Bhtb issue no 1 december preview

1. To earn a living, especially for a family 2. To achieve desired results; have success

The expat magazine from The Interlight Group

Investing Understood!

Relaunch!

The end of a journey‌ the start of something new!

December 2013 INVESTMENT

PEOPLE

CULTURE

Bank runs and fractional reserve banking: Running on fumes...

Angela Merkel: The world’s most powerful hausfrau...

A Scandinavian perspective: Norwegians on Swedes...

2

2

3

TIME, SPACE. The open road.

3

4

A bi-monthly collection of interesting articles both financial and general, aimed at expats and those with an interest in our favourite subjects...

The investment universe has seen tremendous changes over the last decade, brought into sharp focus by the crash of 2008. An understanding of products and terminology is vital and yet most non professional investors don’t have access to advice that’s clear, concise and in everyday language. If the above applies to you, then this magazine is here to help; Its aim is to: 

Explain financial concepts and terminology without the jargon.



Give an insight into the background stories behind the headlines.



Explore the consequences of human behaviour on the markets in the real world.



Be irreverent, humourous, interesting and thought 4

2

5

Our Concept - The Interlight Group Life as an expat is a colourful existence; however, there’s no doubt that it can throw up many challenges. We usually end up chasing our tails , whether it’s trying to book a hotel in Macau, get advice on our new visa, how to check if we’re taking too much (or not enough) risk with our investments or numerous other obstacles...

Essentially, there’s a lack of cohesion to expat life...it’s very fragmented across many countries, services and job responsibilities.

We decided to do something about this...we want to unite the older (by which we mean mid 30’s and up) expat community by creating a ‘central hub’ around which we can congregate.

This ‘hub’ is ‘The Interlight Group’...a collective of quality expat providers who wish to showcase their goods and services in a new way; this alternative approach is fresh, informal and innovative...

The general idea is to be proactive in involving the community in activities of mutual interest...these initiatives include learning about investing in real markets, in real time with virtual money (Trade Winds Expat Investment Club), extending this to your children through schools and/or external lessons (Young Investor’s Club), voting for your favourite classic songs from the 60’s, 70’s and 80’s (Vinyl Days), sharing information on typical expat problems (Expat Round Table) and many others to be announced in the coming weeks...

We have built our concept around three key elements:

1. The Interlight Group Quality service providers are carefully vetted before joining, as it is essential that we are all able to recommend each other with confidence; after all a recommendation means we’re placing our reputation on the line.

2. Bringing Home the Bacon Is the mouthpiece of our organization and is the ‘glue’ that binds us all together. You can view our presentation on the magazine here, to see if it is for you. Subscribing allows you to keep in touch and up to date with what’s important both in the expat world and elsewhere...

3. Quality Content There’s too much information out there, and much of it is irrelevant noise. We understand that our success is based on providing quality content, whether it’s informative articles, education, humour or interesting events to attend. If we can achieve this, we will build a loyal and consistent following.

5

Bringing Home the Bacon 6

Investing Understood

Editor’s Note: An Introduction to BHtB As a long term expat, I often searched for local information and found no shortage of magazines, both physical and on-line that were quite useful and helpful Likewise, there were several 'Offshore IFA' websites that offered rudimentary pointers to the products and services available to those living away from home.

The problem was, with the former, there wasn't anything of real interest to read, and with the latter, they were written in such a dry, formal style, it was almost as if they were actively discouraging you from reading any further.

So there was, we felt, a considerable niche market for a publication that left the listings market to the established players whilst focusing on more general interest subjects.

If we could then marry this with a section on finance and investing, that aims to dispense with the jargon and make the subject more approachable and understandable, then we might just be onto something.

Will you like it?

Is BHtB for you? We have put together a presentation to give you a feel for the style and content, to help you decide if this is ‘your thing’…

Click here...

6

2

Bringing Home the Bacon 7

Investing Understood Subsequently, BHtB was born in mid 2013, initially as a straightforward newsletter; then, throughout our testing period over the next few months, it morphed into something much bigger and more complex. Eventually it ended up as a bi-monthly magazine, delivered straight to your inbox in both pdf and ‘page turning’ options, that expats can call their own, and can dip into for both conversational and educational needs.

History So, what to call a financial magazine? It’s potentially a pretty boring subject, so the name had to be witty, quirky, related to money and convey the fact that its going to be lively and interesting… hmm, no mean task, and so it proved.

The name took up around a week of our time, with all of these names being (more or less) in the frame: ‘Average Joe’, ‘Money For Nothing’, ‘Minted’, ‘Pieces of Eight’, ‘Doubloon’, ‘Filthy Lucre’, ‘Making Coin’, ‘The Holey Dollar’. None of them quite made the grade based on the parameters outlined above.

The term ‘bringing home the bacon’s origins are uncertain...it may come from the 12th century English custom of giving a young couple bacon if they were still happy after one year’s marriage (quite a piece of bribery there!). In any event, BHtB made it to the finish line, for better or for worse…

Content is King Reading and understanding about finance and investing is a time consuming and potentially labourious process, unless of course, you count it as one of your main hobbies.

From experience, it is a subject that most

7

2

Bringing Home the Bacon 8

Investing Understood

people want to get to grips with, but don’t find the time and more importantly, are afraid to ask about terminology, for fear of looking foolish. real world. Once you begin to understand this, you will feel much more confident about your investing decisions...

To this day, we come across terminology that stumps or confuses us, and we spend a fair amount of time researching or revising our knowledge base. The flow and speed of information we are bombarded with these days is simply overwhelming; what is more, most of it is irrelevant noise.

Again, as we will see from our articles under ‘The Herd’, Homo sapiens brain was never designed to sit at a desk processing what is often counter intuitive information. Our survival instincts kick in and we make financial decisions in the heat of the moment...great if escaping from a marauding lion...not so good if it’s your pension plan.

The Human Condition You will come to recognise our fascination with the human condition and in particular how behavioural science has come to help us understand why such anomalies as stock market crashes occur.

Well, never fear...after 20 years in the business, I can confidently tell you that analysts and wealth managers don't actually know that much more than you do…Why? Well, with the former, their job involves predicting the future from the data to hand, which, as you will see in the forthcoming articles is worth next to nothing, and with the latter because finance is such a huge, complicated and opaque subject that you can’t possibly know all the myriad ways that it interacts with the unpredictable, messy Elsewhere, we will visit the Eurozone for regular updates on their ongoing can kicking exercise (‘Eurozone Woes’), shine a light on specific countries and subcultures (’Global Focus’), take time to sniff out winning investment strategies (‘Investment Hound’) and get to grips with investment terminology (‘Jargon Buster’).

On the non financial front, we bring you a series of interviews with expats describing their homeland, together with their stated opinion on someone else’s (’Culture Cross’) ...should be interesting!

We will periodically dig into the backgrounds of the major players on the world stage (‘Cult of Personality’), poke around the unexplained dark corners of ancient human history (‘World Mysteries’), discuss expat specific issues and problems (’Expat Round Table) and finally we give you great pictures, cool new gadgets, fascinating facts and the genius of ‘The Far Side’ (‘Endgame’).

In summary...finance and investing: explained, demystified, understood.

8

2

9

Quotes to note...

Our bi-weekly words of wisdom from the great and the good...

‘Do not become a mere recorder of facts, but try to penetrate the mystery of their origin’ - Ivan Petrovich Pavlov

‘He who wishes to be rich in a day, will be hanged in a year’ - Leonardo da Vinci

‘Your wealth can only grow to the extent that you do’ - T. Harv Eker

‘At least 80% of millionaires are self made. That is, they started with nothing but ambition and energy, the same way most of us start’ - Brian Tracy 9

10

Index Finance & Investing Topics Each issue will have a number of articles, all categorized under the following headings, for ease of reference: Lead Article This week’s focus

News Links Current events to keep abreast of.

Investment Hound Sniffing out the best strategies

The Herd How to avoid the pitfalls of behavioural investing.

How Did we Get Here?

A look at background events & pivotal moments that brought us to this perilous juncture.

Eurozone Woes The ongoing saga that is the eurozone crisis.

Inside Track What it’s really like on the ‘dark side’...life as an investment banker.

Global Focus A look at specific countries, related to finance.

Jargon Busters Finally understood...plain English explanations..

Question of the Week A Submit your queries here.

Black Swans with White Tails A Gems of wisdom from Nassim Taleb.

Piggy Bank Financial issues for expats.

10

11

Index General Interest Topics Cult of Personality Background on the movers and shakers on the world stage.

World Mysteries Baffling artifacts and stories that defy the conventional view of history.

Urbanity Unusual cultural stories from around the world.

Culture Cross What do we really think about each other? Cultural observations from your international neighbours.

Expat Round Table Discuss specific issues affecting expats today. Please contribute any relevant similar experiences you may have had.

Little Wonders Tipping Point How chance and random factors have influenced world history.

Phrase of the Week English is full of weird and wonderful phrases...we take a look at their fascinating origins...

Amazing facts about existence, human perception & everything...

Medieval Times A look at what the kings and queens of England were really like...unknown facts!

Vinyl Days Charts, classic album reviews, rock legends and urban myths from the 60s to the 80s...

Myth Busters Some myths are passed down through the generations… we debunk or clarify the issue...

Just Plain Interesting Articles that are just a great, interesting read.

Infographics Information on little known facts, presented in the best way...visually!

