Wealth management on a tight budget
It’s a given that the wealthy have more options to consider when it comes to growing and protecting their wealth. But that is not an excuse for those of us with limited resources to do nothing.
1. Get out of debt. Paying off your debts is a form of savings, and in a deflationary scenario, debt is a killer.
2. 6 to 12 months of expenses in cash. Calculate how much you will need on a monthly basis to pay all bills and living expenses. Have a kitty for that in cash. Do not dip into this kitty for any reason that is not an emergency, and if you do, top it back again as soon as you can.
3. Even if all you have left after doing the above is just RM 1000 in excess cash, convert it into either gold or silver. The foundation of your wealth must always be built upon a 7 – 15% base of noble metals. There is a premium when you purchase investment quality Gold and Silver (coins, bullion, bars), so it will be cheaper and in some ways more prudent to substitute jewellery for coins. The easiest ways to do this will be through Ebay for silver, which you can sometimes get at no premium to spot market prices, and buying used jewellery from pawn shops, as you will be paying only for the gold content and not for the workmanship. I have also seen silver jewellery being sold at a discount in shopping malls , so always be on the lookout for a bargain. Store in a secure location, don’t walk around with them.
4. If you want a more active portfolio, and have an understanding of the underlying market, you can also opt to hold undervalued currencies which can give returns in excess of 10% p.a. with little effort. Right now the Sterling looks the best bet in the short-term. If you want to hold a currency for the long-term, the Swiss franc is the best bet as it is the only ‘major’ currency where the notes in circulation are balanced by gold reserves to nearly 100%. It is also the darling of the wealthy in times of crisis, and has a proactive citizenry who do not let the Swiss Central Bank get away with any hanky panky.
5. Do not, in any way, shape or form, follow the herd. By this I mean do not jump into whatever asset class the general public is flying to at any point in time. In Malaysia right now, real estate is the current darling. This is driven by credit (mortgages) and while valuations can still go up, a double dip which looks more and more likely in the global economy will squeeze credit, and many property ‘flippers’ who have not taken anything off the table will find themselves in the same boat as millions all over the world. The time to get into properties, just like any other asset class, is when the general public won’t touch it with a ten foot pole.
6. Read. There are tremendous changes happening right now. And knowledge will help you find ways to protect your wealth from external factors. The best website at the moment is http://www.marketoracle.co.uk/, try to read at least one article a day. Malaysians in general suffer the same mentality as others, in that they think,”it won’t happen to me”. Trust me it will.
7. Don’t panic. This ties up with being well-informed. Expect that change will happen, but do not panic when it does. Every right action you take today will show its true results at some point in the future.
8. I am truly sorry that the best options out there are beyond the reach of us normal folk, but that is the way things are. The world is not fair, but that is not a reason to just roll over and play dead.
Good luck and God Bless.
Jeevindra Kumar
Understanding Today’s Economy
UNDERSTANDING TODAY’S ECONOMY
The global monetary systems are broken. This simply means that most, if not all fiat currencies, or currencies by decree (the polite term for a politicians promise), are entering the twilight of their existence.
But two hostile forces are pulling in opposite directions, and the game will be played out according to who wins first, and who wins second.
The citizens of the world are pulling the economy into a deflationary phase; spooked by the ineptitude of the authorities, they have entered the default mode of financial survival, “when uncertain, save money, spend less, lend less, reduce borrowings, hold cash above all else”. Good common sense, except that when too many follow these rules, it reduces prices of goods and services as it becomes more difficult to part a man from his dollar; the prices of real assets drop, incomes will fall with falling prices as profit margins are reduced, which in turn reduces the number of available jobs because of slower or negative business growth and expansion, which makes things worse, which reinforces the whole loop.
In the opposing corner are the sovereign governments, nearly all of whom are into debt at levels never before seen, and the only way out for them is to be able to monetise all the debt, and hyper inflate their respective “currencies by decree” until the repayment of debt is done with little more than worthless coloured paper.
They also want to get re-elected, so it is not as simple as running the printing presses at maximum speed, as that will just bring the lynch mobs to their doorsteps before they can make good their escape.
While this silent, but massive battle plays out, we see another significant development coming into play. The slow but sure ascent of Gold, and it’s sidekick, Silver, back into contention as the money of choice for not only the citizens, but the governments that rule over them as well, witness the Central Banks buying physical Gold once again after decades of selling the stuff from their coffers.
Gold was unceremoniously kicked from its pedestal in 1971 by Nixon, when he shut the Gold window which allowed holders of US Dollar bills to convert them into physical Gold,essentially decoupling all currencies from Gold.
So now we have the citizens of the world, holding inflation at bay with one hand, while the other hand converts the paper cash it holds into Gold and Silver.
While the Citizens are winning at the moment, the time will come when hyper inflation will have to win, as the credit bubble can only de leverage to a certain point, after which Governments have to choose between defaulting on their debts directly like Argentina did in 2002, or monetise the debt and pay it off.
Citizens do not need a Government to survive, but no Government can survive without Citizens, because it’s the Citizens who support the Governments with their taxes and give them control through their votes. Hyper inflation and continued mismanagement will see governments tumble like bowling pins.
“The Breakup of the United States”, by Michael S Rozeff, Jul 26, 2010
“Switzerland Under Siege, Free Markets May Yet Save the Swiss Franc” by Axel Merk, Jul 20, 2010
“Governments Squandering the Wealth of Generations” by David Galland, Jul 16, 2010
Some events can push the situation off the cliff overnight, for example;
“Government Confiscation of Gold: It Happened Before — Could It Happen Again?“, by J D Seagraves
So, what is the best we can hope for here in Malaysia?
Force intellectuals into office, and hold a gun to their heads until they sort things out, gets my vote.
