On Target Newsletter

In this issue:

  • Low-carb dieting

  • Coronavirus

  • Managing your money

  • Gold

  • Germany’s energy policy

  • Living abroad

  • Japan’s population is shrinking

How I Made a Radical Change to Lifestyle

Nearly a year ago I had a nasty surprise when my annual medical check alerted me to a blood sugar rating that warned I was heading towards diabetes, a particularly nasty affliction.

However, a close friend who had already faced this problem, and overcome it without needing to recourse to drugs, told me what to do. I had to make radical changes in what I ate. The answer was a low-carbohydrate diet.

I had to stop taking sugar in beverages and avoid what he calls “rubbish” – high-carb foodstuffs. I stopped eating rice, noodles, spaghetti, potatoes, candies, biscuits and all those delicious pastries and desserts.

I cut my bread intake to no more than a couple of slices a week. I had to be careful not to eat too much fruit (high in the version of sugar called fructose). A daily glass of red wine is OK, but beer… no more than one bottle a week.

Instead I ate more of the good things – meat (fatty stuff that tastes best), fish (preferably oily ones, sashimi-style or steamed), and vegetables (especially greenery, for which I had the common male disdain). Veggies are delicious when creamed in a blender, spiced with fresh ginger and celery.

The surprising change was that I was told to eat more cheese and other natural fats, And lots of eggs. I can spoil myself occasionally — ice cream, but no more than a couple of portions a week. (Not good for carbs, but such naughties make it easier to stick to a diet that as a whole is low-carb).

All this forced me to make radical changes in what I eat at home, and especially when out at restaurants. It was all much easier thanks to great support and attention to meals for me that are often unconventional (no more accompanying chips or mashed potatoes) generously provided by Liz and my children.

After nearly a year, this diet has been a spectacular success.

My blood sugar readings have plunged 26 per cent from near-diabetic levels of Glycosylated Haemoglobin – the test which measures one’s average blood sugar over the past two/three months — to normal, safe levels. My threat of diabetes has disappeared.

What I didn’t foresee was the incidental side-benefits. My periodic insomnia disappeared; I now get seven/eight hours of good sleep every night. My average blood pressure readings have plunged more than ten units. And I’ve also lost a few kilos of my overweight.

Even at my age – I’m nearly 84 – it shows what’s possible!

Coronavirus and Investment Markets

It’s become clear that investors aren’t worried about the consequent damage to economies as a whole from Covid-19, the Coronavirus, despite all the scary stuff.

The American stockmarket continues to rise as if the virus threat doesn’t exist. Europe has regained half its initial losses. Japan is still nervous with that viral hothouse liner sitting in Yokohama harbour, but is nevertheless only 5 per cent down from its December peak. Most extraordinary of all is that the Chinese markets have bounced back so strongly that they’ve recovered almost all the ground they lost last month.

One reason is that investors know their history. After the outbreak of the SARS infection the Shanghai market recovered within three months to rise 30 per cent higher than its pre-crisis peak. Almost the same happened in Mexico after the swine flu crisis, and in Brazil with the Zika outbreak.

Another reason for investors’ optimism is that they expect central banks to flood their economies with money to counter the damage that the virus panic is doing. Easy money is always good for shares (at least initially).

A third reason is that we’re all becoming increasingly aware that although the Coronavirus can spread aggressively and is deadlier than the commonplace influenza that kills many thousands every winter, it still isn’t that bad. Only about 2 per cent of those infected are dying. Numerically it doesn’t compare with ‘flu which, worldwide, according to one estimate I’ve seen, kills two-thirds of a million people every year.

China and other governments have acted impressively to counter the outbreak. One measure of that is how low has been the death-toll of medical staff who are on the front line of dealing with those infected. One report from Wuhan is that only 3 per cent of doctors and nurses in Wuhan are dying, compared to a 15 per cent rate in the SARS epidemic.

Where can investors seek profits in the current situation?

Reports suggest the economic damage being caused by the Coronavirus panic is major in China, where all sales of new homes have been banned in more than 100 cities. Food production has been devastated, with travel restrictions leaving farmers with no chance but to slaughter at least 100 million young chickens.

Covid-19 is also doing significant damage in certain industries elsewhere in Asia such as airlines, hospitality and restaurant chains that rely on Chinese travellers, as well as businesses hit by the shutdowns of Chinese factories that are key in supply chains such as motor vehicles.