End Game Pictures, fascinating facts, gadgets of the week….and ‘The Far Side’ 11

12

Contents Issue 1 10th December 2013 6

Quotes to Note

9

Editor’s Note

Finance & Investing 23

Investment Hound

48

What you really should know about investing in the ‘New Normal’ 28

Jargon Busters Bank runs and fractional reserve banking - running on fumes

34

The Herd

28

66

Brain Choices - The Irrational Consumer: Why economics is dead wrong about how we make choices.

42

Trade Winds Expat Investment Club Invest in real markets, in real time, without the risk!

44

Young Investor’s Club Engage young minds and prepare them for the important investment decisions they will have to make all too soon...

44 12

13

General Interest 48

34

Vinyl Days ‘Dancin’ in the Sheets’… Was Bowie and Jagger’s urban myth true?

50

Cult of Personality Angela Merkel: The world’s most powerful hausfrau

56

Phrase of the Week Fool’s Errand

66

Culture Cross Norwegians on Swedes - A Scandinavian Perspective

50

68

End Game This Week’s Pictures, Fascinating Facts, Cool New Gadget and of course…’The Far Side’

13

14

Lead Article This week’s focus...

A Toast you your Ancestors

F

irst off, time flies...we are already looking at 2014! Before we begin to study and fret over the new year, it may be appropriate to start with a look back at your past, so we can put the whole thing into some kind of perspective.

As mentioned, we’re fascinated by the human condition; a fact that was helped along considerably some ten years ago when I read the first few lines of a book I’d just picked up....

You are truly amazing! Now we’re not attempting to flatter you as a new reader, in the vain hope that we can entice you into coming back; no, really, the fact that you are here at all, reading this article is such an infinitesimally small probability as to defy the imagination.

Our time here is fleeting; even a long human life adds up to about 650,000 hours... atoms had to somehow assemble in an intricate and curiously obliging manner to create you. It’s an arrangement so specialized and particular, that it has never been tried before and will only exist this once.

For the next many years (we hope) these tiny particles will uncomplainingly engage in all the billions of deft, co-operative efforts necessary to keep you intact and let you experience the supremely agreeable but generally under appreciated state known as existence.

Our time here is fleeting; even a long human life adds up to about 650,000 hours; still, be thankful for small mercies.

As Bill Bryson states in his excellent book ‘A Short History of Nearly Everything’, (buy it here) for you to be here now, trillions of drifting 14

10

15

To be here, alive in the 21st century, and smart enough to know it, you also had to be the beneficiary of an extraordinary string of biological good fortune.

After that, I don’t feel like doing anything as mundane as food shopping! Now we have everything in perspective, lets consider the next 12 months (or 8,760 hours if you prefer).

Survival on earth is a surprisingly tricky business. Of the billions and billions of species of living things that have existed from the dawn of time, most - around 99.9% it has been suggested are no longer around.

Not only have you been lucky enough to be attached since time immemorial to a favoured evolutionary line, but you have been extremely ......make that miraculously...fortunate in your personal ancestry.

Consider the fact that for 3.8 billion years, a period of time older than the Earth’s mountains and rivers and oceans, every one of your forebears on both sides has been attractive enough to find a mate, healthy enough to reproduce and sufficiently blessed by fate and circumstances to live long enough to do so.

Not one of your pertinent ancestors was squashed, devoured, drowned, starved, stuck fast, untimely wounded or otherwise deflected from its life’s quest of delivering a tiny charge of genetic material to the right partner at the right moment to perpetuate the only possible sequence of hereditary combinations that could result - eventually, astoundingly, and all too briefly – in you.

In upcoming issues, we will visit this topic again, when considering the roles of luck and chance in life, as well as in the markets; in this way we hope to blend the financial and the non financial, in an attempt to educate and to fascinate in roughly equal proportions.

There is a feeling that we continue to be in for a roller coaster ride...we will be on hand to monitor and observe, and try to make some sense of the whole thing.

Now do you believe you’re amazing?

15

11

16

Lead Article This week’s focus...

A Toast to Your Ancestors

Our time here is fleeting; even a long human life adds up to about 650,000 hours...

16

17

First off, time flies...we are already looking at 2014! Before we begin to study and fret over the new year, it may be appropriate to start with a look back at your past, so we can put the whole thing into some kind of perspective.

hope) these tiny particles will uncomplainingly engage in all the billions of deft, co-operative efforts necessary to keep you intact and let you experience the supremely agreeable but generally under appreciated state known as existence.

Our time here is fleeting; even a long human life adds up to about 650,000 hours; still, be thankful for small mercies.

As mentioned, we’re fascinated by the human condition; a fact that was helped along considerably some ten years ago when I read the first few lines of a book I’d just picked up....

You are truly amazing! Now we’re not attempting to flatter you as a new reader, in the vain hope that we can entice you into coming back; no, really, the fact that you are here at all, reading this article is such an infinitesimally small probability as to defy the imagination.

As Bill Bryson states in his excellent book ‘A Short History of Nearly Everything’, (buy it here) for you to be here now, trillions of drifting atoms had to somehow assemble in an intricate and curiously obliging manner to create you. It’s an arrangement so specialized and particular, that it has never been tried before and will only exist this once.

For the next many years (we

To be here, alive in the 21st century, and smart enough to know it, you also had to be the beneficiary of an extraordinary string of biological good fortune.

Survival on earth is a surprisingly tricky business. Of the billions and billions of species of living things that have existed from the dawn of time, most - around 99.9% it has been suggested - are no longer around.

Not only have you been lucky enough to be attached since time immemorial to a favoured evolutionary line, but you have been extremely ......make that miraculously...fortunate in your personal ancestry.

Consider the fact that for 3.8 billion years, a period of time older than the Earth’s mountains and rivers and oceans, every one of your forebears on both sides has been 17

18

Lead Article This week’s focus...

A Toast to Your Ancestors

Our time here is fleeting; even a long human life adds up to about 650,000 hours...

18

19

First off, time flies...we are already looking at 2014! Before we begin to study and fret over the new year, it may be appropriate to start with a look back at your past, so we can put the whole thing into some kind of perspective.

hope) these tiny particles will uncomplainingly engage in all the billions of deft, co-operative efforts necessary to keep you intact and let you experience the supremely agreeable but generally under appreciated state known as existence.

Our time here is fleeting; even a long human life adds up to about 650,000 hours; still, be thankful for small mercies.

As mentioned, we’re fascinated by the human condition; a fact that was helped along considerably some ten years ago when I read the first few lines of a book I’d just picked up....

You are truly amazing! Now we’re not attempting to flatter you as a new reader, in the vain hope that we can entice you into coming back; no, really, the fact that you are here at all, reading this article is such an infinitesimally small probability as to defy the imagination.

As Bill Bryson states in his excellent book ‘A Short History of Nearly Everything’, (buy it here) for you to be here now, trillions of drifting atoms had to somehow assemble in an intricate and curiously obliging manner to create you. It’s an arrangement so specialized and particular, that it has never been tried before and will only exist this once.

For the next many years (we

To be here, alive in the 21st century, and smart enough to know it, you also had to be the beneficiary of an extraordinary string of biological good fortune.

Survival on earth is a surprisingly tricky business. Of the billions and billions of species of living things that have existed from the dawn of time, most - around 99.9% it has been suggested - are no longer around.

Not only have you been lucky enough to be attached since time immemorial to a favoured evolutionary line, but you have been extremely ......make that miraculously...fortunate in your personal ancestry.

Consider the fact that for 3.8 billion years, a period of time older than the Earth’s mountains and rivers and oceans, every one of your forebears on both sides has been 19

20

A Toast to your Ancestors attractive enough to find a mate, healthy enough to reproduce and sufficiently blessed by fate and circumstances to live long enough to do so.

Not one of your pertinent ancestors was squashed, devoured, drowned, starved, stuck fast, untimely wounded or otherwise deflected from its life’s quest of delivering a tiny charge of genetic material to the right partner at the right moment to perpetuate the only possible sequence of hereditary combinations that could result - eventually, astoundingly, and all too briefly – in you.

Now do you believe you’re amazing?

After that, I don’t feel like doing anything as mundane as food shopping! Now we have everything in perspective, lets consider the next 12 months (or 8,760 hours if you prefer).

In upcoming issues, we will visit this topic again, when considering the roles of luck and chance in life, as well as in the markets; in this way we hope to blend the financial and the non financial, in an attempt to educate and to fascinate in roughly equal proportions.

There is a feeling that we continue to be in for a roller coaster ride...we will be on hand to monitor and observe, and try to make some sense of the whole thing.

20

21

21

22

Finance & Investing Section Stay on top of what you kneed to know...

22

23

Investment Hound

Essential information on the knowledge and strategies required to negotiate the investment minefield.

What you Really Should Know About Investing in the ‘New Normal’

An investor looking for 'aggressive' returns on his money comes across something interesting in his local paper: 'Well thought out investment by our team of experienced analysts, using tried and tested methods over many generations. Risk is known and conducted by venerable institution based in tax friendly jurisdiction since 1856'.

100% return on investment after two weeks lock in period...minimum deposit: $100,000.

Sounds good, thinks our investor, so he contacts the agent and goes ahead with the deal.

Sure enough, the agent returns after 14 days with a cheque for $200,000. He is delighted, and enquires as to how it is possible to make such a fantastic gain? 'Oh', said the agent, 'I flew to the casino at Monte Carlo and placed your $100,000 on red!'

These are exceptionally volatile times.

