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Money matters: False profits?
Part 2
Graham Macdonald
MBMG International Ltd.
From last week: Cobus realized that one of 4
situations can happen:
- Dividend Yields can be above the net mean and can actually still be increasing
- They can be above the mean, but be falling
- They can be below the mean but rising
- They can be below the mean but falling
Grouped this way performance data for these periods is very
consistent: as you’d probably expect below average and rising or above average
and falling are the most common scenarios (just under 60% of the time since 1946
and just over that since 1972). Also, as you’d expect, when the yield starts
to fall (whether from above average or below average) returns are negative,
volatility is high and the Sharpe ratio (risk/reward co-efficient) turns very
ugly.
Is this coincidence? Dividend yields are driven by the
expectations of the people running the businesses as to the future performances
of those businesses in relation to the amount of capital employed (the stock
price multiplied by the number of stocks). If the business prospects can’t
keep pace with the stock price, the yield will fall. If there is a lot of fat in
the business it will fall from a higher level. If it falls from a low level,
then we’re in a nightmare scenario, indicating that the stocks might be
overpriced, the future performance of the business might be none too clever and
confidence may be turning increasingly negative. We’ve just moved into that
pattern now and could be expected to remain there for up to 3 years.
The fact that we have just entered this phase should be seen
as extremely negative and a cause for real concern -
“Distribution IV generates a consistently negative Sharpe
ratio, suggesting that risk taken in this conditional distribution has
historically been uncompensated by return in excess of the risk-free rate.”
Another indication is stock activity by business owners and
SEC filings by connected persons show that those in the know are dumping stock
at the fastest rate for 4 years, although that is more of a short term and less
of a structural indicator than the one above.
Finally, technical analysts looking at the 200 day moving
average trends are seeing indications that stocks are looking ugly and bonds are
looking set for a reversal. Again technical indicators are notoriously
unreliable in certain conditions but technicals, fundamentals and strong
co-incidentals all point towards a big stock move down and a bond market rally.
However you look at it, this does not look like an ideal time to be in the
S&P 500.
We currently face an extremely dangerous juncture in world
economic events as evidenced by the release of the US Federal Reserve’s last
policy meeting and news of the record trade deficit in February. The minutes
cited the Central Bank’s growing concerns about inflation, but downplayed the
need for a faster pace of monetary tightening.
The minutes also revealed that several members had become
less certain about their previous benign outlook for US inflation; while some
said that the Fed’s pledge of a “measured pace” of rate increases should
be dropped.
What is our view of the Fed minutes? Most mainstream
economists have been fretting about the word “measured” for months. The
minutes clearly state that they were considering dropping the word, yet there
was no real reaction. These economists must have forgotten about last months’
issues? Our fundamental view remains that the worsening of the structural
imbalances in the world’s largest economy and its growing need for daily
capital will erupt at some point.
As we recently touched on in our criticisms of the Fed’s
plans to allow the US$ to drift further down (copying an economic blueprint from
Ireland, Israel and Greece), a weaker US$ is only part of the problem and the
bigger issue is that domestic consumer spending/debt needs to be addressed.
The interest rate increases by the Fed are a step in right
direction in this regard, but the extent of the leverage within the system means
that using higher rates to control the supply of new money will merely cause
major problems with imbalances elsewhere in the system. The danger is that the
dam will spring leaks and every time one gets covered, 2 more will appear.
You can’t simply turn on and turn off inflation like a
switch; over time the pressures build up, inventories become habitual, usage
patterns become established so even a recession doesn’t necessarily dampen
prices immediately, especially in a high risk environment when paper currencies
and intangible assets are locked in a depressionary spiral.
Commodity prices can carry on rising long after the onset of
a recession and this stagflation has been evidenced many times over the years
and spiralling tangible assets and collapsing paper ones should be familiar to
any students of the Great Recession.
