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Money matters: Conclusions that we draw
Graham Macdonald
MBMG International Ltd.
MBMG International Ltd.
Over the last couple of months we’ve looked at the history of equities and
equity markets and the current global economic background. The conclusions
that WE draw from this are:
- The twin deficits are about to derail the US economy and any dissenting
arguments proposed so far do not appear to hold water as far as we’re
concerned.
- If the US economy is derailed then almost all the global economy will
suffer, particularly other Western economies.
- If there is economic slowdown then equity prices will fall sharply as
they are currently priced assuming that earnings will grow at a far faster
rate than the historic average of 6% and once it’s apparent that they
can’t achieve that let alone exceed it, share prices will have to be
adjusted downwards.
- This is all to be expected in terms of the long term economic cycle.
- Japan is out of kilter with the cycle.
So it’s clear to us that in general Western equities should be avoided.
Certainly any investment that replicates the main equity indices in the US
and almost all Western equity markets doesn’t seem to us to offer good
value right now. So we would avoid index funds, ETFs and growth funds.
We’d definitely avoid tech and smaller company funds.
We believe that value funds might offer some prospects, as they will
benefit from a rotation away from the general market into defensives and
for this reason defensive stocks will also relatively outperform the
market. However, if things get as bad as they could then even these
defensives may turn negative (although still nowhere near as bad as the
general market).
Oil and commodity stocks are interesting. However, for oil we would far
rather own the commodity itself and for gold the balance between bullion
and gold stocks requires careful managing. We’ll actually cover both of
these when we look at commodities as an investment class.
So it seems like we’re not touching equities right now? Yes and no. There
are alternative methodologies for equity investing that remain attractive
right now and there are also still a couple of possibilities for
traditional long equity investment that look attractive.
We’ll deal with this latter first - Japan is, as we’ve said, out of synch.
It operates to the same seasonal cycles, but its cycles aren’t
synchronised to those in the West. Right now the Japanese consumer is
awash with cash and Japanese companies have completed re-structuring.
Japanese society and government is slowly modernising and having been in a
winter cycle for over 20 years, the Japanese economy should now be ready
to emerge from this.
While longer term the impact of an increasingly dominant China may cause
structural changes to the Japanese economy, in the shorter term there is
every possibility of a domestic spending driven recovery. This will have
its mettle tested by recession in the West and won’t be plain sailing but
we believe that we will see improvement in economic conditions in Japan.
This will ultimately bring some relief to the Nikkei which has been in the
doldrums for many years (let us not forget that the Nikkei is still around
70% below its 1989 levels!).
We expect the Nikkei to fall back (maybe around 15% or so) from current
levels when the Western economies slow but then to quickly decouple and to
move back strongly higher as the roots of a domestic recovery are
apparent. Trying to time this could be difficult. So some portfolio
managers are taking small allocations to Japan right now and looking to
increase these on any signs of weakness.
Alternatively, buying a balanced blend of smaller companies, growth and
blue chips in Japan every month through a regular savings/investment
programme looks a pretty good call right now. To us the right way to buy
Japanese equities has always been through the leading fund managers
(unlike the US markets where the majority of funds don’t add or detract
value). In Japan it seems pretty clear that active management is essential
and the differences between the top and the bottom performances are
extreme.
The long-only Japanese funds that we currently use are:
Fidelity’s Japan/Japan Smaller and Japan Spec Sits, GAM Japan, Gartmore
Japan, Invesco Japan Smlr Cos/ Invesco Japan Discovery, Schroder
Japan/Tokyo, Merrill Lynch Japanese Opportunities, Thames River Japan,
JPMF Japan Smaller Companies/OTC, and our personal favourites Odey Japan,
Polar Capital Japan and Atlantis Japanese Growth.
It may be that Asia in general also benefits from Japanese recovery, but
we’re negative on Korea, cautious about Thailand (too much money being
borrowed too fast) and we’d avoid the Chinese equity markets. Again Asian
exposure through regular purchase might not be the worst investment call
right now.
