Sunday, November 30, 2008
2. Xiao Wang Fu
3. Ke Jia restaurant
4. Modern Beauty @ World Trade Centre
5. Dong Lai Shun
6. Made in China @ the Grand Hyatt Beijing (Peking duck).
7. Li Jia Cai restaurant @ 11 Yang Fang Hutong, De Nei Da Jie, Xicheng, Beijing.
Tuesday, November 18, 2008
The price of gold has not fallen as sharply as the price of crude oil and other cyclical commodities during the global financial crisis, and bullion should strengthen relative to other commodities as economic troubles deepen.
Gold bullion has dropped 16 percent since October after a recent wave of fund deleveraging. But its oil purchasing power, a key gauge of economic strength, is at its highest in nearly two years and is holding up relative to equities and other asset classes.
The precious metal's unique monetary functions as an inflation hedge and safe haven have not been tainted, fund managers said.
"Right now you would rather be long gold than short oil because you are still heading into a direction where gold will continue to buy more of everything," said Greg Orrell of California-based OCM Gold Fund.
Orrell said a key difference between gold and oil is that oil is produced for consumption and will deplete one day, but gold accumulates over time.
"For a commodity such as oil, you are getting a reflection of the global slowdown, and that's why it is going down on a relative basis versus gold," Orrell said.
An ounce of gold on Friday bought 12 barrels of oil, its strongest since January 2007. When oil peaked at a record near $150 per barrel in July, the gold-to-oil ratio was 6.6. Gold's weakest point relative to oil was in 2005 at just over 6, and its long-term average was about 15.
Historically, gold tends to rise in tandem with oil. Investors use the metal as a hedge against inflation because bullion's intrinsic value is not tied to any paper assets.
Gold also has risen against major industrial commodities such as copper and nickel.
In October, Deutsche Bank said the gold-to-nickel ratio, a key indicator of economic performance, could fall into single digits in the case of a deep recession as deep as that of the early 1980s.
BUY GOLD, SELL OIL
Gold's rise against oil in the second half of this year was a result of "recession trade" by investors, said Caesar Bryan, portfolio manager of GAMCO Gold Fund in New York, who manages $250 million assets.
"As the economy slows and central banks ease, you would expect gold to rally relative to the oil. We are coming off a huge 'buy gold sell oil' signal in the summer -- it was way out of whack," Bryan said.
Data released on Friday showed U.S. employers cut payrolls by a worse-than-expected 240,000 in October. So far this year, 1.2 million U.S. jobs have been lost, bringing the unemployment rate to 6.5 percent, its highest level since 1994.
Year to date, gold was down 12 percent, while crude oil dropped 36 percent and has lost more than 50 percent since it hit a record $147.27 per barrel, and the MSCI All Country World Index index .MIWD00000PUS, which tracks the performance of the global equities market, dropped 43 percent.
"We are still in a flight to liquidity rather than a flight to safety," Orrell said.
Other fund managers expressed optimism about gold as global central banks fight a deepening economic downturn.
Brian Hicks, co-manager of the Global Resources Fund PSPFX.O at Texas-based U.S. Global Investors, which oversees $2 billion assets, said the extra money flow related to the stimulus packages could spur inflation and weaken the dollar, which would be bullish for gold.
"At some point you have to wonder how that is going to impact price levels. I think gold will return as a safe haven as we come out of this short-term deleveraging process," Hicks said.
"As we move away from the peak of this financial crisis, we will start to see gold outperform relative to oil," he said.
James Steel, chief commodity analyst at HSBC, said bullion could still rise further but not because of rising price levels.
"We are clearly not in a period of inflation, but that doesn't mean that gold won't trade higher. It's a risky world and there is still a high degree of uncertainty in general as far as paper assets go," Steel said.
This is chapter VII of the Gold Drivers 2005 report. It discusses the historical Gold/Oil ratio which suggest a price of Gold exceeding $700 nowadays and shines a light a light on previous oil shocks and their consequences. Furthermore it discusses PEAK-OIL and why it is about to bring a nasty Oil shock coming years.
As we will see, previous oil shocks were a perfect call for higher inflation figures and recession. Will this time be any different ? According to Alan Greenspan yes, he says that higher oil prices won't be much of a problem for the economy these days and inflation won't pop up as during the seventies. Well, energy experts such as Mathew Simmons and Colin Campbell do think otherwise. They make a powerful case for the end of cheap energy. The nasty consequence of a lack of cheap energy is the end of economic growth. Will we ever come out of a recession again for a sustained period of time ? Well, Richard Heinberg author of "The Party is over - Oil, War and the Fate of Industrial Societies" doesn't think so. Matthew Simmons (energy advisor for Dick Cheney) just uses different words, he says :
" there is not one serious economist in this world who would say that you can have significant economic growth without the availability of cheap energy." END.
Simmons rules out the possibility of cheap energy coming decades. When asked if there is a solution to the impending energy crisis he said :
"I don't think there is one. The solution is to pray. Under the best of circumstances, if all prayers are answered there will be no crisis for maybe two years. After that it's a certainty." END. We'll have to get used to oil prices far exceeding the $100/barrel mark. This leads us to the Gold/Oil ratio which is at an historic low these days. Such imbalances won't stay there for a long period of time so what gives ? Oil going down or Gold catching up ?
Let's focus on the following issues :
- Previous Oil shocks and their consequences
- Gold as a financial protection against coming Oil shock
- PEAK-OIL and the end of cheap energy
Previous Oil shocks and their consequences.
Stephen Leeb (president of Leeb Capital Management and editor of the prestigious newsletter 'The Complete Investor') wrote an excellent book this spring called ' The Oil Factor - Protect Yourself (AND PROFIT) from the coming Energy Crisis'. In this book he explains how to use the Oil indicator in order to predict upcoming stock bear markets and economic recessions.
In an interview with Jim Puplava on the Financial Sense Newshour Stephen Leeb says :
It's so easy, nothing has been a more reliable indicator for an upcoming recession as the price of Oil. Every major bear market, every major economic decline has been preceded by a large spike in oil prices. The 73-74 recession, recession of beginning 80's and the recession of 2000. Oil prices jumped 80% between 1999 and 2000. Oil prices have been the most important indicator of major economic disasters. Whenever Oil prices rises about 80% from year ago levels, a fair chance does exists that a recession/bear market will follow. END.
So any sudden increase in the price of Oil should be something to fear or at least pay serious attention to it. Furthermore Stephen Leeb warns for the rapid rise in the price of Oil in the face of a less rapid growing demand. He says :
When you are facing rising commodity prices in the face of a declining or less rapid growing demand, it tells you something. It tells you that you can't count on the supply being there when needed. It tells you that the world has changed. END.
It tells you that the world has changed. Stephen Leeb sounds serious, maybe even a bit alarming. What consequences Stephen Leeb expects from rapid rising Oil prices ?