We’re advisors and planners, not economists - we take the view that you
don’t have to be right; just take the right investment action for whatever
actually transpires - the scenarios could play out in a whole host of different
ways right now (Heck, Saul could even be right, though we’re sceptical about
Goldilocks) but the balance of probabilities is so unclear that making a call
one way or another is very dangerous right now. We don’t see an economic happy
ending to all of this, but we’re keeping our options open. An optimal
portfolio now is one predicated around a very big ‘what if’ factor.
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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]
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Snap Shots: How to give
your portraits
a knock-out punch
by Harry Flashman
 This
week’s column is designed to make you look critically at your photos and
see how to get some ‘punch’ into your portraits, in particular.
Remember that the most common subjects in front of camera lenses are
people, and yet for many photographers, the results of picture taking of
loved ones, pretty girls or even one’s own family members can be
disappointingly ‘flat’.
Take a look at the four pictures of people I have
included this week and you will immediately see a common theme that runs
through them all - these portraits fill the frame. There is no doubting
who is the ‘hero’ in these shots.
 Now
let’s look at them and dissect what gives them that punch. It certainly
is not eye contact, with the women, one does have eye contact, the other
has her eyes closed. With these two photos, the common factor is that
their faces fill the frame to almost overflowing. There is nothing else in
shot. You are looking at a close-up portrait.
With the two photos of the men, you are again left in
no doubt as to who is the hero. One shot has the frame filled with the
sitter, the other shot, which has more dynamism, captures the man having
filled his plate at the buffet, and his anticipation of eating it was
caught on film. While there is another person in shot, she is very much a
background item and that is all. Once more you are looking at a close-up
portrait.
 To
immediately improve your shots, firstly walk up closer to the subject, but
use a portrait lens (about 135 mm) if you have one, or use the
‘telephoto’ position if you are using a compact point and shooter.
The best technique is to look through the viewfinder
(or at the digital screen) and physically walk in closer until the
portrait begins to fill the frame to overflowing, if it is a straight
glamour shot. Mentioning ‘straight’ reminds me, try to get the subject
to stand at an angle to the camera, and not straight on. You are making a
pleasing portrait, not a head shot for a passport!
 The
other factor to make sure you get that satisfying shot is to take a few
frames. Not just one or two, but several. With flash photography, many
people will close their eyes at the wrong moment, but you should get one
that is usable out of every 12 shots. Remember to try a few portraits in
the ‘landscape’ (horizontal) format too. Sometimes the different
framing adds interest to the shot. This is something you should get used
to doing with all shots, not just portraits.
Note that I did not mention lighting in this article.
You can use shadow to emphasize shape and form, but three of these shots
were taken with a simple on-camera flash.
However, you will find that your people shots will improve as soon as
you move in closer and fill the frame to overflowing. Try it this weekend.
Modern Medicine: DIY Monitoring - Is it a good idea?
by Dr. Iain Corness, ConsultantThe
correct answer, in my book, to the question of DIY monitoring of chronic
conditions is a qualified ‘Yes’ but with the proviso that it should be
done in conjunction with the medical attendant who is looking after you for
that condition.
I am not backing all the horses in the race with the
above statement, but since your doctor has been trained in the treatment of
chronic ailments, and is treating your particular one, it makes good sense
to monitor, but with the doctor’s assistance and directives.
A good example of where the patient can assist in their
own treatment by self-monitoring, is in Diabetes. Blood sugar (glucose)
levels can vary enormously over the span of one day, and sometimes it is
very difficult for the doctor to gage just “how much” medication to
give, to keep the blood sugar within acceptable limits for the entire 24
hours. A few readings, before and after meals can certainly make life easier
for the prescribing doctor, and make life better for the person suffering
from diabetes.
With electronic everythings these days, electronic blood
glucose monitors are fairly common on the shelves of the better pharmacies,
so it is quite simple to become your own blood technician.
First: Keep a Log Book. Keep a record of your blood sugar
values in a log book or diary, which should show dates, times, sugar levels
and relationship to meals.
