday at the following times:
Sophon at 8:00am - Midday- 4:00pm- 8:pm and Midnight.
Chonburi at 9:40am- 2:00pm - 8:40pm and 40 minutes after midnight.
Jomtien at 9:00am- 12:30pm - and 9:00pm
Sattahip at 8:00am - 1:30pm - 5:00pm- 8:00pm and 11:00pm
A Female Perspective: Stability and security
with Sharona Watson
What do you think women want in a
relationship with a man? Do you think they want to play a minor role in the
life of their partner, to be a mover of props, a stage hand working behind
the scenes to make someone else’s performance a success? Well if you believe
that, think again. Whilst some women can give the appearance of desiring
nothing more than to observe their spouse’s achievements almost as if they
were spectators, I think that the truth may very well be more realistic, in
some cases more sinister, and in others, more to do with qualities like
recognition and respect.
Lady Macbeths – maybe you know one?
We have all heard and read, I am sure, about women who personify the
(alleged) truism that ‘behind every strong man is an even stronger woman’.
Typically, there will be a big tough guy in charge of something, at least
acting all tough. Then you look around and you see his wife or girlfriend
(sometimes both!) and they have their beady eye on their man. Sometimes,
he’ll do or say something and you see the wife wince like she’s in terrible
pain and you know for sure that this ache she feels will provide her with
the desire to make her partner’s life an absolute misery when they get home.
To be fair, perhaps we’ve all done that, in some form or other. But it gets
sinister and downright nasty when you come across ‘Lady Macbeth’ kind of
women, who force their (usually mentally and certainly morally) very weak
husbands into doing something that they would never otherwise be interested
in doing. Men like this can be aggressive and bullying in pursuit of their
wife’s desires. But they are cowards and will be first to slap their victim
on the back before they stab them. They learn to smile like a chimpanzee, as
they kill.
When I watched a movie of ‘Macbeth’ the other day, I was suddenly struck by
how relevant the play still is today. In the beginning, Macbeth is this
quite cool man, happy just to get on with enjoying his life; suddenly he is
completely transformed by a dreadful witch of a wife. Now she gives women a
bad name! Lady Macbeth lies, cheats and persuades her husband to carry out
all manner of horrible deeds on her behalf. She makes things up about other
people and manipulates everything to her own and her husband’s advantage
without any sense of contrition. ‘Vaulting ambition’ is what she wants him
to show but still Macbeth needs convincing. In the end, it’s as if he just
does what he does, because she’s such a dragon. That’s why she’s the one who
feels guilty all the time, trying to wash her hands clean from all that
blood. In the end, her behaviour becomes so crazy and obvious that nobody
can fail to notice what she is doing. Her evil eats her up. Seeing the film
with the actors in ‘modern dress’ really makes it feel real; I kept seeing
people I recognise!
On reflection, I think that what this woman wanted was actually what many
women want – stability and security – but she’d allowed her greed to get out
of control. It’s a strange thing that seems to happen a lot in life. If you
want something so much that you will make someone else’s life a misery to
get it, then either you end up not achieving what you want, or you get it
but it feels terrible.
I think many women suffer from low self-esteem, repeatedly told that they
don’t provide (financially, for example) and it is possible to generally
feel diminished by the male. With a little bit of recognition of her role
‘just as she is,’ perhaps women wouldn’t feel the need to go that extra mile
to prove themselves. If there was real respect for a woman from a man, then
perhaps she’d really feel what she wants; stability and security. It doesn’t
take much effort, you know, but so few men seem prepared to make it. Maybe
that’s because it means something different to each of the sexes? It’s as if
the male has an idea of the kind of partner he wants and he judges her by
this idea, not by whom she happens to be. This situation means some kind of
failure is almost inevitable, because firstly, how can she know what kind of
woman she is expected to be? Secondly, it’s demeaning to expect a woman to
work towards her partner’s idea of perfection. Why can’t she just be
herself? Maybe he should try moving towards her idea of what a husband or
boyfriend should be, instead?
As a woman, stability means reliability and reassurance, but not boredom. It
doesn’t mean being taken for granted or not taking risks (although I’d
rather not drive quite as fast as my husband). Security means looking after
the future, not only financially, but in terms of trust and love.
Personally, I find it difficult to cope with uncertainty. I want to know
where I’m going to be a year from now and where the money’s coming from.
Andy’s much better at dealing with impermanence than I am. But he’s had much
more practice at it than I have, although I really think it’s sad when
things happen and you think, “Well you can’t trust anybody, anymore”. I’d
find that difficult, having to watch who was around you before you said
something, knowing that someone wanted to have a go at you. I guess that’s
how presidents and prime ministers feel.
I just want to feel safe and I want my family to feel safe. Because if they
feel safe and secure, then as a family we have a chance of being happy.
Stability is like the foundation of happiness, where you don’t have to worry
so much anymore. If you can acquire stability and security honestly, then I
think (as Macy Gray sings), “All your demons will wither away”. If only Lady
Macbeth had listened to Macy Gray!
Next Week: “I’m OK only if you’re OK”
[email protected]
|
