Why? Part 1

Why are so many commentators so positive about the global outlook when there are so many reasons to be negative?

1) It’s their job - in the main equity analysts can only sell their products by forecasting some level of growth in equity values. Their most cautious statements still imply that buying and holding equities remains a good idea. This isn’t always the case but for equity analysts to admit that would be like turkeys voting for an early Xmas.

2) Liquidity has been the dominant force recently - The global economy ended 2006 on a strong note recording one of the strongest quarterly gains of the expansion. The impressive gains in final demand (principally consumer spending and capex) stemmed from the US policy of using liquidity to finance growth. This policy has been echoed in many other markets. However, history and common sense both dictate that it’s impossible to maintain ever higher liquidity. At some point a credit crunch follows and brings down the curtain on a high growth economy powered by leveraged liquidity.

3) Arrogance - in all walks of life most people think that with the lessons of history we’re all smarter and more sophisticated now. In many areas that may be true. However, in economics we’re actually choosing to ignore the lessons of the past. The dot.com boom of the late 1990s saw a vast amount of egg on the faces of the “it’s different this time” crowd and yet the same mantra is heard every time you turn on CNBC. Some things do change but the fundamental facts that if you borrow money you have to pay it back and the more that you borrow the more you have to pay back remain constant. Debt and repayment are big factors in creating expansion and decline respectively. That’s why economies remain cyclical and why history’s pointers that we’re headed for a significant downturn can’t be ignored. Some things aren’t different this time - some things never change.

Volatility is definitely the big thing at the moment with markets being “all over the shop” in the last few weeks. From big up days to key reversal down days, being in cash would have saved you a lot of anxiety and little lost opportunity cost since late February. Gavekal are fantastic ‘out of the box’ thinkers and whilst correctly bullish for the past few years, their recent research piece entitled “Enough Dynamite to go fishing” made very interesting reading. “While there are over a million earthquakes per year around the world, most are too small to be felt. According to the Centre for Earthquake Research and Information at the University of Memphis, approximately 80,000 earthquakes per month, which means the planet experiences one every 30 seconds. However, a large 8.0+ magnitude quake on the Richter scale happens only once per year. The definition and frequency of earthquakes is quite analogous to financial markets – a constant building and releasing of pressure that most of the time is imperceptible to market participants.”

However, global markets undoubtedly experienced a seismic event in late February and early March. When comparing the indicators to October 1987, the Russian debt crisis in 1998, September 11th 2001, the sell off of 2002 and the correction of last May, the magnitude was off the chart! This was not an imperceptible pressure blow off. The NYSE ARMS Indicator, which relates advancing to declining stocks and volume, logged a reading not seen since the crash of October 1987. The CBOE put/call indicator, which relates the number of puts v calls purchased, recorded a more fearful spike than after 9/11 or the sell off in 2002. Gavekal provided no conclusion to these charts, other than to point out that their technical indicators for the US market turned quite violently. They then posed the question, “Will this earthquake be enough to cause lingering damage to the system?”

Our conclusion, volatility is here for the remainder of this year at least and when staring through the abyss it is amazing to see what is on the other side.

4) Optimism - the global economy has been led for some time now by the US economy. The US economy was the most successful economy in the 20th century. Its development during that and the preceding century were built as much on ability to develop and exploit new technologies as on a vast and willing, increasingly skilled labour force. Both of these piggy backed the ‘American Dream’ - a lot of people got rich in the ‘land of opportunity’ because they believed that they could. Although the US economy was the greatest beneficiary during times of expansion, recessions often hit the US harder last century because the nation just didn’t see them coming and was geared up gung ho to opportunity.

The most intelligent comments that we have heard about the direction of the world economy in 2007 have emanated from General Surayud here in Thailand - not needing to pander to or support any particular ‘dream’, he has been very forthright about the imminent slowing of the global economy and the need to de-leverage, adopt austerity measures and brace for the coming impact.

