Sunday, 26 June 2016

Brexit - Rolf's View

Britain surprised the world with a vote to leave EU after being part of it since 1973. 

Honesty it was not a big surprise to me. Well it's not that I am bragging after the result is announced! “Very lame”, you may think, but there are several truths to it. 

The uncertainty of the world and Brexit to a certain extent had led me to starting a series of Gold and Silver articles lately. Refer as follows:


It is not to advocate any buying/selling, but to allow ourselves to understand the precious’s metals’ history and its impact on the world when uncertainty is looming.  

Expect the unexpected these days! 

Majority of people here are almost certain that Brexit is a myth and even speculated in stocks hoping to profit from the eventual result. It is not uncommon. It is like saying PAP will always win all Singapore elections. This is mainstream thinking and nothing wrong with that. Yet, counterintuitive to normal belief, the unexpected sometimes do take place! The world is apparently going through a stage of anomaly these days. Do not be surprise if Donald Trump is elected coming November. In fact, There should be no political rant here, but I seriously do not see much long term difference between whether Clinton or Trump being elected as the president of the United States.

Always understand both sides of the coin! 

Recently, I read many articles and videos relating to the Brexit referendum and majority of the articles on papers are inclined towards "Remain". For a start, I was convinced about the benefits of staying too. Nonetheless, me being me, I usually will not allow myself to see or hear just one side of the story. I did some research on the opposite camp and come across a video as follows: 



In another incident last year while having dinner with my former British boss, we discussed about the same topic. Back then, I was pretty sceptical about the viability of Brexit. My perception was jolted when ex-boss told me his side of the story about why Britain will be much better off in the long run to be out of the EU. It is always more convincing hearing from the horse mouth - a local Brit in his mid 50s who travelled widely and someone I look up to as always logical and sensible.

With that, my views are more balanced.

Do not be over-confident even with familiarity, it is not sufficient! 

For many years now, I had worked with the Europeans. My current company also has hundreds of British employees. It is not unfamiliar for me to travel to UK and other countries in Europe, working with both internally and externally with British and Europeans. Considering that, and in addition to all the articles I read relating to Brexit, you may think that it's no surprise that I will consider myself knowing this referendum much better than the average people on the streets. 

Nah.... absolute not! 

The reason is clear. I am not a British, neither did I follow Britain closely as compared to China and USA. It is also more difficult for us to judge politically or socio-economically a country if you do not grow or stay there. This is despite the business aspect which I may have experience in. Hence if the only exposures we have are just by reading articles online, it is without a question – insufficient! With that in mind, I did not make any action speculating on stocks before the result, neither is it any easy to take sides.

Rolf's final thoughts

Many people thought a coin has two sides. Nope, it has three sides – head, tail and edge. I prefer to stand at the edge of the coin, rather than to take sides of head or tail if Brexit is the right decision. 

Good for long term only if...
Nonetheless if you were to ask me for my truthful personal opinion, I believe that Brexit is actually GOOD for Britain in the long run. That is provided that the British citizens can stay strong and united to create a brighter Britain of their own just like centuries ago when they were such a dominant force. It is absolutely not necessary to be part of the bloc to become successful.

Didn't we Singapore survive after leaving Malaysia? There are countries like Norway and Switzerland who are doing relatively better than their rest of European counterpart being not part of the bloc as well. 

Many believe that after Brexit, Britain will be on the way to decline. In my view, EU as a whole is already declining and even at a faster rate than Britain. Except for Germany who is doing relatively better, but yet also being heavily dragged down by the rest of Europe countries especially those in the south, I really cannot figure out what efficient and effective strategies EU will employ to stimulate the entire European economy. Perhaps there are only two things they will do. 

1) More stimulus to the economy by means of printing more and more currency and continuing creating an absurd negative interest rate environment. 

2) Heavily reliance on USA who already is a bigger ship with holes sinking.

So what make us think that UK can actually benefit from an already declining EU economy in the long term? 

Britain has their own strengths 
Britain has a long history of superpower being as an independent country. Being colonial masters of many Asian countries in the past, they are one European country who has not only good understanding of Asia but also great trading relationships today as well. I went to many local Asian countries before and they are generally always happy to do business with the British. In return, as from my experiences, the British are always more understanding to Asian cultures compared to the rest of the European countries. As I speak, London has also overtaken Singapore as the second-largest offshore yuan clearing centre in terms of payments processing volumes, just behind Hong Kong. This can spell great relationships with the Chinese without having the bureaucracy of EU who is also greatly influenced by the Americans in one way or another.

