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Money matters: Economics
Graham Macdonald
MBMG International Ltd.
If one can accurately predict what the
US consumer will do in 2005, than one would be a very wealthy man or
woman. In an unbalanced world, where trade still relies on the US, its
health or otherwise is still key in determining how or where to invest
one’s money. On a balance of probabilities, it is our view that US
growth will disappoint in 2005. This we base on a number of factors,
chiefly that tax cuts for consumers are now largely exhausted; Greenspan
has indicated that interest rates are rising and wage income growth has
not kept pace with consumer spending.
However, the latest economic numbers have not helped
solve this conundrum. On the one hand, retails sales remain buoyant, but
on the other hand real average weekly earnings are anaemic and mortgage
refinancing is coming off the boil. It may not be 2005 that the consumer
capitulates, but with debt at sky high levels, it is only a question of
time before the US housewife starts to try to save. Modern history is
replete with examples of consumers maintaining their spending habits long
after they ceased to be affordable. Inevitably the payback has been
painful.
Equities
Risk aversion seems to be the name of the game, as most
major indices have started the New Year off in the red. In a recent
Merrill Lynch survey of global fund managers, the dominant theme seemed to
be one of avoiding risk and holding on to the spectacular gains seen in
the final quarter of 2004. So why this sudden change of heart? We think it
has everything to do with Greenspan and his comments made at the December
FOMC meeting, which is why the focus on the February meeting is even more
intense than usual. In December he indicated that he was concerned about
inflation and the excessive risk taking in the markets.
Rather than any decision to increase or not increase on
Feb 1, this indicated that the Fed is suddenly serious about raising rates
through 2005 and that short term rates will probably have only one
direction to go and that is up. Given that the dollar carry trade has been
all the rage for the last two years (thanks to a weak dollar and low
interest rates in the US), it is probably not that surprising to see that
higher beta trades are currently under pressure, as rates start to rise in
the US and the dollar has pulled back from historic lows.
The majority of strategists that we read have
collectively turned bearish on world markets in the short term. Belkin,
who is one of the most bearish, advocates selling into any strength and
says that he feels that any new rallies in the market will struggle to
reach higher highs than those reached in late 2004. This is even more
pertinent, given his bullish view of markets in the final quarter of 2004.
The markets also make Richard Russell nervous and he
bases this view on the technicals of the US markets deteriorating. The
Buying and Selling indices are off their highs, the advance decline ratio
is struggling, there is non confirmation of the new high by the Dow
Transports by the Down Industrials and the Big money breadth index (an
indicator of the institutional investors’ interest in the markets) is
off its highs.
Bonds
It is clear that one of the few asset classes (apart
from being the long dollar) to achieve positive returns, so far, for 2005
has been long dated US treasuries. This fact is all the more amazing,
given the weakness in equity markets on the back of rising inflation and
interest rate concerns. The only way that this current rally makes any
sense is if investors honestly believe one of the following:
- Deflation is just around the corner;
- US growth will slow;
- Foreigners are continuing to support the treasury
market (which would at the same time explain a lot of the strength of the
dollar).
Currencies
As predicted, the dollar has staged a comeback in the
early part of 2005, which we can happily report is the call we made late
2004. It also did not surprise us to see the dollar bounce back from the
horrific November trade deficit numbers, as we have long argued that a
weaker dollar is not the answer to the world’s trade imbalances. What is
needed is stronger growth outside the US and until either that happens or
there is a recession in the US, the deficit is not going to suddenly get
any better, weak dollar or not.
In the short term we maintain that the dollar could
enjoy a bit more strength, especially against the euro. The euro, from a
purchasing parity point of view, is starting to look expensive and the ECB
is starting to mutter that exports could come under pressure.
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 graham
@mbmg-international.com
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: More powerful photography
by Harry Flashman
 A
few weeks ago I published a photograph of Pablo Picasso, all dark and
moody with lots of shadow, taken by the famous photographer Irving Penn.
