Money matters: Cinderella without a clock
MBMG Special Report
Graham Macdonald
MBMG International Ltd.
Our currency view for some time has been that there
would be a short term US$ rally in the second quarter of this year (which
we have already seen) but that from that peak we would see either a
gradual orderly fall back in the value of the Dollar to around 10% below
the pre-rally levels against the average value of the international basket
or an uncontrolled major drop in the value of the US$.
Either way, being out of Dollars is a smart short term
move and moving back again when the picture is clearer and the fall has
occurred would be a good long term strategy. This has long been our view
and that of our preferred analysts, but this was summed up extremely
neatly by John Taylor of Market Insights in one of his more recent weekly
reports.
“Last month Warren Buffet caught our fancy, while
encapsulating our outlook, by commenting that the carry trade was ‘like
Cinderella at a party with no clocks.’ In that case, he commented, ‘it
is very hard to leave early.’”
With the violent recent downward correction in emerging
market bonds and equities, and the twitchiness in most developed equity
markets as well, it is possible that the clock is starting to chime
midnight. But, we think it is too early. The problem is, as Buffet stated,
we can’t be sure. We don’t know what time it is. We are using the term
“carry trade” in a broad way, as financing a house with floating rate
debt is a carry trade. When a corporation issues fixed rate debt, and then
swaps it into paper whose rate is based on one month Libor, it is entering
a carry trade.
Banks have been in this business for years, but now
many near-banks, non-banks, and hedge funds are in it too. Everyone
participates in this strategy because the payoff is so high, and looking
back over the past few years, the risk has been so low. Today overnight
money is near 1.00% while five year US Notes are around 4.00%. With
returns like these, leveraged many times over, the whole world sits up and
pays attention.
Because the carry trade is so profitable, and capital
projects are so easily financed, the economy is running away with
excitement. Nominal growth rates over 6% are way above the cost of
short-term money, and this leads to more growth. To slow the economy,
short rates should be around 4%, which is the rate that would not
stimulate more borrowing, the so-called “neutral” rate. The problem as
we see it is that the Fed cannot move rates anywhere near the 4% level
without causing a massive financial dislocation. Because the various carry
strategies have been so profitable for so long, many of the structures
that have been created for them would fail with higher rates. One clear
example is the housing market. If floating rate mortgages, now roughly
4.10% - which is 1.10% base plus a 3.00% spread, went to 7.10% - prices
would collapse, builders would go broke, and Congress would be up in arms.
Many hedge funds and other financial institutions have followed LTCM’s
path, a bit more circumspectly perhaps, but there will be many market
disruptions when rates rise.
The Fed is walking a fine line, and it is possible that
their goal is unattainable. In that case, the economy will either expand
further in an uncontrollable fashion or will collapse under the weight of
higher rates. The Fed has told us that rates will rise slowly, but the
market has forced them up rapidly, and there are the mini -panics in
various weak spots, like Brazil and Turkey.
We believe the Fed will follow this gradual path, but
the crises will grow. Even a ผ point move could be enough to cause a
global dislocation and turn the US economy down. Our cycles, the best
clock we know, say this will happen in the third quarter. As the economy
buckles, rates will begin to drop again and the dollar will plummet. The
US dollar is presently being supported by the strengthening US economy and
its out-performance of Europe and Japan. Because of the economic growth,
dollar interest rates have been rising, both in absolute and relative
terms when compared with the euro and the yen. It is clear that the US
rates have been strengthening against European rates for more than 1ฝ
years.
US rates began to rally in the fourth quarter of 2002,
along with the US equity market, but the increasing attractiveness of
dollar deposits did not begin to affect the dollar until the beginning of
this year. This lag, which we have discussed before, is a consistent
factor in the foreign exchange market. As the lag is somewhere between one
and two years on average, the rising interest rate spreads today should
translate into a stronger dollar next year - all else being equal. As we
are forecasting a peak in US interest rates after July and a decline to
new lows in 2005, there will be a further dollar decline ahead. The
question is when?
Of course, this is not the only factor impacting the value of the
dollar. However, even if we just look at these differentials, they point
in favour of a weak dollar. Although US rates have been climbing for a
year and a half, Eurodollar rates are still below Euribor rates and have
been that way for almost 4 years. When US rates are below European rates,
taking the lag into consideration, the dollar also tends to weaken. As we
expect US rates to drop further below Europe after July, the dollar will
decline again.