As for the alternative equity methodologies, we’ll discuss that soon, once
we have the latest market news, and then we’ll bombard you with the
esoteric details of market neutral, long/short, split strike and a whole
bunch of other good stuff.
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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: Now even Kodak has deserted film
by Harry Flashman
 For
a second year, Kodak leads in US digital camera market, reports Ben
Dobbin, the AP Business Writer. Eastman Kodak, the company that brought
photography to the masses, and have undoubtedly been one of the prime
movers for the acceptance of film processing at the corner store,
entered the digital market in 2001, in a move that many said would be
the end of the company. By being in the digital market, Kodak was
killing its own film cash cow, was the popular opinion.
What popular opinion had got totally wrong was the fact that digital
photography was going to take over the popular market, at least. Kodak’s
move was made at the right time, and with their now ‘digital’ corner
store has successfully combined both film and digital photography. After
all, despite the ease of digital cameras, you still want to send a print
to mother-in-law of the new baby.
Digital cameras began outselling film cameras in the United States in
2003. And in 2005, Kodak generated more annual sales from digital
imaging than from film-based photography for the first time. A few weeks
ago, I wrote “film is dead” and it seems Kodak has the numbers to back
me up.
The size of the market in the US is just staggering. While Kodak is
king, Japan is not far behind with Canon Inc. and Sony Corp second and
third. Domestic sales of digital cameras surged 21 percent to 28 million
in 2005, and Kodak’s market share leaped to 24.9 percent from 21 percent
in 2004, according to data released by IDC, a research firm in
Framingham, Massachusetts.
Look at these numbers, Kodak shipped 7.05 million digital cameras to US
retailers last year, 43 percent more than in 2004. Tokyo-based Canon
moved ahead of Sony into the No. 2 spot with 5 million shipments, a 16
percent increase, but its market slice still shrunk from 18.3 percent to
17.7 percent, IDC said.
Japan’s Sony, which lost its front-runner position in the US market to
Kodak for the first time in 2004, was third in 2005. It shipped 4.78
million cameras, up 10 percent from 2004, but its share of the US market
slumped to 16.9 percent from 18.5 percent, IDC said.
Do the maths – that is 17 million digital cameras in one year. And there
are also the digitals from other manufacturers to add in as well. Behind
the top trio in the U.S. ranks in 2005 were Nikon Corp. with an 8.2
percent share and Palo Alto, California-based Hewlett-Packard Co. with
7.5 percent. Next in line were Olympus Corp. with 6.9 percent and Fuji
Photo Film Co. with 6.3 percent, IDC said.
However, this is small bikkies compared to the world market. In the
global digital camera race, Kodak was third in 2004 with an 11.8 percent
market share to Canon’s 17.1 percent and Sony’s 16.7 percent. While the
2005 rankings are still a few weeks away, “we don’t expect any big
changes” but Kodak will likely make up some ground, said IDC analyst
Christopher Chute.
It is even more interesting to break down Canon’s 17.1 percent too.
Canon benefited from robust sales of digital single-lens reflex cameras,
IDC said, showing that the more serious amateurs are abandoning their
SLR film cameras and replacing them with digital SLR’s. There is also a
strong group who have started with digital compacts, and now want a
little more. It is reported that Kodak is now increasingly shifting its
focus (nice pun) toward boosting sales of higher-end models. Its new
pocket-sized EasyShare V570 couples two lenses - a 3x optical zoom lens
and a specialized lens for ultrawide-angle pictures.
Even on the local front, I have noticed the inexorable move towards the
higher end digital SLRs too. My photographic friend Ernie Kuhnelt, a man
who has been true to film, has just purchased a Nikon D50 as a starter
kit, and so far is delighted with it, and the results are excellent. As
I have written before, there is no substitute for a good piece of glass
up front, no matter what way you capture the image in the back of the
camera.