“The Disappearing Intellectual in the Age of Economic Darwinism” , Henry A. Giroux , Global Research, Jul 13, 2010
Jeevindra Kumar
Capitalize on Energy trends
Open letter to the Honourable Shadow Minister for Energy regarding Malaysia’s Nuclear Plans.
First of all, this letter is addressed to a phantom as there needs to be a shadow cabinet before there can be shadow ministers for anything.
Esteemed Minister, the incumbent government is planning to build a nuclear reactor by the year 2021 that will yield 2000MW’s of power for our future energy reserve needs. The cost is estimated by TPTB to be around USD 6.1 billion (2010 Dollars), which is par for the course at the moment.
During this time, China will build 60 reactors of 1000MW each, to reach a capacity of 85 GW, while India will quadruple its nuclear capacity to 20 GW. Leave aside the other minnows that are turning to nuclear power, these two juggernauts alone are expected to raise the demand for nuclear fuel, reactor know how and costs to levels not seen since the peak of the Cold War. This raises many questions, and permit me to ask them on behalf of all current and future taxpayers, and future TNB bill payers.
Esteemed Minister, how are we preparing to hedge against the rising costs of building the reactor? What recommendations can be raised to pre empt yet another ‘sweetheart deal’? The private citizen has a few options, but what options is the Shadow Cabinet studying at the moment?
Esteemed Minister, the planned reactor will require 800 tons of fuel to start off, and about 400 tons per year to generate the 2GW required. At current prices, of around USD$42 per pound of uranium, this works out to USD$ 1,185,172,800 for initial start off and USD$ 592,586,400 per year of operation, raw fuel costs alone, in today’s Dollar.
With China stockpiling half its purchase of 5000 tons this year, and the two juggernauts expected to import 28,000 tons per year by 2020, the price we will actually pay is estimated to be closer to USD$250 per pound in today’s Dollars by the time the reactor is operational.
Esteemed Minister, how are we going to hedge against this six-fold increase in raw fuel costs alone, costs which will be borne by future tax payers and bill payers? Action today can save taxpayers and billpayers nearly RM 30 billion the first year, and up to RM 115 billion over the first ten years of operations, in today’s Ringgit. Again, while the private citizen has options to capitalize on these trends, what plans does the Shadow Cabinet have on the shelf?
RM 115 Billion buys many, many, many scholarships.
Esteemed Minister, let us look at natural gas, a commodity which is subsidised to “deserving” entities, excluding private citizens , to the tune of RM 18.9 Billion per year (2009). We are to become net importers in 5 years, according to some upstart analysts from an island nation nearby.
Natural gas has an historical price ratio of around 6 to oil, but is now trading at nearly 15, or two and a half times cheaper than its average price vis a vis oil. In what ways does the Shadow Cabinet feel we can secure our future needs in Natural Gas at favourable prices? Again, even though I repeat myself, private citizens and corporations can capitalize on this, but how is the Esteemed Minister planning to save the tax payers Ringgit tomorrow?
It is easy to look at past numbers and put the blame on the incumbent government, the consequences for which they will face at the hands of the voters. It is not as easy to start planning for the future using existing data, and to pre empt as much pain as possible to the people that are waiting to vote you in power, my Esteemed Phantom Minister for Energy. I do hope that the day will come, when the Shadow Policy Papers produced by the Shadow Cabinet, will show the voters that the stewardship this country lacks is but waiting in the wings.
In the meantime, do not blame the smart money for leaving the country, FDI outflow is as much a result of past and current policies, as a lack of belief in future ones.
Jeevindra Kumar
Global Balanced Portfolio for Malaysians
Malaysian Investment Expo Non Options
Let’s Invest in Exceptionally Expensive Alcohol while the West Panics.
I was at an investment expo in the city centre yesterday, a watcher amongst droves of those who were looking for a safer place than the Will Need a Bailout Bank to hide some money.
The largest booth at the expo was by a company that sells high end, premium grape borne vintages. This for investors who wish to clutch an asset which has no correlation to any other asset class, as none can come in dark bottles and carry peculiar bouquets as it does. I always knew that alcohol can do more than merely make you jubilantly pissed and stupid, now it makes you rich as well, provided the raging alcoholic in you does not break free one night and drink your investment, turning the liquid part of your portfolio into a really lavish hangover and extra time in the john.
Compare this with the western world.
Philip R. Davis, founder of Phil’s Stock World, writes a piece entitled,”It’s The End of The World As We Know It”.
Andrew Butler, managing partner of ABMC, an investment adviser based in Dubai, does a piece called, ” According to Robert Prechter, Is the World Doomed?”(Robert Prechter being the Guru of Elliot Wave International). The doom echoed by Nathan Lewis, Bill Bonner, The Hon. Ron Paul (R), Richard Dougherty aka Mogambo Guru, and many more, the numbers growing by the day, screaming, DEFLATION!! But only in the western part of the globe, plus Japan, the country which kicked off the trend in the first place.
Why this dichotomy? Why are some of the citizens of the developed nations building bunkers in their basements, stocking up on canned food and bullets while taking lessons on how to roll cigarettes using paper and loose tobacco, as that can be considered as money, while we are learning to pronounce “Lafite Rothschild” correctly before bed?
And then we have China, sitting on a humongous pile of cash and slowly buying up Gold and Gold Mining Stocks, farmland, cornering commodity supplies, downgrading US debt, acquiring energy companies, water technologies, clamping down on a domestic real estate bubble, while at the same time letting Hong Kong become the freest economy in the world, as an example to governments everywhere on how to manage an economy.
The West is entering a deflationary depression panic mode and we are busy buying wines and creating property bubbles.
Does anyone have Wen Jiabao’s number? Great clients are hard to come by.
Jeevindra Kumar
jeevindra
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