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Money matters: The ups and downs of today’s market
Graham Macdonald
MBMG International Ltd.
Judging by the latest nonsense on CNBC, the markets this year
have most people confused; one minute they are up and the next they are down.
Greenspan tells us that all is well, the EU says that exports are going great
and everyone emphasises the strength of the emerging markets. This is then
followed by dire problems such as profit warnings, poor job growth, worldwide
political worries, the price of oil, war and terrorism. How does one plan for
the future with such conflicting reports?
Share prices are basically driven by two things: earnings per
share and how much investors are prepared to pay for those earnings. This is
known as the Price/Earnings (P/E) Ratio. At the moment there is no way that most
stocks can get us the high returns that existed for much of the last two decades
of the twentieth century. At best, by themselves, earnings can achieve low
single digit returns. What about P/E Ratios? Most analysts regard them as far
too high at the moment. Low growth + high P/Es = a sure fire mixture that means
the markets will go nowhere for the foreseeable future, except may be downwards.
Having said all of this, there is no reason to go and dive
under a baht bus. Sectors of the major world economies may do well over the next
few years. A lot of growth will come from new technology, bio-technology and
other such innovations (however, many of these companies probably do not exist
yet, and therefore few people can extract benefit from these. Certainly not in
the publicly-owned domain).
Earlier this year the S&P500 showed an increase of 27% in
earnings per share, but this cannot last. As we have said before, everything is
cyclical. Nothing goes on forever. There is a limit to how big a share of the
economy the powers that be are willing to hand over to the large corporations.
In the US, tax corporate profits’ share of GDP hit 7.9% in the first quarter.
This is the highest it has been since the mid-sixties and so that limit seems to
have been reached. Corporate profits simply cannot sustain a growth rate faster
than that of GDP.
Without getting too complicated, economists use something
called the internal rate of return of stocks. This is the annual growth of
earnings per share of present public companies plus the dividend yield. In
America at the moment this would mean that there would be an annual return of
under 3.00% on shares if one assumes that the P/E ratios stayed as they were. If
one was optimistic then you might get to just over 4%. However, if the economy
does not grow as quickly as expected then the GDP will be reduced. In turn this
means that you could get better returns from protected government bonds (PGBs).
The only way that shares can beat these PGBs is for P/E
ratios to go back up again. At the moment they are at about 25 which is 67%
above the historic average of 15. They cannot go much higher because that would
reduce the attractiveness of stocks over things like PGBs even more. However,
going back to the beginning of this article, with the likes of Greenspan trying
to talk the economy up, it will take time for many investors to realise that the
earnings per share are falling behind economic growth. Once they do though, then
they will leave the markets entirely. This should drive the P/E ratios down to
levels that are much more realistic.
Naturally, this would mean that there will be a substantial
fall in the stock markets. However, that might, in turn, mean that future
investors will be able to make big gains. This is exactly what happened after
the 1970s bear market.
Alternatives: It is possible that investors are happy with
these low returns and keep their shares in the hope of some meteoric rise
sometime in the future. If this is true then the markets could potter along in
the low digit growth range for years to come.
So, what do you do in such a situation? The first thing is
not to get too greedy and attempt to become a millionaire overnight. This is a
guaranteed way to lose all of your money. For people who like to invest in
equities directly then look at dividend yield. A company that yields over 5% per
annum and has a P/E ratio below 14 should not do too badly. Warren Buffet has,
for nearly forty years with Berkshire Hathaway, frequently accepted income
inline of capital gains. You can always re-invest it if you do not want the
money.
However, investors would be better advised to forsake
equities in favour of diversity. To put it simply, not everything can go badly
all at the same time. What to put your money in? Forget property and equities in
the US. Europe does not look too healthy either. A good global dynamic fund such
as the Optimal Core Harbour Fund or PGS’ Global Dynamic Fund is worth looking
at. They survey the markets and make long and short calls that will never set
the world alight but should always beat the bank by a good few basis points.
With these types of funds you should be able to double your money every seven or
eight years with very little risk. This is because they allocate to all 5 asset
classes (equities, property, cash, bonds and alternatives).
For those of you with regular premium funds, do not despair either. For the
first time institutions such as Generali and Friends Provident are offering the
dynamic 5 asset classes structure to their regular premium clients. But I hear
you all say, “Surely a long term portfolio performs best if it’s invested is
equities”. We’ll find out next week when we examine the performance of
equities versus the other asset classes.
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: Who dreamed up 35 mm?
by Harry Flashman
It was the famous photographer, the late Henri
Cartier-Bresson who said, “Photography appears to be an easy activity;
in fact, it is a varied and ambiguous process in which the only common
denominator amongst its practitioners is their instrument.” The
instrument he was referring to was, of c ourse,
the camera itself.