Modern Medicine: Back Pain
by Dr. Iain Corness, Consultant
One of the commonest conditions experienced by the human race
is back pain. There are several reasons for this including poor engineering
design in the first place, and secondly our insistence in walking upright,
when our spine was actually designed to allow us to walk on all fours, and
also our not keeping the spinal muscles toned up, to do the job of keeping
our spines together. There is also a problem with overloading! In actual
fact, our human spines are a walking disaster, looking for somewhere to
happen. It is estimated that 50 to 80 percent of adults have had back pain
at some time and that 10 percent of the population will experience back pain
in any given year.
Medically we tend to lump back pain into three baskets – Acute, Sub-acute
and Chronic. The pain itself is also graded as mild, moderate or severe.
Acute back pain is the most common (around 80 percent), and often comes on
after an accident or injury. This type of pain is usually severe, but does
not last more than seven days. Typical of this, is the pain after lifting
and twisting. Immediate pain, severe in intensity, but settles quickly with
bed rest. Sub-acute back pain drags on and on for a few weeks. Generally the
intensity is not severe, but the pain is always there. Chronic back pain on
the other hand, grinds on for months, and months and months. The pain can be
anything from an annoying niggle, all the way through to intractable agony.
One reason for the spine’s problems, as I stated before, is the incredible
complexity of engineering of the spine itself. Made up of 24 bones
(vertebrae), with ‘springy’ (intervertebral) discs in between, there is a
‘hole’ down the back through which the spinal cord runs, and between each
vertebra, off-shoots from the spinal cord go out to supply nerve connections
to the body. Keeping the spine together are a complex series of ligaments
and muscles, without which the whole shooting match would just fall apart.
The vertebrae also ‘lock’ together if weight is placed on the back, but only
with the spine parallel to the ground, like a horse! However, the vertebrae
become unstable and unlocked when the spine is bent forwards from the
vertical position and you try and lift something from the floor.
Now whilst we would be much better off walking around on our hands and feet,
or crawling as we did as babies, it is probably too late to change the
habits of the last umpteen million years!
Unfortunately, the causes of back pain are numerous. Anything that puts
pressure on your back muscles or nerves can cause pain. Any illness or
damage to your spine also can cause pain. The cause of most acute back pain
is unknown, but is probably due to minor strains, sprains and overuse.
Other causes include ruptured intervertebral discs. This does produce severe
pain, and comes from the nucleus of the disc popping through the outside and
pressing on the spinal nerves. CT and MRI scans have made it easier to
pin-point the exact disc, and also assist in deciding whether surgery or
traction is required.
Another is spinal stenosis, where the spinal canal becomes narrowed. This
squeezes the nerves and puts pressure on them, causing the back pain
(similar to the ruptured disc physical pressure). Numbness, pain and
weakness in the legs also can occur.
Osteoarthritis is just one form of arthritis that can also cause back pain.
It breaks down the spinal joints and other joints and often produces lower
back pain in the elderly, or those who have been manual laborers all their
lives.
There are many more causes, but if your back pain is accompanied by any of
the following, see your doctor today:
Weakness or numbness in one or both legs.
Pain going down one leg below the knee.
Pain from a fall or injury.
Pain accompanied by fever without flu-like aches.
Pain that continues to interrupt sleep after three nights.
Pain that remains after six weeks of home treatment.
 Heart to Heart with Hillary
Dear Hillary,
I came back (not to Brylcream), but to Chiangmai, and to the best Country on
Earth. Hillary whenever I walk around cities in England and Australia
everyone seems to be dressed quite normally, but when I walk around here the
Chiangmai farang seem to be dressed anything but normally.
Do you think I should start a Pedestrian Police Force? I could send all
these strangely dressed farangs to the nearest circus, where it appears they
must have escaped from!