Investor's worries reflect our modern world, which is uncertain and fearful of collapse, whether economic, political or environmental.

We all want to make money, and to make a decent return on the investments we make, but as you can see, you need to understand the risks to your capital. The advert in the local paper above is a good example of how the marketing team can dress up anything to make it sound great.

This is why investment firms are obliged to disclose all relevant facts about their products, including the fact that your capital is 'at risk'

23

24

What you Really Should Know about Investing in the ‘New Normal’ and 'you may not get back the original sum invested'.

These are exceptionally volatile times. Investor's worries reflect our modern world, which is uncertain and fearful of collapse, whether economic, political or environmental. investing opportunities have come and gone; indeed, 2012 was a solid year for investors.

Strategies for the Coming Months Unfortunately, when it comes to prediction, the well paid number crunchers are usually well wide of the mark...often embarrassingly so.

All of them proved wrong and investors would have done better listening to Goldman Sachs Group Inc. Chief Executive Officer Lloyd C. Blankfein, who said the real risk was being too pessimistic. Of course, if things had turned out differently, we would be looking at the complete reverse situation.

Black Hole

For 2012, Wall Street's ill-timed advice shows that even the largest banks and mostsuccessful investors failed to anticipate how government actions would influence markets.

From John Paulson’s call for a collapse in Europe to Morgan Stanley’s warning that U.S. stocks would decline, Wall Street got little right in its prognosis for the last calendar year. Paulson, who manages US$19 billion in hedge funds, said the euro would fall apart and bet against the region’s debt.

Morgan Stanley predicted the Standard & Poor’s 500 Index would lose 7% and Credit Suisse Group AG foresaw wider swings in equity prices.

Don't forget, the money in markets is not 'lost'...it doesn't just disappear into a black hole; it simply moves somewhere else. If money flows out of equities, it flows into cash, sovereign debt or whatever else is in current vogue. For every investor who sells their asset because they think the price will drop further, there is a buyer who thinks the asset is good value and that it will increase its value over the time scale envisioned.

Who is the bigger fool?

Only time will tell.

There are many investment strategies out there, and some of them may or may not be right for your circumstances and there are many things to consider: your time horizon for investing; your knowledge and comfort 24

13

25

What you Really Should Know about Investing in the ‘New Normal’

Levels, your attitude to risk, your desired returns; the total level of your overall assets; how much are you investing; the frequency and timing; your tax and residency situation....the list goes on and on.

Moving Forward

The upshot of all this, is usually one very confused layperson, who, unsurprisingly, tends to leave things as they are or does not even get involved in the first place.

This should generally start with increasing your knowledge base of the real state of affairs that drive poli-

Well, actually, if you have assets, then you have no choice but to be involved. In an environment where interest rates are rock bottom, and the world's central banks printing money like there's no tomorrow, inflation will erode cash deposits very quickly, making it a ‘risky' investment.

So, what can you do about this state of affairs? Our first recommendation is that you begin to take matters into your own hands to some degree and begin to take responsibility for your future.

goals, in light of what you have learned from your research. It may turn out that your goals are inconsistent with your attitude to risk. If your retirement fund projections are based on a 12%pa return, and you are an ultra cautious investor, sticking with cash and sovereign debt, then we’re sorry, but you will have to do one of three things: 1. Revise your goals (ultimately your standard of living requirements) down in your old age.

2. Increase your contributions significantly.

tics and finance...the 'big picture' if you like.

An informed investor is a wise investor. The knock on effect of this is to give you increased confidence when making investment decisions.

If you have personally researched the issues and reasons why you should (or should not) invest, then it's amazing how much stress is taken out of the process.

Secondly, you should sit down and take a revised look at your current assets, cash outflows and your long term

3. Revise your attitude to risk to be more tolerant of 'riskier' assets.

Hence back to knowledge and understanding. If you better understand the nature of 'risk' then you will be more comfortable going through the process.

This is where this publication is designed to help. For background information on how we got ourselves into this mess, follow our section on 'How Did We Get Here?' For strategies and ideas on where 25 14

26

What you Really Should Know about Investing in the ‘New Normal’

to invest, follow our 'Investment Hound' series. For an explanation of finance terms, check out 'Jargon Busters'. If you have a particular query, then submit it to our 'Question of the Week'.

Finally, we can provide additional resources through our new investment club ‘Trade Winds’; more on this in our other piece.

Summary The investing universe has never been so complex, fast paced and subject to such extreme pressures brought on by excessive debt and the use of leveraging and financial instruments of mass destruction, such as credit default swaps (to be explained in 'Jargon Busters’).

On the other hand, some things never change; human behaviour will always be driven by basics such as fear and greed; most investors still 'run with the herd', buying high and selling low. So there is good reason to get involved and make decent returns without taking too much risk; however, you will need knowledge, discipline and the ability to see the bigger,

26

27

27

28

Jargon Busters We seek to bring investment terms out into the light, dust them off & explain what they actually mean (as far as is reasonably possible) in plain English.

Bank Runs & Fractional Reserve Banking ‘banks, on the other hand are like the cars that constantly run on fumes...the petrol gauge always deep in the red warning zone...they can splutter to a halt at any time.

Why Is There a Problem?

As the knock-on effects of the Cypriot blow up slowly continue to manifest themselves in the background, with depositors with more than €100,000 in any eurozone bank looking nervously at their ‘safe’ assets, we decided to take a look at ‘fractional reserve banking’ and why it is potentially such a time bomb.

While EU leaders underlined the 'unique,

exceptional' nature of Cyprus and the non-template nature of the 'deal', the need for Europe-wide guarantees, and that the ESM should be used to recap banks and not depositors, none other than Dutch Finance Minister Dijsselbloem was at it again as he admits what many have suspected: 

DIJSSELBLOEM SAYS LEVY ON WEALTH IS DEFENDABLE IN PRINCIPLE 28

29

Bank Runs & Fractional Reserve Banking  DIJSSELBLOEM SAYS DEPOSIT GUARANTEE SYSTEMS ARE NATIONAL It would appear that a wealth tax is coming in much more systemic a manner than many expect currently.

In Their Place Put yourself in the shoes of a Cypriot with any deposits at all in the system, even though deposits under €100,000 are spared, what would you do as soon as soon as ‘capital controls’ are lifted (if indeed they ever are)? I'd be angry and feel betrayed...and crucially, I've lost my faith in the system. I know what I'd do and it's not rocket science to figure out what everyone else is going to do. And if everyone else is going to pull their money out, then that will bring down what’s left of the banks, and I'm going to lose everything, I'd better get my money out whilst I can…

This vicious negative loop is what brought down even healthy banks at the beginning of the depression in 1930's America. Unfortunately, we humans are part of the herd and the herd is a huge driver of our behaviour. Once panic sets in, there is no way back...it has to work itself through, ploughing through peoples savings and destroying lives.

So why are banks so vulnerable to bank runs?

Banking is a confidence trick. The modern financial system – fractional reserve banking as it’s technically called – relies on the public putting faith in their banks. After all, the nature of the system is that at any one time there’s never enough cash in bank vaults to give everyone their deposits back – which is why bank runs are so fatal.

Confidence of this nature only affects the banking sector...it is always fragile just under the surface. We don't have the same lack of confidence in computers or TVs...we buy them, they work, they are repairable when they break, or we simply replace them. Banks, on the other hand are like the cars that constantly run on fumes...the petrol gauge always deep in the red warning zone...they can splutter to a halt at any time.

That’s why in financial crises the cardinal rule is always to attempt to reassure savers that their deposits will be safe. It’s why we have things like deposit insurance; it’s why all Northern Rock, RBS etc savers were made good during the crisis in the UK. 29

30

Bank Runs & Fractional Reserve Banking Yes, everyone ended up having to pay the eventual price anyway through austerity and higher taxes but people are accustomed to having money confiscated through income and consumption taxes: their savings, on the other hand, are considered inviolable...well they were, not least because it is morally offensive as small depositors are merely savers who also use the money services of the banks.

What Is 'Fractional Reserve Banking'?

If I were to conduct a straw poll of...well...just about anybody...I'm fairly certain that the vast majority believe their money at the bank is safely sat in a big vault, just waiting around for them to collect it as and when they please.

Unfortunately, this is far from the case. The very name 'fractional reserve banking' is designed to put you off...it sounds like technical boring jargon, so most readers will walk right on past it. This, however, would be a big mistake. Take another look...the devil is in the detail.

Put another way, of all the banks reserves (including your hard earned cash), they only need to hold a fraction of it as cash on deposit... these days around 10% and possibly as little as 1%.

Think of it as a lazy husband, sat at home, doing nothing, watching TV. He would be much better employed in a job, earning a salary, or at least fixing that leaking pipe. Same with your money. When you signed up for your account and deposited your money, it is wasting its time and usefulness sat around doing nothing in a vault, so you agreed that the bank could put that money to work elsewhere, by lending it out, to, well, pretty much whoever they want.

Some of it (well a lot of it) on very dodgy or risky deals, amounting to billions of euros. I know, you don't remember that bit, it was buried in the small print on page 33 subsection D paragraph C: 'We have the absolute right to effectively take your cash, leverage it by a huge amount and then gamble on high risk deals'.

This, in effect, has what has happened to the Cypriot banks...that is, they have far less cash on hand than there are demand claims to cash outstanding.