Short Term Pain
That said, this separation like any other divorces after so many years will be extremely painful in the short term. There will be problems like the need to find a new PM and formed a new cabinet, renegotiate trade deals with an EU who may bear grudge and make life difficult for the new British government. It is not unlikely that UK will need to endure one of their difficult few years ahead.

Not the best timing though
And worst of all, all the impending problems ahead of Britain is going to be worsened in a current deflating world economy. It is definitely one of the worst times to get into a Brexit. And this is the one major reason, why I will not vote for Brexit in a time like this! 3-4 years ago, it will be perfect when the economy is much more stable. It is just like for the Fed, 3-4 years ago, it will be better to raise interest rate.

In a nutshell
Brexit is good for long term depending on British people how they brace themselves, very bad in the short term and above all, taking place at the very wrong timing now! Good luck for the British!


Monday, 20 June 2016

Venezuela - A Nation of Beauty Queens; Now A Nation of Hungers! Who will have thought this will happened?

“It was all a new reality for Gabriel Márquez, 24, who grew up in the boom years when Venezuela was rich and empty shelves were unimaginable.”

Read below news and you will be shocked that this is happening to a country that used to be extremely prosperous.

Venezuela had once the world's largest oil reserves and had been one of the world's leading exporters of oil. Besides, it is also the country which also produced many beauty queens!  TODAY it is in riot for food. In 2015, Venezuela had the world's highest inflation rate with the rate surpassing 100%, becoming the highest in the country's history.

THIS IS REAL AND NOT IMAGINARY!

Venezuela’s woes are results of years of DEFICIT SPENDING from populist policies leading to overspending on social programs and over-reliance on oil funds. 

As from Ray Dalio’s economic principles, very often a situation like this will lead to the poor resenting the rich and riots will take place. And the most worrying is that it will then lead to a dictator coming in power just like Hitler during the WW2.

Perhaps Venezuela too insignificant a country to have a big impact to the global economy. 

How about USA?


UMANÁ, Venezuela — With delivery trucks under constant attack, the nation’s food is now transported under armed guard. Soldiers stand watch over bakeries. The police fire rubber bullets at desperate mobs storming grocery stores, pharmacies and butcher shops. A 4-year-old girl was shot to death as street gangs fought over food.

Venezuela is convulsing from hunger.

Hundreds of people here in the city of Cumaná, home to one of the region’s independence heroes, marched on a supermarket in recent days, screaming for food. They forced open a large metal gate and poured inside. They snatched water, flour, cornmeal, salt, sugar, potatoes, anything they could find, leaving behind only broken freezers and overturned shelves.

And they showed that even in a country with the largest oil reserves in the world, it is possible for people to riot because there is not enough food.

In the last two weeks alone, more than 50 food riots, protests and mass looting have erupted around the country. Scores of businesses have been stripped bare or destroyed. At least five people have been killed.

This is precisely the Venezuela its leaders vowed to prevent.

In one of the nation’s worst moments, riots spread from Caracas, the capital, in 1989, leaving hundreds dead at the hands of security forces. Known as the “Caracazo,” or the “Caracas clash,” they were set off by low oil prices, cuts in subsidies and a population that was suddenly impoverished.

The event seared the memory of a future president, Hugo Chávez, who said the country’s inability to provide for its people, and the state’s repression of the uprising, were the reasons Venezuela needed a socialist revolution.

Now his successors find themselves in a similar bind — or maybe even worse.

The nation is anxiously searching for ways to feed itself.

The economic collapse of recent years has left it unable to produce enough food on its own or import what it needs from abroad. Cities have been militarized under an emergency decree from President Nicolás Maduro, the man Mr. Chávez picked to carry on with his revolution before he died three years ago.

“If there is no food, there will be more riots,” said Raibelis Henriquez, 19, who waited all day for bread in Cumaná, where at least 22 businesses were attacked in a single day last week.

But while the riots and clashes punctuate the country with alarm, it is the hunger that remains the constant source of unease.