With many film stock sizes available these days (35 mm,
120, 5x4 and 10x8) it may come as a surprise that still photographers were
not the first to use 35 mm, even though these days the vast majority of
still cameras are 35 mm.
The answer to why the 35 mm size became the most
favoured lies in two areas. The first was the availability of film. Did
you know that the first people to use the 35 mm film with perforated edges
were not still photographers, but were the original movie makers? In the
late 1890’s this film was introduced to be used in the burgeoning movie
market - so there was good availability of film stock of this format.
In fact, 35mm film is even now the basic film format
most commonly used for both still photography and motion pictures, and
remains relatively unchanged since its introduction in 1889 by Thomas
Edison. The origins of the 35 mm size was an Eastman Kodak 70 mm roll film
for photography, being cut in two. Technicians working for Edison then cut
four round perforations per frame along both edges. This format was
initially called ‘Edison’ size. The flattened perforations were
introduced by Bell & Howell around 1900, which remain to this day for
camera original film. Kodak-Standard perforations were introduced some ten
years later for projection use.
However, the first still cameras to utilise this film
did not come out till 1913 and there were quite a few brands on offer
between 1913 and 1924, but none really ‘caught on’.
The milestone in photographic history was the 35 mm
camera produced by the German Leica Company that came out in 1925. This
had actually been based on a 1913 design when the prototype was built by
Oskar Barnack. Leica refined this and produced an immediate winner with
the following specifications - a focal plane shutter with speeds from
1/25th to 1/500th of a second along with a ‘fast’ f 3.5 lens. The
small size, precision and build quality of these cameras made them
instantly popular, and began the reputation for highest quality that Leica
still enjoys today.
In 1930, Leica improved on the original and coupled
rangefinders, even faster shutter speeds and interchangeable lenses came
on the scene.
The next company to join this new breed of cameras was
Zeiss Ikon who produced the Contax in 1932, which by 1934 had a coupled
rangefinder, a separate optical viewfinder and a range of slow shutter
speeds as well.
In the earliest days, the photographer had to wind 35mm
film into reusable cartridges himself, and cut the film leader. In 1934,
Kodak introduced the 135 single use cartridge as we know it today. It was
the invention of Nagel Camerawerk in Stuttgart, and Kodak was so
interested in this invention that it bought the entire company, and
marketed the Nagel camera as the Kodak Retina.
As this ‘new’ 35 mm format became more popular, the
next milestone was the introduction of colour slide film. Kodak began
producing the Kodachrome film in 1935 for 16 mm movie work. This was the
first multiple layer colour film and in 1936 this was expanded into the 35
mm format. In fact, the early boxes of Kodachrome used to have printed on
them “For use in Retina, Contax and Leica cameras.”
The next major step was the introduction in 1942 of the
Kodacolor process to produce colour prints and the future of 35 mm
photography was sealed.
After this, when the Japanese avalanche started, the end result is
almost a 35 mm camera in every home in the western world. However, we
should not forget Oskar Barnack and the early movie makers!
Modern Medicine: The Tooth Fairy does have a magic wand!
by Dr. Iain Corness, Consultant
Stem cells seem to be the current buzzwords.
Stem cells are immature ‘growth’ cells that can produce new organs for us,
well that’s the hope (or the hype) anyway.
Stem cell research has also been controversial, as it has
been reported that scientists were harvesting stem cells from the unborn foetus.
Naturally this brought howls of indignation, and condemnation from some areas,
and not without reason, I should also add.
However, the stem cell concept has been gathering momentum.
Here was a scientific solution to aging. As all our organs wore out, we could
replace them with new ones grown from stem cells. Well, that was the picture in
everyone’s minds. This really was the hope of the future!
Unfortunately, it requires dangling such carrots before the
world, if the researchers are to get sufficient funding to be able to continue.
And yes, I know that’s a fairly cynical view, but after many years in medicine
I have a fairly cynical experience of what happens in the course of the quest
for scientific knowledge.
One such carrot has been the ‘news’ that teeth are living
organs, and as such, stem cells could be used to grow new ones for us. Being a
person with a morbid fear of dentists (quite irrational, I admit, as my dentist,
Dr. Tapasit, is a wonderful chap who must despair at my phobia) but here was
science offering me new real teeth, rather than plastic ones on spikes, with
bridges and metalwork! I was interested!
