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Money matters: Commodity investing - As good as it gets? – Part 2
Graham Macdonald
MBMG International Ltd.
Over the last few months, growth investing appears to be back
in vogue and investors are starting to ask for higher earnings streams. This has
led to increasing M&A activity in the commodity space, as the big majors realise
that it is cheaper and a less risky strategy to buy a smaller start up company,
than go into these projects themselves. CSFB are predicting that 2006 will be
one of the most active M&A years for corporations in the past two decades, as
the big miners start to appreciate that there is still significant value that
exists in a target’s share price, provided they eventually come round to
adopting higher long-term assumptions.
This in itself will underpin the mining sector this year. However, there is not
an infinite supply of smaller companies out there and it will only be a matter
of time before companies are forced to spend on exploration once again. But the
fact remains that the longer they hold out, the longer the commodity cycle will
be sustained for.
The recent price rises in many commodities is still daunting however, but when
one looks at them in inflation adjusted terms, the moves do not appear so big.
In reality, base metals have been one of the worst performing assets since 1973.
Over that time period they have significantly underperformed real estate,
equities and bonds. In real terms commodities are not expensive.
Positive supply and demand fundamentals, coupled with attractive “real”
valuations have not gone unnoticed, with UBS and Macquarie estimating that
around $80 billion has been invested in commodity index funds for 2005, up from
$55 billion in 2004 and less than $30 billion in 2003. Based on UBS
calculations, they estimate that the equivalent of around 3-4% of total annual
production has been ‘bought’ via these indices.
But there appears to be more liquidity to come, with Bloomsbury Minerals
Economics predicting that investment in commodity index products could rise from
around $80 billion currently to $105-$115 billion by the end of 2006 and
$140-$150 billion by the end of 2007.
If these predictions are correct that the impact on base metals could be
significant. UBS estimates that new funds flow into these indices during 2006
could increase the fund position by another 50%. In each case investment could
be sufficient to either intensify a market deficit, or in some cases turn what
could have been a surplus into a deficit.
Also, index funds are currently playing a big part in the commodity market. In
reality investment flows are playing an even bigger part, as the funds reflected
are only index tracking and do not include over the counter trades, which could
be substantial.
GRAPH 1
In conclusion we do not believe that this is as good as it gets and in fact we
believe that the best is yet to come. However, this recommendation needs to come
with a health warning, especially if the US consumer does precipitously slowdown
in the second half of 2006, leading to an inevitable slowdown in China.
Commodity investments will be impacted by this, which we think will present a
great buying opportunity to buy these assets at cheaper prices, for the growth
in China is not a one year story, but one that we are going to see played out
for the next 10 years.
According to research from Macquirie Bank that even if China were to slow down
from current growth rates, China is still likely to account for 30%+ of world
demand by 2010.
Finally as David Fuller of Fullermoney fame so eloquently said, “With
approximately one billion people in the developed world and another five billion
in developing countries, the largest of which are scrambling to increase GDP and
the standard of living for their burgeoning populations, it is not difficult to
envisage a steepening demand curve for all resources, many of which are finite.”
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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: Holiday photography
by Harry Flashman
The best way to relive all holidays is through the photographs you bring
back, however, like the fish, just how many ‘got away’? And since they
were taken while you were on holidays, it will mean that you might just
have to wait till next year.
 Photo
by Ernie Kuehnelt
Many years ago, I used to carry a Polaroid back for my camera, so that I
could take the shot and review the result in 60 seconds, just to make
sure I’d got it. Now you can see if you’ve got it in one second.
Digitally!
As much as I love film (and continue to use it up to the negative
stage), digital photography makes much more sense, in many ways. The
first of these ways is that ability to see instant results. If you
haven’t got the shot you wanted, you are still there and can take it
again. For that reason alone, you should take a digital camera with you
on holidays.
However, there are many other good reasons, including the fact that the
memory chip is not affected by the airport security scanners. You can
take two or three memory cards with you without using up space in
handbags. And photoshops can read the cards very easily and burn you a
CD instantly.
However, to come back with some cracker holiday shots is not all that
difficult, it just needs some thought and time. Not taking the correct
amount of time in shooting is probably the number one reason for getting
disappointing results. The corollary is that by taking time, you will
get good results!
