|
Money matters:
Graham Macdonald
MBMG International Ltd.
Nominated for the Lorenzo Natali Prize
Why commodities should always be a part of your portfolio
Ever since the turn of the millennium people have started to
take notice of commodities. People have found the volatility is usually less
than the more traditional equity and bond asset classes whilst at the same time,
for the most part, showing sustainable growth. It has also become a lot clearer
to most how to understand the basic fundamentals.
People have cottoned on to the fact that with the emerging markets in a period
of continued growth they need commodities. They have also seen that there was
not nearly enough investment in this asset class in the 1980s and 1990s which
has meant the prices would basically keep on going up as more and more were
needed. Even when taking into account the sudden drop post-Lehman, commodities
can still seen to be a good investment.
Just to cite a few examples, gold went from under USD260 per oz in 1999 to over
USD1,200 late last year. Also, in 1999, oil bottomed out at USD10 per barrel and
went up to USD150 by the middle of 2008. These were exceptional but also the
broader Reuters CRB Index (RCRBI) which covers a broad range of commodities had
its best ever year in 2008 since its inception in 1956.
As stated above, there was a correction in 2008 whereby oil dropped to USD35 per
barrel and the RCRBI retreated to seven year lows. Despite all this though,
prices have jumped this year due to exceptional growth in most emerging markets
- especially China where the Shanghai Index has grown by 80% this year - and
cuts in production costs.
So, now commodities have rebounded, what can we make of this and how can we plan
for the future? Goldman Sachs believes commodity prices will continue to rise as
there will be more and more demand from Asia and other emerging markets and, as
stated before, the lack of investment in this asset class has meant certain
commodities are not as available as they could be. This is why China has been
buying up mining companies in Africa and elsewhere.
While there are some proponents of the theory we have reached the end of this
commodity cycle most people agree there is still a long way to go before the
upward trend finishes. It would seem that investors would agree with this and
the pension and hedge fund managers are looking to get in whilst the prices are
still comparatively cheap. Until recently commodities were only a tiny part of
their respective portfolios and this was usually only via a tracker index just
so they could say they were invested in the asset class. However, they are now
looking for more varied and sophisticated strategies.
One of the reasons for this is that commodities can offer good protection
against inflation. For example, when prices go up then this will usually include
things like oil and sugar, etc. These days, with the ever-present problems of
fiscal and monetary easing, this is vital. It is true that this usually depends
on supply and demand but, at the moment, there is not exactly a glut in almost
any type of commodity.
There are different ideas on how to invest in commodities. You can do this
through the equity route and invest in the companies which are involved, either
directly or indirectly, or you can enter the market via the asset itself.
Exchange Traded Funds (ETFs) or Exchange Traded Commodities (ETCs) are equally
as good if you want to use the latter method. It just depends on the goals of
the investor as to which should be used. It must be remembered that just because
one does well that the other will follow although this can, obviously, happen.
If you are not sure of what to do then you can always follow the advice of Evy
Hambro who manages one of our favourite commodity funds, the Blackrock Gold and
General Fund. He recommends averaging, i.e. do not commit everything at the same
time. Hambro points out that, “equities go up and down a lot more…the long term
average for a one percent change in the value of gold results in a three percent
change for its equities. Sometimes it’s even ten percent so it is a much higher
beta.” To further reduce volatility Hambro suggests diversifying across the
whole commodity range.
Another of our recommended funds is the Moonraker Commodities Fund. The manager,
Jeremy Charlesworth, agrees that there is definitely a difference and he
concentrates much more on commodities themselves, options and futures rather
than equities. One of the reasons for this is that it negates having to consider
how a company is run which can have its own influences on price.
Let us return to Hambro and his fund. This has returned nearly 22 percent per
annum over the last five years. The fund typically invests in fifty to eighty
companies as well as cash. Well over eighty percent invests in precious metals
with over 16% in two companies - Kinross Gold and Newcrest Mining. The fund
manager has no loyalty to any part of the world but does believe that most of
the gold in America and Australia has already been found and so will concentrate
elsewhere with new investments. One of the countries he is looking at is
Thailand but he has worries about making too much commitment to somewhere like
Vietnam, Indonesia, Russia and other places as things are not as stable as where
most of his present investments are. He will risk a bit but not a lot.
Hambro believes gold still has a long way to go and that banks will be big
buyers as an alternative to money. He thinks the real price, inflation adjusted,
for gold should be around USD2,800 per oz.
This is in the long run though. Many people think gold is due a correction
before it starts to climb again. This uncertainty is causing confusion and, to a
certain extent anxiety, amongst prospective investors. Barings manager, Andrew
Cole, believes it would be unwise to invest in gold until the price has dropped.