Stephen Leeb says :
Sharply rising energy prices, similar the the 70's, will lead to double digit inflation figures over the next 10 years. It's going to turn the economy on its head.END.
But wait, the FED can fight inflation by engineering a recession (rapid increase of interest rates) as former FED chief Paul Volcker did in the early 80's right ?
Stephen Leeb says :
Today, we cannot engineer a recession. In 1980 when Paul Volcker took over the head of the FED, he was able to say : Well, inflation is at 12%, I don't care what it takes, I'm getting Inflation down and he was willing to engineer a big recession.
Today because of all that debt, that's not a policy alternative. Sure , the FED will raise interest rates a little bit here and there but not in such a dramatic way to create a recession. In the face of the giant total US debt, a recession would be a catastrophe. END.
Stephen Leep's Oil indicator has worked remarkably well over the last 30 years. If this Oil indicator is going to perform as well in the future as it did before than investors should be on high alert for possible nasty future economic events and be prepared to take appropriate measures in order to protect themselves financially.
Gold as a financial protection against coming Oil shock
So why to buy Gold when Oil prices are rising rapidly ?
- Gold as an Inflation Hedge
- Gold/Oil ratio says Gold is a screaming Buy.
Gold as an Inflation Hedge
The Gold/Oil ratio
The Gold/Oil ratio says Gold is a screaming Buy.
Over the last 30 years Gold has been trading at an average of 16-17 barrels of Oil per ounce of Gold. At the moment Gold is dirt cheap compared to Oil and trades for about 9 barrels of Oil for an ounce of Gold. Such extremes won't last for a long period of time so what gives, lower Oil prices down the road or Gold catching up ?
According to Matthew Simmons we shouldn't count on cheap Oil anymore coming decades. Let's repeat once more what he said when asked if there is a solution to the impending energy crisis he said :
"I don't think there is one. The solution is to pray. Under the best of circumstances, if all prayers are answered there will be no crisis for maybe two years. After that it's a certainty." END.
So with these kind of statements in mind, would you bet on lower Oil prices or higher Gold prices ? (see chart below)
OK, fine you'll say, higher Oil prices should make a case for Gold indeed but how serious are those people screaming about the end of cheap Oil ? Should we take their claims seriously ? Why hasn't the mainstream media hardly picked upon it ? Why didn't we hear anything about it during the presidential debates ? I've heard that at least for the next 30 years there should be plenty of Oil, what about that ? Well, many questions which deserves serious attention.
PEAK-OIL and the End of Cheap Energy
Alarmist preaching a peak in oil production within a few years are referring to studies by Shell geophysicist Dr. Marion King Hubbert. Hubbert predicted already in 1956 that US domestic Oil production would peak around 1970. Unfortunately Hubbert wasn't taken seriously at all. But what happened ? US Oil production indeed peaked in 1970 as predicted by Hubbert but still it took many years before geologists were willing to admit that Hubbert was right and that US Oil production indeed had peeked in 1970.
So based on what theory Hubbert made his predictions and how reliable is this theory in order to predict a future peak in world wide oil production ? It goes far beyond the scope of this article in order to explain the scientific background of PEAK-OIL (Hubbert's Peak) , it'll just focus on its conclusions backed up with data available for the last 100 years.
Hubbert says more or less that oil discoveries and oil production do follow a so called Bell Curve. The production curve follows the discovery curve with a 40 year delay.
Prof. Kenneth Deffeyes who wrote the book 'Hubbert's Peak - The Impending World on Shortage' explains in detail the scientific background of Hubbert's theory. But let's focus on just two important issues here :
- Oil discoveries do follow a Bell Curve
- Oil production does follow a Bell Curve with a 40 year delay compared to the discovery curve.
OK, fine you'll say, but what does actual data regarding oil discoveries and oil production tell us so far ? Could Hubbert be right ?
Dr. Colin Campbell is most probably the dean among Hubbert's followers. He worked for Texaco and Amoco as an exploration geologist working in countries as Borneo, Trinidad, Colombia, Australia, Papua New Guinea, the US, Ecuador, the UK, Ireland and Norway. Later on he was associated with Petroconsultants in Geneva, Switserland and brought about the creation of the Association for the Study of Peak Oil (ASPO). Dr. Campbell did a tremendous amount of research regarding Peak-Oil and published his findings in his book 'The Coming Oil Crisis'. His findings indeed confirmed what Hubbert predicted so many years ago.
Let's focus first on data available regarding world wide Oil discoveries. We'll see that the peak of Oil discoveries already occurred in the 60's, see chart below :
Now please digest this carefully. If Hubbert is right then the world Oil production should peak somewhere during this decade (40 years after discovery peak). But the problem is that you can't say with certainty that Oil production indeed has peaked until several years after the fact. So the only thing we can do is to analyze the production curves of oil producing countries which had a discovery peak way earlier than the 60's. A good example is the US which saw it's discovery rate peaking during the early 30's. Hubbert concluded that the US therefore should experience a peak in Oil production somewhere during the early seventies. At the time Hubbert made that prediction in 1956 he was ridiculed by Oil experts and economists, but nevertheless Hubbert's prediction came true in 1970, see chart below :
So the US Oil production peeked in 1970 indeed and declined ever since then just as Hubbert predicted.
When examining the production curves of all Non-Opec countries combined we'll see a production curve which matches the predicted Bell Curve almost 100%. See chart below.
So what do we see so far :
- US Oil production already peaked in 1970.
- Non OPEC Oil production already peaked in the early 90's.
What does it tell us ? It tells us that the world oil production still hasn't peeked because OPEC Oil production still hasn't peaked. So in order to make predictions about world peak production one should focus on the main OPEC producers.
So when will OPEC peak ?
According to Bush energy advisor Matthew Simmons OPEC will peak when Saudi Arabia peaks.
So what about Saudi Arabia ? When will Saudi Arabia peak ?
Matthew Simmons says :
When Ghawar peaks (Ghawar is the largest oil field ever found) Saudi Arabia peaks and when Saudi Arabia peaks the whole World peaks. END.
But the problem is that Ghawar is aging rapidly. It's one of the oldest Oil fields in production and lots of water injection is needed in order to keep production going. At one moment more water injection won't be able to keep production going and Oil production will fall off a cliff meaning the Oil field dies.. According to Matthew Simmons, the end for Ghawar must be near. It goes far beyond the scope of this article to specify why Matthew Simmons does think so but interested readers can study Simmons findings themselves at :
Matthew Simmons : Saudi Arabian Oil - A Glass Half Full Or Half Emptywww.simmonsco-intl.com/files/Hudson%20Institute.pdf
So with the peak of world Oil production in sight, what kind of production curve could we expect for total World Oil production ?
