HEADLINES [click on headline to view story]:

Family Money

Snap Shot

Modern Medicine

Heart to Heart with Hillary

A Slice of Thai History

Personal Directions

Social Commentary by Khai Khem

Women’s World

Family Money: Sitting in Judgment (Part 2)

By Leslie Wright,
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.

Small-cap stocks

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 benchmarks.

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 scorched.

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 benchmarks.

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 answers.

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 answers.

Sure Thing

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!

Dear Hillary,

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.


Dear Survivor,

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?

Dear Hillary,

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”.


Dear Libby,

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 of Thailand (part three)

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 defeated power.

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 related crime.

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 the past.

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 alcohol abuse.

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 program.

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 being promoted.

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 Part II

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.

Yes, these 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!