Take a look at the shot of the Cambodian girl on the bicycle. This was
taken by keen amateur Ernie Kuehnelt and took one hour. No, he did not
get the girl to cycle back and forth for 60 minutes, but he stayed in
position (in the shade) close to a bridge in Siem Reap for one hour.
During that time he snapped interesting looking subjects and this shot
was one of the best. It is a wonderfully evocative shot that shows the
life of a Cambodian peasant girl. By the way, the shot was taken on an
AF Nikon using the follow focus facility, and it certainly worked well.
What is worth noting from Ernie Kuehnelt’s photograph is that he came
back with images of Cambodia, not photographs of “me beside a temple” or
“me taken with our guide”. Your camera should be used to record the
place you visited, not just you on your holidays. The former kinds of
photographs are interesting. The latter are not!
Other local interest items to look for include parades. Every city, town
or village anywhere has its parades, but have you ever tried to record a
parade? It is actually very difficult. The eye sees a long procession of
musicians, marchers, flag wavers and the like as they pass by, but the
camera sees only one thin slice of the action about 1/60th of a second
long!
There is only one way to get parades, and that’s get up high and use a
long lens. By shooting down the oncoming procession you will get several
squads of musicians, marchers etc all on the one frame. By using the
telephoto lens you ‘compress’ the action and get even more in.
All tourist towns have their nightlife. Lots of lights, neon signs and
flood-lit fountains are the norm for this type of photograph. The secret
here is a wide angle lens with an aperture down around f 1.8 and not to
use your flash. Let the attractions provide the illumination, rather
than blitzing it with flash bursts. If you try and take neon light using
flash you will totally wash out the neon and again get very
disappointing results.
Finally, think about how you are going to present the results. It is
always a huge temptation to bring out folders of photos as soon as you
get back. Wait! Sort them, keep the good ones, throw away the bad. Put
your best shots on CD and think about an on-line site that will host
your shots for the world to access. Your shots could make you famous!
Modern Medicine: Eating for the Elderly
by Dr. Iain Corness, Consultant
We are all getting older. The average age of westerners is
increasing. The more developed countries in Asia are also showing the same
trends. Grey power is becoming an important factor, with the marketing of
goods and services designed for this increasing niche market. We (me
included) are becoming important people.
That’s the up side. Unfortunately, there is a down side (there always is,
isn’t there?) and that is just simply that the longer you live, the more
parts of you that end up wearing out. And if you didn’t look after yourself
some years ago, your past indiscretions can surely come round to bite you
now!
And talking about ‘biting’, one of the organs that can show the ravages of
time, is your digestive organ, the gut. As the body ages, the
gastrointestinal tract changes and people tend to develop more problems with
constipation. The pundits will tell you a high-fiber diet can prevent that,
but many elderly people, especially those with dentures, do not want to eat
the seed-filled or crunchy food that is typically high in fiber. They go for
soft food that is easily chewed, but is often high in fat.
So where can we get some fiber? Try some cooked or baked vegetables, fresh
fruit and high-fiber breakfast cereals as these are some denture-friendly
ways to get fiber in the diet. Beans and black-eyed peas are also nutritious
and inexpensive.
Another problem, especially in hot climates such as in Thailand, is
insufficient intake of water. The elderly have a decreased thirst and often
do not get enough fluids in their diet. Getting plenty of fluids helps
prevent constipation, because the bowel is a water absorber. The
constipation decreases when fluids are taken generously. Milk, tea, coffee,
soda, ice cream and soup all count as fluids.
Exercise plays a part here too. Get more physical, not less. The amount of
exercise needed depends on the person, but in general, people need to step
up their activity as they get older. Elderly people often do the opposite,
because of bad knees or arthritis. Instead of becoming a couch potato, they
need to walk, bicycle, swim, garden and find other ways to stay on the move.
As we age, our calorie needs decrease due to a drop in muscle strength from
taking less physical activity (see above). However, vitamin and mineral
needs may stay the same or even increase if the body absorbs them less
efficiently. The daily calorific requirement varies from person to person,
but as a very rough guide, males need to drop their calorie intake by around
20 percent after the age of retirement (2,500 cals down to 2,100 cals) and
women form 2,000 down to 1,800 cals.