However, it isn’t bad news for everybody. Since millions of Chinese have been stuck at home by enforced shutdowns designed to stop the spread of the epidemic, many of them have gone on line to play games or use the time to advance their education. The FT reports that shares of Tencent, the world’s biggest mobile games provider, have soared to a 20-month high while those of New Oriental Education, China’s big on-line tuition provider, have jumped 17 per cent this year.

The panic will almost certainly ease and probably disappear within a couple of months… although some sectors such as tourism may take up to a year to recover fully. Permanent damage will be very limited. 

The FT’s James Kynge suggests that we can expect strong rebounds in sectors hit hard by panic and government actions to combat Covid-19. Other industries to look at are those that were showing signs of cyclical rebound just before the crisis hit and can be expected to regain upside once the virus threat fades. One such sector is semiconductor manufacturers in Asia – for example microchip firms SK Hynix, TSMC, MediaTek, Win Semiconductors.

Moneycraft: Managing Money for a Better Life

There was a time not long ago when planning personal finances was a straightforward affair. The responsible salaried person spurned credit, except perhaps for a mortgage loan, and placed a specific monthly sum in a secure investment such as a savings account. He/she protected family with life insurance, trusting a pension scheme and the government to take care of old age.

Many of such principles are still sound. But what about the person who subsidizes an aged and bewildered relative trying to live on shrinking real income from an inadequate pension, disappointing investments and savings deposits paying almost nothing? Who sees his life cover and pension fund eroded by prices that always seem to rise much more than official inflation figures claim? Who finds advancing a career or a small business so much more disappointing than anticipated?

He/she learns the hard way that times have changed. Thrift, hard work and regular savings habits no longer seem enough to guarantee security and prosperity.

Yet planning ahead is now more important than ever.

In the past, self-discipline was the quality you needed most. It still is. But now you also need imagination, flexibility, expert and unbiased advice – and constant vigilance in protecting what you already have.

A new Golden Age of prosperity is unlikely to dawn in our lifetime. So before going for high profits you should aim to minimize your losses and secure your future. For this, a personal financial strategy is needed.

If you’re doubtful whether you need such a management programme, see how you answer these questions…

► Are you living within your means?

► Are you spending your money on the things you really need?

► Are you getting full value for the money you spend?

► Are you able to save on a regular basis>

► Are you able to meet your bills and instalment payments promptly?

► Are your debts increasing or decreasing?

► Are you in a position to meet a major unexpected expenditure?

► Are you working towards specific financial goals?

► Are your children assured of a good education?

► Are you providing for your family’s security in the event of your death or disability?

► Are you planning positively for a comfortable retirement?

Managing your money is a skill that you can learn, like doing arithmetic or driving a car.

The principles are simple. Just follow my KISS plan…

Know how much money you have and exactly where it’s going;

Impose control on your spending so you can’t get into debt (unless you do so consciously, for good reason);

Spend wisely; and

Save and invest carefully, so you build up resources throughout your lifetime.

Run your life as you would a business. Make as much provision as you sensibly can for a major unexpected personal setback, sickness or social upheaval. Make every dollar, pound or whatever work flat out for you. Plan for tax… you can’t escape it, but only pay what you must. Don’t be so focused on earning and spending money that you have no time to invest it wisely.

You can control your finances only when you have a clear idea of what you own, where your money comes from and where it is going. You need to establish whether you are living within your means, and whether you habitually get value for money.

You should know whether your debts are increasing or decreasing, whether you are in a position to cope with emergencies, educate your children, and provide for your family should you die or become disabled.

In future articles I’ll outline all the basics for you to plan a personal money management programme.

Why Bulls Believe in Gold

Numerous factors are converging to cement the case for investing in gold, argues Paul Mylchreest of the London consultancy Hardman & Co…

► The capitulation in hawkish interest-rate policy by the US Federal Reserve and its resumption of unconventional monetary policy.

► Trillion-dollar US budget deficits in prospect for at least the next decade, if not indefinitely.

► Periodic US/China trade tensions and a schism in economic thinking (Trump-style nationalism vs globalization).

► Central banks bought the most gold in 2018 since 1967, with another strong year expected for 2019 when the final data are released.

► Gold has always outperformed in the late stages of previous debt cycles all of the way back to the late 18th century and the Industrial Revolution.

► The current debt cycle is unprecedented, with global debt surpassing $250 trillion and more than 320 per cent of global GDP.

► When we look at financial markets we see QE/ZIRP [quantitative easing and zero interest rate policy] driven asset bubbles in bonds, stocks and real estate, and the US economic expansion now the longest in the post-war period.