However, many people are lining themselves to buy when this has happened. When
it does then many think it will be too cheap to ignore as, in real terms, if it
is compared to its peak of USD850 in 1980, it is well down on what its value
should be. Pictet, Credit Suisse, John Paulson are just some of the people who
have just launched or are about to release on to the market new gold funds.
Central banks are also looking at the gold situation as an alternative to FX.
They cannot all be wrong.
What of other commodities. Well, Dr Marc Faber recently pointed out that, when
adjusted for inflation, sugar was at two hundred year low. Now, as people who
know me will attest to, I am not the greatest health freak in the world and it
is a commodity which will always be needed whether the likes of Dr Atkins and
Jane Fonda like it or not. Dr Faber also likes agricultural commodities.
Another relative and popular newcomer to the market recently has been forestry.
The large university funds at Harvard and Yale have been invested in this for
quite some time now. Not for the first time, they have shown the way and now
this is a thriving fund industry. In 2008, wood fell to new lows but the prices
have been improving ever since. However, forestry held its own as people
expected timber to improve and new technology is coming in which is
eco-friendly. It is also possible to make money two ways, either by selling the
tree or waiting for timber to be cut. We have long been fans of Plum Creek
Timber and the Phaunos Timber Fund is another one we will look at soon. Pictet
also has its own fund which shows good potential. GMO Renewable Resources
invests in more traditional places and will not look elsewhere for the
foreseeable future. Exchange Traded Funds are also a good way of dipping your
toes into this market. The one real problem for this particular commodity is
climate change and its affect on the world as we know it, i.e. fire, too much
rain, not enough rain, temperatures, etc.
Oil, along with natural gas, is expected to do well. New finds are being
discovered all the time but usage is also increasing, in fact it is being used
more quickly than it is found. Therefore, we just have to revert to the old
economic dictate of supply and demand to see that these commodities will be
needed for many years to come as there is no mass viable alternative. This being
so, it is hard to see the price of oil falling below USD50 per barrel and it
will probably be a lot more.
I am often asked how much of the portfolio should be in commodities. There is no
easy answer to this as it depends on a person’s investment strategy and present
fund make up. For example, if you are already in a fund of funds there is a
chance you may already be in commodities and not even know about it. However,
without doubt, you should hold some in your portfolio - for a multitude of
reasons.
|
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: by Harry Flashman
What do you need to be an ‘Events’ photographer?
 The
festive season is over, but if you have a half decent camera, you will
be asked to take photographs at all the forthcoming events. Happy Xmas!
Happy Anniversary! Happy Birthday! Congratulations on your engagement,
graduation, marriage, baptism! Congratulations on the divorce! Have a
great vacation! It just goes on. Every week there will be some sort of
celebration. Have a look in your own family album and you will
undoubtedly get all sorts of memories - here’s Gary when he graduated,
Bill’s birthday, Wanda’s wedding or even Felix’s funeral.
For all these people, the event is an important milestone in their
lives, in some way or another, and so the event deserves to be recorded
properly. And guess what, you can’t do it with one shot. It takes a
sequence of shots.
So to make sure that you can get the event in its entirety, here are a
few hints. The secret is to start long before you get to the event venue
and sit down and make yourself a list. A checklist, in fact. What you
have to remember at all times, is just what is this event all about? Let
us assume that the party you are going to record is a birthday. Here’s
what you should be thinking about.
What do you need to show? Firstly you have to show that it is a
birthday, not just any old party. Secondly you have to feature the
person whose birthday it is. Thirdly you have to show who came to
celebrate the birthday and fourthly any significant gifts that were
received. Not even Henri Cartier-Bresson would be able to get all that
lot into one photograph!
It should go without saying that you have checked your camera, it does
work, you have spare memory stick/card and you do have spare batteries
for the flash. Here is the type of list I would draw up if taking
photographs for your child’s birthday:
1. Shot of birthday boy looking at a birthday card (close up - this
gives the visual clue that it is a birthday)
2. Birthday boy opening present (close up - more clues)
3. As above with parents and friends standing around (wide angle shot)
4. Mother placing candles on birthday cake (classic clue)
5. Father lighting candles
6. Blowing out the candles (close up - an absolute “must”)
7. General shots of people singing and clapping
8. Happy time shots
Note that all these shots are designed to set the scene, show the
participants and nominate the “star”. There are varied shots, some close
up, some group shots and together they make a package called “Billy’s
Birthday”.