Dr. Colin Campbell calculates the following production curves :
Any case whether it's the high case, base case or low case, what should be obvious is that the end of World Oil production increase is near. A World which requires ever increasing amounts of energy (eg China, India, increasing world population etc…) and facing a limit in increasing Oil production simply has to face an increase in Oil prices. It simple as that. Demand outstrips supply by a great margin coming years. Yes, people arguing that there is still Oil left for 30 years, they are right. The Earth contained approximately 2 trillion barrels of Oil. We just consumed 1 trillion barrels of Oil by now so still 1 trillion barrels of Oil to go. With current demand of 80 million barrels a day it's easy to see why people come up with an estimate of another 30 years of Oil supply. Again, it's not the problem of No Oil, but it's the End of Cheap Oil what causes economic turbulence. Matthew Simmons says that Oil prices exceeding $100 / barrel is unavoidable and that should be a wake up call for all investors out there because the end of cheap energy could lead to an unwelcome economic slowdown.
- Oil discoveries have peeked already 40 years ago
- According to M King Hubbert Production peaks follow Discovery peaks after approximately 40 years.
- US Oil production already peaked in 1970.
- Non OPEC Oil production already peaked in the early 90's.
- World Oil production will peak when OPEC peaks
- OPEC peaks when Saudi Arabia peaks
- Saudi Arabia peaks when Ghawar peaks
- Ghawar is aging rapidly and its life expectancy isn't rosy. Matthew Simmons says that the end is in sight.
- World Oil peak production means the End of Cheap Oil
- The End of Cheap Oil means continuing rising Oil prices which translates itself into Oil shocks.
- Previous Oil shocks were an perfect call for recession/Inflation
- Gold is the ultimate Hedge against Inflation
- Rising Oil prices brings the historical Gold/Oil average way out of balance
- Historical average of the Gold/Oil ratio suggest a price of Gold exceeding $700 nowadays.
Historical average of the Gold/Oil ratio suggest a price of Gold exceeding $700 nowadays. Please think about that !
Of the various vulnerabilities traditional financial assets are exposed to, a rising oil price is of particular concern. In 2004, oil hit an all-time high of $56 per barrel, up 366 percent from the $12 low of 1998, and up 75 percent since January 2004.
Generally speaking, an increasing oil price results in increasing inflation, negatively impacting the global economy, particularly oil-dependent economies such as the US. Apart from increased transportation, heating and utility costs, higher oil prices are eventually reflected in virtually every finished product, as well as food and commodities in general. Furthermore, there is evidence that global oil production is peaking and the flow will soon be in permanent decline.
The US has enjoyed inexpensive oil-based energy for nearly a century, and this is one of the prime factors behind the unprecedented prosperity of its economy in the 20th century. While the US accounts for only 5 percent of the world's population, it consumes 25 percent of the world's fossil fuel-based energy. It imports about 75 percent of its oil, but owns only 2 percent of world reserves. Because of this dependency on both oil and foreign suppliers, any increases in price or supply disruptions will negatively impact the US economy to a greater degree than any other nation.
The majority of oil reserves are located in politically unstable regions, with tensions in the Middle East, Venezuela and Nigeria likely to intensify rather than to abate. Because of frequent terrorist attacks, Iraqi oil production is subject to disruption, while the risk of political problems in Saudi Arabia grows. The timing for these risks is uncertain and hard to quantify, but the implications of Peak Oil are predictable and quantifiable, and the effects will be more far-reaching than simply a rising oil price.
In the early 1950s, M. King Hubbert, one of the leading geophysicists of the time, developed a predictive model showing that all oil reserves follow a pattern called Hubbert's Curve, which runs from discovery through to depletion. In any given oil field, as more wells are drilled and as newer and better technology is installed, production initially increases. Eventually, however, regardless of new wells and new technology, a peak output is reached. After this peak is reached, oil production not only begins to decline, but also becomes less cost effective. In fact, at some point in this decline, the energy it takes to extract, transport and refine a barrel of oil exceeds the energy contained in that barrel of oil. When that point is reached, extraction of oil is no longer feasible and the reserve is abandoned. In the early years of the 20th century, in the largest oil fields, it was possible to recover 50 barrels of oil for each barrel used in the extraction, transportation and refining process. Today that 50-to-1 ratio has declined to 5-to-1 or less. And it continues to decline.
Hubbert's 1956 prediction that crude oil production in the US would peak in the early 1970s and then decline was greeted with great skepticism. After all, production in the US was increasing and technology was improving. However, there were no new major reserves being discovered, and his prediction proved to be correct. Oil production in the US did peak in 1970, and has been declining ever since.
Using analytic techniques based on Hubbert's work, oil and gas experts now project that world oil production will peak sometime in the latter half of this decade. We are now depleting global reserves at an annual rate of 6 percent, while demand is growing at an annual rate of 2 percent (and that growth rate is expected to triple over the next 20 years). This means we must increase world reserves by 8 percent per annum simply to maintain the status quo, and we are nowhere near achieving that goal. In fact, we are so far from it that, according to Dr. Colin Campbell, one of the world's leading geologists, the world consumes four barrels of oil for every one it discovers.
Once a supply shortfall materializes, the US will be in competition with China, India, Japan and other importing countries for available oil. Many experts are now predicting US$100 per barrel within the next two years. Some believe it will go even higher. Taking geopolitical factors and supply/demand fundamentals into consideration, it is impossible to predict how high the price of oil will soar. One thing seems certain - the age of cheap oil is over.
There are numerous social, economic and political implications related to world oil production peaking in the next few years, but our concern here is to examine how a rising oil price is linked to precious metals. The answer to that question begins with the historical desire of Arab producers to receive gold in exchange for their oil. This dates back to 1933 when King Ibn Saud demanded payment in gold for the original oil concession in Saudi Arabia. In addition, Islamic law forbids the use of a promise of payment, such as the US dollar, as a medium of exchange. There is growing dissention among religious fundamentalists in Saudi Arabia regarding the exchange of oil for US dollars.
Oil, gold and commodities have all been priced in US dollars since 1975 when OPEC officially agreed to sell its oil exclusively for US dollars. From 1944 until 1971, US dollars were convertible into gold by central banks in order to adjust for any trade imbalances between countries. Up to that point, the price of gold was fixed at US$35 per ounce, and the price of oil was relatively stable at about US$3.00 per barrel. Once the US ceased gold convertibility in 1971, OPEC producers were forced to convert their excess US dollars by purchasing gold in the marketplace. This resulted in price increases for both oil and gold, until eventually oil reached US$40 per barrel and gold reached US$850 per ounce.
Today, apart from geopolitical threats in oil-producing regions, supply/demand imbalances from Peak Oil and increasing demand from developing countries, the price of both gold and oil can be expected to increase as the US dollar declines. With an ever-increasing US money supply, growing triple deficits and mounting debt at all levels, the US dollar is likely to continue the decline that began in 2001. Since then, foreign holders of US dollar assets have already lost 33 percent of their investment. How long will oil exporters continue to accept declining US dollars? How long will they continue to hold US dollars as their reserve currency?