Historical drivers for the gold price dovetail with today’s risks, since gold is the only financial asset that has no counterparty risk and outperforms in both deflation and inflation – resolution of this global debt cycle will require an intensification of one or perhaps both (sequentially).

Rising Hostility in Germany to Energy Policy

Germany’s ruling elite’s obsession with climate policy, which has already forced its energy costs up into the ranks of Europe’s highest, means the nation seems to be heading for an energy nightmare.

Using every means of subsidies, political power and virtue-signalling, they have raised the share of renewables in electricity supply capacity to 35 per cent. They are determined to push it much higher, in line with European Commission’s German president Ursula von der Leyen’s plan to achieve zero carbon emissions by 2050. And to shut down all Germany’s nuclear power plants in two years’ time, even though those don’t generate any carbon gases.

Jonathan Tannenbaum, an American expert based in Berlin, highlights foolish aspects of what Germans call their Energiewende (energy transition) policy…

► When there is neither sun (it’s night) nor wind, renewables don’t provide any electricity. In 2016, for example, this happened on 52 dates. So Germany is forced to rely on back-up supplies — power stations driven by fossil fuels such as coal and natural gas; the remaining handful of nuclear plants, soon to be shut down; or imports from neighbouring countries. Ironically, those imports mainly come from France, where three-quarters of electricity is generated by nuclear, and from Sweden, which is 40 per cent atomic.

► “On ‘good days’ Germany floods the rest of Europe with excess power from its wind and solar installations, often at dumping or even negative prices… Germany has turned its huge amounts of wildly-fluctuating renewable power sources into a European-wide problem.”

► The most efficient way to store excess electricity is to pump water into a reservoir for later use driving generators. The best way to do that would be to transmit the power to Norway and Sweden for later return to Germany. But that would require building additional high-voltage lines. Expensive.

► Because wind is abundant in the north but it’s needed in the west and south, four long-distance transmission lines are planned, at huge cost, as Germany more than doubles its renewables’ generating capacity.

► The Energy Agency has estimated that to ensure stable supply of electricity Germany will need to maintain 61 gigawatts of conventional power plant capacity – we can assume most of that will be fossil-fuelled by largely imported natural gas – by the time output of renewables is up to 80 per cent of electricity consumption. To put that into perspective, current installed capacity of renewables is nearly 60 gigawatts.

► Although renewables are quite popular – most of the present solar capacity takes the form of panels on the rooves of private houses – there is mounting public hostility to expanding wind power. “Protests and law suits have brought the construction of new wind turbines in Germany to a near-standstill.

“Projects for pump storage stations and for new transmission lines have met with such intense resistance that there is little chance of fulfilling the original goals of the Energiewende,”  Tannenbaum says.

Want to Live Abroad? Here’s an Action Plan

If you’re thinking about retiring overseas, here’s the step-by-step programme to follow from Kathleen Peddicord, the American expert on international living…

► Make a list of your personal preferences and priorities.

► Narrow the list of places where you think you might like to live to three or four. Then arrange to spend a little time in each one.

► After your visits, cut the list to one or two countries. Plan extended stays, preferably through the least agreeable time of year in each place (the off-season, the rainy season, the hurricane season, and so on).

► While you’re in each country, do three things… Meet with as many expats as possible who are already living there. Meet with real estate agents operating in the areas you’re interested in. Look at as many properties for sale or rent as you can.

► Meet with an expert on international relocation who can guide you on the best way to meet the visa and residence-permit conditions of your chosen country.

► Meet with an international tax planner. This is especially important for Americans, who remain subject to US tax obligations wherever they live. And with a tax expert in the country you’re considering moving to who is experienced in working with foreign residents. It’s important to do this before taking up residence there.

► Set a date for your move. Decide whether you want to ship your household belongings with you or buy new when you arrive.

Your decision may be affected by the type of visa you’re arranging, which may or may not allow for the tax-free importation of personal belongings, household goods, a car, appliances and so on.

Packing and shipping a household-full of stuff across borders can be a pain in the neck… and expensive.

► Set up a “global office” to allow for reliable and efficient mail forwarding, e-mail, international phone calls, bill paying, credit card usage and so on.

► Do not buy… at first rent a home in your chosen haven, in the area where you think you want to relocate permanently. Rent for six months to a year before committing fully by buying.

► Open a local bank account. You probably won’t be able to do this until you have a local address, and you may need a letter of reference from your bank in the country that you’re moving from.