Seriously though, I’m lucky enough to be a volunteer teachers assistant at
Anubaan Chiangmai, but I notice a large percentage of the children aren’t
really interested in learning English. Do you think it could be that the
Farang they see around town puts them off?
Delboy
Dear Delboy,
Glad to see you are back in Thailand, and enjoying it as much as ever.
Probably the reason that the children aren’t interested in English
communications is they’re not old enough to know how to use an ATM yet. Give
them a couple of years. Teach them “Herro sexy man!”, “Sit dow pleez”, “Wun
moah beeyah?” and they’re ready for a long and fruitful association on the
economic front with farangs, no matter how they are dressed. Don’t start a
Pedestrian Police Force, we’ve got too many boys in brown already!
Dearest Hillary,
I have once again had the privilege of visiting your great and wonderful
city. It was a fine time for me, no baht bus barbarians, no rip offs, no
trouble, a great time.
There were a few things though that “itched” me a little, such as the
constant ding dong every time you enter one of the country’s two most famous
supermarkets. Does this constant ding dong not also make the friendly
workers there also a bit ding dong?
Another thing that interested me, or more to say it annoyed me, was the
“would you like to buy a suit sir” line. Everywhere I went, morning, noon,
night I got the same old scam. People trying to block the footpaths with the
old “have suit for you sir”. Sometimes there were five of these so called
shops, one after the other, with salesmen trying to shake hands with the
innocent tourists.
P Dorf
Dear Mr. Dorf,
I have to agree about the ding-dong supermarkets, but with now one every 50
meters, the ding-dong is firmly entrenched as part of the national music
scene, and probably of more musical merit than the local hip-hop heroes. As
far as the sartorial splendor situation, perhaps you are dressed in the garb
that Delboy is alluding to in the letter above yours, so the tailors are
only trying to improve your dress sense, to make you even more desirable.
Are they saying, “Herro sexy man!”, “Sit dow pleez” and “Wun moah beeyah?”
Dear Hillary,
There seems to be a severe local shortage of sturdy knicker elastic! Dear
old Pater requires a piece for his catapult and wonders where he can lay his
hands on some.
Mistersingha
Dear Mistersingha,
Words fail me, my pubescent Petal. As large as life and twice as lively, up
you bob again, as if we are close confidants. Nothing could be further from
the truth, other than your good self, who is so far removed from what is
truthful, that I doubt if you could even lie straight in bed. With or
without your Isaanette twins Nit and Ying to act as nocturnal splints, which
I am sure would be needed in your case. Anyone who reads this column
regularly knows of your hollow, empty promises, complete with incessant
excuses. Take a leaf out of Delboy’s book and you won’t have to spend your
time running around trying to look after your father’s knicker elastic
needs. In fact, if you really were the dutiful son you claim to be, you
could buy your father a complete new catapult, which comes with knicker
elastic Grade A, and will last longer than the knickers from the chrome pole
palaces.
Dear Hillary,
One of my close friends is worrying me a lot. He has dark moods and gets
depressed very easily. When he is down, everything is “wrong”, but when he
is not depressed he is really a great person. He is only in his forties, but
I worry that he will get worse as he gets older. Have you any suggestions,
Hillary, as I like this man and would like to help him. Would psychoanalysis
help?
Julia
Dear Julia,
First, Hillary is not an analyst, but what you are describing is very
common. When people get depressed, they naturally think that the world is
dark and gloomy. This is not something that you should tackle on your own,
as skilled help will be required. When your friend is in one of his happy
times, you can try and discuss whether he thinks he would like to see
someone professionally, but don’t try and fix the problem yourself. It will
end up in tragedy if you do. Be careful, Petal!
Psychological Perspectives: The meaning of “race”
by Michael Catalanello,
Ph.D.
As far back as I can remember I have
always identified myself as a member of the “White” race. I don’t recall
specifically how I came to think in those terms. It might have been while
filling out one of those standardized test forms in school. Perhaps Sister
Beatrice, my kindergarten teacher, instructed me to blacken the “White” or
“Caucasian” balloon on the form with my number two pencil. Perhaps it was
my mother or father who taught me that I am “White.” I don’t remember.
