ISLAND RETREAT

Hello Heinz and Joel, Some random notes from the past eight days, after we took the


Studious Coconut



Waiting for flight to Island


Day One: I am bivouacked on the island Koh Samui in the Kingdom of Thailand. Constitutional monarchy seems to work well, especially for the monarch.

My order of holiday is comprised of mom, wife, Coconut, baby's nanny, Swiss friend, (a banker, of course), his wife (classmate of my wife), and their baby Paul.


Holidaying Coconut

The house has two master bedrooms and four bed/bath small suites, and so just right for two families plus.

My Team B, comprised of in-laws, wife's sister, my English Jewish brother and his Chinese Moslem wife, and operating business partner and his wife, is camped out at a neighboring house.

The houses are on the beach, on raised platforms, surrounded by landscaped gardens, fronted by pools, on the ocean side, and from street side, camouflaged with foliage in depth.


Lonely Path is the Right Way


This is a better place to hangout at when global monetary system falls apart, I reckon. The locals are friendly, soldiers are inexpensive, accessibility limited, plenty of water, good deal of solar energy, lots to eat, and not a great deal to fuss over.


Day Two: Our days start with swimming, at 7:00am, first in the large salty ocean, then the smaller fresh pool. I am motivated to swim by thought of breakfast.



Bed, Breakfast and Beyond


Breakfast is served at 8:00 by the full complement of staff at each camp ... cholesterol-spiked everything, and caffeine infuses everything else, Ph-balanced with tangerine juice, and kept smooth with tropical fruits.



Exhausted Coconut

Besides sleeping, baby Paul and Coconut seem to appreciate water melon juice, scrambled eggs, bread, cheese, and yogurt.


Yogurt Session


The rest of the day is spent on one of many day-beds arranged on covered-decks and gazebos here, there, and everywhere. The tropical furniture, no, correct that, the tropical civilization's contribution to human development, is used for after-breakfast, before-lunch, after-snack, and post-dinner naps.


Coconut Grumble



Day


All of us have fallen victim to the strange gravity of the Koh Samui culture, extracting therapeutic value from the island by lying on the day-beds, caressed by the wind, dabbed by the salty air, and soothed by the chimes.


Day after Day


The day is a collage of naps, massages, reading, daydreaming, feeding, drinking fruit juices of varying degrees of fermentation, and just staring at the gentle horizon puzzling over the nature of the bountiful service economy.

I still do not get it. I do not understand how the Last Man Standing Financial Deathmatch finances me and my always hungry entourage in Koh Samui by accepting my "put" promises generated out of thin air from desolate Hong Kong by night, on New York-traded derivatives of ownership of Canadian uranium by day. How weird is that?!

The game is too kind, surreal, and thankfully very suitable for fun-loving adventuresome sorts with no particular skills worth a Greensputin fiat dollar.


After Day


Well, perhaps I am too harsh, for a Greensputin dollar is worth precisely nothing, according to Chavez. Compared to what Chavez has, namely oil, he is correct. But of course Chavez cannot telegraphic transfer oil if he finds necessary to run from regime-change operation of the surgical strike sort. Small wonder Chavez is pondering over cooperation with the Iranians, to balance off crude energy with nuclear motivation.

Speaking of oil, China just did another oil deal, this time with Nigeria. Coincidentally, I am sure, Nigeria just did a jet combat aircraft deal, this time with China. I wonder whether China has more jet fighter manufacturing capacity or Nigeria has more oil reserve, on purchasing power parity basis, naturally.

Enough of that geopolitical soap opera, and let us not fuss over how the deathmatch mechanism works. Let us simply count the loot and spend the blessings, while the blessings are still plentiful, and loot forthcoming. We must not forget to salt away something for the hurricane days and typhoon nights, obviously, and solidify such salts in the form of gold, naturally, while accumulating Canadian oil sands, just like Newmont Mining, to hedge our 50-years future ability to operate a 2005 Humvee SUV classic.

Observation: the lootings are getting more difficult, and blessings less plentiful. Interest rates around the world are rising, along with price of gold; the obvious is becoming more apparent, even for the dumb and dumber, because it is now on CNBC. What is coming up soon enough will likely be ... a series of choreographed "knowable known surprises".



Chilled Crab is Delicious


Our day ends as it starts, swimming, at 9:00ish, first in the large salty ocean, then the smaller fresh pool.


Day Three: I am deliberately staying away from connections to the outside world by refusing to turn on the TV except to watch DVD movies. I am getting my news by third hand over dinner conversations, so I am not as confused as usual.

