Jozi, Jozi. Friday we were stranded in my little study at home, it felt like we were in an internet cafe all staring at the wall and all browsing at snore like speeds. But that was a whole lot better than no speeds, at the office the power was out and we had to be mobile, so we picked up and left. Markets were fairly choppy, financials and banks continued to be under pressure as the (pressure) cooker heat intensifies in Europe, everyone is urging them to work together and get the job done. The Greeks are pleading, the rest are squabbling seemingly over austerity measures that are yet to be implemented. After all was said and done the Jozi all share index this side slipped away to the lowest levels of the day at around one, but gradually gained a little bit to close down 261 points to 30061.

The Rand finally caught some sort of bid, commodity prices continued to take some pain, but I think in Friday's message we pretty much summed up why in explaining the pot of money around the world, searching for yield. And making decisions based on how they see the future. And hey, it is not altogether pretty at the moment, but this is just what we are going to have to live with until the world's finances are a little more balanced. We will need the emerging world to catch up, but this is going to take decades, but at least it is happening.

Remember that song, oh no Joe, not again Joe? Maybe. But that is the case with Europe again this morning, we wake up on Monday mornings to the same problems over and over again. This was after a weekend of finance ministers from Europe, the IMF and the US along with the other important finance ministers from around the world thrashing out the problems of Europe again. The Americans of course know too well what dilly dallying can do to confidence and the banking structure as a whole, the Europeans are obviously in a trickier position of not having political unity. Nor a central Treasury, that is probably the core of the problem. So there were some solutions involving the EFSF, remember we chatted about the fund last week in our piece titled: Nudge nudge, wink wink, twist twist!

Angela Merkel is talking of a firewall around the Greeks. But, as Paul said this morning to a client, the Europeans are dealing with this in a particularly slow and bureaucratic way. This is true, coupled with the EU structure, which makes high school romance look easy. It wasn't of course back then, it was the most complicated thing.

Still, I imagine that the alternative is a Euro disaster, making the Lehman Brothers bankruptcy and aftershocks look like a picnic. But that is exactly what the Germans are suggesting, orderly defaults somewhere down the line if sovereigns cannot meet their obligations. But not Greece, and not now. Check out the Bloomberg article: Merkel Says Greece Needs 'Barrier' Erected to Stave Off Default. Poor lady is suffering from high blood pressure and she is on medication.

I do not really understand that notion that it is the markets (or certain elements) attacking the Euro zone, rather than the countries themselves being undisciplined. That is the political perception, or at least the one that is conveyed to us. Sorry, that is not reality, quite simply, not all Europeans are the same. Important dates to pencil in this week, as per the Bloomberg article are tomorrow and then Thursday, tomorrow, curious George Papandreou visits Berlin and Thursday is the German vote on the EFSF.

In closing (for today) on the European issues, I think that this post about central banks and confidence about sums it up for me. It is specific to the United States, but I think that it applies to all markets everywhere: WHAT THE LOSS OF CONFIDENCE COULD MEAN FOR U.S. MARKETS. His conclusion on the short piece is interesting, and I am guessing that the fellows over at the PIMCO will be nodding about the new normal. I am not too upset about that, if you get a gap of efficient companies, that are still good quality, at lower valuations, that might well be the time to continue to accumulate the big names. Just keep going.

Byron's beats is either going to make you very hungry, or the absolute opposite, it will make you skip some meals. Either way, interesting points, and the great imbalances in the world are once again exposed.

Paul referred me to an article which I think is a good sign of the times we live in although it is a sad tale to tell. The article refers to how more people suffer from obesity than undernourishment as we face a possible food crisis. Populations are increasing while bad weather depletes crops and raises prices. Globally 1.5 billion people suffer from obesity while 925 million are undernourished.

You can see where the problem lies. In the US, Government policies which subsidize farmers are making the wrong products cheaper. "If these agricultural subsidies went directly to consumers to allow them to purchase food, each of America's 144 million taxpayers would be given $7.36 to spend on junk food and 11 cents with which to buy apples each year - enough to buy 19 Twinkies but less than a quarter of one Red Delicious apple apiece."

There are three things I take away from this article. Firstly, it shows that we are entering a time in our history where overconsumption is exceeding deprivation. The human race has become so successful and efficient that people are dying because they consume too much. Tell that to any man who lived 100 years ago or more and I am sure he would be dumbstruck.