At some point, they may decide to abandon the US dollar in favour of euros. Russian premier Vladimir Putin and Venezuela's president Hugo Chavez have both publicly announced that they may begin to price oil in euros in the near future. Even Saudi Arabia has stated that it is considering pricing its oil in euros, as well as in US dollars. There have even been discussions among Arab nations about pricing oil in Islamic gold and silver dinars. If this happens, other producers may follow suit and opt out of accepting US dollars for oil. Demand for the currency will plummet, sending the dollar into a freefall while demand for euros, gold and silver soars.
In addition, Middle Eastern oil producers would be forced to diversify their vast US dollar holdings into precious metals and other currencies to protect themselves from further losses. As losses mount, other large, non-oil producing, US dollar holders such as Japan, China, Korea, India and Taiwan would seek to diversify out of US dollars. Eventually, this could result in a dollar sell-off and a corresponding increase in oil and gold prices.
Over the last 50 years or so, gold and oil have generally moved together in terms of price, with a positive price correlation of over 80 percent. During this time, the price of oil in gold ounces has averaged about 15 barrels per ounce. However, with recent soaring oil prices, the relationship has strayed far from this average. While oil prices recently set an all-time high of $56 per barrel, gold prices have not kept pace and the oil:gold ratio fell to an all-time low of 7.5:1. At US$56 per barrel oil, the gold price should be in excess of US$840 per ounce. Some experts are suggesting that, in two or three years, US$100 per barrel oil is very possible. At that price gold should be US$1500 per ounce.
The gold silver:ratio has varied from 16:1 to 100:1. Currently it is about 66:1. Gold Fields Mineral Services expects this ratio to fall to between 40:1 and 50:1 in the near future. At a 50:1 ratio and a $1,500 gold price the price of silver should be $30/ounce. At 16:1 it would be $94/ounce.
The size disparity between oil and gold markets must also be considered. While annual gold production is approximately US$35 billion, annual oil production is US$1.5 trillion, by far the largest-trading world commodity. As oil prices increase and demand for US dollar diversification increases, there will be an ever-expanding number of petro dollars and other offshore dollar holders chasing a relatively small amount of bullion ounces.
In conclusion, the price of oil is poised to rise steadily as the supply/demand imbalance increases and the dollar declines, even if there are no supply disruptions, terrorist threats or geopolitical concerns to consider. As this happens, the price of precious metals will climb until they eventually catch up to their historic ratios. Should oil producers demand euros, dinars or precious metals in payment for their product, the decline in the US dollar will accelerate while the price of precious metals explodes. If oil producers and other foreign US dollar holders begin to sell the trillions they hold and diversify into alternatives, then the price of both oil and precious metals will rise to levels that today are hard to imagine.
Nick Barisheff is the co-founder and President of Bullion Management Services Inc., which was established to create and manage The Millennium BullionFund. The fund is Canada's first and only RRSP eligible open-end Mutual Fund Trust that holds physical Gold, Silver and Platinum bullion. www.bmsinc.ca
- Bus 15C from the lay-by outside Central Pier 6 to the Lower Peak Tram Terminus on Garden Road and take Peak Tram to the Peak.
- Bus 15 from Exchange Square.
- Green minibus 1 from MTR Hong Kong Station Public Transport Interchange.
2. A Symphony of Lights, daily 8pm.
3. HK Disneyland, Lantau island.
- MTR Disneyland Resort Station.
4. Giant Buddha, Lantau island.
- MTR Tung Chung Station Exit B, then take bus 23 from Tung Chung Town Centre. Road up to the mountains is windy and takes about 40 min. Bus fare is cheaper on weekdays (HK$17) compared to weekends (HK$28).
- Worth taking the Nong Ping cable car ride down @ HK$58 per person. Takes about 15-20 min. Can see aerial view of Chap Lak Kok Int'l Airport on the left.
- Caution: Those with fear of height.
5. Avenue of Stars, Tsim Sha Tsui, Kowloon.
6. Clock Tower, Tsim Sha Tsui, Kowloon.
7. Kowloon Walled City Park.
- Take a taxi from MTR Lok Fu Station Exit B to the entrance on Tung Tau Tsuen Road.
- Bus 1 from Tsim Sha Tsui Star Ferry bus terminus and get off at Kowloon Walled City Park.
8. Wong Tai Sin temple.
9. Fa Yuen Market, Kowloon.
- 11am - 9.30pm daily.
- Walk along Tung Choi Street and turn left into Bute Street and then turn right into Fa Yuen Street.
10. Ladies Market, Kowloon.
- Open 12 noon to 11.30pm.
- MTR Mong Kok Station Exit E2, then walk along Nelson Street for two blocks.
- Bus 1, 1A, 2, 6 or 6A from Tsim Sha Tsui Star Ferry Pier.
11. Stanley Market, Hong Kong island.
- 9am to 6pm.
- Bus 6 (HK$7.60), 6A, 6X via Aberdeen Tunnel (HK$8.40), 66 or 260 (HK$10.60) from Central (Exchange Square) Bus Terminus.
- MTR Causeway Bay Station Exit B, walk to Tang Lung Street then take green minibus 40.
- Bus 973 from Tsim Sha Tsui East Bus Terminus or Canton Road outside Silvercord Centre.
12. Temple Street Night Market, Kowloon.
- Busy from 7pm onwards.
- MTR Jordan Station Exit A. Turn right into Jordan Road and walk three blocks to Temple Street.
- MTR Yau Ma Tei Station Exit C, walk along Man Ming Lane to Temple Street.
13. Golden Bauhinia Square, Hong Kong island.
- Daily Flag Raising ceremony, 7:50am - 8:03am.
- Take MTR to Wan Chai Sta. and walk (about 15-20 min slow walk, just follow the signs).
- Take Star Ferry from Tsim Sha Tsui to Wan Chai Ferry Pier (5 min walk), free for senior citizens.
14. Take the Longest Escalator to Mid Levels, Hong Kong island.
15. Hollywood Road.
- Bus 26 outside Pacific Place at Admiralty to Hollywood Road and get off near Man Mo Temple.
- MTR Central Station Exit D2 and turn right to Theatre Lane. Walk along Queen's Road Central towards The Center. Then take the Central - Mid-Levels Escalator to Hollywood Road.
16. Lam Tsuen Wishing Tree, New Territories.
- Bus 64K from MTR Tai Po Market Station and get off at Fong Ma Po (Lam Tsuen Wishing Tree) stop.
- About 30-40 min bus ride.
17. Yuen Po Bird Garden, Kowloon.
- 7am - 8pm daily.
- MTR Prince Edward Station Exit B2 and walk along Prince Edward Road West towards the direction of MTR Mong Kok East Station for about 15 mins.