There are many foods and ingredients needed to retain optimum health,
including those high in Vitamin C, such as blackberries, strawberries,
raspberries, blackcurrants, citrus fruit, kiwi fruit, peaches, mango,
cantaloupe melon, and apples.
Vegetables high in Vitamin A (beta-carotene) and Vitamin C including
carrots, squash, sweet potato, tomatoes, spinach, kale, collard greens,
broccoli, cabbage, Brussels sprouts, onions, leeks and avocado.
Fish should also be included as many are rich in Omega-3 essential fatty
acids and high in Vitamin E, like salmon, mackerel, sardines, herring, tuna
and trout. It is also a good idea to substitute white fish in place of red
meat.
Some nuts and seeds are also rich in Omega-3 essential fatty acids and high
in Vitamin E, including unsalted nuts, walnuts, cashews, brazil nuts and
almonds, and seeds such as poppy seeds, sunflower, flax seeds and pumpkin
seeds.
Proteins are also important in the diet for Seniors and should include eggs,
white fish, milk, cheese, yogurt, lean meat, chicken, beans and lentils.
Fiber can come from lentils, chick peas (garbanzo beans), brown rice, whole
wheat bread, wheatgerm, whole wheat cereals and whole wheat crackers.
A good spread of items, different dishes every day, plenty of water and
moderation in all things seems to be the answer. A glass of red wine gets my
nod of approval too.
 Heart to Heart with Hillary
Dear Hillary,
In the latest edition I read again from poor foreigners complaining about
Thai ladies. What do they expect? Do you really think that a sexy young
beautiful lady wants an old ugly foreigner with beer belly? Let us be
honest, all they want is their money and who are we to blame them if some
foreigners behave so stupid. I am 49 and have a lovely friend 45 years
young. She still has great looks, and more importantly we can talk on the
same level. I don’t have anything to tell to a 25 years old as that is a
completely other generation. There are enough great ladies in Chiang Mai, or
other places, in their forties who still look great and with good brains,
also important if you want to live with someone I think. The 60 plus section
who come to look for “Fresh young girls” should think of the fact that most
of that young ladies also want a fresh young man. Have you ever thought
about that? Ladies who want to escape from their poor life, just do that for
the money and the promises some foreigners make them, but once in Europe
they face other problems and get disappointed very quick as they found out
that in Europe or elsewhere it is the same struggle for life. Many poor
ladies get misled because they think that for example 75,000 baht a month is
a lot of money, and it is...in Chiang Mai, but not in Belgium or Germany
where it is only an average income. My friend is well educated and knows the
differences between the West and the East. To put it simply, stop fooling
yourselves and others and try to find or get a realistic relationship, you
won’t regret it, I am sure.
Willy
Dear Willy,
I am so pleased to see you are thinking with your head and not with the
(eponymous) organ, my Petal. There is so much more to any relationship than
20 minutes of sweaty rumpy-pumpy (and 20 minutes is probably an exaggeration
for most of the over-60’s viagorous exercises). The ability to communicate
on a similar level is even more important when you are contemplating mixed
races. If all you want is the nocturnal nookie, then buy it and don’t waste
your time and money on 24/7 relationships which will always be
unsatisfactory in the end, and leave you writing to Ms. Hillary saying your
wallets had a spring clean and vacuum. Thank you for a clear and lucid
letter, Willy. Your lady (and you) are lucky people.
Dear Hillary,
Every week I see all these old men tourists with young girls. Bold as brass,
down the street they come, arm in arm or holding hands with girls one
quarter of their age. From the leers on their faces you know what they are
thinking. Surely they must know they are a joke? These girls are after one
thing only and these old codgers are too stupid to see it. They certainly
don’t have any sex appeal left. Why don’t you tell the old duffers to stop
making fools of themselves?
Ginger
Dear Ginger,
You are all spiced up, aren’t you, Petal. The problem here is just who is
“making fools of themselves”? The old dodderers I see on the streets seem to
be enjoying themselves no end. Is there a law against enjoyment? What these
old codgers have found is someone who is prepared to look after them on
their holiday, don’t complain and make no judgments of their behavior. So
what if the girls are “after one thing only” – if the visiting tourist is
happy to look after his side of the bargain and the locals are happy to
supply what the visitor wants, then why are we (sorry, you) pointing the
finger of scorn? Lighten up, Ginger.