To get an accurate blood sugar result, you need to make
sure that the meter is clean; the meter has the correct code that matches
the strip you are using; you have a clean finger and you have collected a
good- sized drop of blood.
To get a good blood sample, before pricking your finger,
wash your hands with warm water, shake your hands below your waist, use the
lancet to the sides of the tip of the finger, then gently squeeze or milk
your finger a few times.
Generally, the best times to check are before breakfast,
before lunch, before dinner and before bedtime snack. Sometimes it is useful
to check blood sugar two hours after a meal to see the effect of the food on
your blood sugar levels.
Remember that the routine that you select may have to be
changed during periods of stress, illness, or surgery, if you become
pregnant, if low blood sugar is suspected or when there are changes made to
your treatment program, such as a change in medication, dosage, meal plan or
activity.
At those times it is also of value to carry out testing
your urinary ketones, which is done by the old dipstick method in freshly
passed urine. Ketoacidosis, which can occur with high sugar levels should be
dealt with promptly.
The other important blood sugar test is Glycated
Haemoglobin (HbA1c). While your home monitoring gives a reasonable
indication of how you are doing at that moment, the HbA1c, gives your doctor
a picture of how well controlled you have been over the past three months,
but this is a lab test, not a home monitor.
Each individual has his/her own target range. This
depends upon many factors, including your age, your type of Diabetes and how
long you have been a diabetic. This is where your doctor will guide you as
to what levels you should be attempting to maintain.
A rough guide would be: HbA1c(%) between 4.5-6.5, and
blood sugars (fasting or pre-breakfast) of around 80-120 mg/dL, but it is
something about which your doctor will give you a much better indication.
Learn to Live to Learn: Postcards from Oxford – Part One
with Andrew Watson
Ah, those dreaming spires. It’s not Cambridge, but
it’s a quality city, steeped in traditions of excellence in education,
architecture and the Arts. For centuries, punting has provided the
summer setting for reverie, contemplation, courting and intellectual
stimulation. But today, it’s raining and freezing cold. It’s the
winter we never get in Thailand.  Ali
Damati:
“A teacher can spread awareness”
The busy, bustling, wet and windy city centre
displays little of the anxiety sweeping London, but terrorism remains
the main topic of conversation. Puntless, in search of a warm college
room and a cup of tea, I have tracked down some academics of significant
standing in South East Asia and around the world, who are gathered here
at this centre of learning, engaged in a range of research in
international education.
In light of their obvious commitment to lifelong
learning, I was interested to know what had taken them into the teaching
profession in the first place. In the current climate of fear and
suspicion, what role could education play, I wondered, in making the
world a safer, better place?
Ali Damati is a speech therapist from Jordan, in term
time to be found at the Kuwait National English School. What lured him
into education?
Ali: Let’s start from the beginning. For me,
it was like a family choice of career. Both my parents and all five
children are teachers, although in different fields. We were following
the road. I feel education is more about giving than taking and I feel
free in practicing education and excited to explore different fields
within it.
AW: What’s a teacher, Ali?
Ali: We have saying in Arabic, “Salute the
teacher and respect him because he is just like a messenger from God.”
He (or she) educates about society and the role of people in it,
bringing people to “the threshold of their own mind” as Khalil
Gibran says.
AW: How can education help to deal with
terrorism?
 Sign
posted on the London Underground
Ali: It’s more about how a teacher can
spread awareness. Even if it’s only for five minutes, if they sit down
and talk about the background, the whole picture, it helps. On the news
for example, they seem to be saying that suicide bombing is part of the
religion of Islam, which it is not! So, we need to look at where it
started from. The students should be introduced to a variety of causes,
historical problems and why it happened. On the other hand, at the end,
there should be a positive message of how to deal with these issues when
they arise in the community. For instance, last week, I left the
shopping mall and went to a bus stop. There were people sitting next to
me and I was wearing a back pack. When I put it next to me on a bench
one person stood up, looked at me, looked at the back pack and just
walked off. The people started leaving one after the other.