Earlier this year it was reported that scientists at King’s
College London had been awarded around $850,000 to help them develop human teeth
from stem cells. The scientists had been experimenting on mice, and had
apparently managed to grow new mouse teeth, putting rodent dentists out of
business. Not only were they good at the scientific side, but they had good
business advisors as well and set up a company called Odontis to spend the
$850,000 wisely.
The Odontis concept is to program the undifferentiated stem
cells into being teeth, and then transplanting the new living teeth into the
spaces in your gums where teeth used to be.
Professor Paul Sharpe is the genetic research scientist
behind the technique and head of division of Craniofacial Biology and
Biomaterials at the Dental Institute at King’s College.
He said, “A key advantage of our technology is that a
living tooth can preserve the health of the surrounding tissues much better than
artificial prosthesis.”
These new living teeth, grown just for you, would cost around
$2000, about the price of synthetic implants, but he felt it was five years away
at this stage.
Research down-under has been ongoing as well, at the Hanson
Institute, the research arm of the Royal Adelaide Hospital. The director of the
Institute, Professor Howard Morris, came forward in November 2004 to counter
much of the negative feelings towards stem cells, saying that they can isolate
the stem cells from either baby teeth, or adult teeth.
According to their work, our own stem cells exist inside the
teeth, and this could one day lead to teeth being regrown or repaired. Stem cell
biologist Stan Gronthos told a symposium on stem cell research that the goal is
to store harvested dental stem cells in liquid nitrogen, ready for use to repair
damaged or diseased teeth. But he says there is a lot of work still to be done.
So is Stan Gronthos the Tooth Fairy? Perhaps not yet, but
this is one area of research that many of us would like to get our teeth into!
Learn to Live to Learn: Quality, Concentration, Depth –
The Advanced Placement Programme
with Andrew Watson
Born and bred in the United States, the
Advanced Placement Programme (AP) offers high level educational opportunities
for high school students, for which significant university credit can be
accrued, much as with the IB diploma and A levels.
I taught AP in Jerusalem and was struck by the extraordinary
demands placed on students in subject specific knowledge, understanding and
demonstrations of expertise. Visual Arts students have to produce as many as 50
(yes fifty!) pieces of work in three areas – quality, concentration and depth
– which just about sums up AP for me.
I found the academic rigour required to administer the
examinations, let alone take them, extremely demanding and I must admit to
finding it quite extraordinary that students sometimes expect to take the exams
(which are held only once a year in May) after only one year of instruction.
Such is the quantity and level of the content that I would strongly advise
students to take two full years, in order to give themselves the best possible
chance of success.
What I find almost implausible (but true) is that you don’t
actually have to take an AP course in order to sit the exam. On the other hand,
why would you want to if you hadn’t taken the course? Well, there is a good
reason. Upon closer examination, the College Board (which administers the exams)
is committed to providing access to the AP exams to home schooled students and
students whose schools do not offer AP.
With 34 courses and exams across 19 subject areas, AP can be
said (and does say) that it offers ‘something for everyone’. The only
requirements are a strong curiosity about the subject you plan to study and the
willingness to work extremely hard.
I think the best way to understand AP is to acknowledge that
they are inherently American; in fact I like to think of them as the ‘best of
America’. They are part of the academic fabric of a school, but they do not
dominate. They are the culmination of 12 years of study and a logical
progression for high achieving students. In this sense they can be reasonably
seen as much more of an equivalent to A levels, rather than the IB diploma.
In my experience of education, American parents display what
I like to describe as ‘healthy consumerism’. I think that certain healthy
expectations of a level of service and provision, firmly rooted in an
understanding of value for money, is to be encouraged. And let’s not kid
ourselves; the kinds of pre-university academic programmes that have been
written about in this column don’t come cheap.
Generally, I think it’s fair to say that most professionals
abroad are well-educated and from what I have seen and heard, American parents
are amongst the most discerning and knowledgeable. They can smell when they’re
getting a bad deal and they won’t stand for it.
I welcome this; I welcome their openness and their
willingness to engage in constructive dialogue. Sometimes, one encounters
fascinating (if terrifying) culture clashes between American parents and other
dominant school cultures, British for example, where it appears that the English
and the Americans are truly ‘divided by a common language’. But I digress.
More of cultures another time.
The question I want to pose is, what has this ‘healthy
consumerism’ got to do with the AP? Well, it’s this: Firstly, any school
that is prepared to offer the course must have some academic pedigree. It’s
high level stuff. They wouldn’t dare offer the course to ‘tuned-in’
parents and students if they couldn’t provide the results to go with it. So
you can be pretty sure they have high quality, qualified teachers, who have
experience of the AP programme, teaching it.