Probably one of the most important items to remember is my adage - “Walk
several meters closer!” When people are just small dots, you cannot pick
out who they were, several months later. Do not be afraid to walk in
close - this one factor alone will result in much better pictures.
For many of the shots, you will also have to be prepared, because when
the action happens at an event, it can happen very quickly. For example,
blowing out the candles. You can’t say, “Sorry, I wasn’t ready. Can you
do it again please?” The name of the game is to know what you need to
shoot, and be ready for it.
Now when you come to put them in the family album, you have a nice group
of pictures which many years later will continue to say “Billy’s
Birthday”, unmistakably. And you made it happen photographically. Well
done!
So next time you are going to photograph an important event, plan your
shots, take them deliberately according to the plan and be amazed at how
much better your results will be!
One final word of warning. When you have become the ‘official’
photographer for any event, you cannot be the life and soul of the party
until you have taken all the shots on your list. You are being relied
upon to come home with the goods. You can’t do it with a belly full of
gin and tonics!
Modern Medicine:
by Dr. Iain Corness, Consultant
Do you mind if I smoke?
How many times have you been asked, while in a social
situation, “Do you mind if I smoke?” and before hearing your reply the
person is lighting up. I used to say, “No, that’s fine,” to be polite. Now,
I say “Yes, I do mind, but please feel free to smoke outside.”
I too, was a smoker - many years ago, before we (the medical profession)
worked out how dangerous the habit really was. As well as being ridiculous
in a social context. Rolling up dried plant leaves and sticking them in your
mouth and setting fire to the end of it sounds like a pretty silly proposal,
particularly when you now know it is dangerous.
Unfortunately, when you start smoking, it becomes very difficult to stop
smoking. This is because smoking is not just a habit like chewing on a
pencil when concentrating. Smoking is an addiction. What you have to realize
is that nicotine is more addictive than heroin. I know that’s probably hard
to believe, but that really is the crux of the matter. You take nicotine
into all of your metabolic pathways until you “need” to have nicotine to be
able to function. Nicotine becomes part of your metabolic chemical chains,
and they don’t work properly without it. Now you can see just why you feel
so dreadful when you go without cigarettes (nicotine) for any period of
time.
To give up cigarettes there are many, many ways, ranging from acupuncture,
hypnosis, the I Ching, acupressure, Nicotine Replacement Therapies (NRT),
chewing gum, patches, nasal spray and many others all the way through to
Cold Turkey!
Interestingly, all of the above methods need the smoker to become committed
to ceasing cigarettes. The success rate really hangs on that commitment.
Leaving aside hypnosis and acupuncture, about which I know very little, but
the good books tell me do not enjoy high success rates, let’s look at the
other methods. The majority rely on Nicotine Replacement Therapy (NRT). All
the gums and sprays do is to make nicotine available for you in measured
doses - much like cigarettes do. You get the craving, you chew the gum. You
get the craving, you squirt the spray.
Patches are slightly different. They deliver the nicotine slowly over a 12
or 24 hour period and are supposed to stop the craving before it happens.
But often do not.
After stabilizing on the NRT it is time to bring the dosage down, which is
the next hurdle at which many fall. The end result can be cigarette smoking
plus NRT - a potentially fatal combination. In fact, I strongly believe that
NRT should only be done under close medical supervision. Too much nicotine
can kill too!
So what is the best way? It’s called Cold Turkey. The proof is in the
numbers. There has been enough research done and the prime factor is that
the quitter has to be committed to the concept of becoming a non-smoker.
Doing it (quitting) for somebody else, because you lost a bet, because you
are being nagged into it by your wife, girlfriend, boyfriend is doomed to
failure, I am afraid. This is something which requires your total
commitment. 100 percent all the way. When I gave up smoking (yes, in my
teenage years nobody thought that smoking was bad for you. Smoking was being
cool and ‘adult’) and I thought it would be a bad scene for a couple of
days, and then found that it was a couple of weeks of torture. Here I am
almost three decades later and I could begin smoking again tomorrow. It
requires dedication and commitment. Yours! No one else’s!
So, I admit that those who go Cold Turkey may go through a rough time with
withdrawals initially, but the majority are still non-smokers after one
year. The same cannot be said for the others. The “hard” way is ultimately
the best way.
You have to make the decision to quit. You set the day. You tell all your
friends that you are now a non-smoker - and you stick to it! Best of luck,
the ball is in your court.
Heart to Heart with Hillary
Dear Hillary;
Please tell “Nobody’s fool” to complete the real estate change so that I can
move in. He has been keeping me in Singha’s and I do like his girl enough. As
she works often I can go out with her ‘sisters’ while she’s away. Keep it coming
my good friend.
