Family Money: Sitting in Judgment (Part
Managing director of Westminster Portfolio Services (Thailand) Ltd.
Last week we started looking at how most of us judge
funds based on past performance, generally against an index. We saw that
this can be misleading, and statistically, out-performance one year rarely
forecasts out-performance the next year.
In fact, to repeat my closing line of last week’s
article, research has demonstrated time and again that a fund’s past
performance bears almost no relation to future performance.
There are good reasons why this happens. One problem
for fund managers is that active stock picking is such a bad science.
Economists have shown that most of the movement of a share is due to the
overall performance of the asset class it belongs to. A manager can be
very smart at rooting out promising shares - but if the sector to which
the shares belong moves, so will the shares. Similarly, share earnings are
also strongly correlated to the performance of the sector.
Another factor is the “efficient market hypothesis”
which premises that in an active market that includes many well-informed
and intelligent investors, stock prices will reflect all available
information. If a market is efficient, no information or analysis can be
expected to result in out-performance of an appropriate benchmark.
The implications of the efficient market hypothesis are
profound. Most individuals who buy and sell shares assume the securities
they are buying are worth more than the price they are paying, and that
the securities they are selling are worth less than the selling price. But
if markets are efficient and current prices fully reflect all information,
then buying and selling securities to try and outperform the market will
effectively be a game of chance rather than skill.
Given that some funds do outperform, the implication is
that these outperform largely from luck rather than skill. Therefore
picking these funds is also largely due to luck, despite greater research
into rating funds.
Balancing your portfolio
One fund management expert counters that a proper
benchmark allows you to gauge market volatility. “The risk profiles for
all sorts of market sectors, from industrial goods to staples like energy
and basic commodities, are fairly predictable,” he explains. “They
also vary predictably against each other. Although returns from individual
sector funds will be hard to predict using a benchmark’s historical
performance, there is valuable information to be gleaned from the way the
overall sector moves. This is important in constructing a balanced
portfolio,” he says.
Another expert says that benchmarks are a “headline
indication” of what sort of investment fund you are getting into. When
building a portfolio it is useful to know that your fund is closely
following a particular index. This will allow you to have an idea of what
the ‘investable universe’ is like, and delineates the size of the
pond. A fund manager will use that information as a reason to dip in and
out of the pool in the hope of getting access to that particular risk
profile; investors can look to benchmarks to do the same.
Another reason to follow benchmarks is that if you know
that your fund or portfolio manager is pegged to a benchmark, you can be
fairly sure that you’re not going to get any major nasty surprises. But
within that straightjacket, intelligent managers have the possibility to
choose the right equities and potentially make a bit of extra return.
Indeed, some active managers, while generally acknowledging the
“efficient market” argument, say that certain corners of the stock
market allow clever managers to pick up extra return - and to beat the
Small-cap stocks are often seen in this category, as
well as more underdeveloped sectors such as emerging markets, where
greater “information” opportunities exist. The large-cap markets have
been analysed to death, goes the theory. Just look at the international
business news on TV! Small-cap stocks contain un-mined bits of information
that a shrewd manager can be the first to discover, and therefore exploit.
Are benchmarks irrelevant?
How best, then, to judge the performance of our
investments? In the long run, the average performance of developed world
stock markets has been just over 8% per year, bull and bear markets
combined. But over the last three years of stock market falls, both cash
and bonds have handsomely outperformed most equities and equity funds. In
this environment, whether your fund is benchmarked to the S&P500 or
another index has been irrelevant: it has simply not been a good time to
be in equities. Most of us have had our fingers burned, or at least
Until this extended stock market slide, many
bog-standard investment funds were returning 20% per year. In 1999, for
instance, the average US investment fund returned a little over 27%. The
average technology fund returned 135%. Investors were complaining to their
portfolio managers that they were “only” earning 40% on some funds.
Yet this is a fallacy of believing that stock market bubbles translate
into trend-busting performance over time. They do not.
Importantly, it is up to individuals to benchmark their
investments, not their fund managers. The current global slump should make
investors rethink just exactly what is the most suitable benchmark for
their investments, not the ones used by the professional fund managers who
will continue to flatter investments in the best light possible.
Instead of falling for this or that transitory fund
performance, which is rarely replicated in the long term, investors should
concentrate on building a balanced and diversified portfolio through
investments that offer low risk levels of return.