I am without broadband connection and am only able to access the WWW via my O2 XDA IIs PDA GPRS-roaming function. I did so only to test the functionality, and not even to check the price of gold, satisfied to know where it will rise to, not quibbling over where it now might be.

Speaking of functionality, it appears that 'Stuff-happens' Rumsfeld has mismanaged the budget for the Space defense program. No surprise, the man messed up everything else. Oh, well, easy come, easy go, and as Cheney had mentioned in passing, deficits do not matter.

The fact that Stratfor http://www.siliconinvestor.com/readmsg.aspx?msgid=21774609 is starting to worry about the deficits (typical Stratfor, worried about deficits affect on the number of aircraft carriers) probably means that the deficits will go on for awhile longer, to allow more home equity extraction to generate taxable GDP so as to sustain the unsustainable for a bit longer, and then, . . . well, you know

either the above, or that we are really close to the defining event, because even Stratfor is clued in.

Of course, the simple arithmetic truth is that deficits make everything more expensive, and people will tend to do less of expensive acts, such as manufacturing, and as they do not, deficits become worse, eventually requiring borrowing money to pay interest obligations, which then makes expensive acts even more dear, ad infinitum, until nauseam.

Observation: life on Koh Samui can save on medical expenses, while ballooning out the massage budget. What I would judge to be a win-win exchange.


Coconut Float


Day Four: Besides thinking and partaking food from the bountiful ocean, swimming and playing with the Coconut, I am reading "Conspiracy of Fools", the definitively true and very entertaining (funny) story about Enron that went EnrOff, the not especially singular company of the very fictional New Economy.


Enron - A True Story

I have saved the book for nearly a year, and now must enjoy it to the full and cut short the very simple and inexpensive pleasure of anticipation.

I need to make room for equally entertaining (funny) books that will doubtlessly be written about Fannie Mae, AIG, JPM, real estate, and yes, even GE Capital.


Coconut Shake


I sense the perturbation in the Force, just as I did before the beginning of revelations http://www.siliconinvestor.com/readmsg.aspx?msgid=21746294 , before Enron and Worldcom became household words, like Xerox.

The approaching demise of the financial economy will result from a change of global currency regime is per script.

Prologue: "The This Time It's Different Housing Debt Bubble, Enhanced by Constipated Devaluation, Made Worse by Frustrated Wars, More Memorable Due to Horrific Inflation Not Really Offset by Wage Adjustment, More Terrible Due to Once In Several Generations Demographic Inflection"

But gold allows one to chill out, as it had historically, without fail.


Day Something: Erita is several dozen hours away from reaching one year's young. The Coconut is coming along fine, can stand, walk with help, likes bread and olive oil, prefers watermelon juice over water, partial to dogs and rabbits, and enjoys music and dancing.

The Coconut is also developing some survival skills, as well as nurturing habits.

Coconut at Play


By the way, I understand from conversation that Taiwan real economy is collapsing, and its politics is becoming simpler, namely, to merge or not to merge.

Apparently the US and Japan has a good case on the reality that China is gearing up to back its rhetoric that Taiwan is not negotiable, and the KMT is democratically holding up protection money payoff (in the form of pointless arms purchases) to the USA, making the issue of US protection for Taiwan a moot and pointless point.

It appears that China, in cooperation on coincidental interest with Russia, is getting tough with Japan despite Japan-USA alliance.

Can the lightweight politicians in Taiwan handle matters astutely? Dunno.

Same game, changing rules, new players, reshuffled cards. Someone will have to back down eventually. Drama developing.

Recommendation: buy gold.


Gold is Redemption


Day Something Else: I, along with a cabal of white collar and otherwise honorable and honest fellows, speculated on a piece of Koh Samui land at the height of frenzied panic that was the Asian Financial Crisis. I had never been to the island before and have not since, until now.


Chaos is a Gift


The astute holding structure codified, land has been chopped up into 29 lots, water well dug, master plan defined, covenant signed, all sea-view lots grabbed or otherwise sold, and two show houses under construction.

For my troubles I have received a building plot valued at as much bread as I wagered, plus pocketing twice as much moolah as I bet, enough to build a spectacular solar-powered and broadband-enabled miniature palace to house two families.


Asian Financial Crisis is a Partner


Even better, the Thai Baht will likely appreciate against the currency I originally committed, and the real estate will gain in worth as the retirement service economy on Koh Samui gains more infrastructure investment Bahts.