Look at this week’s photograph, that of the eminent historian Thomas
Carlyle. It was taken in 1867 and is ranked as one of the most powerful
portraits in the history of photography. I have written about this before,
but it stands repetition. This is photography with a capital P!
Now look again - technically it is imperfect. There is
blurring of the image, but when you realise that the shutter was open for
probably around three minutes, then you can see why. The sitter could not
possibly remain motionless for that period of time.
The dynamics of this shot come from the very first
principles of photography - painting with light. It is not the subject -
it is the way you light the subject. The light is falling on the sitter
almost from the side and slightly above. One eye is partially lit and the
other in shadow. The hair and beard show up strongly. The photo is totally
confrontational.
Analyse further. If the face had been front lit, and
both eyes, the nose and the mouth were all clearly visible then there
would be no air of mystery. The dark shadow areas of the photograph have
made you look further into it. You begin to imagine what the features were
like. You also begin to imagine what the person was like. You have just
experienced the “perfect” portrait.
The shot was taken by Julia Margaret Cameron (1815 -
1879) a British lady who had been raised in India, in the days of the
British Raj. Surrounded by servants, she had never had to do anything for
herself, and yet, in her late forties she took up the new fangled notion
of photography. This was not the age of the point and shoot simplicity we
enjoy today. This was the age of making your own photographic plates by
painting a mixture of chemicals all over it - chemicals you mixed yourself
- exposing the plate in a wooden box camera and then fixing the negative
in more chemicals and finally making a print.
It was the 29th of January 1864 when Mrs. Cameron
finally produced her first usable print. She had made the exposure at 1
p.m. and in her diary recorded the fact that by 8 p.m. she had made and
framed the final print. (And you think you are doing it tough if you have
to wait two hours, instead of one!)
As opposed to the tiny “cartes de visite” that were
the norm at that time, Julia Margaret Cameron was making close up
portraits 30x40 cm. However, she would not have managed to photograph so
many of the notables of the era had it not been for her next door
neighbour, the Poet Laureate, Alfred Lord Tennyson. After Tennyson saw his
portrait he persuaded his eminent friends to sit for her as well. Most of
these portraits were different from the Thomas Carlyle photograph in that
they were taken in profile. Mrs. Cameron felt that the innate intelligence
could be more easily seen in the profile and this may have been the result
of the influence of the quasi-science of Phrenology, whereby your cranial
bumps showed your true talents, which was all the rage at that time!
Julia Margaret Cameron contributed to photography by
showing that it is the eye of the photographer that dictates the
photograph, not the “smartness” of the equipment. She also showed a
personal determination to succeed which should be an example to the young
photographers of today.
So you can stop reading the photographic magazines to see if you should
buy the latest offering from Nikononanolta complete with one zillionth of
a second shutter speed and dedicated flash power for up to three
kilometres and just go out and take photographs with what you have got.
Look at what is in front of you and “make” your own photographs
“work” for you. Thus endeth the inspirational lesson. Thank you Mrs.
Cameron. Class dismissed!
Modern Medicine: Drug abuse - just a Thailand problem?
by Dr. Iain Corness, Consultant
With all the various “Wars on Drugs” over
the past few years you could be forgiven for thinking that this was some sort of
peculiar local problem. It isn’t. The report, A National Survey of
Canadians’ Use of Alcohol and Other Drugs, which is available at
www.ccsa.ca/pdf/ccsa-004804-2004.pdf would show that drug abuse has increased in
Canada over the past 10 years.
Where in Thailand it is amphetamines that are the
‘pleasure’ drug, in Canada it is cannabis (marijuana). What is additionally
brought out in the Canadian report is that the authorities overseas also
consider alcohol as a drug which is overused, and they are correct. When you
look around you in Thailand, you would have to agree that this is just as great
a problem here as it is overseas.