This means that the depositor who thinks he has â‚Ź10,000 in a bank is misled; in a proportionate sense, there is only, say, â‚Ź1,000 or less there. And yet, depositors think that they can withdraw their money at any time on demand.

Under normal circumstances, 1-10% in reserve is enough to meet the 30

31

Bank Runs & Fractional Reserve Banking day to day withdrawals and transfers of its customer base...the inherent riskiness lies in a bank run when everyone catches onto the confidence trick and wants their money out at the same time. This invites a crash and bankruptcy in very short order, because they are irresistible and cannot be stopped...have you ever stood in front of a herd of stampeding buffalo? You can try, but it's not recommended...

Obviously, such a system would be considered fraud when practiced by other businesses and is inherently insolvent; however, banks, due to their special place in a capitalist economy, have always danced to their own tune.

So What Do The Banks Do With My Money?

Banks create money in the economy by making loans. The amount of money that banks can lend is directly affected by the reserve requirement set by the Federal Reserve and central banks. The reserve requirement is currently around 10% of a bank's total deposits. This amount can be held either in cash on hand or in the bank's reserve account with the central bank, or the Federal Reserve in the States.

Your money is lent out to others and the bank charges a higher interest rate to them for their loan than they are paying to you on your deposit. Think about it…if you could borrow money from me at basically a zero interest rate and lend it to some other guy who will pay 5% interest, you’d be laughing (all the way to the bank). Well, that situation is not far from reality.

On the surface, this is quite possibly the best business model on the planet - maybe that’s why banks (used to) make so much money. The guy deposits €100, you loan out €90 (see why below), the borrower buys something with it, the person that the borrower paid needs to put the money somewhere, so he…wait for it…deposits it back in the system and quite possibly in your bank!

So you loaned out €90 and either you or some other bank in the system received €90 as a result…and that’s before even considering that the borrower has yet to pay back the loan!

There are two catches here. First, as a deposit account owner, I don’t have to commit to only withdrawing my money at particular points in time, I can instead have it whenever I want. In this way, if I want my money back before the guy that ultimately borrowed it from the bank has to return it, the bank is stuck in the lurch.

Also, there’s no guarantee that the borrower will actually pay the money back on time, or at all for that matter. (This should be increasingly obvious to anyone who's been following banking woes).

31

32

Bank Runs & Fractional Reserve Banking Knock on Effects Whichever bank receives that deposit, that bank can then lend out $81 of that $90 deposit, and that $81 goes into the economy to purchase goods or services and ultimately is deposited into another bank that proceeds to lend out a percentage of it.

It continues down the line thus: Step 1: €100 deposit Step 2: €10 in vault, €90 loaned out Step 3: €90 deposit Step 4: €9 in vault, $81 loaned out Step 5: €81 deposit Step 6: €8.10 in vault, $72.90 loaned out etc. etc.

Throughout most of our lives, this element of trust has not been a problem; the system has worked satisfactorily, with most people perceiving that their lives and wealth has improved. To a large extent, this was another confidence trick. Real wages have been stagnating for decades; however, the introduction of easy credit and rapidly increasing asset prices masked the reality.

As an example, your salary might have only increased from €40,000 to €50,000 over the last ten years, an increase of only around 2.5% per year, probably going backwards when inflation is taken into account; how-

In this way, money grows and flows throughout the community in a much greater amount than physically exists. That €100 makes a much larger ripple in the economy than you may realize!

Bank Runs and Trust As I mentioned above, and in our first newsletter, the whole system is based on trust. People have to be confident that the system works and that their money is safe and has value. This enables you (and the BMW dealer) to enter into a transaction where you give them a bunch of paper in return for a very nice car.

ever, you are now driving a BMW due to the fact you obtained a personal loan from the bank, or you remortgaged your house because some guy (a surveyor, probably) said it was now worth €180,000, rather than the €120,000 you bought it for.

The bank was prepared to accept this guys word because, well, they were eyeing up all those juicy repayments at 6% interest, which after all, they conjured up from depositors savings and due to FRB grew quite literally from thin air.

32

33

Bank Runs & Fractional Reserve Banking Why Wait Until Tomorrow for What You Can Have Today?

The man or woman in the street is only human, and being subject to human nature in our hierarchical society, tends to focus on what is positive and in plain sight. It's fairly obvious that most of us would rather look at the shiny new BMW in the drive and bask in the admiration/envy of our peers, rather than focus on the huge €50,000 loan we took out to pay for it, and is consuming 23% of our net income through interest and capital repayments…

As long as your property kept rising in value, this merry go round could continue. Simply remortgage your house, push back the final repayment date, and increase your monthly payments by €300, then the exotic holidays and expensive cars continued to beckon.

Likewise with rising stock prices...then as now, you could buy an equity, sit back, watch it grow (it always went up, until it didn't), cash it in for real hard money, and live the life of royalty.

As I said, the vision of increased wealth is/was illusory. It is only now coming home to roost, and people are beginning to realise the true nature of the beast.

Take time to carefully consider the implications of the events of early 2013, of bank runs and fractional reserve banking.

Further Discussion We will be holding a seminars shortly to discuss these issues in greater depth...please indicate if you would be interested in attending these informal events.

33

34

The Herd How to avoid the pitfalls of behavioural investing

Brain Choices The Irrational Consumer: Why Economics is Dead Wrong About How We Make Choices ‘Our brains are computers, and we like to access recently opened files, even though many decisions require a deep body of information that might require some searching.’

This article is on the long side; however, we couldn’t find much to cut that wasn’t relevant to everyday decision making… it’s well worth the read.

34

35

Brain Choices - The Irrational Consumer: Why Economics is Dead Wrong About How We Make Choices

Daniel McFadden is an economist. But his paper, "The New Science of Pleasure," shows the many ways economics fails to explain how we make decisions -- and what it can learn from psychology, anthropology, biology, and neurology.

The old economic theory of consumers says that "people should relish choice." And we do. Shopping can be fun and democracy is better than its alternatives. But other fields of science tell a more complicated story. First, making a choice is physically exhausting, literally, so that somebody forced to make a number of decisions in a row is likely to get lazy and dumb. (That's one reason why stores place candy near the check-out aisle: They suspect your brain is too zonked to resist.)

Second, having too many choices can make us less likely to come to a conclusion. In a famous study of the socalled "paradox of choice", psychologists Mark Lepper and Sheena Iyengar found that customers presented with six jam varieties were more likely to buy one than customers offered a choice of 24.

If you've read the work of Dan Ariely or Daniel Kahneman, you know exactly how far from perfectly rational we are when faced with a decision. Many of our mistakes stem from a central "availability bias." Our brains are computers, and we like to access recently opened files, even though many decisions require a deep body of information that might require some searching.

35

36

Brain Choices - The Irrational Consumer: Why Economics is Dead Wrong About How We Make Choices

Cheap example: We remember the first, last, and peak moments of certain experiences. So when we make a choice about how to spend a certain amount of time -- say, by going to Disneyworld - we forget that most of the time at an amusement park is spent waiting around doing nothing. Instead, we remember the thrill of the roller coaster. (This has been previously used to explain why people sometimes go back to disappointing old romantic partners, but that is another story...)

The third check against the theory of the rational consumer is the fact that we're social animals. We let our friends and family and tribes do our thinking for us. In a fascinating example, McFadden presents a study that shows Korean peasant women within the same village tend to use the same contraception -- even though there is "substantial, persistent diversity across villages." This pattern could not be explained by income, education, or price. Word-of-mouth explained practically all the difference.

In another corner of the ivory tower (or, more likely, across campus in a glassy lab), neurologists are finding that many of the biases behavioral economists perceive in decision-making start in our brains. "Brain studies indicate that organisms seem to be on a hedonic treadmill, quickly habituating to homeostasis," McFadden writes. In other words, perhaps our preference for the status quo isn't just figuratively our heads, but also literally sculpted by the hand of evolution inside of our brains.

A final example to show how other fields of science are ganging up on classical economics: The popular psychological theory of "hyperbolic discounting" says people don't properly evaluate rewards over time. The theory seeks to explain why many groups -- nappers, procrastinators, Congress -- take rewards now and pain later, over and over again. But neurology suggests that it hardly makes sense to speak of "the brain," in the singular, because it's two very different parts of the brain that process choices for now and later.

36

37

Brain Choices - The Irrational Consumer: Why Economics is Dead Wrong About How We Make Choices

The choice to delay gratification is mostly processed in the frontal system. But studies show that the choice to do something immediately gratifying is processed in a different system, the limbic system, which is more viscerally connected to our behavior, our "reward pathways," and our feelings of pain and pleasure.

And there's much more. To explain it, here's Daniel McFadden himself. The following transcript of our email conversation has been very lightly edited for clarity.

Let me try to sum up your paper for readers, because it covers a lot of ground. Classical economists used to posit that, since consumers are rational, we make decisions to maximize our pleasure, end of story.

But your paper reviews all the ways we know that consumers aren't in fact rational but prone to all sorts of biases and habits that pull us from any strictly rational view of the consumer. Is that alright?

This is a good summary, but I think the final message is that neither the physiology of pleasure nor the methods we use to make choices are as simple or as single-minded as the classical economists thought. A lot of behavior is consistent with pursuit of self-interest, but in novel or ambiguous decision-making environments there is a good chance that our habits will fail us and inconsistencies in the way we process information will undo us.