Jerry Singha
Dear Jerry,
To bring the readers up to date, three weeks ago “Nobody’s fool” was
transferring the title deeds of his house to his girlfriend, the cashier at the
bar. He wrote, “Now, bless her compassionate soul, she is kindly allowing me to
transfer the ownership of my two houses to her name, thus saving the annual dues
I have been paying because they have been registered in Limited Companies.”
He was very happy to do this, though I did question the advisability of such a
move, but now you are insinuating that you are cuckolding him behind his back.
And not only with his newly numerically enhanced Nok, but with her sisters as
well. Jerry, how could you? Have you no shame? Is there no honor left amongst
the males in Thailand? And these same people have the temerity to suggest that
the Thai ladies are untrustworthy. Some days I just cry myself to sleep.
Dear Hillary,
(This email came in after Jerry’s letter was received by the office, but again
refers to the original letter three weeks ago.) The last time I wrote to you I
misspelt your name. Please accept my apologies, it was purely a little gender
confusion, and thank you for your considered reply.
You will recall how much I praised my lady Nok. Well, things have now changed
since she has obviously come under the spell and evil influence of a wicked man.
I recently visited the UK for a few days and when I returned found my key would
not open the front door. I rang the bell and this man came to the door and told
me, in no uncertain terms that I will paraphrase to meaning “please move away
with jerky movements” as this a family newspaper. When I told him this was my
house he said it wasn’t as it is now in Nok’s name and he will call the police
if I pester them again. He said the same applied to my car. I know my Nok, who
he would not let me see, would not do this to me without being in some way
forced to.
Anyway, since then I have seen a For Sale sign at the house, and on my other one
that I also put in her name. I am happy this is Nok’s way of making sure I do
not lose out financially and will give me the proceeds when both are sold
because I know she truly loves me, as I do her.
In the meantime do you think I should temporarily stop her allowance and
discontinue sending her family 50,000 baht a month? I do not want her to suffer
any hardships because of this bad man, but a little guidance would be
appreciated. Sorry I can’t afford chocs or bubbly. However, you will be welcome
to some sticks of Blackpool rock if you are interested.
Nobody’s Fool
Dear Nobody’s Fool,
The letter above yours may have come as a bit of a shock to your neatly closed
mind, but at least you know what the man’s name is, the one who so rudely told
you to ‘shuvoff’, if I read between your lines correctly. I could be crass and
say that “opportunity only ‘Noks’ once” and I think your little cashier has
responded to the call.
It is time you went to see one of the nice glasses dispensaries around town and
get your rose-colored ones changed for the usual clear varieties. I doubt very
much that your angel Nok will return to you bearing large parcels of cash from
the sale of the houses. That notion you should get rid of immediately. If you
ever do see her again, it will not be a pleasant meeting, I am afraid.
You ask whether you should “temporarily stop her allowance and discontinue
sending her family 50,000 baht a month.” That’s about the first bit of real
sense you have shown in all our dealings so far. When you are so hard up that
you cannot even offer me some chocolates and fizz, why would you even
contemplate sending 50,000 baht to her family, plus goodness knows what you have
been sending to her! Do you realize, my Petal, just how much chocolate and
champagne you can buy with 50,000 baht? And I’m talking the good stuff here -
Belgian chocs and French fizzwater. And every month too! Oh dearie, dearie me.
Why don’t I meet such bewildered buffoons before they throw all their money
away? Dear Nobody’s Fool, you know just what you can do with your stick of
Blackpool rock! (But before you do, do they still make it with the letters
B-L-A-C-K-P-O-O-L all the way through it?)
There is a famous quotation, “Its quite true there’s a fool born every minute.
It’s also quite true they don’t die that fast.” You are living proof!
Let’s go to the movies:
by Mark Gernpy
Now playing in
Pattaya
Shutter Island: US, Drama/
Mystery/ Thriller – Director Martin Scorsese directs Leonardo DiCaprio,
Ben Kingsley, and Max von Sydow in this horror fantasy. Looks good to
me, from what I’ve heard and what I’ve seen in the trailers.
It’s 1954, and an up-and-coming US marshal is assigned to investigate
the disappearance of a patient from Boston’s Shutter Island Hospital and
before long he wonders whether he hasn’t been brought there as part of a
twisted plot by hospital doctors.
Valentine’s Day:
US, Comedy/ Romance – Intertwining couples
and singles in Los Angeles break-up and make-up based on the pressures
and expectations of Valentine’s Day. With a star-studded cast.