AW: Did anyone say anything?
Ali: No. What we need to focus on after such
terrorist attacks happen is to sit adown and discuss the consequences.
In education it’s about listening and understanding, communicating.
AW: Where do you think the roots of the
problem are?
Ali: The bombers have been brainwashed.
They’ve never been given the right idea about British society. I
don’t think it has anything to do with the Middle East or Israel. I
don’t think they are linked. In the UK, it is the bad influence of
certain groups. It’s not an Arabic thing, either. You can’t apply
what’s happening around the world or outside the UK, to what’s
happening inside. The terrorists are not achieving a political aim. In
fact it’s counting against them.
June van den Bos is principal of one of the very best
schools in Thailand, KIS International School, in Huay-Kwang, Bangkok.
I’ve said it before and I’ll say it again – go and take a look,
it’s fantastic and a model to follow. Why education, for June?
JVDB: For many years I wasn’t in education.
I really only came to it in 1988. Prior to that I worked in child
welfare. I was a nursery nurse and I worked in hospitals, in the burns
and intensive care units. I worked for the Social Services in the UK and
in day care in Canada. I’ve always worked with children and their
needs and with parents. The needs and services might have differed but
the work hasn’t, really.
AW: Do you think it’s important to have
experience outside education?
JVDB: The wider your experience, the more you
bring to a position.
AW: What’s central to the role of being a
teacher?
JVDB: Trying to build a community which is
conducive to learning, so that includes many different areas of care and
welfare for many different stakeholders – students, teachers, parents,
administration…
AW: What role can education play in combating
terrorism?
JVDB: Especially with the IB programmes, (KIS
is an ‘all IB’ school) as teachers, we are looking to develop
characteristics in children such as tolerance, open-mindedness, empathy,
celebration of diversity, world views and different perspectives.
Hopefully, through our work in school, learning becomes a lifelong
passion for children. Having a diverse population in school helps, of
course.
AW: Aren’t you preaching to the converted?
JVDB: Actually, I don’t believe people in
International schools or any segment of society for that matter, are
immune from prejudice. And all prejudice is ignorance.
AW: So how do you reach beyond the school
gates?
JVDB: I think the ideal is that you can try your
best. You might not reach the bin Ladens of this earth, but you might
reach someone who would otherwise be a disciple of his. History tells us
that there will always be evil people who do evil things and you’d
hope that we should have learned from our past experiences, and that
extends from experience of family life, for example, to the big picture.
It’s all to do with vision. I’ve worked in very economically diverse
situations and I believe that education has an important role to play
because education is the opposite of ignorance, although they don’t
necessarily cancel out each other. I think we need to reach as many
people as possible.
AW: Isn’t that what bin Laden is trying to
do? Are we in a battle of ideology?
JVDB: Certainly a conflict. For me, it comes
down to respect. Respect for life. Respect for each other’s rights and
everyone’s right to get along together, whilst remembering your
responsibilities to others. Allowing others to develop their views,
whilst you follow yours.
[email protected]
Next week: Postcards from Oxford: Part 2
 Heart to Heart with Hillary
Dear Hillary,
I am trying to buy a second-hand car. I don’t have much to spend, but
I want a good one. I have trudged in and out of so many car sales
outlets, I am starting to get depressed. The sales people don’t want
to talk to me and none of them seem to be able to speak English. Don’t
they want to shift the vehicles in their forecourts? Have you any
foolproof way to make sure I don’t buy a lemon?