Your investment goals should focus on what you need to
provide for. This means investing strategically for the long run, not
whimsically or speculatively for the short term. Work out when you want to
retire, and how much capital you will need to provide for it
realistically, or when you need to pay school fees, and create a balanced
portfolio accordingly. That is the only sound reason to look at
Snap Shot: Colour your world - and get great wall art!
by Harry Flashman
Wall art is something any photographer can achieve,
without any special equipment or even special training (other than reading
this article, I suppose). The secret is in thinking colour, taking your
time to compose and then sitting back and letting your local photo-shop do
the rest. Here’s how.
Take a look at the photographs with this week, and you
will soon see that these could have easily been taken by you. No tricky
exposure details either. Whilst I usually run my camera in ‘Manual’
mode, for this exercise I let my 15-year-old Nikon do the work instead,
sticking it on Auto mode, just to see what would come out. If you can view
this page in colour, you will see that it worked fine. (Go to the web
version of the paper and it’s in glorious technicolour!)
These pictures were all taken on a trip to the flower
market in Chiang Mai, but any flower market anywhere would give the same
opportunities. What you are looking for is colour and the stall holders do
that bit of work for you too, by displaying large bunches of the same
blooms. I do not profess to know much about botanical species, but colour
I can recognise!
Since you are again looking at ending up with these
photographs on the wall, try as much as possible to fill the frame with
the blooms. This means that you really must move in close. However, make
sure that you are not too close for the camera to be able to focus. With
compact point and shooters you may have to do some rough estimations of
how close you really are. With SLR’s you can directly see if you are in
focus. While concentrating on the blooms, do not forget to get a couple of
atmospheric shots of people and their purchases as well.
Having got your prints back from the photo-processors,
select the best ones and return to your friendly photo shop girls, with
whom you will be on first name terms by now, and get some enlargements
done. 10 x 8 or 11 x 14 prints are not expensive, then get them mounted in
simple thin frames and hung on your wall. You have just produced “art”
at a cost so reasonable, you may as well make doubles and send them off as
presents at Xmas.
Recapping - look for colour, move in close, select your
enlargements and don’t let the frame overpower the photograph!
Modern Medicine: Will watching footy on the telly kill you?
by Dr Iain Corness, Consultant
Well, guess what! It can! That is according to a UK
study reported in the British Medical Journal, a medical paper not prone
to sensationalism like the UK tabloids these days.
Learned professors from the universities of Birmingham
and Bristol looked at hospital admissions for a range of conditions on the
days surrounding England’s 1998 World Cup football matches. Now if you
are not a footy fan, let me explain. This was when England was eliminated
from the 1998 World Cup by Argentina in a penalty shoot-out. There was
national pride riding on that match to an enormous degree.
The multi-centre analysis looked at the number of
admissions for acute myocardial infarction (heart attacks), stroke,
deliberate self harm, and road traffic injuries on the fateful day and for
the five days after England’s World Cup matches, compared with
admissions at the same time in the previous, and following, years and in
the month before the tournament.
The results are interesting. The risk of admission for
heart attacks increased by 25% on 30 June 1998 (the day England lost in
the penalty shoot-out) and the following two days. No excess admissions
occurred for the other conditions or on the days of the other England
matches. No one threw themselves over the cliff or jumped off the roof.
They just clutched their chest in pain instead. Individual analyses of the
day in question and the two days after the Argentina match showed 55 extra
admissions for myocardial infarctions compared with the number expected.
These are figures that you cannot put down to mere chance.
Now just in case you think this is some strange British
effect, an increase in cardiovascular deaths among Dutch men was
associated with the 1996 European championship match between the
Netherlands and France, with the Dutch on the losing end. So is it a
football thing? The answer is one of those brilliant medical Yes and No
The scientific conclusion was that heart attacks can be
triggered by emotional upset, such as watching your football team lose an
important match; however, I must add that it had already been noted that
physical and emotional triggers, such as environmental disasters and
vigorous physical exercise, can bring on an acute heart attack.
Now let’s look a little closer to home - how about
all the “broken hearts” one hears about? Well, if you were to carry
out this study on heart attacks after marital break-ups, I think you would
find the same results. The condition did not get the common name of a
“broken heart” if there were not some physical basis to it.
So what can you do to avoid your heart attack? I do not
believe that banning telecasts of Man U or Real Madrid is a practical
answer, nor is joining a monastery so you don’t get involved with the
opposite sex. The answer is to make sure your heart is in good enough
shape to withstand all the stresses that another fumble by goalie Seaman
could put upon it.
That requires your knowing your cardiac risk factors as
Cholesterol, Blood Pressure, Blood Sugar and whether you are obese. And
how do you find that out? By attending your cardiac physician and
arranging to have the tests done.
