Skip to main content

The Food Train Wreck

Comments in PURPLE.

Blogger Encik Wan said...

What do you suggest? Cut liquidity to curtail demands? Speed of production of commodities cannot match rate of increase in demands. You cannot ask emerging countries to go back to old days, right?

The biggest problem, which many are still not aware, is that unlike the subprime crisis and the credit implosion, a food crisis cannot be solved or minimised by pumping liquidity or having more bailouts. You cannot just plant more rice or coffee overnight. Hence the headline: its a train wreck waiting to happen. It will happen. There is nothing much we can do to stop it. How's that for being optimistic?

Blogger Wai Kit said...

question is, what's the best way to position our portfolio during inflation environment? invest in gold, palm oil, stocks related to food production, O&G etc?


Blogger Smart Money said...

What's your thoughts on the effects of inflation on property prices? Are they sure to increase in value? What's the effect of restrictive monetary policy on the property values? Do rentals go up during inflation? The effects on equities are quite predictable. But real estate?

Inflation = Higher interest rates = Lower affordability. Hence spiraling food inflation does not necessarily equate to corresponding property price jumps. Even in those supposedly good sectors with positive black swans (food manufacturers, plantations), their earnings jump will be regarded as an anomaly and would not get a long term hike in PER valuation. What can the governments do? Put more funds into subsidy. This is a case of people getting richer but clamouring for reduced supply. Prices get bidded higher. Unlike oil which affects companies a lot more, food prices affects a much larger crowd. We all will have to live with much higher food prices, not to mention fuel prices. Governments will have to pay higher salaries for civil servants. Countries like Malaysia will be net beneficiaries as we have oil royalties and plantations to help cushion the blows. It will hit resource poor nations a lot harder. Developing economies with high poverty levels will be hit especially hard. Even the aid in USD have depleted in value and can only buy a lot less of things costing a lot more.

A looming food crisis = spiraling inflation = restrictive market policies = higher interest rates to curb spending = not so good for equities.

A looming food crisis = Mounting government subsidy = Controlled prices break loose = Social unrest & riots = not good for equities.

p/s photo: Niki Chow


Encik Wan said…
My comment is "Cut liquidity to curtail demands?", not "Increase liquidity". For example, reduce money supply to induce slower growth.
Opine said…

May i get your opinion on the best method to invest in Gold?

Thanks :)
Salvatore_Dali said…

cut liquidity means selling bonds, but this will have the effect of lowering rates (not what you want)... or you can do it via raising interest rates, which was what I suggested will happen to rein in the economy and spending ... the artful types will want to hold interest rates steady and sell more bonds (soaking liquidity), but how many central banks can sell aggressively while keeping rates flat??

go to trade bursa malaysia and ask boon... the chicago merc ex or even some independent but respected futures/spot trade sites on commodities/currency ... what would be a good idea is to buy out of money call options, e.g. gold at US$1,200 Dec 2008 etc...
Opine said…
Here's an interesting blast from the past :-
(note the date of the article)

Also note from wikipedia :-

"In general, gold becomes more desirable in times of:

-Bank failures
-Low or negative real interest rates
-War, invasion, looting, crisis "

Sounds kinda bleak, hope i am wrong.

Thanks Dali for the reply.
Wonderful Blog :)
John Lim said…
Whether gold is a good hedge against inflation, it's questionable !

Gold price has been increasing since 2000, but on overall for the last 30 years of gold prices, it wouldn't make much differences.

In 1981, gold price stood at about US$700 per ounce but today it only priced at about US$880. Looking the price in this way, if this is consider a good hedge against investment......I don't think so !

You'll notice gold price had hit the lowest in 2000 at about US$270 per ounce before 1981. If you would to invest in 2000, your investment value has tripled.

Looking at the current trend, gold price is on the down trend. Look like it's a good buy sign. Whether gold price will achieve another new's very subjective.

Like any other investment, gold price is still determined by demand and supply. China and India have very strong demand on it but on the supply.....I'm still doing my researche !
see said…
Thot recently gold has been influenced by fall in USD although traditionally it has been hedge against inflation. These are interesting times

Popular posts from this blog

My Master, A National Treasure

REPOST:  Its been more than two years since I posted on my sifu. This is probably the most significant posting I had done thus far that does not involve business or politics. My circle of close friends and business colleagues have benefited significantly from his treatment.

My Master, Dr. Law Chin Han (from my iPhone)

Where shall I start? OK, just based on real life experiences of those who are close to me. The entire Tong family (Bukit Kiara Properties) absolutely swear that he is the master of masters when it comes to acupuncture (and dentistry as well). To me, you can probably find many great dentists, but to find a real Master in acupuncture, thats a whole different ballgame.

I am not big aficionado of Chinese medicine or acupuncture initially. I guess you have to go through the whole shebang to appreciate the real life changing effects from a master.

My business partner and very close friend went to him after 15 years of persistent gout problem, he will get his heavy attacks at least…

PUC - An Assessment

PUC has tried to reinvent itself following the untimely passing of its founder last year. His younger brother, who was highly successful in his own right, was running Pictureworks in a number of countries in Asia.

The Shares Price Rise & Possible Catalysts

Share price has broken its all time high comfortably. The rise has been steady and not at all volatile, accompanied by steady volume, which would indicate longer term investors and some funds already accumulating nd not selling back to the market.

Potential Catalyst #1

The just launched Presto app. Tried it and went to the briefing. Its a game changer for PUC for sure. They have already indicated that the e-wallet will be launched only in 1Q2018. Now what is Presto, why Presto. Its very much like Lazada or eBay or Alibaba. Lazada is a platform for retailers to sell, full stop. eBay is more for the personal one man operations. Alibaba is more for wholesalers and distributors.

Presto links retailers/f&b/services originators with en…

How Long Will The Bull Lasts For Malaysia

Are we in a bull run? Of course we are. Not to labour the point but I highlighted the start of the bull run back in January this year... and got a lot of naysayers but never mind:

p/s: needless to say, this is Jing Tian ... beautiful face and a certain kind of freshness in her looks and acting career thus far

I would like to extend my prediction that the bull run for Bursa stocks should continue to run well till the end of the year. What we are seeing for the past 3 weeks was a general lull where volume suddenly shrunk but the general trend is still intact. My reasons for saying so:

a) the overall equity markets globally will be supported by a benign recovery complemented by a timid approach to raising rates by most central banks

b) thanks to a drastic bear run for most commodities, and to a lesser extent some oil & gas players, the undertone for "cost of materials" have been weak and has pr…