The above data and research was compiled from sources believed to be
reliable. However, neither MBMG International Ltd nor its officers can
accept any liability for any errors or omissions in the above article nor
bear any responsibility for any losses achieved as a result of any actions
taken or not taken as a consequence of reading the above article. For more
information please contact Graham Macdonald on [email protected]
Snap Shots: Goodbye Howard Greene
by Harry Flashman
Howard Greene, one of Pattaya’s photographic people
has departed from the scene. Unfortunately by his own hand, after he
reached the end of his acceptance of his situation in this country.
This was a great shame, as Howard did have a rare
talent in photographing people, with children and ladies, in particular.
The images he left behind from the Jester’s Children’s Charity Fair
each year and the UNICEF golf tournaments are testament to his
photographic eye.
We all have our time on this earth, I hope Howard enjoyed most of his.
I publish Howard’s photographs as my final goodbyes.
Modern Medicine: A Coronary Conclusion. Are you next?
by Dr. Iain Corness, Consultant
With thanks to Mrs. Malaprop, the real
problem I will address this week is that of a Coronary Occlusion. While this
is a fancy name for blockage of the Coronary arteries, the end result is not
fancy at all. It can be death, generally referred to as a ‘Heart
Attack’.
Before launching into the real factors in the situation,
a little understanding of what constitutes a ‘heart attack’ is in order.
I think everyone understands that you have both red blood cells and white
blood cells. The function of the red ones is to carry oxygen to the tissues,
so that the tissues can survive. The heart muscle is no exception to this
rule. This hollow muscular pump needs oxygen just like all the other organs
you keep inside you - spleen, kidneys, lungs, bowel and so forth.
However, the inside lining of the heart (muscle) is
smooth and impermeable to the oxygen tied to the red cells. In other words,
the heart does not get its nutrition from the blood it pumps through it. In
fact, the blood supply to the heart is through the specialized arteries
called the “Coronary” arteries. These run along the outer surface of the
heart muscle and then split up into smaller tributaries which dip into the
muscle to supply it with oxygen.
Now if we are to consider that the heart muscle is
probably the most important muscle in the human body (well, physiologically
it outranks the other much more highly publicized muscle in males!) then it
become important that this heart muscle gets a good supply of blood. And the
quickest way that the supply can get altered is by blocking off the coronary
arteries. This is most usually done via a slow process by which a small
obstruction in the artery slowly gets bigger and bigger until eventually it
blocks off totally and the heart muscle “starves” of oxygen and that
section of the heart muscle, supplied by that artery, just dies.
This event of blocking is called a Coronary Occlusion,
which may end up as a coronary conclusion if the section of dead muscle is
large enough! The actual death of the muscle resulting from this is called a
Myocardial Infarction, often shortened to the simple M.I. (The heart muscle
is called the Myocardium.) The simpler name is ‘Heart Attack’.
In short, cardiac health is mainly involved in keeping
the coronary arteries clean and clear. This is where our old friend
Cholesterol comes in. You see, the deposits inside the artery are generally
made up of this chemical and other blood fats. This makes a “sticky”
patch in the artery and some blood cells get stuck there. This causes a clot
to form and you have all the precursors needed to block the artery, with the
occlusion leading to the infarction, to your family claiming early on your
life insurance policy.
To be able to keep your arteries clear you need to have a
nice low cholesterol, which can be done by diet plus medication if required.
But first you need to know what your cholesterol level is. This requires a
blood test, which can be done at your favourite hospital.
The most likely candidates for a heart attack are overweight,
hypertensive smokers, with high cholesterol. If this is you, do something
about it today. Well, perhaps that’s being a little bit too melodramatic,
but you are certainly one of the cardiac high risk people in the population.
Heart to Heart with Hillary
Dear Hillary,
Thai girls seem to still be very much into the mini-skirt fashion, but our
office girl is taking the cake. Her skirts are getting shorter and shorter and
she doesn’t squat down any more, she bends over the filing cabinet draws
(sic). This has raised some interest in the lads in the office. Is this normal
behaviour for a Thai office girl? Or is this being done for effect? I am her
supervisor and wonder if I should be saying something?
Jimbo
Dear Jimbo,
It’s being done for effect, Petal. Despite what many expats think, Thai girls
are modest - the immodest behaviour in bars is not the ‘norm’ for Thailand.
As you point out, her hem length has raised some interest in the lads, and it
sounds as if she has raised more than just interest! If this is inappropriate
for your office, then you should bring this to her notice, but discreetly. If it
is you that the ‘show’ is meant for, make sure she doesn’t get the wrong
vibes from you. By the way, it’s ‘drawers’, Jimbo.