Dear Hillary,
Every week in your newspaper there is an article about local people in the
news, and most of them I have never heard of. Everyone round here has heard
of Hillary though. When are they going to do an article on you, “Petal”? You
are so wise that you must have been around for a while, but don’t let the
odd wrinkle or two stop you posing for the camera. As your loyal fans and
readers we would like to know more about you. How about it?
Ryan
Dear Ryan,
You are a lovely young fellow, aren’t you, Petal. How do I know your age?
Anyone with a name like Ryan has to be young! And as for your “How about
it?” How about what? Things seem to have changed a bit since Hillary was
young, footloose and fancy free. “How about it?” had a very sexy meaning way
back then, but, heaven forbid, I am sure you were not propositioning Hillary
through the column. But then, at my age I am allowed to dream. No, sorry
Ryan, Hillary is far too shy and retiring a person to allow an article to be
written about her. I am happy just helping those people with problems, and
putting people like you back on the straight and narrow. Growing up is a
long and painful process. You have my sympathies.
Beyond the Beach: “Beyond the Beach”
“In search of real England”
Caspian Pike
“Beyond the Beach” is certainly spreading itself far and wide. Last week’s
show down in Ban Sare took Andrew to meet Spencer Roberts, Chief Executive
Officer of BelleVue properties and an influential figure in the current
real-estate boom along the Eastern Seaboard. It was a slick, well produced
programme; relevant and informative. I love the variety. You know the show’s
always going to have a different slant, but always a cutting edge. Tongue in
cheek too, as the host cruises in his Jazz. Looks pretty down there, too.
Cotswold
resident John Hughes-Reckitt, introduces Andrew to his very own little piece
of England.
This week, Andrew Watson takes us to the heartland of old England, the
Cotswolds, to try and find out a bit about the England he claims he never
knew. He’s been away from England, the country of his birth, for almost a
decade now. Ten years of increasingly rapid change. There’s a saying, “They
little know of England whom only England know” and if you think about the
idea of being away, Andrew proposes, then it’s possible to cultivate a
compassionate but critical eye about where you come from. After all, in the
middle of this World Cup mania, perhaps it’s worth quietly reflecting on
what on earth it is, that we are supporting? What is it, this England? (Or
whatever your team happens to be). Is it Rooney’s, Owen’s and Gerrard’s
Liverpool? Or Ferdinand’s, Campbell’s and Lampard’s London? Or is it the
countryside?
The man Andrew knocks up to help him in his quest as he goes “In search of
real England” is John Hughes-Reckitt, a pillar of the community, a man of
breeding, a Cotswold cottager in his own right, an organist and retired wine
merchant. By all accounts he’s an authority on all that’s real about this
little corner of England. He kindly offers to take Andrew to a local Art
exhibition (what better way to understand how people view their country?)
and introduce him to this picturesque part of ‘perfidious Albion’.
The weather isn’t clement (this was filmed back in April) yet snow isn’t
quite what was expected. The show gets pretty funny as Watson freezes in
front of a pile of manure. Actually, the light and landscape throughout are
spectacular. There’s a glorious sense of serenity about the place as the
programme ambles easily around the unspoilt charm of the parish church and
country lanes. John Hughes-Reckitt is a charming and subtle guest, debonair
in an understated and I must say, very English way.
Next week, I’ll be previewing “Beyond the Beach” as Andrew Watson meets
Henry Elwes, Lord Lieutenant of Gloucestershire. Andrew is “Still in search
of real England”.
Catch Andrew Watson’s interview with John Hughes-Reckitt “In search of real
England” 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: “I’m OK only if you’re OK”
with Sharona Watson
Jerusalem: “I’m OK only if you’re OK”
When I lived in Jerusalem, I found that life can be very
hard. In every way, the process of getting through the day was difficult.