Do it before the footy match this next weekend - or
before your girlfriend takes off with the football player next door!
Heart to Heart with Hillary
Dear Hellary (sic),
I have a new maid from up-country working in my house. She is
16 and quite cute and knows nothing about life in the big city, i.e. unspoilt by
the night time scene. Her family are relatively poor. If I wish to ‘adopt’
her, what should I pay her family? Is this legal? A box of chocolates for your
Dear Sure Thing,
First off, I may have been a hell-raiser in my youth, but
I sure as hell like people to spell my name correctly, if they want me to be
serious in my replies. It is Hillary not Hellary, OK, my Petal? Now about your
maid being 16 and “quite cute” - I am sure that even you at that age were
“quite cute” too, even though that seems to have well worn off by this stage
in your life. As far as taking this young girl into your care, I would sincerely
hope that you do not offer financial inducements to an already impoverished
family. Legal or otherwise, poor or otherwise, they deserve to keep their
daughter “unspoilt by the night time scene” to use your words - especially
night times with old lechers like you. You may take the chocolates and pop them
you know where, Poppet!
I have read your chronicles for years, and had lots of good
laughs. Please continue the good work. So that my fellow Farangs in trouble with
Thai ladies do not lose all hopes, here is my true story. As a young, unmarried,
well paid executive in Bangkok during the fifties and sixties, I have been
victim of an uncountable number of Thai women, including one adept of black
magic who half-destroyed me. Farangs my friends, beware, the less you believe in
this sort of things (magics), the more vulnerable you are, until I had what can
be called a spiritual experience, and my life changed completely.
Through friends, I met a freshly graduated nurse who, having
applied for a job at a US hospital, wanted to polish her English. We were
married two years later, and soon we had a baby boy. I wanted this boy to have
the same sort of education in Europe as I had, so I resigned my comfortable,
well paid job and we moved to Europe with the baby and the cat, both taking
turns to cry in the plane.
We stayed 36 years in Europe, had another four children who
are all university graduates by now. One hot August day I fell unconscious and
collapsed, and was taken to hospital, where I remained in coma during three
weeks. Showing her nurse diploma, my wife was authorized to enter the intensive
care unit. Day and night, hardly taking time for eating and sleeping, she sat at
my bedside, praying.
When I finally woke up from my coma, the head-nurse told us
that she had never seen so much love and devotion. Farang my friend, good luck.
You have been lucky in more than one way, haven’t you my
Petal. What can I say, other than to wish you all the best for the next 36 years
here. It seems your family has been lucky too, but I am a trifle worried that
the cat was not mentioned a second time. Was the plane trip too much?
We read all about the poor English and American tourists
(male) who find themselves heartbroken over another fruitless romance with the
local Thai ladies. Apart from the fact that none of them seem to learn anything,
but that’s a common problem with men anyway, what about the life for us women
in this country? There are many professional women who are here on secondment,
as well as those women who come here to have a holiday. We have our needs too,
Hillary. Are there any places or people for us? Why do you not get any letters
from women, Hillary? Perhaps it is because we women have a better idea on what
can be achieved in this world, have our feet more firmly planted on the ground,
and when we do have a problem, learn to fix it ourselves? Hillary, you have to
agree, or admit you are one of “them”.
Admit I am one of “them”? Them what’s Petal?
Actually you astound me, Libby. Males have always been the ones who are supposed
to internalise their problems and we women are told to tell the men that it’s
alright to cry and let their feminine side come out a little. Now here comes
liberated Libby saying that women shouldn’t ask advice or admit to problems of
the heart, and if we do, we should internalise it and fix it ourselves. The
whole world really is upside down! Sorry, Libby, I don’t agree with you at
all. I think it is good for men to have a shoulder to cry on. As for you, I can
see you have a perfectly balanced life - you have a chip on both shoulders.
A Slice of Thai History: The Japanese invasion
by Duncan Stearn
On 9 December 1941, Japanese forces moved into Bangkok
after an agreement was signed with the Thai government permitting Japanese
troops right of passage through Thailand. A Japanese air group moved into
Lopburi in central Thailand and began developing the airfield as a fighter
base. The Japanese also took over the telephone line between Lopburi and
Bangkok as well as the local radio station.
That same day, Yamashita’s forces attacked along the
Pattani to Keroh road destroying the Indian troops in front of them and
crossed the frontier to Betong. The British attempted to launch an air
strike against the airfield in Songkhla but only one bomber managed to get
over the target. The pilot, Flt. Lt. Arthur Scarf was wounded but managed
to return to Alor Star, crash landed without injury to his crew but died
later in hospital. He was awarded the Victoria Cross, Britain’s highest
award for gallantry. A second attack against Songkhla by six British
bombers saw three of them shot down.