Dear Hillary,
I think I’ve done something really stupid. I remember you saying not to give
money to the girls round here. I loaned ten thousand baht to one lady I know who
said she would pay it back within three weeks. Well it’s a month now and I
haven’t seen her or heard from her and her friends say she has gone up
country. Do you think I’ve lost the money? What should I do now?
Foolhardy.
Dear Foolhardy,
You haven’t “lost” your money. You know perfectly well where it is. It’s
with some girl up country, you silly fellow. You gave it away, that’s what you
did with it. Mind you, I didn’t say you shouldn’t give your money away, I
said you shouldn’t lend it. There’s a big difference. Yes, Hillary doesn’t
think you’ll see that money again (or the girl). Next time give it to Hillary
for “safe” keeping. At least you’ll know I’m enjoying it as French
champagne and Belgian chocolates are expensive these days. In the meantime, what
you should do is to buy one of those T-shirts that says, “I spent all my money
on women and booze. The rest I wasted.” It fits. Hope the T-shirt does too.
Dear Hillary,
Why do some of the expat women say there’s so much for them to do here? I am
complaining that I’m bored all the time and nothing like what they say. I am
so bored that this makes me start drinking every everyday. Is it because they
are pampered too much and are easily pleased? Or is it something else. What’s
your take on it, Ms. Hillary?
Bored Barbara
Dear Bored Barbara,
The expat women who say there is lots for them to do have discovered the secret
of life, my Petal. There really is so much, even for retirees to do, that they
have to ration their time. Far from being easily pleased, the expat women I meet
are strong characters who make life happen the way they want, and it is that
that pleases them. It’s about time you really looked at your situation and
look at why you have found nothing to do. I guess that you’re not really
looking, but using ‘boredom’ as an excuse for the drinking. Am I right? You
should go and get some professional help from a psychologist or a doctor. There
is a reason that you are acting this way and you should realize this, and do
something about it. Now.
Dear Hillary,
I am coming over to your neck of the woods at Christmas and was wondering if you
could help me with accommodation? I want to keep enough money so that I can go
trekking and I want to ride an elephant. Is Malaysia very far away, as I would
like to try surfing? I only want to spend about seven quid a day for the place,
is this possible? I know it’s probably a funny question, but I’m serious.
Trekker Tom
Dear Trekker Tom,
Don’t worry, my little impecunious one, Hillary has had sillier questions than
yours over the years. When I first read your letter, I thought you were asking
to come and stay with me, and I was about to suggest that if you brought enough
bottles of bubbly, I might just be able to help you. Having said that, I must
point out that Hillary is not a travel agency, a real estate office or an
elephant mahout. Then I read the “seven quid” line. By “seven quid” I
presume you are from the UK and this is about 500 baht in Thai money. Yes, you
will get accommodation for that amount. Reasonable, basic, but clean, and with
air-conditioning, which you will probably need, coming from the UK, not known
for its blistering temperatures in December. Malaysia is the next country
hanging off the bottom Thailand, getting closer to the equator, which you could
have easily worked out by looking at your old school atlas. However, trekking
and Malaysia do not go together at that well. Stick to Thailand’s north, where
you can do everything you want to do, other than surfing, but white water
rafting is here.
PC Blues - News and Views:
Dropped lines,
broken service
by Monitor
I have just spent three quarters of an hour trying to
get my email. Why? I kept getting disconnected.
My phone line is provided by TOT, and my Internet
Service Provider (ISP) is CS Loxinfo (through a CScoms Country Plus
package). I was trying for connection between 06:00 and 07:00 - not a busy
time, I would have thought.
For about half an hour I tried the trusty 1222
connection. Each time I got as far as entering my password for Yahoo mail.
There would be a long pause, and the connection would drop. I would redial,
and find there was no dial tone: 1222 doesn’t seem perform a proper
hang-up. I would reset the phone and try again. About half the time, I
would be told the computer was not answering, and I would have to restart
the connection from the dial-up networking icon. Other times I would get
through, and begin the process of connecting to Yahoo mail again.
Eventually, I tried a local (CS Loxinfo) phone number,
which gave me a fairly slow connection (about 16000 baud), and I eventually
got to my mailbox - which was empty.
Besides this being a waste of three quarters of an hour,
there is money involved here. Not much, admittedly, but significant when
all the ISP customers are taken into account. Why is the service so bad?
And who do we approach for recompense and improvement?
Each new connection through 1222 costs 3 baht, so it is
not in TOT’s interest to sustain a good connection. How can we penalise
them for this state of affairs? Similarly for the CS Loxinfo number.