Secondly, if you look at what schools often require as
pre-requisites for taking AP courses, which include demonstrating superior
academic potential, displaying an excellent command of spoken and written
language, consistently showing personal initiative, enjoying involvement in the
extracurricular life of the school and showing a willingness to assume
leadership – well you think to yourself – where have all these estimable
qualities come from? And the most telling of answers to this question is –
from the school itself.
With good reason, American schools are often called,
‘Community schools’. They reflect and cater for every aspect of the American
way of life, whilst generally doing a pretty good job of celebrating the
diversity of population groups in their ranks.
Of course I’m fortunate to be talking from experience, but
I have found the grand ideals that America purports to uphold around the world,
such as ‘freedom’ of the individual, epitomised by the right of
self-expression in students, nurtured and encouraged in a positive, caring and
tolerant environment in American schools, in such a way that it seems to provide
an example to their own leaders, as well as less ‘consumer aware’ schools.
Next week: Advance Placement Programme and Cultural Bias
 Heart to Heart with Hillary
Dear Hillers,
Just a quickie to thank you for all the belly laughs I have had reading your
column. I have just finished a seven week holiday in Thailand, golf great,
food better, weather ok and the Beach road well !!!!!!!
My tips for making Pattaya a little more user friendly.
1. Take all the horns off the Baht Buses.
2. No one should be allowed to open a restaurant until he or she knows that
white wine should be kept and served chilled.
3. Notice to all bar owners, every 30 minutes they should conduct a poll of
the ages of the punters at the bar, upon finding an average age play the
appropriate music. It seems the 18 year old girls choose the loudest bang
bang disco stuff and inflict it on the delicate 50 odd year old ears of
their prospective clients.
4. Urgent, by law, the planners should immediately cap the amount of tailors
opening shops or just call the place the New Saville Row.
5. Bar owners go to the expense of cable TV Sky Sports and then P off the
guys by not turning the sound up for the commentary, go figger!
Having said all that I will be back. Thank you again dearest.
GT
Dear GT,
What’s with this “Hillers”? I am Hillary, my Petunia. However, you
have made a number of very salient (that’s a new word, isn’t it) points
that the city fathers and the Guild of Indian Tailors (GIT) should note (and
not just in Pattaya, but Chiang Mai as well). The constant beep-beep, the
constant “Would you like a suit/dress” (delete whichever is
inappropriate, but leave both in if you are a cross-dresser), hot white wine
and noisy bars are items worthy of complaint.
Some of your reasoning is a bit off, though. 18 year old girls in bars? This
is not possible, as the Ministry of Fun (MOF) says they are all over 20
(some well over), and sends in the Fun Police at night to check. As far as
the ages of the prospective clients at the bar are concerned, why don’t
you open a bar here yourself? Call it the “Over 50’s” bar with
suitable time-frame music, chilled white wine and English sub-titles on the
TV. You’ll make a fortune with this - there’s got to be more of you out
there!
Dear Hillary,
Nit and Ying (the adorable wee ones) are busily knitting
bootees and bonnets! I wonder if this is a traditional custom when baby
buffaloes are due or if the portents are more ominous eg., a delivery of
anklebiters?
Mistersingha
Dear Mistersingha,
Well one thing is for sure and certain, my precious
reneging little Petal, the delivery won’t be the promised (many moons ago)
chocolates and champers for Hillary. Personally I hope you get quintuplets.
Dear Hillary,
We have been together for four years and he recently
spent five days in the temple. Upon his return, he seems a changed person,
doing morning and evening prayers, reading books on Buddhism, which is good
and I fully respect, as I am a Buddhist too.
This evening over the phone, he dropped the bombshell. He
plans to enter the monkhood at age 45, which is 11 years time, irregardless
if I am still alive and kicking. So what happens to the “I will look after
you when you are sick and old, and be by you in times of need.” (I will be
58 years old then.) Of course that is only his plan for the future but I
cannot imagine continuing to invest love in this relationship to face the
day when he leaves for the temple while I am in my golden years and too old
to start another one (relationship). I gave him an education, set a sum of
money in a few banks for unforeseen circumstances and bought a house (in his
name) hoping that it would be my retirement home. Should I wait and face the
impact years later or should I leave and make alternative plans?
PS: I am a gay Asian man in Singapore, having a
long-distance relationship with this Thai guy.
John
Dear John,
You are trying to provide a ‘retirement plan’ for
yourself, but rather than use tangible items such as provident policies, you
are, as you say, investing “love” in a relationship to do this for you.