The Canadian addiction study was done as a phone survey, and
was the first since 1994, and covered the habits of Canadians aged 15 and older.
While these types of surveys really only scratch at the surface, and are not
totally accurate, they are sufficiently sensitive to show trends that occur,
especially when taken several years apart.
According to the report in the British Medical Journal, a
total of 13,909 Canadians from across the country took part in telephone
interviews for the latest study between December 2003 and April 2004. It focused
on the impact that alcohol and drug use has on physical, mental, and social
well-being.
Overall, 45 percent of Canadians reported using cannabis at
least once during their lifetime. Fourteen percent of Canadians reported using
cannabis in the past year, nearly double the rate reported in 1994. Of these,
almost 46 percent had not used cannabis or had used it only once or twice in the
three months preceding the interview. However, 18 percent of users in the past
year reported daily use.
While it could be said that this does not represent much of a
threat to society, when the figures were broken down into age groups, a picture
emerges that is worrying for Canadian health professionals.
Again returning to the British Medical Journal, reported
rates in youths show that almost 30 percent of 15-17 year olds and more than 47
percent of 18-19 year olds said they had used cannabis in the past year. Almost
70 percent of survey participants between ages 18 and 24 reported having used
cannabis at least once.
The study also showed that the prevalence of lifetime use of
cannabis increases with education and income, the study found. Also, people who
had never been married were more likely to use cannabis. This has to be another
worry for the public health people overseas. The better educated group, that
should know and understand the problem, are choosing to ignore health
directives.
Without wishing to spark off debate as to whether or not
cannabis is dangerous, even the pro-marijuana lobby has to admit that for the
vast majority of users it is not taken for medicinal purposes, but for the mind
altering states that it can induce. “The rise in cannabis use, especially
among young Canadians, is of concern because we know that cannabis is not a
benign substance,” said Michel Perron, chief executive officer of the Canadian
Centre on Substance Abuse. “There are a number of health risks associated with
use.”
Nor am I ignoring that alcohol is another mind-altering
substance with serious health effects. It is a sad reflection on our societies
that we have to escape from reality in these ways.
Learn to Live to Learn: Heroic leadership
with Andrew Watson
Nelson Mandela maintains that, “The terms of
the struggle are dictated by the oppressor, not the oppressed”, a view which
combines knowledge of the reality of people’s condition with their civil and
human rights and legitimate aspirations.
Mandela justified his decision to embrace armed struggle on
this basis, feeling he had exhausted all legal forms of representation and been
greeted by intransigent, inherent prejudice and overwhelming brutal force.
 Von
Shmelwyn: “An Orchestra wants to be told what to do.”
Prejudice encapsulated for me in Attenborough’s film
‘Cry, Freedom!’, when the judge asks Steve Biko, “Biko, why do you people
call yourselves, ‘Black’? You people are more brown than black.” Biko
pauses before responding, “Why do you people call yourselves ‘white’? You
people are more pink than white.”
Mandela’s 27 years in prison (30 in total) movingly
documented in his autobiography, “Long Walk to Freedom”, helped create a man
of extraordinary resolve, determination, discipline, mental and physical agility
and in the end, compassion for humanity which cannot fail to move the reader to
tears.
I have been fortunate enough to see him twice. Once in
public, in Brixton, London, usually an aggressive, uncompromising inner city
environment. When Mandela came to town, it was as if his aura of reconciliation
had infected the swarming masses with great happiness and tangible joy.
Four years later I was fortunate enough to see him address
the South African parliament in Cape Town. The previous day, when he had been
absent, question time had been characterised by a raucous mob of seemingly
fanatical members of parliament, yelling claims and counter claims across the
floor. The next day, I was amongst a lucky few squeezed into the chamber as
Mandela addressed the ‘Council of Provinces’. The difference could not have
been more profound. There was utter, reverential silence, punctuated only
occasionally by the gentle clink of glass on lectern as he paused and sipped
water.