The ISP charges for connect time, so a low speed
connection makes more money for them. The phone number I was using is
advertised as being the 56000 baud number, but you should be aware that
this is merely a theoretical maximum. If you have a 56k modem, and a
perfect phone line, and the sun is shining in Bangor, you might get that
speed. More to the point, if you have a 56k modem, and you use a phone
number which is not capable of 56k, you certainly won’t get that transfer
rate.
I cannot know whether the phone company or the ISP was
to blame for this abysmally poor service, but it certainly needs
improvement. This is the twenty first century. Some enterprising ISP might
provide a monitor program to its customers, so they can find out the reason
for unexpected disconnections. We will then know who to complain to.
SCO/Novell
Copyright Update
A court in the United States has ruled that SCO must
fight its case in a Federal Court. This makes it even more difficult to
prove its ownership of Unix copyright.
SCO claims to have purchased copyright from Novel some
years ago. It must now prove that the form of words used in the transfer
were sufficient to transfer copyright, and further, they must identify the
version of Unix to which they claim copyright. Even if they win (doubtful)
they may be left with copyright only to a particular version of Unix. If
they lose, all their other cases (against IBM, among others) will fall
apart.
Two follow-ups
Lindows/Linspire
Linspire has agreed to stop using the name ‘Lindows’.
In turn, Micro$oft will pay them $20 million. You may remember Micro$oft
was pursuing them round the world: now they are paying them to shut up.
Malaysia
Malaysia has decided, shortly after an inspiring talk by
Bill Gates, himself, to require Open Source products in its government
systems. “CYBERJAYA: All Government technology procurement will now have
a preference for open source software (OSS), under the Malaysian Public
Sector Open Source Software Master plan made available to the public this
morning.”
They have targets: 60% of new servers, 30% of office
systems and 20% of schools. And by next year.
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Personal Directions:
It really does matter…
by Christina Dodd
What really does matter you may ask, having quickly read
the headline?
Customer service – good customer relations – I
announce, and I announce loudly!
On my recent travels to places in the region I was
astonished to witness and to experience such low levels of service. At
airports, in public places, at hotels, at restaurants, in shopping plazas
and just about any place you can think of, I came away very disappointed. I
felt I had been short-changed on simple niceties and regard in terms of
being a customer and in some ways – a human being.
What is going on out there? What is happening when people
cannot even manage a simple smile or hello, not because it is their job to
be pleasant, but because it is so basic and important in relating to other
people.
Some people in the service industry seem to have given up
totally and are getting by with the minimum in interpersonal skills. They
may be able to perform very well in their jobs, tending to and answering
customer needs, and they may have the perfect product that sells well
anyway, but that is only “half the battle” if you want customers to
become repeat customers – to come back again and again – and to build a
business even further. It is only half the battle in providing what most
customers want these days and perhaps have always wanted – and that is to
be treated in a decent and courteous manner with more than a dash of
sincerity thrown in.
I have heard some arguments such as, it is “their
way” or “their culture”, or that “not everyone can feel on top of
the world all the time”, or “why smile if the customer isn’t
pleasant” or, and I really love this one – “they don’t get paid
enough so why should they bother” and the list goes on. These are just
excuses for poor behavior and nothing – nothing – can validate them. If
you are in the service industry you have to make up your mind whether you
are in it “all the way” or not. And “all the way” means, in addition
to actually performing the different aspects of your job efficiently,
putting your problems and personal inadequacies aside and being a pleasant
and sincere human being.
If this is something you are not prepared to do and be
– then you should not be in this business. Period!
In every situation no matter how tough it may be or how
annoying it may be or how unpleasant it may be, every possible effort must
be made to stay in control and on top of the situation. There is always a
positive solution out there somewhere and I know you have heard this from me
before, but I want to stress that there is always a way to serve even the
most testing customers “without having tempers getting out of control and
unpleasant relations developing”. If you haven’t found them, then you
are not trying hard enough and you need to open your eyes much wider. The
ways are there and you need to find them at all costs – if you want to
provide real customer service! The kind that most of us look for – and
deserve.
Technical skills aside, it appears to me that a good
lesson in “how to say hello” is first-up on the “to-do list”. And
this is in any culture – across the board shall we say. Cultures are no
excuse for not being pleasant. Yes I know that people from some cultures
avoid a lot of eye contact and perhaps feel uncomfortable doing this and
doing that as we do – but let’s not fall into the giant trap of
dismissing and, in some respects, sanctioning this behavior, because it’s
a “culture thing”. Culture can condition a person, but it doesn’t make
the person.