- MTR Mong Kok East Station Exit C. Walk to Sai Yee Street via footbridge and follow the signs.
18. Flower Market, Kowloon.
- 7am - 7pm daily.
- Walk through the Bird Garden to the junction of Yuen Po Street and Flower Market Road.
19. Goldfish Market, Kowloon.
- 10.30am - 10pm daily.
- At the end of Flower Market Road, turn left and then right into Prince Edward Road West. Walk west until you see a petrol station, then left into Tung Choi Street.
20. Lan Kwai Fong, Hong Kong island.
- Walk from the Lower Peak Tram Terminus to Queen's Road Central, turn left at D'Aguilar Street and walk up to Lan Kwai Fong.
21. Tsing Ma Bridge
- Green minibus 308M from MTR Tsing Yi Station Exit A1.
- Take a taxi from MTR Tsing Yi Station Exit A1.
- Note: all airport buses cross Tsing Ma and Kap Shui Mun Bridges.
22. Happy Valley Racecourse, Hong Kong island.
- MTR Causeway Bay Station Exit A, walk along Wong Nai Chung Road towards Happy Valley Racecourse for about 20 mins.
- Take tram to Happy Valley Tram Terminus.
23. Repulse Bay, Hong Kong island.
- Bus 6, 6A, 6X, 66, 260 from Central (Exchange Square) Bus Terminus and alight at Repulse Bay.
24. Ocean Park, Hong Kong island.
- Bus 629 from MTR Admiralty Station Exit B.
- Bus 6X also can.
25. Cheung Sha Wan Road Fashion Street & Apliu Street, Kowloon.
- MTR Sham Shui Po Station Exit C1, and walk to Cheung Sha Wan Road Fashion Street.
- MTR Sham Shui Po Station Exit C2, and walk to Apliu Street Flea Market.
26. Jumbo Kingdom @ Aberdeen.
- Take taxi to Aberdeen Pier. Walk to dock for free boat ride to floating restaurant.
27. Kowloon Park.
28. Causeway Bay, HK island.
- Times Square, Caroline Centre, World Trade Centre, The Lee Gardens, Lee Theatre Plaza, Fashion Island, Island Beverley, In Square in Windsor House.
- Jardine's Crescent, Jardine's Bazaar (Exit F from Causeway Bay Sta.).
29. Causeway Bay (Firing of the Gun @ noon daily).
Monday, November 17, 2008
Sunday, November 16, 2008
- 241, Swanston Street.
- Tel: (613)-96633288
- What's good: beef rice noodle soup (variant: yellow noodle, beef ball), fried spring roll, prawn paper rolls.
- Beef noodle soup: A$7.50 (S), A$8.50 (M), A$9.50 (L).
- Prawn paper roll: A$4.40.
- Fried spring roll: A$4.80.
- Vietnamese coffee: A$3.00.
2. Dine @ Fifteen on Collins Street. Jamie Oliver's chain of restaurant around the world. One-and-only in Australia.
- 115-117, Collins Street.
- Tel: 1300 799415 (Reservation).
3. Big Aussie breakfast @ Treasury Cafe inside Treasury Building.
4. Big Aussie breakfast @ Muleta's near Queen Victoria Market.
- 422, Queen Street.
- Veggie Big Breakfast with cuppacinno: A$14.00
5. Breakfast @ Chepelli's Cafe and Restaurant on Chapel Street.
- 571, Chapel Street, South Yarra.
- Tel: 98269516
6. Breakfast @ Mojito at Prahran Market.
- 169 Commercial Road, South Yarra.
- Veggie Big Breakfast: A$11.50.
- Latte, Cappacino: A$3.00 each.
- Bircher Muesli: A$7.90.
- Fruit Loaf: A$4.90.
7. Breakfast @ Crown Cafe & Bakery.
8. Tropicana Food/Juice Bar.
9. Lunch @ Merino Club Cafe and Bar on Chapel Stree.
- 131 Chapel Street, Prahran.
- Tel: 95332991
They focused on inflation and raised interest rates despite warning signals and evidence of speculation
By NEIL BEHRMANN LONDON CORRESPONDENT
HISTORIANS will narrate one day how central bankers were hopelessly out of touch with reality ahead of the greatest economic crisis since the 1930s. Despite numerous warnings, notably sliding US and European real estate prices, a worsening credit crisis and tumbling stock markets, most central bankers were mesmerised by inflation until only a few months ago.
They kept interest rates at punitive levels for far too long. The US Federal Reserve Board was slow off the mark, but at least it acted a lot sooner than its European counterparts.
The European Central Bank (ECB) and its governor Jean-Claude Trichet, Bank of England governor Merwyn King and the UK Monetary Committee feared that inflation would accelerate.
With few exceptions, central bankers and most economists didn't appreciate that the inflation, caused by an unusual rise in energy, industrial raw material and food prices, had to be tackled in a different way, rather than by increasing interest rates.
Since the inflation was not the result of a surge in money supply, excess credit or large wage demands or a combination of any of these factors, high interest rates were not the solution. It was ludicrous to keep up interest rates in a world economy that was already beginning to contract because of a growing debt deflation crisis.
The commodity inflation was initially caused by higher demand in the US, Europe, China, India, Latin America and other emerging nations and regions. Soon hedge funds and pension funds caught the ball and prices soared following an extraordinary rise in so-called 'investment', ie speculative flows.
That in turn led to fears of mostly non-existent shortages and panic hoarding. Since global supplies were more than sufficient to satisfy normal consumer demand, the commodity bubble was bound to implode at some point. This in turn would be followed by a swift end to the global raw material and food price rises that had pushed up inflation.
Yet, despite evidence of rampant speculation, central bankers and their advisers chose to ignore warnings of experienced commodity traders.
A collapse in shipping rates on the Baltic Exchange also indicated that global demand for commodities including coal, iron ore and steel was declining. Instead of inflation, the far greater danger was recession.
Only one member of the Bank of England's Monetary Policy Committee, David Blanchflower, stressed that inflation was not a problem and urgently advised from October 2007 that interest rates had to be slashed significantly and quickly. If rates were not cut aggressively the UK faced the prospect of a relatively deep and long-lasting recession, he had stressed.
The European Central Bank, under the stewardship of its inflexible governor and his economic advisers, was even more blinkered in its approach and ignored worsening economic conditions first in Spain and Ireland and then in Italy, Germany, France and other members of the European Union.
Then it happened. Commodity prices collapsed. Crude oil, which was trading around US$30 a barrel in 2004, had soared to US$147 in mid-2008. Now it has fallen back to US$56.
Copper, a good industrial raw material indicator, jumped from around US$1,300 a metric ton in 2004 to a peak of US$8,800 and has since tumbled to around US$3,500. Wheat surged from US$3.50 a bushel around 2004 to almost US$14 in 2008 before plunging to around US$5.30.