Lemonade
Dear Lemonade,
What you need is obviously some “lemon aid”, my Petal, but what do
you think I am running here, girl? A used car lot? A car buying service,
or what? In your defense, I must admit that when reading the outpourings
from the hearts of many of my letter writers, they have definitely been
‘used’, so I will excuse you. So you want the sales people to speak
English to you - would you please repeat after me, “The Country I Live
In Is Called Thailand”. Amazingly, the locals speak Thai as well. Now,
to avoid the lemons, buy oranges. More expensive, but leave a sweeter
taste in the mouth afterwards. There’s plenty at the local markets. To
be honest, the best way is to save up the deposit and buy a new one if
you must have a car. With interest rates around three percent, anyone
can afford one (other than me, as I spend my allowance on champagne and
chocolates).
Dear Hillary,
There has been a crackdown recently over copy goods - CD’s, golf
shirts and watches and the like. Why is this? Everyone knows that you go
to Asia and buy real bargains. I always bring back with me three or four
watches for the girl friends and a couple of footy shirts for the blokes
down the pub. What’s wrong with this. If I can’t get the stuff in
Thailand, do you know where I can get them? I’m coming over in a
couple of weeks, so if you can let me know early that would be good.
Copy Kid
Dear Copy Kid,
Put the boot on the other foot. Imagine you are the manufacturer of a
high quality “name brand” item. How would you feel if you found that
cheap copies were being marketed at half the price you sell them for?
They look like yours, but the quality is not the same. Mind you, I think
that many of these overseas goods are highly over-priced too, especially
when they are made in low-cost manufacturing countries like China, for
example. Having said all that, copy goods are still available at the
local markets, but don’t tell the police where. Unless the officers
are running the market!
Dear Hillary,
How do you work out what size shirts you are supposed to buy in this
country? In the UK I am a Medium (M) but over here the shop girls all
say I am XL. So I believed her and got three shirts at the markets, all
with XL tickets, but only two of them fitted, the third was miles too
big. When I went back the little shop wasn’t there any longer, so I am
left with this big shirt. What’s your suggestion, Hillary?
Medium
Dear Medium,
Just a crazy thought, but have you ever tried just holding the shirts up
against your body, before parting with the cash? Seems fairly obvious to
me, Petal. So the shop’s done a midnight flit, give the large one to a
large friend, or wait till you grow into it yourself. Most farang males
seem to get bigger as they get older. It’s something to do with the
refreshment they drink. By the way, it wasn’t copy shirts you were
buying, was it?
Dear Hillary,
This is what happens to single males in this town. I was sitting on my
own in the bar and I didn’t want to listen to the usual inane chatter
that the bar girls think is inviting, “Hello sexy man. Where you come
from?” that kind of stuff. Giving the girls the cold shoulder, I
started to talk to the service lady and she seemed a nice enough woman,
so I bought her a couple of drinks, but then went home (alone). The next
day I was so embarrassed because she arrived at the office with a
container of food for my lunch, as I had told her that I had to get my
own food because I haven’t got a maid or a steady or anything like
that. What do I do now ? The last thing I need is unwanted visits at
work and polystyrene boxes of food.
Office Johnny
Dear Office Johnny,
How did this girl know where you worked? If she is clairvoyant, then I
think you should keep her, my Petal, and cash up on all the winning
lottery tickets she will predict for you. But if, on the other had, it
was because you gave her your business card, then you have nobody to
blame but yourself. If you don’t want to be followed up, don’t hand
out your business cards. Of course you can always use someone else’s
card (like everyone else)!
Psychological Perspectives: Threats to freedom from within
by Michael Catalanello,
Ph.D.
Freedom is a precious commodity. Those of
us fortunate enough to have lived our lives in relatively free, democratic
societies might take freedom for granted. Perhaps we feel secure that
threats to freedom will remain in check, protected by our values and
democratic institutions. It may be difficult to imagine that our most
valued rights and freedoms could suddenly be taken from us by an
authoritarian regime.
Perhaps we think of fascism as being restricted to
remote lands, or as relegated to the pages of history. Yet, a body of
research in the social sciences suggests that fascism is never far from us.