[Liz and I retired to another country, in our case to Thailand, and our only regret is that we didn’t do so when we were younger].

Japan’s Population Is Shrinking

The gap between births and deaths in Japan has risen above half-a-million a year for the first time ever. Its government estimates that the population could shrink by about 16 million, or nearly 13 per cent, over the next quarter-century.

The average number of births per woman is only 1.4 – way short of the 2.1 needed to keep the population steady. As in other countries, women find it easier to find jobs and are less willing to have children that make it harder to have a career.

The government has moved to encourage births by increasing incentives for people to have children and removing obstacles that may discourage those who might want to. Without much effect. Supply of daycare facilities is inadequate, making it difficult for working women to juggle careers with children. Working men who want to take advantage of the country’s generous paternity leave can find themselves stigmatized by an entrenched cultural belief that a man’s place is in the office, not in the home.

Japan is lowering its barriers to immigration. Last year it began issuing more than a quarter-million visas to immigrants to do vital work such as caring for the elderly. Japan is the world’s greyest nation — already almost 28 per cent of its residents are over the age of 65. But difficult language and other cultural factors still discourage immigration.

As the number of births goes down, there are fewer young people entering its work force. That means fewer people to replace retiring workers and support them – a situation that poses a serious threat to the nation’s economic vitality and the security of its social safety net.

However, Japan’s situation it shares with many other countries. Theirs is even worse. According to research by the OECD and Deutsche Bank the proportion of retirees to every 100 workers is expected to grow over the period 2018 to 2050 to almost 70 per cent in Italy. Others expected to be worse than Japan are Greece, France, Belgium, Poland and Germany.

Turkey Flexes Its Muscles in the Mideast, Africa

Turkey’s decision to send military advisers and Turkish-backed Syrian mercenaries to Libya to fight for the Tripoli government highlights its policy of aggressive activism in the Mideast and North Africa independent of and sometimes contrary to the views of the US, Europe and even its new friend, Russia.

Libya is wracked by a civil war between the UN-recognized government and rebel forces led by Khalifa Hafdar that are backed by Egypt, France and the United Arab Emirates.

Since Turkish president Tayyip Erdogan strengthened his power by defeating an attempted coup d’état in 2016 he has moved aggressively to restore Turkish influence in areas that were once part of the Ottoman empire destroyed by defeat in the Great War.

It has made three military interventions in Syria, sent warships to block European oil companies from drilling for gas in the eastern Mediterranean, and has defied the wishes of NATO allies by buying an air defence system from Russia.

Analysts attribute Turkey’s more assertive foreign policy to its anger over Europe’s failure to allow it membership of the EU; deteriorating relations with the Americans over several issues, particularly their support for the Kurds; and warm relations with Russia since it played a key role in helping Erdogan defeat the attempted coup.

Miniature Floating Nuclear Power Plants

Russia is emerging as a leading builder of nuclear plants. Its giant Rosatom has started marketing internationally a miniature floating power station with a 70 megawatt capacity that generates enough electricity for a city of 100,000 people.

It has been developed for locations difficult to supply, but is also ideal for seawater desalination plants and for emerging economies where power is needed but on a limited scale.

Typical on-land nuclear station in Asia, the US and Europe have a capacity of 1,000 MW, making them only suitable for densely-populated industrial areas. The construction and installation cost of an Akademik Lomonasov station is reported to be $480 million, or about $6.90 per watt… said to be slightly more than an average conventional plant.

It is designed for a life of 40 years, then be towed away for decommissioning in Russia. The design uses well-proven reactors operated reliably for five decades to power Russia’s giant icebreakers. The floating plant is on a barge 140 metres long, to be stationed out to sea and connected to land by cables.

Latest Woke Scandal and the Free Speech Union

Latest example of political correctness in the UK is the forced retirement of well-known ITV newsreader Alastair Stewart. His sin was to quote in a tweet a passage from a book that described a petty martinet as one who dressed like an angry ape. It’s clear that he didn’t use the term about the complainant, who is black, but nevertheless his employer forced him to resign, ending a 40-year career in broadcasting.

Toby Young, an editor of The Spectator, says there’s no evidence that Stewart is in fact a racist, and his non-white colleagues have attested that he’s not. Incidents like this are why he is setting up a Free Speech Union. “Careers and reputations should not be ended overnight because someone claims to be offended by a tweet, particularly if the giving of offence was unintentional… as it clearly was in this case.”