When Japanese planes sank the British battleship H.M.S.
Prince of Wales and the battle cruiser H.M.S. Repulse off the Malayan east
coast on 10 December, the die was cast in favour of a Thai alliance with
Japan. Pibulsongkram realised the Japanese were not about to let Thailand
remain neutral in the conflict and it was either join or be occupied as a
Pibulsongkram made a secret agreement with the Japanese
to commit Thai forces to the invasion of Burma and on 21 December he
signed a 10-year treaty of alliance with Japan. The Japanese gave an
undertaking to help Thailand recover what Pibulsongkram considered lost
territory. At his request this promise was made in an annex to the treaty
and not revealed to the Thai public.
Despite the alliance and the fact Japanese forces were
victorious everywhere, Pibulsongkram remained reluctant to declare war on
Britain and the United States. Japanese pressure finally compelled
Pibulsongkram to declare war on Britain and the United States on 25
January 1942. South Africa and New Zealand declared war on Thailand on the
same day. Australia followed soon after.
Social Commentary by Khai Khem
The war on drugs - can we win it?
Thailand’s current war on drugs is well-supported
around the nation. The intensive 3-month crackdown is not going to solve
the problem in a 90 day period, but it IS a place to start and it is
obviously long overdue. Some criticism of the government’s tough
measures is expected. However, since drug abuse in our society has rapidly
spiraled out of control, if these first steps to address the crisis do
actually make it possible to turn the tide - even slightly - follow-up
programs and more effective law enforcement can be implemented.
This is a global problem and super-power USA has had to
deal with it for decades. Americans have a long record of failed attempts
to rehabilitate drug addicts and criminals. This is an on-going war which
no nation can really win, merely continue to fight.
Thailand desperately needs to get these people off our
streets and out of our schools and neighborhoods. Our law enforcement
personnel put their lives on the line when they go after these criminals.
They have a duty to protect innocent and law abiding citizens, and a right
to protect themselves in the line of duty.
Drug dealers and addicts are not nice people. Surely
everyone knows that; even civil rights groups. Crime and drugs go
together, even when the individual has been convicted of a non-drug
The American prison system is broken up into different
categories, but the 2 main branches are state prisons and federal prisons.
According to statistics gathered from these institutions, more than
three-quarters of convicted prisoners convicted on drug had used drugs in
Fifty seven percent of US state prisoners and 45
percent of federal prisoners surveyed said they had used drugs in the
month before their offense. Eighty three percent of state prisoners and 73
percent of federal prisoners had used drugs at some time in the past.
Reports compiled between 1995 and 2000 showed that 33
percent of state and 22 percent of federal prisoners said they committed
their current offense while under the influence of drugs and about one in
six of both state and federal inmates said they committed their offense to
get money for drugs.
According to a special US Department of Justice
‘special substance abuse’ report, about three-quarters of all
prisoners can be characterized as being involved with alcohol or drug
abuse in the time leading up to their arrest. Sixty four percent of state
prisoners and 59 percent of federal prisoners reported having driven an
automobile or other motor vehicle at one time or another while under the
influence of alcohol or drugs.
In the US sophisticated treatment methods for substance
abuse are provided for inmates in the prison system. Prisoners also
participate in self-help, education or awareness programs for drug and
Among those prisoners who had been using drugs in the
month before their offense, 15 percent of both state and federal inmates
said they had received drug abuse treatment during their current prison
term. Among those who said they had used drugs in the month before their
offense, 28 percent of the state inmates and 32 percent of the federal
inmates said they had participated in a self-help group or drug awareness
This is merely a brief breakdown some basic numbers.
The point is the percentages are not very high and the success rate is
even less impressive.
So how do we fight the war on drugs? Every day - in
every way. There is no single solution because the problem is complex.
Thailand is now going through the growing pains of
leaving behind the old agrarian/peasant socio-economic structure and has
become a more modern and industrialized country. The old ways are going
fast. Can we reinstate them? Not in their former shape. Some traditional
Thai culture can be rescued. Families, schools, communities and their
leaders are finally acknowledging the serious damage rampant drug abuse
will do to a small kingdom like Thailand.
Let’s take schools for example. For decades the
educational system has been neglected and a tremendous revamping is now
vital. Poor people in society have had little access to good schools.