This was five years ago and more or less everyday some horrible thing
happened. Either there was a suicide attack, a shooting or some shelling,
all of which took the lives of innocents on both sides and created a
condition which I call “Jerusalem syndrome”. Actually, I’m borrowing this
term, which originally referred to a condition where people would come to
Jerusalem and after a while, they would start believing that they were
either the Messiah or a Prophet of some kind. There was a lot of it about at
the turn of the millennium. In fact even today, there are quite a few ‘John
the Baptists’ hanging around the Old City and sometimes, if you’re lucky,
you can catch a ‘Moses’ or an ‘Elijah’.
But I’m afraid that the “Jerusalem syndrome” which comes about from feeling
like you’re in a war-zone is far more sinister. Not funny at all. From the
time you wake up, you are looking over your shoulder, always alert, checking
out all the people around you to see if they ‘look’ suspicious. Looking for
unusual things, like big coats in hot weather, bags left unattended. You
check what time it is before you go to the market to go shopping because for
superstitious reasons you don’t want to be at the market at the same time as
when the bomb went off the week before. Or do you? Maybe lightning won’t
strike twice. Except that once, you remember, bus bombs went off on the same
number bus at the same time, same place, same day, two weeks running. You
see what I mean? Just living in the place could be enough to turn you into a
paranoid, neurotic, frightened individual. Everybody is your potential
murderer, nobody is your friend. Unless that is, you take a deliberate step
and turn what might otherwise be a negative, into a positive.
One day, I was walking down one of the main streets towards a bank when I
was knocked down by another pedestrian, who either wasn’t looking where he
was going or didn’t care who or what was in front of him, or both. In any
event, he didn’t bother to stop. (This happens more than you might think).
There was a foreign guy (from Belgium as it turned out) watching this and he
chased after the person who had walked into me and remonstrated with him. He
didn’t have much effect on the rather aggressive individual, who just
shrugged and went on his way, but I appreciated the gesture. He came back
and asked if I was OK and I replied that I was and thanked him. Then he
said, “I’m OK only if you’re OK” and I thought, “That’s it! That’s the way
to turn this thing around, to turn the unpleasantness into something
positive.” As it happened, we got to know this guy quite well. His name was
Enzo, he was a Christian and had just moved to Israel where he worked as a
computer wizard whilst preaching his gospel. I remember him also for one
very funny incident in particular. He liked his food, did Enzo, and one day,
he came around to our house. As usual he was hungry and he knew us well
enough by this time to understand that he could just wander into our fridge
whenever he wanted to. We had just returned from the UK and had smuggled
some bacon into the country. Don’t ask me why, but Enzo thought this streaky
bacon was salami and ate a piece, raw, at which point I came in and pointed
out his error. However, Enzo was undeterred. He stopped chewing for a
moment, grunted, then proceeded to eat his way through the entire packet!
The selflessness I learned from Enzo helped me a lot. It felt like something
I had always known but had been suppressing. I mean, in the Kibbutz, a
collective society, you are brought up to depend on each other. Everyone
around you is your family. I had to rediscover that feeling. So instead of
looking at people with fear, I started thinking about their good points and
began to savour the days. I found myself smiling more and things didn’t seem
so bad. You never get used to the bangs of the bombs, but you learn how to
deal with it. Then, when we came to Thailand, things changed again.
It’s funny in a way, but I don’t think you ever lose that sense of caring
for people around you once you have it. Neither do you lose that heightened
sense of awareness which probably helped you survive and which now gives you
a kind of vision and understanding of other people. It’s not meant to sound
arrogant. In fact I think it’s quite simple. If you look after others, then
they are more likely to look after you. In that sense, it’s almost selfish!
Actually, I think it’s just a very human thing. In Thailand, I guess that’s
one of the ideas behind ‘karma’. But the idea that it’s ‘nice to be nice’ is
one which you can find in all the religions, even in business (maybe that’s
pushing it). So I was surprised when in the middle of all the peace and
beauty here, I found some people who were actually quite nasty (none of them
Thai). I had thought that any nastiness in Jerusalem had come about because
of the tension and the fear. I was wrong. It was just a decision that people
had made. There was actually a lot of care and love there, which in
retrospect, I am sure had been partly generated by the situation. People had
learned that looking after each other was a good idea. They weren’t seeking
any personal gain, or hiding from the truth. It made sense. “I’m OK only if
you’re OK” was and is just a great way to approach life.
Next week: A Wine Club Treat
[email protected]
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