Rice, which caused such trauma in Asia earlier in the year and jumped from US$4 to US$25 on the Chicago Exchange, has since declined to US$14. There are numerous other examples of extraordinary commodity price increases followed by steep declines. Since global demand is still weak, prices could fall a lot lower.
People tend to examine recent peaks rather than earlier lows. Most energy analysts used to oil prices of US$20 to US$30 a barrel in 2002 to 2004 neither predicted nor dreamt of quotes above US$50, let alone US$100 within four years of that time.
So what should have the central bankers done? They should have called in the regulators to do something about excess speculation.
The solution is simple and would not have interfered with the free market: Raise the margin deposits on commodity exchanges every day to force speculators to pay up or withdraw.
Simultaneously, central banks should have placed pressure on banks who were lending money to funds that were speculating in commodities on the over the counter market (OTC).
Instead economic gravity has taken hold, pulling prices down. At last, central banks are acting. But had they cut rates earlier, the recession would probably have been shallower with bank bailouts a rarity.
Risk of new energy crisis if investment pullback continues
(HOUSTON) It will require more than a trillion dollars in annual investments to find new fossil fuels for the next two decades to avoid an energy crisis, the International Energy Agency warned on Wednesday.
The warning from the Paris-based agency comes at a time when major oil companies are pulling back investments during one of the most severe economic downturns in a generation.
The IEA stressed that it's vital for the world's energy companies to continue investing in new projects despite the current economic malaise. The total potential tab through 2030: US$26.3 trillion.
'While the situation facing the world is critical, it is vital we keep our eye on the medium- to long-term target of a sustainable energy future,' IEA executive director Nobuo Tanaka said at the release of its annual World Energy Outlook report in London.
There are growing fears the simultaneous plunge in oil prices and a pullback in spending on exploration and production will result in another massive energy price spike.
'While macroeconomic conditions have lowered oil prices for the moment, there is nothing in the underlying economic picture that suggests this slowdown will be long-lived, maybe a year or more out,' said former secretary of energy Spencer Abraham.
'There was not enough production even when we were in triple-digit oil markets over the summer, and there's going to be a lot of pressure on the system when economies recover.'
Mr Tanaka said that state-run national oil companies - like those in Venezuela and Saudi Arabia - are projected to account for about 80 per cent of the increase of both oil and natural gas production to 2030.
But he acknowledged it was 'far from certain' those companies would be willing to make the necessary investment themselves or to attract sufficient capital to keep up the necessary pace of investment.
Future sources of oil, the cost of producing it and the price consumers will have to pay for it are extremely uncertain, the IEA said.
That type of uncertainty already is prompting companies to withhold billions of dollars of investment in new oilfield and refining projects, even though major oil companies have posted record profits this year thanks to triple-digit crude prices.
Producers and refiners, large and small, are delaying and even cancelling some work as they adjust to oil prices that have fallen more than 60 per cent since peaking in July above US$147.
The IEA expects demand for oil to rise from 85 million barrels per day currently to 106 million barrels per day in 2030 - 10 million barrels per day less than projected last year. The IEA is a policy adviser to 28 member countries, mostly industrialised oil consumers.
China and India continue to be the main drivers, accounting for more than half of incremental energy demand to 2030, but the Middle East, a longtime supplier, also emerges as a major new demand centre.
The agency said that these trends call for energy supply investment of US$26.3 trillion to 2030, or more than US$1 trillion a year, but it noted that tight credit conditions could delay spending. Opec has warned that crucial downstream investment - in refining and distribution - will be curtailed if the oil price is not maintained at a reasonable level.
The IEA has nearly doubled its forecast for the price of oil over the next 20 years, because of rising demand in the developing world as well as surging costs of production as oil needs to be sourced from more expensive offshore fields and state-run companies.
It hiked its forecast for the price of a barrel of oil in 2030 to just over US$200 in nominal terms, compared to its forecast last year of US$108 a barrel. Measured in constant dollars, it pegs oil at US$120 a barrel in 2030, up from last year's forecast of US$62. Over 2008 to 2015, it predicts the price to average US$100.
The report also predicts that world renewables-based electricity generation - mostly hydro and wind power - will overtake gas to become the second-largest source of electricity, behind coal, before 2015.
Nikon D300 - best value for money.
Nikor 50mm f1.4, $460 (Alan Foto, 14 Nov 08)
Nikor 80mm f1.8, $760 (Cathay Photo)
Nikor 80mm f1.4, $1,760 (Cathay Photo)
SB-900, $650 (Alan Foto, 14 Nov 08)
Sandisk Extreme III CF 8.0GB, $85.
Toshiba SD 2.0GB, $15.
Lowepro Flipside 300, $183 @ Harvey Norman.
Lowepro Orion AW belt pack, $335 @ Cathay Photo.
Saturday, November 15, 2008
1. Modern China
UG06B Olympian City 2, 18 Hoi Ting Rd, West Kowloon
Lunch: 11:45AM - 3PM
Dinner: 5:45PM - 11:00PM
1002, Food Forum, Times Square, Causeway Bay
2. Sweet Dynasty
Ground Floor, 100 Canton Road, Tsimshatsui, Kowloon
Monday to Thursday (10:00am - 12:00am)
Friday (10:00am - 01:00am)
Saturday (07:30am - 01:00am)
Sunday(07:30am - 12:00am)
Public Holiday opened at 7:30am
The eve of Public Holiday closed at 01:00am
3. Cafe de Coral
- Best value for money for your meals.
- Cleaner, fast food version of Hong Kong's famous Char Chan Tang.
- Price is very reasonable, that's why it's packed all day long with locals.
- Many outlets all over Kowloon and Hong Kong.
4. Tai Cheong Bakery (Egg Tarts) @ 35, Lyndhurst Terrace, Central.
- HK$5 each. Crust is "ang mo" type. Overall rating: Over rated.
- Branches: Shop B, Jardine Centre, 50 Jardine's Bazaar, Causeway Bay, Hong Kong.
- Shop 535, Grand Century Place, Mongkok
5. Yuen Long's Hang Hueng wife biscuit @ 64-66 Castle Peak Road.
Hang Heung Yuen Long outlet is located at 64-66 Castle Peak Road. U can either take their KCR West Rail and alight at Yuen Long Station and walk or for a shorter walking distance, change to LRT at Yuen Long Station and take LRT to Tai Tong Road Station (almost dropping opposite).
6. Lei Garden (Dim Sum)
B-2, Houston Centre, Tsimshatsui East, Kowloon, Hong Kong
121 Sai Yee Street, Mongkok, Kowloon, Hong Kong
Monday to Saturday & Public Holidays
Lunch: 11:30 a.m. - 3:00 p.m.
Dinner: 6:00 p.m. - 11:30 p.m.
Lunch: 11:00 a.m. - 3:00 p.m.
Dinner: 6:00 p.m. - 11:30 p.m.