Choices are good. Trade is good. That's the view of neoclassical consumer theory. But it turns out that people don't really like making decisions. We have habits, we like thinking automatically. So sometimes we avoid making choices altogether because it stresses us out. Why is that? And how might, say, a company use that superior understanding of consumer theory to make consumers behave a certain way?

Trade is a contest, with a chance of coming out on the short end. Animals in "fight or flee" situations often find it safer to flee. Similarly, people in situations where trade is possible, or even promising, may find it

37

38

Brain Choices - The Irrational Consumer: Why Economics is Dead Wrong About How We Make Choices safer to turn away. It takes trust to trade.

McDonald's is successful because it has created a brand people trust - they know what to expect. A "30-day free trial" or "satisfaction or your money back" or "bring us a better price and we will refund the difference" are offers by merchants intended to promote the idea that they can be trusted, and that the risk of an unsatisfactory trade is low.

Real estate agents take advantage of people's discomfort with decision-making. Since buying a house is highly consequential and difficult to reverse, rational people should look at a great many options and think them through very carefully. A good agent will show you a few houses that are expensive and not very nice, and then one at almost the same price and far nicer. Many buyers will respond by stopping their search and jumping on this bargain. Our susceptibility to "bargains" is one of the cognitive devices we use to simplify choice situations, and one that companies are conscious of when they position their products.

One of the observations that most struck me was "economic choices can make us uncomfortable." That seems like a very powerful idea. How might I see it in my life?

If two "rational" people meet and disagree on the probability of an event (e.g., the AFC team wins the super bowl, the price of Google stock goes up), then both can gain by wagering on the event. In the real world, however, wagering is the exception, not the rule.

On the one hand, you could say that getting someone to bet on an event, pay attention to the outcome, and finally make the payoff, is 38

39

Brain Choices - The Irrational Consumer: Why Economics is Dead Wrong About How We Make Choices

too much work. But actually, if you ask people why they don't bet often with their friends, they will simply say that it would make them uncomfortable to do so.

I'm a big procrastinator. Why does that fall under the category of "hyperbolic discounting" rather than "rational way to spend a Sunday afternoon"?

Procrastination is a way of avoiding uncomfortable choices.

Hyperbolic discounting seems to be related to our subjective perception of time, and to the way the brain parses current and future pleasure-seeking - waiting for an hour right now is more painful than our perception of waiting for an hour in the future.

you want. He says it will take 3 days to get that exact model, but you can drive away right now with one that has a better sound system and costs $300 more. Most buyers will choose to pay a little more and take their new car now.

However, if the dealer said that no car is available right now, and he can get the model you want in 33 days, but a model costing $300 more with a better sound system in 30 days, most buyers will choose to wait the 33 days and get the exact model they want.

This is hyperbolic discounting at work.

Rational consumers with consistent intertemporal evaluation should treat the trade "$300 for an attractive but unneeded accessory versus 3 days" the same whether it is executed right now or executed in 30 days.

I felt like this sentence at the end of your paper was really important -- "Specialized brain circuitry processes experience in ways that are not necessarily consistent with relentless maximization of hedonic experience" - but I didn't really understand what it meant.

Our brains seem to operate like committees, assigning some tasks to the limbic system, others to the frontal system. The "switchboard" does not seem to achieve complete, consistent communication between different parts of the brain. Pleasure and pain are experienced in the limbic system, but not on one fixed "utility" or "selfinterest" scale.

Pleasure and pain have distinct neural pathways, and these pathways adapt quickly to homeostasis, (remaining stable, or the same) with sensation coming from

Here is an example of how hyperbolic discounting works: You go to your car dealer seeking a model that has a sound system 39

40

Brain Choices - The Irrational Consumer: Why Economics is Dead Wrong About How We Make Choices changes rather than levels. Overall, presumably as a product of evolution, our brains are organized well enough to keep us alive, fed, reproducing, and responsive to but not overwhelmed by sensation, You make the case that humans are social animals more than economic machines, which sounds right to me. So do social network like Facebook and Twitter help us make better choices?

This is complicated. Social networks are sources of information, on what products are available, what their features are, and how your friends like them. If the information is accurate, this should help you make better choices. On the other hand, it also makes it easier for you to follow the crowd rather than engaging in the due diligence of collecting and evaluating your own information and playing it against your own preferences.

In net, the information provided by social networks probably improves choices. The down side is that it may make you a lazy decision-maker. There is also a problem that if social networks encourage herd behavior, then they increase the risk of panics and stampedes that lead to market bubbles and instability.

THEATLANTIC.COM/LINK

40

41

Welcome to GEORGE & DRAGON …. Shekou’s only British Pub. We are tucked behind the Taizi hotel and have a central location in Shekou’s Sea World.

George & Dragon (G&D) is your good old quintessential British pub with an interesting selection of draft beers, ales, stouts and ciders such as Marstons Pedigree, Murphys, Strongbow and also Rogue Dead Guy from a microbrewery in the US. You can also enjoy specialty bottled brews including Canadian Moosehead and Magner’s Irish cider.

The food is exactly what you would expect and would want from a British pub. Good no nonsense food in hearty portions such as; beer can chicken, shepherd’s pie, Lancashire hotpot, fish & chips, roast beef with Yorkshire pudding...the list goes on.

The interior is British with wooden beams … the horse brasses and other trinkets give it just the right feel. On the more modern end of the scale there are plenty of flat-screen TV’s dotted throughout the bar on which to watch the sports.

The G&D also has its own cozy beer garden and a clever touch has been the installation of cooling units outside to take the edge off China’s hot & humid summers, whilst the heaters do the opposite in winter.

The G&D does host various events such as single malt whiskey tastings, pig in the box, weekend BBQ’s and it can be rented out for private functions. Ask any of the staff for details.

Cheers!

George & Dragon British Pub ~ Shekou Shenzhen www.george-dragon.com

41

42

The Interlight Group Members Coming in 2014...

Trade Winds Expat Investment Club

Understanding Investing in 2014 Investing obviously carries risk...it is not a place for the unwary or the uninformed...having said that, it is increasingly essential that you take control of your own future, as it becomes obvious that most financial institutions are only interested in lining their own pockets and are prepared to go to any lengths (including misselling and obfuscation) to maximise the bottom line‌

wish to get involved in a group meeting of like minded, concerned people.

It can also be a lot of fun, as we will seek to run virtual portfolios designed individually by our members, with prizes for the best performers. There are many lessons to be learned from this group activity, and regular discussions on what happened to the investment and why

Unfortunately, there is little opportunity to try out your newly learned skills and investment strategies in the real world without actually risking your hard earned assets up front.

Being well aware of this problem, we set out to find a solution. The answer presented itself in an unusual way...virtual investing allows you to invest in the real markets, in real time, with virtual cash...You get to experience the highs and lows of the markets without any risk!

Current Issues Currently, there are a number of world issues that can potentially seriously impact on your investment strategies. Although this publication will seek to give our readers a better understanding of the background behind current events, many people have expressed a

are very beneficial from a learning perspective...

Consequently, we are floating the idea of the Trade Winds Expat Investment Club, where we will initially meet once a month to discuss investment ideas and issues at a suitable locations in Shekou and Futian.

In order to gauge likely participation, please drop us a line with your intentions and what you would like to see included in these meetings. we will keep you updated on progress.

42

43

Trade Winds Expat Investment Club In any event, there will be a seminar/presentation coming up soon on Behavioural Finance - ‘Fear & Greed’. Again, we will keep you informed of the details. There will be a discussion about TWEIC after the seminar concludes.

You can now visit our website: www.tradewinds-expat.org for more details...

Click here to email: info@tradewinds-expat.org Click here for membership: members@tradewinds-expat.org

43

44

The Interlight Group Members Coming in 2014...

Young Investor’s Club

Financial Education

Modern Pressures

There's a woeful lack of financial education out there for our children...in the UK, for example, they will not even introduce it to the curriculum until September 2014 at the earliest.

We all know the pressure that kids are put under these days...in a consumer society, every youngster wants the latest phone, tablet or laptop, with peer groups exerting the greatest influence. In such an environment, it's frankly hard for investing to compete...after all it can be a dry, dull subject, if approached in the wrong way.

Is it any wonder, then, that we make so many poor financial choices as adults? In times of easy credit, young people are strongly encouraged to take out personal loans, credit cards, store cards and suchlike, often at eye watering levels of interest.

It is only now, in these straightened times that we see the flip side of amounts of personal debt, and it is not a pretty sight. Unfortunately, like the ‘Roach Motel' cockroach trap, it's easy to get into but almost impossible to leave, and many have been straddled with debts they will never be able to pay back...

It's surely of the utmost importance that we learn about finance and investing as we grow up, as this impacts greatly on our future well being; it's astonishing that mainstream education has all but ignored this area in the past.

More importantly, in a 'I want it now' culture, we are having to instill the ethos of long term discipline and potentially not showing the benefits for many years to come...clearly a difficult sell to many of our children who can measure their attention span in seconds!

A Different Approach Fortunately, it doesn't have to be this way. Introducing them to investing and financial responsibility through TWEIC's financial planning lessons can provide a real point of interest for young minds.

Once they have progressed through a series of interactive lessons, with role play and real life situations to navigate, they qualify for a certificate that allows 44 them

45

Young Investor’s Club to access our ‘virtual portfolio’. They are given a virtual $200,000 to invest and can make 'real world' investments in the real markets, and watch them rise and fall in real time too.

They can be as aggressive or as defensive as they like, and they get to see the positive or negative impact of their decisions. Introducing monthly competitions with prizes and certificates also adds to the 'cool' factor.