This brings me to my second point. When are we going to see stricter regulation? The regulation for cigarettes is making it more and more difficult for smokers. With developed nations struggling with debt issues surely this is one issue that needs to be tackled. Billions of dollars are spent on medical care and unhealthy obese people are sucking up these benefits. It's already happening in Japan. Anyone who has a weight related medical concern and whose waist is bigger than a certain size must lose weight and face compulsory diet advice. And let's not think it is just a developed nation problem either. Here in SA we have one of the fastest growing obesity problems in the world. Again it stems from the cheapness of unhealthy foods. It's a lot cheaper to go to McDonalds or eat lots of maize meal than it is to eat and cook fresh vegetables.

The third issue that comes to mind is the fact that 15% of our global population sits hungry while 20% overindulge. This is a very sad situation. But it is one I think cannot be solved by taking from the over indulgers and giving to the hungry. It is never that easy. Objectives and goals need to be incentivised. I suspect more regulation going forward. It is a trend we are following very closely seeing that we hold McDonalds in our New York portfolios.

Commodities and currencies corner. Just remind me what the reasons are for owning gold? It is a real currency in a time of crisis. Just remind me where we are now? A Euro crisis. So, the price of gold should be soaring, is that right? But it is not, it is falling with all other commodity prices. The gold price is last at 1596 Dollars per fine ounce. I cannot believe that on Friday the price was 1700 Dollars per fine ounce.

And the silver price? Crumbling. Getting absolutely smashed. Check out this 30 day graph, courtesy Kitco:

The 24 hour spot graph is much uglier, the spot price for silver is currently 27.7 Dollars a fine ounce. Down over 11 percent. Wait for the market to open in New York. All I can say is that the price(s) deflating quickly point to speculation and speculative activities around the price. I do buy the longer term demand picture, more middle class people wanting jewellery, that is what is going to be the trend.

The chaps over at the Business Insider (I think Joe is in Paris) have the usual visual of what is happening in these precious metal markets:WAKE UP: It's A Total Catastrophe For Gold And Silver.

But the reason that I think that there will continue to be a demand for gold and gold products is for that reason that I mentioned two paragraphs above. And this great piece reaffirms that: China launches gold vending machine. It is quite funny, if you step up to the machine and someone can see, where do you go next? To the safe deposit box at the bank? Into the vault at home with the family jewels? Wangfujing Street (the cool place to shop as I understand it) is where the action takes place, in Beijing and not Shanghai.

I am not a "hater" of gold (thanks to Serena Williams outburst at US OPEN final 2011 the word is popular again), but I am more interested in the utility of a specific commodity. From oil, the most useful for now, through to soft commodities that are again, very useful through to silver, which does have many industrial uses, but the price seems to be controlled by a whole lot of speculative trading activity. Like one type said, liquidating the stuff that has done well to cover trading losses is what we might be seeing now. I suspect that the folks are right about the gold price, we are still deep in the crisis and once the selling has abated, the price might trend higher. Trying to pick the point where the prices stock falling is the tricky part. Dodging pianos for now and perhaps a reminder that most of the commodity markets that we are so reliant on involve an enormous amount of speculative activity.

The oil price is last at 78.89 Dollars per barrel, the platinum price is also a lot lower at 1531 Dollars per fine ounce. The copper price is under pressure this morning, down at 320 US cents per pound. The Rand is steady to slightly weaker, 8.15 to the US Dollar, 12.62 to the Pound Sterling and 10.96 to the Euro. The Euro is below 1.35 to the US Dollar, the Euro versus the Yen has hit a ten year low. Money back home, foetal position, think about it later is the participants mantra at the moment.

To end this rather long commodities piece, I came across a decent article from The Economist from last weeks print edition, this weeks free web edition (shhhh, don't tell them) titled Crowded out that talks about the developed worlds commodity demand. And how structurally it seems different this time, but Bill Miller's experience would tell him that this is part of cycles that he has studied. For the time being I think that the industrialisation of the worlds emerging markets will continue to see elevated prices. And yes, act as a tax on developed markets. But hey, they are changing their consumption patterns too. See oil at the bottom there? Nice.

So far our markets have opened lower but trended higher, but there are patches of green on the screen, resources are the laggards here today. Flat now. US futures have pared their losses as European markets have trudged higher, slightly better reads from the IFO institute.

Sasha Naryshkine and Byron Lotter
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