No one ever provided me with a definition of “White.” Like most such
concepts, I learned to recognize different races through my experiences.
Most of the people I knew, my family and friends, were “White.” Other
darker-skinned people I saw while growing up in New Orleans, I would learn,
were “Black.” I think the other categories were “Asian,” “Hispanic,”
“Pacific Islander,” and “Other.” I didn’t know any of those, although I
probably first learned to recognize them from TV and the movies.
Like most people, I originally assumed that “race” was a scientific
classification, indicating distinctions that could be made at a biological
level. It was only much later that I began to realize that the concept of
race was problematic. It is now clear that “race” is a concept that was
invented by our human societies. It actually has no basis in biology. The
research bearing on this surprising conclusion was reviewed by Yale
University researchers Robert Sternberg, Elena Grigorenko, and Kenneth Kidd
in the January issue of American Psychologist, published by the American
Psychological Association.
Scientists generally accept that all of us humans are descendants of humans
who first appeared in Africa about 200,000 years ago. Some time around
100,000 years ago, small numbers of people began migrating out of Africa
and into southwestern Asia. The descendants of that non-African population
are now believed to have migrated further, over subsequent tens of
thousands of years, to eventually populate all continents and habitable
regions of the world.
Over many thousands of years, populations living in relative isolation from
one another changed for various reasons. Some of the changes were cultural,
such as developing different foods and different clothing. Some of the
changes, of course, were genetic.
Sometimes changes occurred as a result of Darwinian natural selection,
meaning that those with gene patterns providing some advantage for survival
or reproduction would, in time, become more prevalent. Other changes could
occur randomly through genetic mutations, and also through a mechanism
known as “random genetic drift.” Interbreeding within groups would also,
over time, result in members of those groups becoming more and more similar
to one another, and less similar to groups more geographically distant.
Obviously, differences in skin color are based in the genes. Sternberg and
his colleagues insist, however, that “there is nothing special about skin
color that serves as a basis for differentiating humans into so-called
races.” That’s because if you identify any two groups of people that are
different in one way, you can naturally find a cluster of ways in which
they are different. For example, it has been noticed that groups who have
survived over many generations in cold climates, such as Eskimos, tend to
have rounded bodies, which are better suited for conserving heat. On the
other hand, some populations that survive in hot climates, such as the
Masai, have lanky bodies. A high ratio of surface area to volume, it is
argued, permits better heat radiation, allowing such individuals to remain
cooler.
Using our current racial classification systems, lanky and rounded people
are viewed as representing two kinds of members of the Black and White
races. It would, however, be just as reasonable to decide that
classification of races should be done on the basis of lanky, versus
rounded bodies, resulting in Black and White members of the lanky and
rounded races. One could then identify certain genetic patterns that
correspond to lankiness and roundedness, just as we could find genetic
patterns corresponding to different skin colors.
Interestingly, we don’t speak of different “races” of, say moths, based
upon differences in coloration within a given species. According to some,
the concept of “race” is used by humans exclusively to classify human
populations in order to create social divisions that are beneficial to the
majority or ruling classes. Also, different racial classification systems
are commonly found in different places and times. There is no universal
agreement concerning a method of racial classification, nor can there be.
Human societies will probably always make racial distinctions. We
categorize things quite naturally, it seems, and that’s not necessarily a
bad thing. Racial categories often serve as a source of pride and personal
identity. Unfortunately, racial classifications are too often used as a
basis for discrimination against groups of people, even genocide. Perhaps
as our societies come to grips with the fact that race is a social, rather
than scientific construct, we will become less tolerant of such injustices.
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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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A Female Perspective: More good news
with Sharona Watson
Have you ever received news and thought,
“Fantastic! The world is going to be a better place from now on!”? News,
which somehow changes things which needed to be changed? News, that in some
way, points to a better, brighter future?