Time Is The Biggest Factor In Investing Of all the factors in the investment mix, time stands out as perhaps the most important...and time is the one commodity that children, in normal circumstances, have the most of.

As many expats have found out to their cost, by the time you have reached your 40's, its almost impossible to save for a decent retirement income by your mid to late 50's. As an example, assuming a return of 8% (excluding all other factors, such as inflation for the purposes of illustration), a 42 year old, wishing to acquire a lump sum of $2 million at the age of 58 would need to be saving approximately $5,200 per month.

In comparison, if your 8 year old child wished to achieve the same lump sum at age 58, they would need to be saving approximately $290 per month (both with no increases in contributions).

Let's look at this from another angle...your 8 year old starts saving some of their pocket money, supplemented by your family contributions to the amount of $125 per week or $500 per month. You then increase these contributions at 5% per year (so in in year 2 the contributions are $210 per month).

Assuming the same 8% growth rate, how much will your child have in their nest egg at age 48?

$3,171,271 How much difference is this going to make towards your children's long term future security? You have effectively covered most of their retirement need, freeing up income for other goals.

If you can engage your children's interest in their formative years, you will create a habit that lasts a lifetime. They will grow up making financially wise decisions and be more confident and comfortable in executing them.

As a parent, you might want to get your children involved if they are of a certain age and showing an interest in the wider world around them. It will be one of the most valuable long term gifts you will ever give them.

You can now visit our website: www.tradewinds-expat.org for more details...

Click here to email: info@tradewinds-expat.org Click here for membership: members@tradewinds-expat.org Click here if you have no e-mail link on your device: Contact Trade Winds Here

45

46

General Interest Section Just want something interesting to read?

46

47

47

48

Vinyl Days

Charts, classic album reviews, rock legends and urban myths from the 60s to the 80s...

Dancing in the Sheets Was Bowie and Jagger’s urban myth true?

The Myth They were both known as notorious ladies’ men in their time, but Mick Jagger and David Bowie‘s steamiest encounters may well have been between each other!

It’s long been rumored that the two rockers enjoyed an illicit affair back in the day; however, our story takes root on ‘The Joan Rivers Show’ back in May 1990, when Angie Bowie found

herself finally freed from a 10 year gagging order, part of her divorce settlement from ‘The Thin White Duke’. The time was ripe to spill the beans…

Background The affair allegedly started in the early seventies; after meeting in 1973, Mick went backstage at one of Bowie’s concerts to meet up with his new chum, and things soon took 48

49 in the Sheets Dancing

a physical turn. Bowie and Jagger were soon spotted on the town without their wives: attending the Muhammad Ali – Ken Norton bout, hanging out at the London disco Tramp, yelling and stomping their approval at a Diana Ross concert, or just cuddling up together on a hotel room couch. Neither man complained when one enterprising photographer snapped the two men in a moment of repose, Bowie tenderly cradling Mick’s head in his lap. Bowie also took Mick to gay films.

Rivers had promised her audience that her guest was ready to dish some serious dirt; unfortunately, Angie suddenly got ‘cold feet’ and said she “didn’t like kissing and telling”. This led to an impromptu backstage from Rivers and fellow guest, the ‘shock jock’ Howard Stern.

Angie rethought, and returned to discuss her turbulent marriage. “I caught him in bed several times with men, the best being with Mick Jagger ”. When Stern probed her on the subject, by asking if the two men had their clothes off, she replied “They certainly did”.

Setting the Scene

By October 1973, the Bowies were living on Oakley Street, just a stroll from Cheyne Walk.

Angie had been out of town for a few days when she returned home one morning and went straight to the kitchen to make some tea. The Bowies’ maid, who had arrived about an hour earlier, approached the lady of the house with a peculiar look on her face.

“Someone,” she told Angie, “is in your bed.”

Angie went upstairs to her bedroom, slowly pushed the door open, and there they were: Mick Jagger and David Bowie, naked in bed together, sleeping. Both men woke up with a start. ‘Oh, hello,’ said Bowie, clearly taken by surprise. ‘How are you?’

‘I’m fine,’ Angie replied. ‘Do you want some coffee?’ Mick, blinking awake, remained silent. Angie returned a few minutes later with coffee and orange juice on a tray.

Back-up singer Ava Cherry also supported the story of their affair with her own personal account.

Cherry, who lived with the Bowies for a time, reportedly told a friend that ‘Mick and David were really sexually obsessed with each other. Even though I was in bed with them many times, I ended up just watching them have sex,’ she allegedly said.

Although Angie didn’t place a time on the incident, or offer further details on River’s show, the implications were clear. Bowie had long since acknowledged his bisexuality and rumours were rife

that the Rolling Stone wasn’t averse to taking a turn with other guys, perhaps even the odd band mate.

Was it True?

Jagger was quick to dismiss the story as “complete rubbish” and Bowie’s lawyer stated that any implication was “an absolute fabrication”. Sure enough, the former Mrs. Bowie was soon backtracking. She reiterated that whilst it was literally true, it didn’t necessarily mean what people thought it did.

This being celebrity tattle of the highest caliber, the tale soon spread far and wide. Angie then clouded the issue further in her 1993 ‘tell all’ book ‘Backstage Passes’ when she openly admitted that she herself still believed what everyone else had assumed.

The Rolling Stones #1 hit ’Angie’, a ballad about an unsatisfying love affair has also attracted its fair share of rumours as to who it is actually about. The most common being that it is about Angie Bowie herself; others believe that Mick is actually referring to David Bowie in the song…

As to the truth, we will never know...speculation on the song died away many years ago, as times move on and new gossip is constantly churned. A rumour of two very famous celebrities, who still remain very much in the public spotlight engaging in a homosexual affair, however, will continue to fascinate for as long as there are people around to perpetuate it.

49

50

50

51

Cult of Personality Background on the movers and shakers on the world stage...

Angela Merkel: The World’s Most Powerful Hausfrau George W Bush had to be warned off from giving her a patronising little back rub...

Does she look stern in this picture? Yes. Does she portray the look of a woman not to be messed with? Yes. For a female born in the former East Germany, the look has been perfected over the years as a prerequisite to dealing with overwhelmingly male political leaders...George W. Bush had to be warned off from giving her a patronising little back rub.

She is the third woman to serve on the G8, after Margaret Thatcher and Kim Campbell. In 2007, Mrs. Merkel became the second woman to chair a G8 summit, after Margaret Thatcher. She has served as the president of the European Council and in 2007, became a member of the ‘Council of Women World Leaders’.

September saw the successful culmination of her third campaign for the Chancellorship of Germany, something that could have far reaching consequences

for the future of the Eurozone. We therefore take a look back at her history, personality and what drives the person Forbes magazine has three times in a row named 'world's most powerful woman'.

Early History Born in Hamburg, Germany on the 17th July 1954, Merkel has come a very long way from the house of Lutheran pastor Horst Kasner and his wife Herlind.

Nothing in her childhood hinted at the career she would eventually follow. The Kasners, who had started married life in Hamburg before being allocated a parish in East Germany, had close relatives in the West and made occasional visits. For Merkel, and her younger brother and sister, eagerly awaited gifts – jeans, little luxuries and the like – allowed glimpses of another world.

51

52

Angela Merkel: The World’s Most Powerful Hausfrau

Growing up in an intellectual household, she excelled in school and hoped to become a teacher and translator; however, because of her father's pastoral work, she found those careers closed to her. So in 1973, she opted to study physics at Leipzig University. As a young woman, she married a fellow student, Ulrich Merkel; they divorced in 1982.

initially much underestimated- to negotiate the compromises essential to running a coalition, to the constant bargaining with the state required of private citizens in East Germany. She acknowledges that all these components belong in the mix. And these are qualities that suit Germans, east and west. They like the image of Germany she projects.

Today, she has no children and is married to a chemistry professor, Joachim Sauer, who steers clear of her political career. She is said to like cooking for friends, and has a soft spot for the actor Dustin Hoffman.

Even as she insists her inner hausfrau remains – she still sews and bakes cakes – she has grown immeasurably in confidence and stature. The youthful, almost shy, woman who many believed would not last four months – let alone eight years – at the helm of Europe's most populous country has grown into a leader who inspires respect far beyond Germany's borders.

Personality Merkel is known for her prodigious work rate, straight talking, calm persistence and her evident dislike of show...traits forged from her Lutheran upbringing in the backwoods of the GDR. You could also trace her ability -

Germans are often cited for their lack of humour;

52

53

Angela Merkel: The World’s Most Powerful Hausfrau however, this is misleading...we assume the German style is ruthlessly rational, and this assumption leaves us little room to imagine them finding time to be playful. But be assured, the German sense of humour not only exists, it actually flourishes, albeit in a form we are ill-equipped to recognise.

Said to be witty and warm in private, the Chancellor's public persona ranges the gamut from dry to ultra-dry.

There was one occasion, however, when the mask slipped, and Merkel collapsed into a fit of the giggles. It was all about the submarine...it was lopsided. Suddenly she snorts with laughter, as tears run down her cheeks. She can't even talk anymore. Lopsided, she says, trying to pull herself together. But she can't.

The story Merkel is having so much trouble relating goes like this: The Greeks ordered a state-of-the-art, class 214 submarine from the Howaldtswerken-Deutsche Werft shipyard in Kiel. But when the vessel was ready, they refused to pay. The Greek military experts who had traveled to Kiel explained that the Papanikolis listed even in slight swells, and they declined to take delivery of the vessel.

