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news
1st June 2009
This Thunder Road News was a bit more hurried than normal asI took a few days holiday at the Center Parcs resort in SherwoodForest. In the neighbouring chalet was a lovely couple who hadboth trained as doctors and now work as psychiatrists in the northwest of England. One evening we got chatting and they weretelling us about their concerns for the future and how most of their savings are in UK government bonds and they weren’t sureif this was the right place for them going forward. That was like ared rag to a bull and it was hard not to unleash a verbal tsunamiabout the need for everyone to protect themselves from recklesspoliticians and central bankers and to buy gold/silver, as well asenergy, food/agriculture (they were already thinking about land)and internet infrastructure related investments – the “global endof normal”, etc, etc. I hope I didn’t bore them too much.
The rst three investment classes had a stellar week last week asthe global ination trade (or should we call it an emerging dollar
crisis) took centre stage while I was away: The 22.6% rise in thesilver price was its biggest weekly rise since April 1987. I’m told
that a high prole fund manager in London has personally bought
a cubic metre of silver - the investment case is becoming betterunderstood! I stick to my view that before this gold and silverbull market is over, people will be discussing ownership of gold
and silver exploration companies over dinner in London and New
York.Many people are getting optimistic about maturing green shootsin the global economy, but I still have grave doubts regardingthe UK and US. These quotes from the Cara Trading Advisory(Bahamas) team after the close on Friday summed up my feelingsperfectly: “What is going on today is atrocious. Where is the SEC thesedays? Do you feel like a frog dropped in the lukewarm wateras the heat is slowly turned up, oblivious to one’s impendingdemise? We do. Seriously, could Friday get any duller? Are themasters lulling us to sleep, trotting out their minions on Tout TV,
imploring us to invest on “hope”, buying time as nancial rms
desperately raise much-needed capital? Then suddenly jerking
our chain, as they did in the nal moments of Friday’s trading, to
be sure they have our full attention. Points of interest for Friday:
Paul Mylchreestpaul@thunderroadreport.com
This issue:
Demographics, stock marketearnings and food/energyinvestments (here)Gold - suspicious exportsfrom US (here)
 
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© Thunder Road Report - 1 June 2009
B
Gold (GLD + 2.04%) and silver (SLV + 3.62%) continued their ascent, particularly strong since Thursday
morning, the fundamentals too compelling to ignore; 
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A rare combination of major bond strength (TLT + 2.23%) and extreme dollar weakness (Euro ETF FXE+ 1.36%);
 
B
An unbelievable buy-on-close program, which drove the S&P futures +2% in ve minutes, which left us
shaking our heads at the co-ordination with Tout TV’s usual talking heads; and 
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The Financials (XLF +1.42%) are coiling, getting ready for a large move – one way or the other.
But think, now that Government leaders have taken center stage, with promises everywhere; has
government ever come up with the most efcient, most cost-effective solution? Wasn’t government in
league with bankers to blame for this mess?Most people lost nearly -50% of their net worth over the past 18 months. A week ago I remarked that
promoters were coming out in ocks. This appears to be the start of Silly Season – a bit like the summer of 
1987. Please don’t start swinging for the fence, attempting to get back what is “rightfully” yours. Instead,think singles and doubles, minimizing risk while ringing the register.” 
Demographics, stock market earnings and food/energy
A blog I’ve started to follow is “Nathan’s Economic Edge” at economicedge.blogspot.com. Recently he wrotea piece (here) on demographics and the work of Harry S. Dent in particular. At the beginning he considersthe extent that demographics impacts economics, highlighting the quote from David Foot in his book, “Boom, Bust & Echo”: “Demographics explain about two-thirds of everything: which products will be in demand, where jobopportunities will occur, what school enrolments will be, when house values will rise or drop, what kinds of food people will buy and what kinds of cars they will drive.” Nathan argues (correctly I think) that the impact of demographics is far less than two-thirds as there are somany other factors that “comprise the economic brew that add up to prosperity of lack thereof”. One factor
he mentions is the rule of law (i.e. contracts with integrity), and I want to go off briey on a tangent here.
Regarding countries without the rule of law, Nathan argues that they: “are far more likely to be poor because their rule-shifting drives capital away.” I thought it was very interesting how Obama bulldozed through bankruptcy law in respect of the demotionof Chrysler’s secured creditors vis-a-vis their unsecured counterparts with stronger political connections. It
augurs badly for condence in the US, just at the moment when it needs more nance than ever before.Back to demographics and the subject of world population, the growth of which is rmly in its exponentialphase. The planet is currently adding one billion people every 13-14 years and the population could doubleagain by 2040. On a daily basis, the world population is increasing by 211,000 people daily. This is shown
in chart for below:
 
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© Thunder Road Report - 1 June 2009
Growth in the world population
Nathan then ties this in with the work of economist and writer, Harry S. Dent. I wasn’t familiar with hiswork, although I probably should have been. Wikipedia describes Dent’s work as follows: “The basis of Dent’s research is the highly predictable nature of consumer spending based on a familyformation pattern - minimal spending as young adults, spending more as raising children, peaking in thatspending as children are leaving home, and then slowing spending during the last 15 years of working life
(48-63) while saving more and preparing for retirement.
In the late 1980s, Dent forecast that the Japanese economy, then the darling of the world, would soon entera slowdown that would last more than a decade. In the early 1990s, he predicted that the Dow would reach10k. Both of these predictions were met with much skepticism, and yet both eventually came to pass. In
Japan, Dent was using their peak of 45-50 year olds (1990-1994) as the beginning of a long slowdown.” While these were stunning successes, he did not anticipate the recession of 2002-03 in the wake of the dot.com bust and predicted the Dow would reach 40,000 by the end of this decade. Despite this, I think much
of his analysis is not only thought-provoking, but also has a great deal of validity.Nathan uses some of the charts on Dent’s website, www.hsdent.com, to make a bearish case for the stock
market focusing on US data. The rst key chart is the birth rate index adjusted for immigration. This showsthe rst peak associated with height of the “baby boom” generation in 1961:
 
Trend in US birth rate
 
Source: H.S. Dent Foundation
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