MARKET RALLY ENDS LONG DOWNTURN

Just as the more nervous investors were enquiring if they should encash all their holdings or convert everything into gold the Dow index produced its strongest gains in a year and the index shot above the 10,000 mark again. We wouldn't count on the rally being sustained but if there is a further downturn the trend could follow that of many previous years where markets fall from May but surge again later in the year. Impossible to be certain of course and there is still more bad economic news around than good but long term investors are long accustomed to this.

A word about gold.

No question it should be part of every respectable portfolio but as with any single asset it is not wise to be over-exposed to it. Some may recall when the price fell from around $800 to $300 an ounce in the early eighties. It then remained around that level for 25 years! Could this happen again? Unlikely, but too big a risk to invest excessively in gold. What could trigger a correction, if not a steep fall, would be a sharp rise in US interest rates. Gold will always have value but it pays no interest. Nice to look at a bar of gold on the shelf but it doesn't pay the rent! Then again, it's good to have some gold as a long term hedge against inflation, currency devaluation and political uncertainty. No need to buy it in its physical form; it is now safe and convenient to buy it through mutual funds that invest themselves in bullion or in the mining companies.

Best way to handle unstable markets?

It's a bit like flying a plane. The best way to get from A to B (B = your long term objectives) is to stick to your course, making just minor adjustments along the way to take advantage of prevailing winds and to avoid headwinds and turbulence. Reacting aggressively or panicking can bring the plane (or your investments) down. To be realistic, we should expect some more turbulence while the US and Europe unwind their massive debts. But in the meantime many companies are still making healthy profits and the developing world is ticking along very nicely. With strong growth predicted for emerging markets we should be allocating more in this direction. Some are talking about a China property bubble and there are certainly risks in that market. But keep in mind the words of Warren Buffett who said that the 19th century belonged to Britain, the 20th to America and the 21st would belong to China, so invest accordingly!

SYMPHONY GLOBAL ALTERNATIVE STRATEGIES

The fund has officially closed and is in the process of unwinding the assets that became illiquid as a result of the financial meltdown and credit crunch of 2008. Around 70% of the fund has been returned to cash. Most institutions have indicated they will now accept sell orders for the fund so we intend to place such orders where we have delegated authority. We expect most of the cash to be released before year end when it can be reallocated. The Symphony fund was billed as a low risk fund that invested primarily into Momentum All Weather, a hedge fund with an impeccable record of modest but steady returns and no annual losses - until the meltdown of 2008! Fortunately the losses were small compared to those of some hedge funds that were wiped out.

SKANDIA ONLINE

If you have a policy or policies with Skandia you can now sign up to their client online service. To register, log on to www.royalskandia.com and follow the instructions. You can still of course access the information through PPI's online service which is able to consolidate your holdings with those with other institutions.

OPPORTUNITIES 'OUTSIDE THE BOX'

While we have tended to focus on core investments such as stocks, bonds and cash there are many interesting investment opportunities in other areas. The following should be of particular interest to investors who already have a solid base of core holdings and who can prudently expand their horizons:

Managed Forestry investment here in Thailand, specifically in the highly valuable Agarwood and multi-purpose Giant Bamboo. The standard investment period for Agarwood is seven years, the time it takes for a newly planted tree to reach maturity. For those who prefer a shorter time span there are secondary market opportunities from time to time such as at present, with individual lots of 100 trees upwards maturing in three and four years respectively. Giant Bamboo offers a fifteen year program with returns to investors commencing at the end of year three. The offering company Touchwood projects net returns from 14% per annum upwards. Site visits can be arranged for those interested.

Another investment opportunity which has been with us for some time comes from REDEV, a company that invests in Canadian Shopping Plazas in Canada. This investment produces an immediate regular income exceeding 7% per annum as well as excellent prospects of capital growth. Minimum investment CAD 25,000.

The St. David Group who presented at our last "Opportunities Series" event offer attractive Real Estate investment opportunities worldwide. The most recent offerings consist of off-plan retail units in Southeast London, England from GBP192.5k and Florida, U.S.A for as little as US$70k !