The Germans retested, measured and checked the sub, but found nothing amiss. The boat's lopsidedness is apparently something only Greeks, up to their eyeballs in debt, can detect...

Image Merkel is very comfortable in her own skin, and previously eschewed all efforts to glamourise or to present her in a PR defined way. Until recently, when the media sneered at her frumpy look, and she spruced up her wardrobe and began wearing her hair in a stylish layered cut, Mrs. Merkel looked as if she would still be at home in the drab confines of East Germany. While campaigning for the top job, she projected a stern image, offering few glimpses of her personal side. Now, she clearly relishes shining out in jewel-toned jackets from a forest of dark suits at G20 meetings.

And, just once, she stunned the nation by wearing a deep blue evening dress with a fjord-like cleavage and pearls to an opera in Oslo. Quite possibly that was when a lot of Germans first woke up to the fact that their head of government was female. But, ordinarily, Merkel still wears less make-up and hairspray on the job than Silvio Berlusconi on vacation.

53

54

Angela Merkel: The World’s Most Powerful Hausfrau Political Life On Nov. 9, 1989, the day the Berlin Wall fell, Angela Merkel made her weekly visit to a sauna. Hours later, she caught up with thousands of east Germans, who were streaming jubilantly into the west. It was not the last time her rendezvous with German history was delayed.

In the first post-reunification election, she won a seat in Parliament, and later a cabinet post in the government of Helmut Kohl. He famously referred to Mrs. Merkel as "the girl," but rewarded her with a series of powerful posts. She proved herself to be a skillful political player, unafraid to eviscerate rivals.

In 1999, after Mr. Kohl had been implicated in a financial scandal, it was Mrs. Merkel, not one of the halfdozen remaining young conservative "warlords", who acted decisively and cut loose her old mentor. She rose from the depths of her patron's capacious shadow and felled him with one lethal bite to the jugular: a signed piece on the front page of Germany's most respected conservative daily, calling for his resignation. "The party must learn to walk," she said at the time. "It must trust itself to fight its political opponents without its old battle horses."

It was a brazen act of rebellion, but it made her the unquestioned leader of the pack. Within months, Mrs. Merkel was elected party leader. The episode symbolized that she is capable of making unexpected decisions in difficult situations.

The Top Job She was sworn in as the ‘Chancellor of Germany’ on 22nd November 2005. She led a Grand coalition, comprising of CDU’s sister party, the Christian Social Union (CSU) and the Social Democratic Party of Germany (SPD) and has been following pro -free-market reform agenda since.

This time, her conservative union bloc won 41.5% of the vote, falling just short. As a result, the Christian Democrats will probably seek a "grand coalition" with the Social Democrats to form a stable government.

Back in 2005, Germans, east and west, viewed her in different ways and there were reservations about her. This was reflected in the fact that she endured several weeks of behind the scenes negotiations before she finally emerged as the designated leader of Germany's next government. To get the job, she had to make major concessions to the departing chancellor, Gerhard Schröder, and his party. Mrs. Merkel's achievement, at 51, was 54

55

Angela Merkel: The World’s Most Powerful Hausfrau

significant; she became the first woman to serve as Chancellor of Germany and the first eastern German to lead the reunified country.

Summary Mrs. Merkel's journey from Protestant minister's daughter in East Germany to the pinnacle of German politics as the boss of a male-dominated, Catholic-leaning conservative party - was so improbable that it clearly demonstrated she has extraordinary gifts; however, as with most successful politicians, her career has also been marked by chance and good fortune.

Despite her political odyssey, much remains of the regimented young woman who kept her date at the sauna that day. Dogged, earnest, almost willfully bland, Mrs. Merkel is an unlikely historic figure.

Political analysts have noted Mrs. Merkel has a cool personality and does not easily express her emotions; which probably explains why people have difficulty identifying with her. Mrs. Merkel's firsthand experience of communism has also left her with a fervent conviction about the power of free markets.

Over the past eight years, she has stubbornly refused to turn herself into a symbol - either of East Germany and its reunification with the West, or of women and their changing role in German society.

Eastern Germans yearning for an advocate have been disappointed by how little she focuses on their plight.

Women did not turn out to vote in droves to show solidarity with her precedent-setting career; however, it is this wilful blandness that has allowed her to remain all things to all people in a country where significant divisions still remain and can easily topple the unwary politician. Angela Merkel is truly a wolf in sheep's clothing.

LINK/ www.biography.com/people/angela-merkel-9406424

55

56

Phrase of the Week English is full of weird and wonderful phrases...we take a look at their fascinating origins...

Fool’s Errand Meaning: A pointless undertaking.

Origin The description 'fool' is now often used as a contemptuous insult, but in the Middle Ages it didn't have such negative connotations. A fool then was a naive simpleton but regarded with respect and even admiration - somewhat the way that 'the fool on the hill' is portrayed in The Beatles' song.

The numerous names and phrases that contain the word 'fool' generally refer to how easy it is to dupe (or to fool if you like) a fool. Examples of this are: Fool's gold - a brassy mineral that resembles gold.

Fool's paradise - a state of euphoria based on false hope.

Fool's parsley - Lesser Hemlock, a poisonous weed that resembles parsley.

Fool's mate - a naive chess move that incurs checkmate in two moves.

Fools rush in... - a proverb indicating the unworldly lack of caution shown by fools.

It has long been part of the initiation of new recruits to send them on 'fool's errands'. A credulous beginner might be sent to the stores to fetch a skyhook or a tin of striped paint.

in texts from the 18th century. An early example is from the Yorkshire-born clergyman Edmund Hickeringill's Priest-craft, 1705: Did not the Pope send all the Princes in Christendom upon a Fools Errand, to gain the Holy Land that he might (as he did in their absense (sic)) rob them of their territories.

Given that playing tricks on the simpleminded must have been happening since Adam was a lad, it seems odd that 'fool's errand' didn't emerge into the language until the 18th century.

The reason for this is that mediaeval England had a different name for the sport, which was a 'sleeveless errand'. From the Tudor era to around the 1700s, 'sleeveless' was very commonly used to mean 'futile' or 'trifling'.

'Sleeveless answers' were those that gave no useful information and a 'sleeveless errand' was a fool's errand, often used to get someone out of the way. The historian Raphael Holinshed used the expression in Chronicles, 1577:

The first references to 'fool's errand' come 56

57

Fool’s Errand

So as all men might thinke that his prince made small account of him, to send him on such a slevelesse errand.

'Sleeveless' had also been used for centuries before with the same meaning as now, that is, 'without sleeves', so it's reasonable to assume the same meaning as now, that is, 'without sleeves', so it's reasonable to assume that's where the 'futile' meaning of sleeveless derived.

What's not clear is why 'sleeveless' was used with that meaning. Such usage of the word has long since died out and, although it's not difficult to make guesses at the link between 'sleeveless' and 'futile', to know the real truth of that derivation we may need get aboard a time machine.

PHRASEFINDER.CO.UK/LINK 57

58

Shenzhen

The Place to Be We’ve tried them...so should you. Great services and cool places to eat, drink, stay, visit or chill in Shenzhen...

58

The Place to Be

59

BRIANA’S RESTAURANT ^ Located on the main strip between Futian and Luohu, this upmarket venue provides their clientele with a selection of the finest wines, coupled with an excellent, Asian influenced international menu.

Book your table through our online service to ensure your reservation. Our chef, Andrew Salis looks forward to preparing

Shenzhen

your meal in intimate designer surroundings, and has put together a renowned international team to create some of the best cuisine in the city.

Come and experience the difference true quality can make...we look forward to serving you.

Tel: +86 755 123456 1, Laolin Boulevard, Futian, Shenzhen www.brianasplace.com 59

The Place to Be

60

Shenzhen

JACK & GENEVA > The clean and modern design of The Principal's interior mirrors its culinary philosophy: refined, with colour and texture working in perfect harmony. Designed by renowned Australian studio Harry Hu, this bright airy space reflects a fresh approach to fine dining; sophisticated with a modern yet rustic feel to ensure a relaxed ambience.

The restaurant stands at the site of a former school, whose principal for 14 years was the late mother of one of the Press Room Group's founders. The name - The Principal - is a tribute to her legacy.

Tel: +86 755 254897 6F New Times Plaza International Yan’an Road, Central Nanshan, Shenzhen. www .jackgen.com

< ZULU BAR & GRILL Better known for its international fusion menu, Zulu has now expanded its repertoire with a newly opened bar with a distinctly African flavour alongside the restaurant in downtown Baoâ&#x20AC;&#x2122;an.

Owner and raconteur, Steve Bethel has brought in renowned DJ Svetlana G from Austria to provide the beats for the weekends and more relaxing rhythms during the week.

Try the aged, blueberry storm, the latest concoction from Errol Huang and his talented bar team.

Tel: +86 755 1279 2525 25 Space Mall Plaza Sea world, Shekou, Nanshan, Shenzhen. www .zulu4youcom 60

61

The Place to Be

Shenzhen

The White Elephant Just like home...

The clean and modern design of The Principal's interior mirrors its culinary philosophy: refined, with colour and texture working in perfect harmony. Designed by renowned Australian studio Harry Hu, this bright airy space reflects a fresh approach to fine dining; sophisticated with a modern yet rustic feel to ensure a relaxed ambience.