Any relationship (gay or otherwise) that is based on this kind of ‘guilt
trip’ is almost undoubtedly doomed to failure. You do not have to be so
melodramatic as “leave and make alternative plans”, but if you enjoy the
long-distance relationship, then continue in that, but at the same time look
at what you should do as regards retirement residence for yourself and money
to live on. This is a simple matter to arrange, and any investment advisor
can help you with that (and not Hillary, as I haven’t got enough to pay
the advisor, let alone invest anything - otherwise I wouldn’t be so
dependent upon people like the ingrate Mistersingha).
Finally, you should be aware of the fact that nobody ever
guaranteed you would reach your “golden years”, or that your boyfriend
would either. Stop trying to wield psychological sticks and start making
your own decisions. Finally, as a Buddhist you must know that all of life is
change and suffering, so stop feeling so sorry for yourself.
Psychological Perspectives: Misinformation about HIV/AIDS persists
by Michael Catalanello,
Ph.D.
Scientists first identified the virus
which causes AIDS in 1984. Since that time, despite an explosion in our
knowledge and understanding of the disease and campaigns to disseminate
accurate and qualitative information, many patently false and misleading
ideas concerning HIV/AIDS ideas continue to circulate.
Such misinformation is not confined to the poor and
ignorant. Last week a report issued by U.S. Congressional representative
Henry Waxman revealed that programs funded by the U.S. government are
guilty of disseminating faulty information pertaining to the transmission
of sexually transmitted diseases, among other issues.
These erroneous ideas often contribute to stigma,
discrimination, and unnecessary suffering of people living with HIV/AIDS,
their families, caregivers, and others. Furthermore, experts tell us that
ignorance and misinformation help promote the spread of the epidemic. Here
is a small sampling of some of the myths concerning HIV/AIDS that permeate
our society:
HIV/AIDS is primarily a
disease of the gay community
Because AIDS first appeared among gay men in the United
States, early speculations associated disease transmission with activities
that are peculiar to homosexual men. Already existing negative stereotypes
against gays were further reinforced by these suggestions. Before long,
however, HIV/AIDS gained a foothold within the heterosexual population
where it continues its relentless spread. It is now clear that it is
primarily unprotected sex and the sharing of needles by IV drug users that
transmits the virus. The sexual orientation of those engaging in such
behaviors is irrelevant.
You can tell if a person has HIV/AIDS by looking at him/her
This one persists, despite longstanding efforts by AIDS
activists and educators to debunk it. There is, in fact, no way to tell if
a person has the virus simply by looking at him/her. We now have a medical
test designed to detect the antibodies produced by the immune system after
exposure to HIV. Even HIV antibody tests, however, can yield false negative
results if the person was recently infected. Medical authorities tell us it
may take as long as three months for antibodies to develop to a level where
they can be detected in the blood. Thus, a person can look healthy and test
negative while carrying the virus in his bloodstream.
You can get HIV/AIDS from using drugs
The use and abuse of illicit drugs is a serious problem
for many people. The use of such drugs, however, can not in itself cause
HIV infection or AIDS. Those who inject drugs using needles which were
previously used by a person who is HIV+ stand a high risk of becoming
infected. This is because the used needle might contain small residues of
blood too small to be seen, but containing enough virus to transmit the
infection. It is the sharing of needles, not drug use, which puts the
person at risk.
Condoms are
unreliable in
preventing the transmission of HIV
It is quite clear that condoms provide the most
effective means of avoiding infection through sexual intercourse. The
national campaign promoting condom use by the Thai government in the early
‘90s is widely credited with dramatically reducing infection rates,
making Thailand a model for HIV prevention. The major risk in using a
condom occurs in the event that the condom slips off or breaks. For this
reason, it is usually recommended that a water-based lubricant, like KY
Jelly be used with condoms to further enhance the protection they offer.
If I stick to one partner I can’t become infected
If you are HIV- and if you remain faithful to one sex
partner, and if your partner is also HIV- and if that partner remains
faithful to you, you are safe. That’s a lot of “ifs,” and it is
becoming more common for a faithful wife, who erroneously assumes her
husband’s faithfulness, to become infected by her husband.
You can contract HIV from the body fluids of an infected person,
including sweat, tears, and saliva. You can contract HIV by kissing an
infected person.
This one most likely started when it was publicized that
the virus is found in human body fluids. Fortunately, the concentration of
virus in sweat, tears, and saliva is not sufficient to cause the infection
of someone coming in contact with them. Blood, seminal fluids, vaginal
secretions and breast milk, however, do carry sufficient concentrations
capable of transmitting infection. These fluids then must find a route into
the bloodstream of another person in order for infection to occur.Dr. Catalanello is a licensed psychologist in his home
State of Louisiana, USA. He is a member of the Faculty of Liberal Arts at
Asian University, Chonburi. Address questions and comments to him at [email protected]
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