I am very pleased with the win-win-win exchange, so far, and am anticipating a second-helping as soon as global interest rate ticks by a few thousand basis points, or/and gold reaching USD 1,000 per gram, with a lot of grams going into every ounce, as the current global reserve currency reaches parity with the Zimbabwe Dollar, and less valuable than Scotts softie, and less absorbent as well.

The construction of all 29 concrete, glass, teak, and tile homes, by owners and on spec, will finish by the end of 2006, probably just in time for "you know what will happen to the financial market".

The hilltop homes will be protected by walls, gates, systems, guards, and a few dogs. TeoTwawKi will be survivable.

It is easy for me to see the value of the abode here on Koh Samui, just look out the window, beyond the deck, past the pool, to the blue ocean beyond.


Russian Volatility is a Friend


Contrary to my expectations for Koh Samui real estate, it is difficult to see the worth of the average house in the average city in any homeland that requires heavy defense and heavier regulation, plus the intrusion, minus the freedom, add on the multitude of rights of others, slap on the requirements of the voracious many, all firmly cemented by "simple-majority-who-bothered-to-show-up-cup-in-hand" dictate.


Last Day: Not much happening today, just as yesterday, and all the days after leaving Hong Kong.

We do have a small party this night time to celebrate life, and Coconut's first birthday.


Coconut Party


By the way, the punch line in "Conspiracy of Fools", the Enron story, is that OJ Simpson and Michael Jackson are not guilty, everyone is responsible, but no one is to blame.

We will return to Freedom Mountain Kowloon and Money Rock Hong Kong at dawn tomorrow, and then the looting starts once more.

Uranium, oil, gas, gold, platinum, silver, coal, and Canadian oil sand willing, may we have many happy returns.

Some folks reckon, again, as always, that China will collapse, thus reducing demand for all that is real.

My comment? Bad bet, wrong wager, thankless speculation, and must fight the urge to believe, because the figuring is just wrong.

I do not agree that demand for all that is real will drop, primarily and simply because while Joe6Pack will use less, Wang3Cups and Patel2Kettles will use more. This is how global equalization of revenue and cost is supposed to work.

The value of natural resources will likely rise inexorably against all fiat currencies. This is how galaxy-wide re-pricing will naturally operate, under the circumstances in which we find ourselves, where no currency will drop much against any other currency, and so they will instead all fall together.

Contrary (to CNBC and Stratfor thinking) Wager: The world will not catch cold when the USA sneezes this approaching time, because this time things are different, very extremely different, or the same, very much the same, depending on time frame and what countries we are refering to.

Sure, global hiccup for a moment.

Chill, perhaps. Cold? Hardly.


Chilled Coconut


When England of old suffered a sneeze, did America of yesteyear catch a cold? Of course not.

Did India and China ever catch a cold because America sneezed? Never.

Will Wang3Cups and Patel2Kettles stop upgrading his living conditions and move into a new house just because Joe6Packs stop re-financing? Naturally not.

Wang3Cups and Patel2Kettles do not care whether they are working in exchange for Dollars or Rupees or RMB, all paper.

Does Nigeria care whether it is trading oil for US Dollars or Chinese jet fighters? Obviously not.

I do note, however, that Wang3Cups and Patel2Kettles have historically been partial to gold, and recently took a liking to platinum. They will consume oil, but will save Au and Pt.

Recommendation: remember to buy any and all dips in uranium, oil, gas, gold, platinum, silver, coal, and Canadian oil sand. They are the real things.



Survive to Fight Another Day




Today: Bummer. Back in Hong Kong.

I am greeted by ten phone messages and 68 substantive e-mail communications.

I must travel to China on Tuesday, only to situate myself in a hotel room and work on convolutions and schemes to defend my client against the ravages of the "China Dynamic", and get paid for what comes naturally.

Parting Comment: For whatever reasons I cannot see, folks are wagering on Japan equity recovery just as the world is about to go into the abyss.

I puzzle. I am invested in Japanese property because of Japan's money printing, the vicious real estate bear that was, and the positive carry of rent on Yen debt that is. I am not invested in Japan equity because I do not see rising profit that is sustainable.

Japanese interest rate is rising. Corporate export profit will soon peak via China's import substitution and ever more ferocious Korean competition.

Yen will have to rise, by dictate of rising interest rate and/or rising repatriation, or RMB will not move up against the USD, and Postal piggy bank will leak.

J6P will blowup after another round of re-fi, and so Japan export profit will eventually crater, even if only by currency conversion reckon.

Or something like that.

Either the above, or the world is not going we think we know where it is going in a hand basket, in which case there are better bets, like oil, gas, gold, whatever.

Anyway, bad bet on Japan equity, or at least an unnecessary wager.

Chugs, J