7. Mak Aun Kee - Mak's Noodle (Wanton mee) @ 77 Wellington Street, Central, Hong Kong
- Expensive and small portion.
- HK$28 for wanton mee, HK$30 for dumpling mee (preferred).
- Branch: 44, Jardine's Bazaar, Causeway Bay, Hong Kong.
- Branch: Shop No. C03, 2/F, (Arrival Hall), China Hong Kong City, No. 33, Canton Road, Tsim Sha Tsui, Kowloon.
8. Tsim Chai Kee (Wonton mee) - opposite Mak's Noodles @ 98 Wellington Street, Central.
Cheaper and bigger wontons.
- 5 minutes walk from MTR Central Station (Exit D2)
9. Wong Chi Kei (Bamboo Noodles) - the bamboo noodle shop from Macau.
On the other end of Wellington Street (start at Mak's, walk up and then down the hill).
10. Yung Kee @ 32-40 Wellington Street, Central, Hong Kong.
- Must Try: Roast Goose, Suckling Pig.
- 5 minutes walk from MTR Central Station (Exit D2)
- Reservation By Telephone
(852) 2522 1624
- (852)2523 2343 (Take Out Order)
- Business Hours:
11:00a.m. - 11:30p.m.(Daily)
- Dim-Sum Dining:
2:00p.m. - 5:30p.m.(Mon. to Sat.)
- 11:00a.m.-5:30p.m.(Sunday & Public Holiday)
11. Tsui Wah (char chan teng) @ 15D-19 Wellington St., Central, Hong Kong
Open 24 hours.
12. Wong Chi Kee @ Terminal 2. (Wanton Noodles)
13. Hang Heung's Kitchen @ Terminal 1.
14. T'ang Court (Dim Sum) @ 8 Peking Rd, located in the Langham Hotel, Tsim Sha Tsui, Kowloon
Sun and holidays 11am-3pm
15. On Lee Noodle Factory @ G/F, Shun Loong Mansion, 94-90 Bonham Strand East, Sheung Wan, Hong Kong.
16. Hoixe Bakery near junction of Hankow Road and Haiphong Road.
- Egg tarts @ HK$4 each. Overall rating: Die Die Must Try.
- Bread and cakes are also fabulous.
17. Chao Inn restaurant @ Shop 728, 7/F, Grand Century Place, Mongkok, Kowloon.
18. Jumbo restaurant @ Aberdeen.
- Can take Bus 71 from bus terminal outside Star Ferry terminal.
- Great ambience, fabulous food, quality.
- Worth a visit if you have a huge budget.
- 7 dishes could set you back by HK$2,000.
He says Asia will still emerge in better shape than the rest of the world
By CONRAD TAN
THE world economy will take years to return to the rapid growth it experienced before the current financial crisis struck, Morgan Stanley Asia chairman Stephen Roach said yesterday.
But Asia should still manage to weather a long but moderate recession in the US relatively well, he added.
'The global economy is in terrible shape right now. This is the worst global crisis that I've seen in my 36-year career as a professional economist,' said Mr Roach, who was Morgan Stanley's chief economist until his appointment as head of the group's Asia operations in April last year.
'Asia is going to feel the impact, but Asia is actually going to come out of this better than the rest of the world, and I think the markets are overdoing the gloom with respect to Asia.'
He was speaking to reporters at Morgan Stanley's annual Asia-Pacific Summit in Singapore.
The US will most likely go through a lengthy but moderate recession as consumer spending contracts and people there gradually adjust to lifestyles fuelled by less borrowing, he said.
'My suspicion is that the US recession is going to be long, but it's not going to be deep - it'll be moderate, but not mild.'
In that case, Asia will still fare better than the rest of the world, managing about 5 per cent growth in each of the next two years, he said.
On Wednesday in the US, Morgan Stanley said it would fire 10 per cent of staff in its main institutional securities business - which includes investment banking - and 9 per cent of workers in asset management, Reuters reported.
Asked how the latest job cuts would affect the bank's operations in Asia, Mr Roach said only that the staff cuts in Asia 'will be a good deal less than our global work force reductions given our belief that this region is a huge source of growth for the world and for Morgan Stanley'.
The four-trillion-yuan (S$880 billion) package of fiscal measures announced by China last Sunday would likely support China's economic expansion at about 7 per cent, even as the contribution to growth from exports slow sharply, he said.
'If China can hold the line at 7 per cent, then the region can hold the line at say, 5 per cent, and Asia will come through this global tsunami in better shape than the rest of the world.'
But the prospects of a rapid rebound in economic activity worldwide to pre-crisis levels are dim, he said.
'I think the recovery in the global economy is going to have a big, wide bottom and then a very gradual up-slope in 2010 or 2011 - an anaemic recovery.'
Economic output worldwide, as measured by gross domestic product, grew at an average annual pace of nearly 5 per cent in the four-and-a-half years to mid-2007, when the current crisis started, he said.
'It's now slowed to about 2-2.5 per cent - this is a recession by any standards and it's an amazingly sharp and abrupt slowdown.'
Any recovery in global GDP will likely only emerge in 2010 and 2011 and 'the best I can see in the years beyond that is a return to 3.5-3.75 per cent global growth', he said.
'The 5 per cent, bull-like years of world GDP expansion - you're not going to see that for a long, long time, in large part because of the multi-year adjustment of the US consumer.'
By SIOW LI SEN
(SINGAPORE) Interest rates have plunged to near five-year lows as loan demand falls off a cliff even as governments inject liquidity to get credit flowing again.
Yesterday, the key three-month Sibor or Singapore interbank bank offered rate fell to 0.89 per cent, not far from the all-time low of 0.69 per cent on Nov 21, 2003. The benchmark rate, to which many home loans are pegged, is now 60 per cent lower from less than two months ago when it hit 2.23 per cent on Sept 26.
While this may be good for borrowers, savers may find themselves earning no interest - similar to the situation in Hong Kong where banks pay nothing for savings accounts.
HSBC Hong Kong pays zero interest for amounts less than HK$5,000 (S$969) while amounts higher than that earn 0.01 per cent. DBS Bank Hong Kong too pays a miserly 0.01 per cent for savings accounts regardless of amounts. Even its high-end Treasures customers get only 0.15 per cent, regardless of their balance.
The rapid fall in interest rates has caught many by surprise. 'We are in unprecedented times,' said Alvin Liew, Standard Chartered Bank Singapore economist.
Mr Liew said that Singapore's interest rates are influenced by US interest rates and domestic demand.
'In recent years, domestic interest rates moved more or less in line with the US$ Libor or interbank rate, but at a discount, as Singapore has in recent years had a forex appreciation stance,' he said.
'With Singapore now having moved to a neutral policy, one of the key implications would be that currency appreciation is taken out of the equation, and we are likely to see SGD Sibor tracking US$ Libor much closer.'