The restaurant stands at the site of a former school, whose principal for 14 years was the late mother of one of the Press Room Group's founders. The name - The Principal is a tribute to her legacy.

Better known for its international fusion menu, Zulu has now expanded its repertoire with a newly opened bar with a distinctly African flavour alongside the restaurant in downtown Baoâ&#x20AC;&#x2122;an.

Owner and raconteur, Steve Bethel has brought in renowned DJ Svetlana G from Austria to provide the beats for the weekends and more relaxing rhythms during the week.

Try the aged, blueberry storm, the latest concoction from Errol Huang and his talented bar team.

The clean and modern design of The Principal's interior mirrors its culinary philosophy: refined, with colour and texture working in perfect harmony. Designed by renowned Australian studio Harry Hu, this bright airy space reflects a fresh approach to fine dining; sophisticated with a modern yet rustic feel to ensure a relaxed ambience.

The restaurant stands at the site of a former school, whose principal for 14 years was the late mother of one of the Press Room Group's founders. The name - The Principal - is a tribute to her legacy.

Tel: +86 755 1279 2525 25 Space Mall Plaza Sea world, Shekou, Nanshan, Shenzhen. www .white elephant.cm 61

The Place to Be

62

Shenzhen FUTIAN HEIGHTS GOLF CLUB Ë&#x2026; The Futian Heights Golf Club has just completed a major redesign of its 18 holes undertaken by golf legend Jack Backlaus-Nickerson.

The 19th hole also benefitted from a complete renovation, leaving club members with a super luxury experience after completing their round.

Members now have the option of booking a room at the lodge, which can accommodate up to 200 guests.

Come along and see the all new course for yourself...we guarantee you will not want to leave!

Tel: +86 755 7653 4563 The Back 9 Lodge & Golf Club 34 Outback Road, Luohu, Shenzhen. www .futianheights.com

62

63

< LIONSGATE SAFARI LODGE With just 12 luxury lodges at the exclusive Mumbon resort, GTRâ&#x20AC;&#x2122;s Gray Lieberling believes the experience is a very personal affair.

Each lodge is named after a local tribe, and members of these tribes are employed to escort you around and explain the local customs and more unusual aspects of the wildlife.

Sadly, your smartphone and tablet will still work, so thereâ&#x20AC;&#x2122;s not much chance to get away with slacking off with the lions...

Tel: +86 755 1279 2525 21 New IFC Tower Futian, Shenzhen.

Www.lionsgatesafaris.com

63

The Place to Be

64

Shenzhen

I

MAMBA MANGROVE The exceptional club above the city skyline...

t cost a whopping Y10 million to create and has quickly become Futian’s hottest night spot, rising above the competition in what is a crowded market place.

Manny’s Bar is the entertainment hub of the place, offering international bands every night, together with cocktails created by an award winning team of mixologists. For a night out in Futian, it doesn’t get much better than this.

Mamba Mangrove encompasses several dining options, dance floors and bars in 30,000 square feet of unbridled luxury.

+86 755 7653 4563 29F The Edge Tower East Yan Bin Street, Futian, Shenzhen. www .mambamangrove.com 64

65

65

66

Culture Cross

What your international neighbours really think...

Name: Kim Alexander Dahl Age: 25 Occupation: English Teacher Home Town: Fredrikstad What should people know about Norway?

Norwegians on Swedes - A Scandinavian Perspective

The Vikings are from Norway, we have world famous salmon, the troll originated from Norway, skiing is our main sport. We only have 5 million people.

Any surprising facts?

We are not a member of the EU, the distance from Oslo to the north of Norway is the same as from Oslo to Rome. Our railway ends in Tromsø.

Who is Norway’s most famous person and why?

Edvard Munch, famous painter, painted “the scream”

Where should we visit in Norway?

The fjords on the west coast, “Prekestolen”, “Nidarosdomen”

What about culinary matters? What is the national dish & what do you like to eat?

A series of interviews, highlighting stereotypes and differing opinions other nationalities have about your country. Each week, the interviewee will describe their own country and will give their opinion on one chosen at random by BHtB.

Lamb in cabbage is the national dish. I like all types of meat with potatoes, sauce and vegetables, typical Norwegian meal.

66

67

Norwegians on Swedes

What do Norwegians generally think about Swedish people? Tell us something about the history of your two nations.

There is a real rivalry between Norway and Sweden since ever, it comes from the history of Sweden being in a union with Norway where we basically belonged to the Swedish Crown.

We got our independence in the early 1900’s and since then there has been a fierce rivalry mostly in sports such as handball, soccer and especially skiing.

We also have many jokes about the Swedish, such as how many Swedes does it take to change a light bulb and jokes about a Swede, a Dane and a Norwegian, where the Swedish is always the stupid one, Danish guy is normal and the Norwegian always wins or makes the best decision.

Overall there is a feeling of brotherly love, we respect them and the rivalry is for good fun, we always support them when we are out of a competition. If you meet a Swede on vacation around the world you always feel like you meet a “neighbor” from home. The Swedish are very nice, good humoured and honest..

67

68

Endgame

Casual interest items... ‘Left of Centre’, ’Fascinating Facts’, ‘Cool New Gadgets’ and ‘Stunning Photography’ Enjoy!

Left of Centre ‘Cost Cutting’. Aware that there are huge potential markets in the developing world and that many are restricted by very tight incomes, the fruity one introduces its ‘Econolux Model’. Tag line: ‘Going to the core of the issue…’ We’re sure it will go down a storm...

Fascinating Facts -The words written on Twitter every day would fill a 10 million page book.

-The world’s population spends 500,000 hours per day typing internet security codes.

-For 100 years the flag of the tropical Turks & Caicos Islands in the West Indies mistakenly featured an igloo.

Cool New Gadgets Blue Tooth Umbrella, Hey Why Not? Rain blasted urbanites should love this idea.

Bluetooth Umbrella is simply an umbrella with a bluetooth enabled handle for hands free operation with your mobile phone. It also doubles as radio so you can totally go “singing in the rain.”

68

40

69

Endgame

Casual interest items... ‘Left of Centre’, ’Fascinating Facts’, ‘Cool New Gadgets’ and ‘Stunning Photography’ Enjoy!

Stunning Photography

Emperor penguins hunting in Antarctica.

The grace they have underwater is in stark contrast to their land based activities...Birds that can swim like fish but can’t fly...funny old world...

69

41

70

Endgame

Casual interest items... ‘Left of Centre’, ’Fascinating Facts’, ‘Cool New Gadgets’ and ‘Stunning Photography’ Enjoy!

The Far Side

To purchase ‘The Far Side’ galleries/ books, click here...

Gary Larson is quite possibly the best and funniest cartoonist who ever lived. Published in syndicated newspapers for fourteen years, until 1995, Larson's "The Far Side " is still found on greeting cards, calendars and in books. His wry, insightful sense of humour appeals to many.

The usual butts of his jokes range from scientists, cows, dinosaurs, dogs, chickens, deer, devils, to ... well...ordinary people; his cartoons are never outwardly political or religious.

Larson's observations are primarily aimed at the silliness and stupidity of the human race. And with regard to that topic, you can't help but laugh!

The fact that his humour is still extremely funny today is testament to his genius and also confirms what we here at BHtB always say about human nature...it doesn’t change.

Each issue will showcase some of his finest work, and there’s plenty of it...

70

42

71

Tailor-Made Real Estate Solutions OUR COMPANY Maxxelli Real Estate is a highly motivated and modern real estate company providing tailor made real estate solutions for foreign clients in China.

OUR SERVICES We specialize in the following service areas: 

Destination Services



Residential Sales & Leasing



Commercial/Industrial Investment & Leasing



Property/Project Management & Consultancy



Property Compound Marketing

OUR CLIENTS Whether you are looking to rent/buy a property, open a new factory, start a new office or need investment consultancy, Maxxelli Real Estate is here to help. Our clients include Fortune 500 companies, Consulates, developers, small business owners, government agencies and more.

CONTACT US:

麦克斯林房地产经纪有限公司

4000 150 600/15889368690 - Vicky Yang info@maxxelli.net www.maxxelli.net www.maxxelli-blog.com

71

72

Welcome to GEORGE & DRAGON …. Shekou’s only British Pub. We are tucked behind the Taizi hotel and have a central location in Shekou’s Sea World.

George & Dragon (G&D) is your good old quintessential British pub with an interesting selection of draft beers, ales, stouts and ciders such as Marstons Pedigree, Murphys, Strongbow and also Rogue Dead Guy from a microbrewery in the US. You can also enjoy specialty bottled brews including Canadian Moosehead and Magner’s Irish cider.

The food is exactly what you would expect and would want from a British pub. Good no nonsense food in hearty portions such as; beer can chicken, shepherd’s pie, Lancashire hotpot, fish & chips, roast beef with Yorkshire pudding...the list goes on.

The interior is British with wooden beams … the horse brasses and other trinkets give it just the right feel. On the more modern end of the scale there are plenty of flat-screen TV’s dotted throughout the bar on which to watch the sports.

The G&D also has its own cozy beer garden and a clever touch has been the installation of cooling units outside to take the edge off China’s hot & humid summers, whilst the heaters do the opposite in winter.

The G&D does host various events such as single malt whiskey tastings, pig in the box, weekend BBQ’s and it can be rented out for private functions. Ask any of the staff for details.

Cheers!

George & Dragon British Pub ~ Shekou Shenzhen www.george-dragon.com 72