A staggering 87 percent of Venezuelans say they do not have money to buy enough food, the most recent assessment of living standards by Simón Bolívar University found.

About 72 percent of monthly wages are being spent just to buy food, according to the Center for Documentation and Social Analysis, a research group associated with the Venezuelan Teachers Federation.

In April, it found that a family would need the equivalent of 16 minimum-wage salaries to properly feed itself.

Ask people in this city when they last ate a meal, and many will respond that it was not today.

Among them are Leidy Cordova, 37, and her five children — Abran, Deliannys, Eliannys, Milianny and Javier Luis — ages 1 to 11. On Thursday evening, the entire family had not eaten since lunchtime the day before, when Ms. Cordova made a soup by boiling chicken skin and fat that she had found for a cheap price at the butcher.

“My kids tell me they’re hungry,” Ms. Cordova said as her family looked on. “And all I can say to them is to grin and bear it.”

Other families have to choose who eats. Lucila Fonseca, 69, has lymphatic cancer, and her 45-year-old daughter, Vanessa Furtado, has a brain tumor. Despite also being ill, Ms. Furtado gives up the little food she has on many days so her mother does not skip meals.

“I used to be very fat, but no longer,” the daughter said. “We are dying as we live.”

Her mother added, “We are now living on Maduro’s diet: no food, no nothing.”

Economists say years of economic mismanagement — worsened by low prices for oil, the nation’s main source of revenue — have shattered the food supply.

Sugar fields in the country’s agricultural center lie fallow for lack of fertilizers. Unused machinery rots in shuttered state-owned factories. Staples like corn and rice, once exported, now must be imported and arrive in amounts that do not meet the need.

In response, Mr. Maduro has tightened his grip over the food supply. Using emergency decrees he signed this year, the president put most food distribution in the hands of a group of citizen brigades loyal to leftists, a measure critics say is reminiscent of food rationing in Cuba.

“They’re saying, in other words, you get food if you’re my friend, if you’re my sympathizer,” said Roberto Briceño-León, the director of the Venezuelan Violence Observatory, a human rights group.

It was all a new reality for Gabriel Márquez, 24, who grew up in the boom years when Venezuela was rich and empty shelves were unimaginable. He stood in front of the destroyed supermarket where the mob had arrived at Cumaná, an endless expanse of smashed bottles, boxes and scattered shelves. A few people, including a policeman, were searching the wreckage for leftovers to take.

“During Carnival, we used to throw eggs at each other just to have some fun,” he said. “Now an egg is like gold.”

Down the coastal road in a small fishing town called Boca de Uchire, hundreds gathered on a bridge this month to protest because the food deliveries were not arriving. Residents demanded to meet the mayor, but when he did not come they sacked a Chinese bodega.

Residents hacked open the door with pickaxes and pillaged the shop, venting their anger at a global power that has lent billions of dollars to prop up Venezuela in recent years.

“We are now living on Maduro’s diet: no food, no nothing.” LUCILA FONSECA, 69

“The Chinese won’t sell to us,” said a taxi driver who watched the crowd haul away all that was inside. “So we burn their stores instead.”

Mr. Maduro, who is fighting a push for a referendum to recall him this year over the country’s declines, said it was the political opposition that was behind the attacks on the stores.

“They paid a group of criminals, brought them in trucks,” he said on Saturday on television, promising compensation to those who lost property.

At the same time, the government also blames an “economic war” for the shortages. It accuses wealthy business owners of hoarding food and charging exorbitant prices, creating artificial shortages to profit from the country’s misery.

It has left shop owners feeling under siege, particularly those who do not have Spanish names.

“Look how we are working today,” said Maria Basmagi, whose family immigrated from Syria a generation ago, pointing to the metal grate pulled over the window of her shoe store.

Her shop was on the commercial boulevard in Barcelona, another coastal town racked by unrest last week. At 11 a.m. the day before, someone screamed that there was an attack on a government-run kitchen nearby. Every shop on Ms. Basmagi’s street closed down in fear.

Other shops stay open, like the bakery in Cumaná where a line of 100 people snaked around a corner. Each person was allowed to buy about a pound of bread.

Robert Astudillo, a 23-year-old father of two, was not sure there would be any left once his turn came. He said he still had corn flour to make arepas, a Venezuelan staple, for his children. They had not eaten meat in months.

“We make the arepas small,” he said.