Sometimes, it seems that we work so hard at what we do, running from one
place to another, that there isn’t time to just stop and think about the
things we haven’t thought about for a long time. Then one day, you wake up
and the birds seem to be singing more happily, the sun and moon seem to be
shining brighter than ever and people who weren’t smiling yesterday are all
smiling today. Why does it happen? Is the sun really brighter?
You know, I don’t think it matters. What matters is that you feel that it
is. And you know what? You can make someone else feel that way too, just by
sharing good news. It’s all to do with developing a positive mental
attitude, which also (by the way) helps you get through the times when it’s
difficult to see the good news for the bad. Call someone and tell them
something that you know will cheer them up!
It was Valentine ’s Day last week. I was running around as always, very busy
with this and that. To be honest, I hadn’t given the day much thought, so it
was extra special to find a whole bunch of roses from Andy. I know I give
him a hard time, but I have to say, he always remembers. A couple of weeks
ago, he brought home sixteen of my favourite pictures which he’d had framed
at “The Frame Shop” in Naklua, run by Simon Bubear and his wife Aom, very
nice people by the way. I looked at Andy and I could swear that he got as
much enjoyment from giving these surprise gifts to me as I did from
receiving them. I suppose this kind of thing just makes your day.
On the other hand, if I’m tired, I must admit that I find even good news
cannot always help the situation. For example, the other morning, Andy came
to me with news of some of his “travel plans”. Now, he’s been flying off all
over the world since the New Year, so naturally I assumed he was going to
tell me that he was going off somewhere else on his own. But of course, I
know him very well and when he is about to tell me something he knows I
won‘t want to hear, he changes his tactics. Suddenly, it appears that he has
made travel plans for the whole family. Now, I appreciate that it’s a
privilege to be able to go anywhere, but why was I not included in the
discussion and the planning?
It turns out that he’s intending to take me somewhere where I don’t want to
go, or at least there are other places I would much rather visit before
going to this place (again). So then, he gets upset because he thinks I’m
being “ungrateful”. But he misses the point completely! It’s my holiday too!
I think it is so disrespectful not to ask me where I want to go!
Then he smiles at me and says, “Show some faith” as if he was thinking about
me all the time. I don’t know. Maybe he was, maybe he is.
There’s this guy we know very well and love very much who has this
expression from Oscar Wilde that he repeats all the time; “Two men looked
through prison bars; one saw mud, the other stars”. So now Andy keeps
quoting this line to me. Doesn’t that get annoying, when men keep trying the
same old lines, the same old tricks? So I give as good as I get. When he’s
talking about taking me to a place which he thinks is beautiful and I don’t,
I say to him, “Even the most beautiful prison is still a prison.” That’s one
of Nelson Mandela’s lines, one of Andy’s heroes, so he’s not going to argue
with that!
Living away from my country, one which has experienced so much violence
through the years, news of some development towards peace always gives me a
lift. Having said that, I am not one of those people who feel able to
rejoice in the illness or death of another person, whether it’s Ariel Sharon
or Yasser Arafat. I think if you’re happy about something like that you
bring yourself down to their level.
However, I am always perfectly happy to celebrate when an evil old despot
gets overthrown from power. They have usually grabbed it illegally in the
first place, anyway. It was like that for Andy with Margaret Thatcher
(although she was elected fair and square), Pinochet and Botha and there are
quite a few for me from my part of the world. But I have found that when you
fight for what you believe in, it can be a long hard struggle and sometimes
the news is bad.
But you have to pick yourself up. There’s something else about these
overthrown people that I always try and remember: lots of them were once
very popular and some still are, but the truth always finally comes out. I
suppose you can’t fool all of the people all of the time! To paraphrase
Gladiator, “The time for honouring themselves comes to an end.”
Next week: Household Chores
[email protected]
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