The US Federal Reserve recently cut the Fed Fund Target Rate (FFTR) by another 50 basis points to one per cent (on Oct 29) and many expect another 50 bps snip before end-2008 to bring FFTR to a record low of 0.5 per cent and held at this level for the whole of 2009.
But the three-month Sibor is still lower than the FFTR and one of the factors could be that Singapore is regarded as a safe haven in a more volatile region, said Mr Liew.
Selena Ling, OCBC Bank economist, said that, over the years, the three-month Sibor has traded at a wide discount to the US rate, though a very rough guide would be one per cent discount to the FFTR.
'But if the Fed cuts to 50 basis points, we can't go to negative, right?' Ms Ling said. She noted, however, that overnight Sibor rates recently have gone very near to zero.
'It's highly unlikely we'll go to zero, but never say never,' she said, referring to the three-month Sibor.
'The current circumstances are quite abnormal because all the central banks are injecting liquidity, and you can't second guess them,' she added.
Some feel interest rates will continue to face downside pressure as demand for loans will contract next year given that Singapore is already in a recession.
So what can borrowers and savers expect?
Dennis Khoo, general manager of lending at Standard Chartered Bank was non-committal.
'If customers feel that rates will go lower, then the three-month Sibor is a good way to capitalise, given that it automatically adjusts as the rates go lower. Should customers feel that rates will eventually move higher, then Standard Chartered Bank offers them an attractive mortgage pricing package with a two-year lock-in period of 2.49 per cent.'
He added: 'As interest rates drop, the savings rates will move in tandem.'
Western economies can no longer afford to ignore region's rising contribution
By LEE U-WEN
THE United States will remain first among equals long after the dust from the global financial meltdown settles, but the rise of East Asia could be accelerated by crisis, according to Senior Minister Goh Chok Tong.
He made the point in Hong Kong last night as he argued the case that Western economies can no longer afford to ignore the growing contribution and presence of East Asian nations.
'The current crisis may well accelerate, and its aftermath will at least confirm, the fundamental changes in the international order that rapid East Asian growth has already set in motion,' Mr Goh said in a keynote address at the Asia Society Hong Kong Centre's annual dinner.
Mr Goh, who is on a four-day official visit to Hong Kong and Macau, was invited to speak on the topic, 'Governance and Growth in Emerging Asia'.
'We may well be seeing the birth of a multi-polar world,' he said. 'Will the developed West admit successful East Asian economies into its exclusive club as equals? Or will it simply heighten discomfort which any change to the status quo may bring?'
He noted that 'symptoms of disquiet' are already evident, citing examples such as concern over Asian sovereign wealth funds injecting capital into foreign assets, controversies over the interpretation and implementation of human rights and debates over the reform of the United Nations, World Bank and International Monetary Fund.
'The list could easily be extended,' said Mr Goh. 'The proximate causes may differ, but there is a common source of discomfort. In East Asia, capitalism flourishes without Western style liberal democracy. This challenges the preferred historical narrative of the West in a fundamental way.'
Mr Goh admitted that restructuring of international order 'is never easy' and that historically, all such changes have been either the cause or result of conflicts.
To avoid history repeating itself, countries should 'not propagate simplistic ideas' about the superiority of one system or another, he said. Instead, all nations should realise that no one type of political system has a monopoly on success, and that growth can take place under different types of systems.
Mr Goh listed four main attributes a political system should have for a country to flourish: accountability and transparency; long- term planning and execution; social justice and harmony; a culture of identifying and grooming talent for public service.
'Every country must find the political system that can deliver the goods,' he said. 'And what works in one historical period may not necessarily deliver in another. But however societies evolve politically, we must never lose sight of these basic attributes if they are to continue to prosper.'
SINGAPORE'S already modest interest rates, as reflected in the key three-month interbank rate, have fallen further to a four-year low of 0.88 per cent, placing savers and investors in a quandary. In a normal environment, a negative real interest rate should be supportive of asset prices. Inflation in September was over 6 per cent, and the Monetary Authority of Singapore (MAS) has forecast inflation at 2.5 to 3.5 per cent for 2009. But these times, of course, are far from normal. Stress in the credit market is still starkly in evidence, even as the US dollar Libor rate has trended down to 2.18 per cent from a peak of 4.8 per cent a month ago. Non-investment-grade corporate bonds, for example, are trading at record spreads not seen since the 1930s. While that market segment has fallen victim - along with most other assets - to the savage pace of deleveraging, market participants are also pricing in a level of default and economic stress that fund managers believe is irrational.
The irrationality extends across asset classes. In numerous markets, stock indices have fallen to multi-year lows. The Straits Times Index (STI) is currently trading at a price-earnings ratio of six times and a dividend yield of 5.7 per cent, for example. The yield on Asian investment-grade corporate debt stands at nearly 9 per cent. At a time when deposits of less than $50,000 fetch less than 0.3 per cent, it would seem a no-brainer to begin to take some risk, even as analysts continue to debate the billion-dollar question: Is the world heading for a deflationary-type era reminiscent of Japan in the 1990s?
For now, it would seem that concerted action by governments to reflate economies and kick-start the credit markets should at some point begin to show results. By far, the biggest challenge is to restore confidence, particularly among consumers who are notoriously driven by the rear-view mirror. Deep portfolio losses this year are exacerbated by faltering home values as well, almost wiping out any of the feel-good wealth effect that had buoyed Singapore in the last couple of years. But the last thing the economy needs now is for consumers to retreat into a shell. This is where falling interest rates should help once they begin to translate into lower interest expenses on mortgages and corporate loans.
Looking ahead, the financial landscape is indeed in uncharted waters, as banks scale down investment banking activities and cut risk generally. But for investors and savers with medium to long-term goals, the math does not change. A low interest rate that could well trend to near zero is a positive for investments with a steady stream of cash flow and dividends, as a low discount rate should translate into higher asset values. What remains then is to pick good-quality and defensive assets with low gearing, whose coupon or income payouts will help to cushion price volatility. Those assets are in abundance today, even with the caveat of slower growth. The alternative is to sit on cash - an unpalatable option given the long-term history of returns.
- ► 2009 (202)
- Where to Eat in Beijing
- Where to Stay in Hong Kong
- Gold to outperform oil as recession brews
- Oil & Gold Ratio
- THE GOLD, OIL AND US DOLLAR RELATIONSHIP
- Where to stay in Seoul
- What to See/Do in Hong Kong
- Business Excellence Framework
- Where to Eat in Melbourne
- When central bankers got it all wrong
- IEA warns of impending energy crunch
- Global Foreign Reserves
- Photography Accessories
- Where to eat in Hong Kong
- US faces long, moderate recession: Stephen Roach
- Interest rates fall to five-year low
- Global crisis could accelerate East Asia's rise: S...
- Assets in a time of low interest rates
- ▼ November (18)