Government schools throughout the nation have functioned more as baby
sitters while the parents work and have not offered quality education and
guidance. That may change. Wholesome extra curriculum activities such as
sports and creative projects, life-style education and social studies are
Since Thailand has a very mobile workforce families are
often separated for economic reasons. Communities are now introducing
programs which urge unity, give people things to do in their spare time
and a chance to interact. This helps villagers and urban dwellers form
alliances with which they can better control their neighborhoods.
Pattaya City along with its many charity organizations
and provincial government agencies is a perfect example of the all-out
endeavor in many areas to not only acknowledge the serious neglect of our
residents’ quality of life, but sincere attempts are being made to
repair the damage and improve it. Why now?
In the past the middle and upper classes in Thailand
were fairly insolated from rampant crime and defiant and violent youths.
Drug abuse and crime now touch all levels of society. For this reason
there is less apathy and more concern that even ‘good families’ can be
touched by tragedy through neglect of social reform. That is why the
rising body-count of drug dealers and addicts garner little sympathy in
the general population.
Yes, the public shoot-outs are scary and police
brutality must be monitored. More frightening is the future of a lost
generation of our nation’s youth. What will happen when the current
three-month crackdown expires? Will the dregs of society crawl back out of
their holes and start up again? They will try.
Women’s World: You are what you eat
by Lesley Warner
Beauty from within
In a perfect world eating the perfect diet we should
not need supplements, but this is not a perfect world; and the majority of
us are far too busy to balance our diet correctly. That’s why we need to
supplement our diet with vitamins. The word vitamin is derived from the
words - vital amine - and was conceived by Polish chemist Casimir Funk in
1912. Funk isolated vitamin B1, or thiamine, from rice. This was
determined to be one of the vitamins that prevented beriberi, a deficiency
disease marked by inflammatory or degenerative changes of the nerves,
digestive system and heart. Since his discovery that the body does need
certain essential vitamins a whole range of products is now available.
are my vitamins!
One of the most commonly used supplements is cod liver
oil. I always remember when I was little my mum had a bowel fetish and
used to make me swallow a dessert spoonful of cod liver oil every morning
before school to make me regular, as her mother had before. I found this
morning ritual absolute torture. Have you ever tried to swallow cod liver
oil, especially first thing in the morning? Fortunately for my children I
did not adopt this family tradition.
These days there are cod liver oil capsules that make
the swallowing a lot easier. During the research of this subject I learned
that there is a long-held belief that fish oil is good for growing brains:
More recent research confirms this belief. So taking a dessertspoonful
everyday should have made me brilliant!
Cod liver oil, as the name suggests, is extracted from
the liver of a cod. Its claim to health-giving properties lies in the fact
that it is rich in a type of essential fatty acid called omega-3. In
particular it contains two different omega-3 fatty acids: Eicosapentaenoic
Acid (EPA) and Docosahexaenoic Acid (DHA). Cod liver oil is also a rich
source of vitamin A and D.
I know a married couple that has been taking 2-3
dessertspoonfuls of cod-liver oil a day (the orange flavour) for several
years. They swear by it - the man maintains his eyesight has improved and
although now in their 60’s they do not have a grey hair between them.
Personally I would rather stick to the capsules and have grey hair.
The body needs fatty acids for many normal activities,
including skin repair, nerve function and immune system functioning, the
manufacture of prostaglandins, as well as to carry fat around the body.
Some types of fatty acids are vital to maintain our health. These are
called essential fatty acids or EFA, and we must take them in the form of
food on a regular basis.
Essential fatty acids are vital in the formation of
cell walls, so are needed whenever the body is building or restoring
tissues. They also play an important role in allowing nutrients and other
chemicals to pass in and out of cells.
Omega-3 fatty acids are derived from linolenic acid,
and good sources of this include soya beans and rapeseed oils, as well as
fish. The oily varieties of fish are particularly rich in omega-3; for
example, sardines, herring, mackerel, trout and salmon. About 1-2g are
needed a day.
Omega-6 fatty acids are derived from linolenic acid,
which is found in many vegetable oils, especially sunflower, olive and
corn oil. An adult needs about 4g a day, which is the equivalent of 2
teaspoons of sunflower oil or a handful of almonds or walnuts.
I was inspired to this series on vitamins by my Thai
friend who has been generally in bad health lately, looking run down and
suffering continual headaches. I suggested to her that maybe it would be
worthwhile investing in some vitamins, even just a pot of multi-vitamins.
Her answer was that they were too expensive; that was last week, this week
she proudly showed me the pot of cream she had bought for 550 baht to
whiten her skin. It made me think how often do we try and repair the
damage from the outside?
Remember: beauty is from within!