In the refrigerator of Araselis Rodriguez and Nestor Daniel Reina, the parents of four small children, there was not even corn flour — just a few limes and some bottles of water.

The family had eaten bread for breakfast and soup for lunch made from fish that Mr. Reina had managed to catch. The family had nothing for dinner.

It has not always been clear what provokes the riots. Is it hunger alone? Or is it some larger anger that has built up in a country that has crumbled?

Inés Rodríguez was not sure. She remembered calling out to the crowd of people who had come to sack her restaurant on Tuesday night, offering them all the chicken and rice the restaurant had if they would only leave the furniture and cash register behind. They balked at the offer and simply pushed her aside, Ms. Rodríguez said.

“It is the meeting of hunger and crime now,” she said.

As she spoke, three trucks with armed patrols drove by, each emblazoned with photos of Mr. Chávez and Mr. Maduro.

The trucks were carrying food.


“Finally they come here,” Ms. Rodríguez said. “And look what it took to get them. It took this riot to get us something to eat.”

A Message To My Children: 

Hereby, I will like to tell you kids NEVER to take things for granted just because you are Singaporeans living in a country well-sheltered like Singapore. Our success is not a coincident. Please have your eyes and ears wide open about the world outside Singapore. If possible, go out and experience the world, in particular that of developing countries (e.g. the poorer places of India, South America, China, Indonesia, Africa etc). You will then realise that Singapore is not the typical country you will find on this earth. Your father was lucky enough to travel to many of these countries and also spoke to the natives. Exposures can be one of the greatest gifts in life for you to have a better understanding of yourself and this world, and hence your life. 


Sunday, 19 June 2016

Gold and Silver – History always repeat itself (Part 3)

Of late, I was totally enthralled by the story of Gold and Silver dated back not just hundreds but thousands years back. This was also narrated in Part 2 of my gold and silver series. While I did my homework and owned this alternative investment since sometime back, it was not until recently that I have dug so deep into unravelling its past.

“The farther back you can look, the farther forward you are likely to see.” - Winston Churchill

So I began to read lots of articles and watched many videos relating to the precious metals. And mind you, when I am engrossed into something I love or believe in, I will always pour my heart and soul into it, and often even in my dream! Just like before this, I was very into Mixed Martial Arts and devoted so much of my free time researching on it. I reckon MMA is going to overtook boxing in popularity going into the future.

Back to precious metals, I came across this guy by the name of Mike Maloney who founded and own GoldSilver.com. There are many valuable videos from Mr. Maloney that are free and in my opinion of great educational importance drilling out facts, without any boastful slogans! After benefiting from all his free videos on youtube, I decided on a win-win strategy. This is to reward Mr. Maloney and at the same time further enriches myself by buying one of his best-selling books "Guide to Investing in Gold and Silver."

In this article, I will like to reproduce one interesting pattern that Mr. Maloney pointed out in relation to our world monetary system and the precious metals. Excerpts from the book as follows:

The 7 Stages

1) A sovereign state starts out with good money (i.e. money that is gold or silver, or backed fully by gold and silver)

2) As it develops economically and socially, it begins to take on more and more economic burdens, adding layer upon layer of public works and social programs.

3) As its economic affluence grows so does its political influence and it increases expenditures to fund a massive military.

4) Eventually it puts its military to use and expenditures explode.

5) To fund the war, the costliest of mankind’s endeavours, it steels the wealth of its people by replacing their money with currency that can be created in unlimited quantities. It does this either at the outbreak of the war (as in the case of WW1), during the war or wars (as in the cases of Athens ad Rome) or as a perceived solution to the economic ravages of previous wars (as in the case of John Law’s France).

6) Finally, the wealth transfer cause by expansion of currency supply is felt by the population as severe consumer price inflation, triggering the loss of faith in the currency.

7) An en masse movement out of the currency into precious metals and other tangible assets take place, the currency collapse and massive wealth is transferred to those who had enough foresight to accumulate gold and silver early on.

Summary

1) Good money  
2) Over spend
3) Growing political influence to fund military
4) Military explodes
5) War funded by currency expansion
6) Loss of currency confidence
7) Hyperinflation

During hyperinflation, gold and silver will always emerge as winner as from the history of mankind.

Do you agree with this pattern?

I shall reserve my thoughts for now.