During his speech, he managed to unravel what was becoming an
intractable political problem, and both censured and affirmed the opposing
parties. He had forgiven his captors and with Archbishop Desmond Tutu, promoted
truth and reconciliation as the only way that the peoples of his country could
live together and flourish and be able to look back at the past, without being
held captive by it.
If in reading of Mandela’s epic struggle of pain,
confrontation and eventual victory you are asking yourself, “What has this got
to do with leadership in education?” then you might be surprised how often the
capacity for heroic leadership in education is required, and how the absence of
that capacity can lead to crisis.
During the Al-Asqua Intifada in Jerusalem in 2001, the school
I worked at became a haven for reconciliation and a model for the indigenous
populations to follow. Fearless but tolerant, the leader of the school brought
the community together. This required the capacity for understanding a situation
with intuition, initiative, intelligence, integrity, compassion and courage and
a sense of shared humanity.
The leader demonstrated panoramic vision and was regarded as
a visionary. He was able to ‘identify and maintain the special character,
symbolize to the outside world exactly what the company is, set challenging but
manageable standards of performance, motivate all employees, be a positive role
model’ and in so doing, he epitomised the characteristics of hero-leadership
identified by Clarke (1994). His choice of appropriate response demonstrated
what has become known as ‘style flexibility’, a characteristic apparently
all too rare.
It would be difficult to find a more dramatic contrast with
the political maelstrom of Jerusalem than the idyllic peace of rural Thailand,
but are the requirements for effective leadership any different? Is it necessary
to experience the horror and intensity of Jerusalem in order to demonstrate the
capacity for making leadership decisions of integrity elsewhere?
Shortly after arriving in Thailand, the September 11th
attacks occurred, an event of global importance which presented an opportunity,
as well as the responsibility, to unify the school community and acknowledge the
role of an international school. Surely it is necessary for an international
leader to demonstrate the ability to think globally and interact locally, based
on knowledge of global politics (without prejudice) and an awareness of common
humanity and the ‘widening, deepening and speeding up of worldwide
interconnectedness in all aspects of contemporary social life’. (Thompson
& Hayden, 2003)
Leadership of international schools can be variously
described as like driving at high speed on an uncertain surface, like being the
conductor of the orchestra, or as Huberman (1992) suggests, is like being the
leader of a jazz band, ‘constantly improvising within the bounds of implicit
understandings, even rituals, among its members’.
To expand the analogy, at the heart of jazz there is intimate
knowledge of the rudiments of music and years of learning chord structures,
scales, risk taking, exploring and experimenting. Together, they allow a
virtuoso freedom of interpretation.
So it is with educational leadership. Nonetheless, I thought
I’d investigate the musical analogy a little further. I got in touch with Herr
Petr Von Shmelwyn, an authority on musical leadership and until recently,
‘Kapel Meister’ at Nuremburg Opera and a regular performer at the Bayreuth
Wagner Festival, and asked him about the role of the conductor as leader of the
orchestra. Von Shmelwyn the conductor, conjectured; “In the world of music,
leadership is perceived to be the ability to make a decision under pressure,
regardless of whether it is the right decision. It is not the ability to make
the right decision, but the ability to make a decision. An orchestra
wants to be told what to do without hesitation or conference and a conductor who
involves the orchestra in decision making is perceived to be weak and
indecisive. Dictatorship is preferable to democracy.”
Are Von Shmelwyn’s views applicable to educational
leadership in the International arena? Is dictatorship desirable? Or are
creativity, imagination and participation the preferred model?
Next week: The Imperative for Creative Genius
 Heart to Heart with Hillary
Dear Hillary,
My Thai girlfriend is wonderful in every way except that she lives at home with
her family. We have been going out for almost a year and I am tired of living on
my own, as I have been for the past year. My girlfriend and I agree on every
point, other than the fact that she says she cannot stay with me as her family
would not allow it. We even have to have her aunt as a chaperone when we go out
in the evenings. Is there something different with Thai women? After this length
of time any of my UK girls would have moved in no problems. Other friends of
mine have had no end of girls staying with them, though I have to admit that
these were girls from the bars. My girlfriend is not one of those girls. How do
you get a Thai girl who lives at home with her family to move in with you?