China Bids for the Leading Role in UK Rail Project

The new British government has decided to stick with the controversial HS2 plan to build a high-speed rail link between London and Birmingham at a cost now estimated to be more than £100 billion, and to implement extensions to Manchester and Leeds.

China, whose CRCC giant has constructed most of that country’s 25,000-kilometre high-speed network, has offered to do the job for the UK in just five years, compared to the 15 or more under the existing plan; at lower cost; and with faster trains. It says it’s “ready to solve all of the issues that the project currently faces”

Although the US is increasingly seeking to contain China’s global expansion and putting its allies under pressure to help, Britain isn’t keen to co-operate. It has already welcomed China into its nuclear power and telecoms sectors.

A Spanish Perspective on Carbomania

It is not true that only “a handful of fanatics” – as Spain’s premier Pedro Sanchez puts it – question the mantra continually forced down our throats by mass media that humans are a major cause of climate change. A columnist in the Spanish business paper Expansion, Fernando Calvo-Sotelo, lists these counterfactuals…

► Supposed “fanatics” include Richard Lindzen, who was professor of atmospheric sciences at MIT for 30 years, whose questioning of the scientific basis of the theory of anthropogenic climate change has been supported by 300 eminent scientists and other qualified individuals.

► 83 Italian scientists who last summer sent a petition to their government saying “alarmist predictions are not credible… and it is scientifically unrealistic to attribute to man the responsibility for warming.”

Unforeseen International Risks in Legal Contracts

The outcome of a court case in Dubai highlights the risks you may face from the clash between the legal systems of secular jurisdictions (such as the UK, the US) and those shaped by religion… particularly by Islam.

The Dubai case involved a divorce between a Russian oligarch and his wife. In England the courts awarded her a settlement, which he refused to pay. As part of her campaign to secure her due, she sought to seize her husband’s yacht moored in the Gulf emirate.

Its court rules against her on the grounds that the English court had based its settlement on the principle of the sharing of wealth in a marriage under English law. However, that contradicted Islamic sharia law and the principles of the emirate’s laws based upon it.


Jobs: Many of the better-paid ones rely less on expertise than on red-tape compliance. In the US it’s legally required when buying insurance that you do so via an insurance agent and go through a box-ticking exercise. Vested interests prevent measures to advance productivity. Unions hold up reorganization of work flows, teachers refuse to submit to quality control measures, the law society refuses to automate form filling. The medical profession insists on office visits for prescription filling, banks charge for a host of automated services. “These are all areas of life we interact with regularly which are protected by regulations and laws which are often immune to technological advances,” says a US-based reader.

The biter bit: One of the first things the US/NATO forces did after they invaded Afghanistan in 2001 and swept the Taliban out of power was to scrap the Taliban’s drug eradication programme, which had reduced annual production of opium to just 185 tons. Since then it has exploded. It’s estimated that 93 per cent of the world’s illegal opiates now come from Afghanistan. The global heroin market is reckoned to be worth more than $500 billion a year. And Americans are among the biggest victims. More than four million of them are users of heroin, which is the largest source of drug overdose deaths after synthetic opioids.

Boeing: The explosive revelations of how its technical staff thought the ill-fated 737-Max airliner was “designed by clowns who are supervised by monkeys” shows how the ethical standards of its management were destroyed in a relentless drive for profits. Its engineers, Joe Nocera reports, “are bitter about management’s unwillingness to slow things down to build the plane properly, to take care that’s required to prevent tragedy from striking.”

Periodically there are catastrophic examples of how the hubris of top executives can bring down great companies. General Electric was almost destroyed when it was diverted from being a manufacturing giant into financial engineering.

Oil: There are three reasons for longer-term bullishness about its price, argues Jefferies’ global head of equity strategy Christopher Wood:

► Demand for oil continues to grow, particularly in the emerging world, despite all the talk about the end of the fossil-fuel era;

► Investment in the conventional oil industry has declined sharply in recent years, largely because of the pressure created by the anti-fossil-fuel lobby – Shell, for example, has committed itself to meeting carbon footprint targets; and

► Growth in US shale production has peaked.

Investing wisdom:

Eoin Treacy reminds us of one of the most important rules to follow when deciding what determines trends in investment markets from our friend the late David Fuller: 

“Monetary policy beats most other factors most of the time.”

If you know someone you’d like to receive ‘On Target’, email your request to me at: afrodyn@gmail.com.

On Target is a free, private newsletter for Martin Spring’s worldwide circle of friends and contacts.