There is persuasive evidence that the potential exists for totalitarian
rule to arise even in the most democratic societies on earth. This
potential lies within an attitude, a personality trait that is identifiable
and measurable. Like the aliens in H.G. Wells’s “The War of the
Worlds,” this potential exists among us, dormant, ready to spring forth
when the conditions are ripe.
In his 1996 book, The Authoritarian Specter,
psychologist Robert Altemeyer summarized the then current state of the
research on “right-wing authoritarianism” (RWA), a label used by
Altemeyer and other theorists to describe the conjunction of three clusters
of attitudes in a given person. According to Altemeyer, RWA consists of:
“1. Authoritarian submission – a high degree of
submission to the authorities who are perceived to be established and
legitimate in the society in which one lives.
“2. Authoritarian aggression – a general
aggressiveness, directed against various persons, that is perceived to be
sanctioned by established authorities.
“3. Conventionalism – a high degree of adherence to
the social conventions that are perceived to be endorsed by society and its
established authorities.”
Respect for authority, of course, is a quality we
generally consider as innocuous, even beneficial. It is something we, as
parents, like to instill in our children, and teachers like to receive from
our students. It contributes to a pleasing community atmosphere. It greases
the skids of social interaction.
Similarly, obedience to authority can be viewed as an
essential requirement of social life. It is what keeps our complex
societies from collapsing into anarchy. On a local level, respect and
obedience to authority are seemingly intractable parts of the cultural
fabric of Thai society, and promoted through a variety of local practices
and rituals.
Unfortunately, authorities cannot always be trusted to
make decisions that are just and humane. This fact seems to have escaped
notice by the High RWA individual, who generally accepts the statements and
actions of established authorities unquestioningly. Yet, between 1933 and
1945 millions of people were systematically exterminated in response to the
commands of legal authorities. Thousands of participants from every walk of
life were required to carry out the horrors of the Holocaust.
There are, unfortunately, many other examples that could
be cited, of authority gone seriously awry. Can obedience to authority be
defended under such circumstances?
The notion that these inhuman acts were carried out by
monsters was dispelled by the pioneering work of the psychologist Stanley
Milgram, in his 1974 book, Obedience to Authority. In laboratory
studies, he showed how easy it is for a sanctioned authority to obtain the
cooperation of normal subjects in delivering what they believed were
excruciatingly painful, and even life-threatening electrical shocks to
others.
Not all subjects in Milgram’s experiments obeyed
orders with equal ease. Results showed, however, how certain elements of
the situation could be arranged to either increase or decrease the chances
of eliciting subjects’ obedience. The fact that normal subjects varied in
their willingness to obey orders to inflict pain upon others lends support
to the idea of a personality trait that varies within the normal
population.
One need not look farther than today’s headlines to
see evidence of these dangerous patterns emerging within ostensibly free
societies. The U.S. House of Representatives voted overwhelmingly to renew
provisions of the so-called “Patriot Act” which seriously curtails
rights and freedoms of American citizens in the name of combating
terrorism. British police have “shoot to kill” orders for terror
suspects. According to Human Rights Watch, police in Nigeria, where
military dictatorship ended six years ago, routinely engage in torture and
killings of criminal suspects. Police tactics reportedly include the use of
electrical shocks and the rape of women to extract confessions.
Here in the Kingdom, government officials are accused of
“stealing” water intended for local and agricultural use to benefit
private industry. Government authorities recently instituted a
controversial executive decree which grants immunity to law enforcement
officials who commit criminal offenses in the line of duty, and increases
government control of the media.
It is vital to our free societies that we learn about the threats to our
freedom represented by High RWAs. Familiarity with the work of
psychologists like Stanley Milgram and Bob Altemeyer is highly recommended
for anyone who holds freedom dear.
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Dr. Catalanello is a licensed psychologist in his home State of Louisiana, USA, and a member of the Faculty of Liberal Arts at Asian University,
Chonburi. You may address questions and comments to him at [email protected], or post on his weblog at
http://asianupsych.blogspot.com
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