Will
Dear Will,
You poor Petal, you have discovered where there’s a will, there’s a won’t!
You have fallen into the trap of thinking that all Thai girls are easy, just
because the ‘professionals’ from the bar scene are happy to change
addresses, while the money holds out. There is much to be done before you are
going to prise your lady friend away from the family. There is a bill to be
paid, Will. Even if your lady has told her family that she would like to change
her address and take up residence with you and your rotten jocks, then there
will be prior approval required, plus approval of your financial status, which
will be judged appropriate when a large lump of it leaves your home and moves in
to her family home. Dowry is important, Petal. If you haven’t even reached
that stage of negotiation, then you are still several months away from your
conjugal goal. Perhaps it is time for you to broach the subject with the lady
and then start haggling from there. Bargaining is part of life in this country -
even including the affairs of the heart. If all else fails, you could always try
moving in with her!
Dear Hillary,
My girlfriend rings me a lot while I am overseas. I am quite happy to pay the
phone bill because she has to ring me in Saudi. I also bought the mobile phone
for her, because I know these items are not cheap for Thai people, but she keeps
telling me she has lost the phone. So far this year she has “lost” or had
“stolen” three mobile phones. I have tried ringing the numbers and the
phones are still connected, so they have not been trashed. What bothers me is
that a friend of mine had a similar situation with his girl and it turned out
she was just ripping him off. Is this a cause for concern, or do Thai women lose
things like mobile phones?
Sandy
Dear Sandy,
I think you have a problem. Thai women do not lose anything, especially anything
of value. What you have to do is find out where the bills are going. I think you
will find they will still be going to your girlfriend’s address. Check the
dates. Since you wrote this letter to Hillary, you must have some doubts. I
would have some too.
Dear Hillary,
You always telling the falangs to look for good Thai lady. I good Thai lady but
where you go to meet good falang?
Nid
Dear Nid,
Just as the Thai ladies in the bars are generally looking for a financial mate
and are not the best bet, the farang men in the bars looking for company are
similarly not the best bet. What you should do is read the Community Happenings
in the newspaper and go along to concerts, charity drives and music nights at
the better pubs and venues. Enjoy the music and talk to any farang who is also
enjoying the music and who comes up and sits next to you. Give him a card with
your name and phone number at the end of the night if you like him and go from
there. If he is interested he will ring you. Best of luck.
Dear Hillary,
My secretary is a good employee in every way - other than never replacing the
butter in the fridge. I like a piece of toast mid-morning and there is nothing
more annoying than going to the fridge with my hot toasted bread to find an
empty butter container! I wouldn’t care if she told me the butter was all
gone, but she leaves the container there which is dead set empty. How do I break
her of this habit?
Browned Off
Dear Browned Off,
Oh dear! The empty container in the fridge problem again. The reason is fairly
simple to deduce, Petal. The last one to use the butter would have to replace
it, so unless you have plenty of spare cash, don’t be seen as the last one in!
Since secretaries are usually not all that well paid (but if yours is, then
Hillary will apply for the job) then she does not want to be seen as the last
in. Just tell her to come and see you as soon as the butter gets low and you
will give her the money for the new container.
Psychological Perspectives: The wages of war: A “lose-lose” proposition
by Michael Catalanello,
Ph.D.
Armed conflicts have been around for as
long as there have been arms and human societies on earth. The scale of
these conflicts and their potential for imparting widespread and
indiscriminate death and destruction have grown exponentially in modern
times. The threat posed by modern warfare raises the following question:
What keeps parties in a political disagreement from making the obviously
rational and preferable choice of avoiding military conflict and maximizing
the combined outcome to both?