Generally unfavorable reviews.
The Wolfman:
UK/ US, Horror/ Thriller – An excellent spare, dark, and brooding gothic
version of the famous tale, told with great style and much blood. For
those who like gothic straight-up horror and blood, this is a welcome
new and classic $85 million remake of the 1941 Lon Chaney movie.
Starring Benicio Del Toro and Anthony Hopkins. Rated R in the US for
bloody horror violence and gore. Big C has only a Thai-dubbed version;
in English elsewhere. Mixed or average reviews.
Percy Jackson &
the Olympians: The Lightning Thief:: Canada/
US, Fantasy/ Comedy – The Mount Olympus gods are not happy: Zeus’
lightning bolt has been stolen, and high school student Percy Jackson is
the prime suspect in this sprawling and entertaining teen adventure. As
Percy finds himself caught between angry and battling gods, he and his
two close friends embark on an adventure to catch the true lightning
thief, and return the lightning to Zeus. Logan Lerman as Percy is an
excellent new teenaged hero like Harry Potter, but for me a lot more
interesting and with a lot more charisma; a sequel is already announced
for next year. There’s one short additional scene during the closing
credits. Big C has only a Thai-dubbed version; in English elsewhere.
Mixed or average reviews.
Confucius / Kong
Zi: China, Biography/ Drama – Set in 6th
Century BC, this is the life story of the Chinese thinker and
philosopher, from his days as a court official through battles and
political intrigues, to his old age as a disillusioned sage. China has
here adopted the Hollywood way of pumping up the romantic and
action-related angles of the man, even casting an action hero (Chow Yun-Fat)
as the man himself, and portraying him as romantically attracted to a
concubine. In Pattaya as in most places in Thailand it’s in a
Thai-dubbed version without English subtitles.
From Paris with
Love: France, Action/ Crime/ Thriller – An
intelligence operative working in the office of the US Ambassador in
France (Jonathan Rhys Meyers) takes on more than he bargained for when
he partners with a wisecracking, fast-shooting, high-ranking US agent (a
bald John Travolta) who’s been sent to Paris to stop a terrorist
attack. Stylish, fast-moving, exciting, with a wild performance by
Travolta. Rated R in the US for strong bloody violence throughout, drug
content, pervasive language, and brief sexuality. Mixed or average
reviews. A Thai-dubbed version at Big C, English elsewhere.
Avatar:
US, Action/ Adventure/ Sci-Fi/ Thriller – Nine Oscar nominations,
including best picture and best director. Now the highest grossing film
in the world ever, bypassing the director’s own Titanic. It’s a
very good film and a truly major technological breakthrough. It’s
exciting and beautiful, and has received near-universal rave reviews
from critics and fans.
In Pattaya, Major
Cineplex has a 2D version, which is in English and Na’vi dialogue (the
completely new language created by linguists for the natives of the
planet Pandora), with English and Thai subtitles as needed. Pattaya
Beach no longer has a 2D version; the 3D version remains, in English and
Na’vi languages. Unaccountably the 3D version does not have English
subtitles for the Na’vi language, only Thai. Big C has a Thai-dubbed 2D
version, no English subtitles.
Reviews: Universal
acclaim. Not to be missed..
Tai Hong / Die a
Violent Death: Thai, Horror/ Thriller – This
omnibus film consists of four short shocking stories of death and
horror, exploiting four real news stories, including one tasteless
recounting of last year’s deadly blaze at Bangkok’s Santika pub, which
is truly shocking – but shock at the incredible insensitivity that can
be shown again by Thai filmmakers toward traumatic Thai events.
Directed by Poj
Arnon (Bangkok Love Story) and three young directors. The final
story, by Poj, I thought an enjoyable horror sex-comedy.
My Valentine:
Thai, Comedy/ Romance – A girl who hates Valentine’s Day meets three
young men, each determined to make her his Valentine. The usual Thai
rom/com, with a mixture of cute young Thais and older TV comedians.
Couples Retreat:
US, Comedy – Four couples settle into a tropical-island resort for a
vacation. One of the couples is there to work on their marriage; the
others fail to realize that participation in the resort’s therapy
sessions is not optional. Generally unfavorable reviews. At Pattaya
Beach only.
The Spy Next
Door: US, Action/ Comedy/ Family – Jackie
Chan fans may be running to see this, but people in the real world think
it’s a sad little movie entirely designed to set up Chan’s stunt
sequences as he fights with pots, pans, and ladders. Reviewers say it’s
flat and witless – one of Chan’s worst ever. Generally unfavorable
reviews. At Pattaya Beach only.
|