I came across a study on the Elements of Human
Communication a year or so ago done by Pennsylvania University which
highlights the fact that 93 percent of our communication is the person we
are. The actual words we speak account for only 7 percent, whilst tone of
voice accounts for 38 percent and everything else in terms of body language,
attitude, behaviour, emotions etc, accounts for 55 percent. The person we
are is responsible for how we get on in the world and how we live our lives.
The person we are is – in the service industry – integral to being
successful.
Emotional Intelligence, the skills that help people
harmonize, is becoming increasingly valued as a workplace asset. Not just
for the service industry but for any industry. EI embraces five domains such
as self-awareness, managing emotions, motivating oneself, empathy and
handling relationships. It covers areas like social skills, interpersonal
competence, psychological maturity and emotional awareness. All of these
have been around long before the term “emotional intelligence” came into
use by the way. But there are a lot of people out there lacking in these
particular skills. They may be shining like the sun with regard to specific
job skills, but barely giving out a flicker of light in terms of their
emotional intelligence!
For anyone working in service related businesses, if
their level of emotional intelligence is poor, so too will be their
performance.
You may be thinking that EI is a natural intelligence and, as such, it is
an intelligence that we should all have because it is something that comes
from our up-bringing, our environment and our education. This is true and we
all possess it to a certain degree, but if you consider this subject
closely, you can begin to understand how for many people, this area of
intelligence is seriously limited and has therefore become a problem causing
great concern.
Psychological Perspectives:
Emotions
by Michael Catalanello,
Ph.D.
We all know what it feels like to be
happy, sad, angry, disappointed, or depressed. We experience a variety of
emotions on a daily basis. Emotions are a part of the fabric of our lives,
a seemingly central part of the human experience.
We occasionally observe displays of emotional behavior
by others around us: a family member who becomes angry or upset, a coworker
who is excited by an unexpected promotion, a stranger who expresses
frustration while waiting in a slow moving queue, a child who is tired and
cranky.
In the news we also frequently witness displays of
strong emotion. We see the jubilation of fans of some victorious team of
athletes on a celebratory rampage. We see crowds of stone-throwing
political demonstrators, as well as the angry responses of law enforcement
officials charged with controlling violence.
Occasionally we see emotion being strategically employed
in order to affect public opinion or political policy. For example, we
recently saw a vividly emotional display by an unfortunate young Korean man
being held hostage by Iraqi insurgents, pleading for his government to
reconsider a decision to deploy troops into Iraq. We subsequently saw
emotions of sorrow expressed by his family and countrymen in response to
the tragic news that he had been brutally murdered by his captors.
The use of emotion as a political tool is certainly not
a new phenomenon. It has been used throughout human history by political
leaders to arouse passions around some important issue. Intense emotions
can have a powerful effect upon people, energizing them to perform acts
that might seem unlikely or impossible in their absence.
What is emotion? Modern psychological theory views
emotion as a complex response that produces a readiness to act. Six
different components of intense emotion have been identified by theorists.
The first component is a cognitive appraisal. This involves a person’s
assessment of the meaning of a situation or experience. For example, if you
consider your favorite athletic team’s winning of the championship as
evidence of the inherent superiority of your social group, you might
experience the emotion of joy, even ecstasy. If you interpret a slight by a
friend or lover as evidence that you are no longer loved or lovable, you
might experience emotions of sadness or despair.
Cognitive appraisals like these trigger a number of
other components of the emotional response. There is the subjective
experience of the emotion, the way you feel as a consequence of the
emotion. There are also a number of physiological changes that occur within
the body. The body’s autonomic nervous system is a major player in
producing such changes as increasing our heart rate, changes in blood
pressure, producing sweaty palms, etc.
Researchers have also identified certain characteristic
facial expressions associated with emotions such as happiness, sadness, and
disgust. These expressions are universally recognized regardless of
cultural or ethnic background.
Another component of emotion is the tendency to think or
act in a certain way. For example, if you experience the emotion of
affection toward someone, you might feel compelled to get to know him or
her better. If you experience anger toward someone you may feel an urge to
verbally or physically attack him.
The final component consists of the actions we perform
in response to the emotion. A person who experiences love or affection
toward someone, for example, might begin spending time with the object of
her affection. A person who is angry or fearful might begin avoiding the
object of his negative feelings.
Dr. Catalanello is licensed as a psychologist in his
home State of Louisiana, USA. He is a member of the Faculty of Liberal Arts
at Asian University in Jomtien. Address questions or comments to [email protected]
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