Nobel laureate Ronald Coase, Professor Emeritus of Law
and Economics at the University of Chicago has proposed the “Coase
Theorem.” According to this idea, two parties have an incentive to reach
an agreement that maximizes the combined outcome for both. Furthermore, it
is in the interest of the party who benefits the greatest to provide
sufficient compensation to the other party to make the exchange worthwhile.
Clearly war does not offer such an outcome to the warring parties. As such,
it is cannot be considered a rational activity.
The development and stockpiling of modern weapons by
bureaucratic governments is usually justified on the basis of appeals to
defense and national security. A compelling argument can be made, however,
that the existence of such weapons generally, and armed conflicts in
particular, contribute to political instability, making nations willing to
resort to such barbaric tactics less secure. The argument advanced during
the cold war that the threat of mutual annihilation is a deterrent against
the use of nuclear weapons no longer seems plausible in a world inhabited
by a seemingly unlimited supply of extremists whose fondest wish is for a
glorious “martyrdom” in the name of their God.
In the aftermath of the U.S. led invasion of Iraq,
pro-war apologists began announcing the advent of a “better world”
resulting from Iraqi dictator Saddam Hussein’s ouster from power.
Although few long for the days when Saddam was free to exploit and
terrorize the Iraqi people and his neighbors in the Middle East, one has to
wonder if war was the best alternative for containing him or removing the
threat represented by his brutal regime.
While it was certainly heartening to see the Iraqi
citizens casting their votes in the recent election, the cost of this
achievement cannot be overestimated. To date over 1,400 America soldiers
are reported killed in Iraq and over 150 civilian contractors,
missionaries, and civilian workers have died. Over 40 international media
workers have also been killed. The economic cost to the U.S. continues to
spiral, and is expected soon to top $300 billion U.S.
According to The New England Journal of Medicine, 1 in 6
soldiers returning from war in Iraq showed signs of post-traumatic stress
disorder (PTSD), major depression, or severe anxiety. A study by the
Institute for Policy Studies and Foreign Policy In Focus reported between
12,800 and 14,843 Iraqi civilians had been killed as of September 2004 as a
result of the U.S. led invasion and occupation, while an estimated 40,000
Iraqis have been injured. Between 4,895 and 6,370 Iraqi soldiers and
insurgents were killed during “major combat” operations, according to
this report. The Iraqi infrastructure is in shambles.
Top U.S. national security officials testified before
the U.S. Congress last week that the Iraq war and U.S occupation has had
the unintended result of providing a powerful stimulus for the recruitment
of “holy warriors” for Islamic extremist organizations who are outraged
by U.S. and other unwanted Western influences within Muslim societies. Was
the war a mistake? The decision makers will never admit it.
The parties responsible for launching the 9-11 attacks
are losers as well. The hijackers lost their lives, and those who inspired
them have lost a major political stronghold in Afghanistan. Although a few
high profile leaders remain at large, there are hefty bounties on their
heads. They will clearly need to remain in hiding and at risk for capture
or death for the rest of their lives. Rather than achieving their dream of
reducing foreign influence in the Middle East, we now find Western troops
occupying two Moslem countries with no end in sight.
Clearly, all sides have experienced a net loss since
9-11. Is war a rational enterprise? I would think the answer is
resoundingly “no.”
On the question of what keeps parties from making the
rational choice of avoiding conflict and maximizing the combined outcome to
both, Professor Douglass North, Nobel laureate and Professor at Washington
University in St Louis has some thoughts on the subject.
On Friday, March 4, 2005, Asian University in
association with the International Peace Foundation will present the third
in our series, “Bridges: Toward a Dialog of Peace.” On this occasion
Professor North will appear at our Jomtien campus to speak on “Beliefs,
Institutions and the Control of Violence.” Directions and a map to our
campus is available here: http://www.asianust.ac.th/Univer/maps.html
I hope to see you there.
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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