TAKING CARE IN TIMES OF RECOVERY

       The jury is still out on the new rays of economic recovery, with some market movers being certain there is more pain to come before an upturn sets in despite what the bigwigs have been saying lately.
       Among them is Trevor Keidan, director of Infinity Financial Solutions, a Bangkok-based financial advisory firm, who said that the world would see the Dow Jones, S&P, Nasdaq,MSCI and FTSE indices all potentially tumble below last year's lows before they recover because there is still a lot of grime in the system, similar to the Bernie Madoff scandal,that has to be washed away.
       However, both US Federal Reserve chief Ben Bernanke and the IMF think that recovery is at hand with the latter expecting a global contraction of 1.4% this year followed by growth of 2.5% next year.
       Mr Keidan bluntly said he does not buy this optimistic view because they would be reluctant to make negative projections.
       "I think there is a lot of bad debt out there,there is a lot of credit card debt that people are going to struggle to pay and service, and I think we could see a 'sub-prime' in the credit card market."
       He also pointed to the US government's popular "Cash for Clunkers" programme that led to car sales rising in August compared with last year. Although carmakers are celebrating this spike in sales, their performance is still below par and would not have improved at all but for US government intervention.
       Mr Keidan warned that the US national debt is out of control, and this is causing the dollar to weaken, with this slide probably leading to some inflationary measures.
       However, it is not just the US that is struggling economically - the UK also is in a difficult position. Sterling has been volatile,rising as high of US$2.60 a few months ago and falling back to $1.36, although it has now clawed back to about $1.62.
       Also, while emerging markets such as China and Russia have done phenomenally well,recovering about 50% after falling 50-60%,one must bear in mind that this increase is from a lower base."If you had $100 and it falls 60% that leaves $40. You need 125%growth just to get back even."
       While the situation is far from rosy, Mr Keidan agreed there is always money to be made because generally when someone loses someone else wins.
       "I think people need to be well diversified.Personally I would be with good managers,good fund managers." He suggests adopting quality long and short strategies and opting for managed futures and very macroeconomically managed funds that look at obtaining returns wherever they might be made.
       He is all for investing in gold because although it is now trading in the range of $940-$950 a troy ounce, its intraday peak this year was $1,035. This precious metal could potentially dip to $750 a troy ounce,and should this occur it would be a definite buying opportunity because it could rise to $1,250 by the end of this year.
       That gold could soar this high is because several countries, among them China and Japan, have piled up a lot of dollars that they do not know what to do with and could be quietly acquiring this precious metal.
       "I think they want to find something to do with their money, they have so much surplus dollars, but now all currencies are worthless because interest rates are on the floor and no one is getting any return on their cash."
       Because oil and gold have such a close correlation, with Opec also to a large extent controlling the price, Mr Keidan expects the price per barrel to climb to about $90, although others believe it will hit $110.
       "If the US keeps printing money they are going to put this immense inflationary pressure on everything, so that is going to have an impact."
       Turning to property, Mr Keidan said there are interesting opportunities here but this does hinge on the banks freely and sensibly lending money to buyers again.
       Although inflation does drive up the price of commodities, which in turn would push up the replacement cost of property as well as the cost of running it, we must remember that the value of a product is defined by the amount of money someone is willing to pay for it.
       "If you're willing to pay 1,000 baht per square metre, and that is the best price they can get - that is the value because you can say the value is 2,000 baht per square metre but it's not the real value because you can't realise it.
       "If we have a stranglehold on property because the banks won't lend or can't lend,or don't have the money to lend, then actually the prices of property will fall even in an inflationary environment."
       Mr Keidan warns against buying property in Thailand because he believes the corrections have not been big enough yet.
       "If you want to buy property in Florida where markets have corrected hugely, where you might be buying 40-50% below the highs,then maybe it is worth looking at to hold on to.
       "But you need to have other assets because property at the moment is very illiquid."
       While many expect China and India to emerge as economic powers from this global crisis, some doubt that India with its wide-spread poverty will make it. However Mr Keidan believes both Asian giants will soar economically mainly because of their huge populations. Despite India's poverty problem its one billion plus population does mean that there are that many people consuming food and drinking water every day.
       "China and India are very interesting, China has probably got more chance from the nature of the beast, my only concern is the lack of transparency in doing business with them.
       "India is much more transparent - it's an ex-colony and the legal system and everything is like the British system, whereas China,they are very closed and if you come in as a foreigner they will take your money and just close the door."
       "If the US keeps printing money they are going to put this immense inflationary pressure on everything