A fourth case is Litigation Funding investment in the UK. The first opportunity to share in some of the bounties arising from litigation where the costs of fighting cases deemed to have a high chance of success are shared by investors. The cases are accepted on a win-only fee basis but the company involved in the funding has a high record of success with most cases being settled out of court once the defending party is aware that it is up against a well-funded team of lawyers. The success rate is so high that an insurance company even covers the possibility of losing. At the moment this area of investing is open principally to institutional investors but a small retail market is developing and after a successful recent tranche release, PPI will be offering this opportunity on a limited period basis later in Quarter 3 2010 with returns expected to be in excess of 12% per annum. Participation will probably be from GBP25k. The second opportunity associated with UK litigation is a fund that makes very healthy returns by just lending to UK solicitors for approved cases that are insured against loss and will also be available on an open basis later in Quarter 3. Participation commences from as low as GBP12.5k in portfolio bonds.

Fine Wine continues to be one of the best performing assets in 2010 . PPI recommend Premier Cru who state that returns on wine investing are influenced first and foremost by demand - good vintages attract more buyers and since there is a strictly finite quantity (reducing as the wine is drunk) prices tend to rise. Given that Asian consumers are predominantly buying to drink, the demand and supply dynamic remains very much in place at present. Prices have risen significantly in recent times , with the cost of Chateau Lafite Rothschild, a favourite among Asian consumers, climbing by about 30-50 per cent over the last year. Current chart analysis reveals that a fine wine portfolio has produced in excess of 21% compound annual growth during the past five years and Premier Cru are predicting a further 20% average market growth of fine wines by January 2011, fuelled by demand in Asia, particularly in China.

For income focused investors the concept of Mortgage Trusts might appeal, which are a very common form of investment in Australia. They make commercial loans with security taken and secure those loans against physical property i.e., land and buildings. Investors provide pooled financing for the capital secured Trusts in exchange for a higher return than bank interest rates. Two income generating funds are available for investment from a reputable Queensland based company managing funds linked to such Trusts. It has been operating for ten years very successfully in this sector and has always paid distributions to investors in excess of bank interest rates, without ever having suffered a capital loss. Minimum term is 12 months with a maximum of 36 months; and for one of the funds income distributions are available quarterly (monthly in AUD) as well as at the end of the chosen investment term. Income yields currently range from 2.75% (Yen) to 9.5% (AUD) per annum depending on the currency, fund and term.. The funds are described as being low to medium risk and have been awarded a '5 Star' rating by 'Morningstar', their highest rating.

Now with over 30 years experience, Walton International is one of the largest managers and operators of Raw Land in North America. Traditionally reserved for large institutions or corporations, Walton buy strategically-located raw land in the path of development of major North American growth corridors. Key benefits include: Low correlation to equities, bonds and commodities; consistent proven performance - over 15% compound annual growth ; long term positive, low volatility returns. Recent inventory offers from Walton include land acquired from a distressed developer in the US state of Georgia with only a 2-4 projected time horizon targeted to achieve the normal "double your money" minimum returns expected over 4-6 years. Walton's raw land is recommended for portfolio diversification over a usual 4-6 year period.

MEDICAL INSURANCE REVIEW

If you're an expatriate, you should consider that relying on inadequate local government run medical facilities may cost you your health, whilst paying for private medical treatment may cost you your livelihood! There are many providers of international health plans covering Thailand and throughout Southeast Asia. PPI has recently conducted a review of its business relationships in this respect and will be featuring very a comprehensive and competitively priced range of international health plans on our website that will enable you to afford the best treatment available throughout Southeast Asia and beyond. These plans may also include the provision for world-wide travel cover and personal accident insurance if required.

WEBSITE UPDATES

PPI will be adding a number of new features to its website during July and August, including content associated with specific areas of client interest such as Enhanced Income Investments and Pension Transfers. Please take a look when time permits and let us know your feedback !

Eric Jordan, Bangkok, 20. July 2010
Please note this news update is primarily for information only for clients of the PPI. If you are not a client please seek professional advice before making any investment decisions.