Politicians (and in the widest sense that includes Fed chairmen) don’t have that luxury and find themselves pressured - unless they have the exceptional moral fortitude to stand against the tide and make massively unpopular decisions - into leading the charge of “all is wonderful ... this time it’s different” crowd. This attitude prevails through the markets that want to believe this and this explains why, when symptoms of slow down appear, they are assumed to be proof of soft-landing when equally they could be harbingers of depression.

Forsyth’s Chief Economist, Peter Toogood (appropriate name in this context?) recently wrote: “The next few quarters should see weaker consumer spending in the US due to the lagged effect of monetary tightening, higher gasoline prices and an increasing spillover effect from the housing downturn.” But then, without any further explanation divined that this means a return to ‘normal’ trend growth rates for the next 2-3 years before the race is back on again and that in the meantime, the rest of the world will take up the slack. This is typical of the scenario that is widely presented as what’s likeliest to happen. That’s extremely misleading - this is the best possible scenario that could happen but ignores all of the structural problems facing leveraged western economies over that time.

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]@mbmg-international.com.com

Snap Shots: by Harry Flashman

Why you should leave your lenses on f5.6

I have three lenses in my camera bag. A 24 mm, a 50 mm and a 135 mm. Pick any one out of the bag and you will most likely find that it is set on f5.6. Why?

There are many reasons, including laziness, extreme familiarity with my camera and equipment, and the fact that I take more ‘people’ shots than countryside landscapes. Boiling all this down, I am generally more interested in shooting the subject than I am in the background.

How many times when you are taking a photograph do you actually look at the background? If you are honest, then the vast majority of you will reply, “Never.” Unfortunately, the wrong background, fussy, cluttered or “jarring” is a sure-fire way to spoil what could have been a great picture.

In your haste and eagerness to make the subject the “hero” you forget to look at the background, being so engrossed in making the subject in the foreground look good. However, there are many photographic techniques that can be used to get rid of backgrounds completely.

Take a look at the two photographs with this week’s article. The first shot shows a young girl sitting in a row of chairs, with an extremely “busy’ and distracting background. On the other hand, the second shot shows the same girl sitting on the same row of chairs, but the background has degenerated into a blur of shapes. There is only one heroine in this shot - the girl. The fact that these shots were taken less than 30 seconds apart, by the same photographer, using the same camera, shows that the control over the background is possible. It is not hit or miss.

One of the best techniques to master is the one that allows you to control the Depth of Field in any photograph. This relates totally to f stops and backgrounds! By the way, Depth of Field is merely the “sharp” area between the foreground and the background in any photograph. To isolate your subject in a snapshot you should try and get the sharpness region to begin just before your subject and end just behind the subject, your “hero”. Here’s how to do this.

For this technique, you do need a camera that allows you to select the Aperture, otherwise called the f stop. Look at the ring of numbers around your lens and you will see that they go from about 2.8 through to 22. You don’t even need to know what those numbers mean, but all you have to remember is that the smaller the number, the shorter the Depth of Field, and conversely, the bigger the number, the deeper the Depth of Field.

When you want to take a portrait, focus on the eyes and set a wide aperture - generally around f4-5.6 is satisfactory. Using a standard lens and shooting about 2 metres from the subject, you will get a Depth of Field that will extend from around 200 mm in front to 400 mm behind. Anything further away will be gloriously out of focus, isolating your portrait subject from any distracting background, just like the second photograph here.

So that is the reason that my lenses sit on f5.6. I can shoot in a hurry and not have to think about the backgrounds at all. I do know this is a lazy way, and every so often I can get caught out, so after the first couple of grab shots I do check the aperture ring! And so should you!

Modern Medicine: by Dr. Iain Corness, Consultant

SuperSight Surgery club sees a bright future

(I have previously mentioned SuperSight Surgery, but having heard that a “fan club” for the procedure has begun, I thought it worthwhile to feature it again.)

Are you over 50 and using spectacles to read this article? Do you hate your reading glasses? If so, keep them on and keep reading, help may be at hand!

Unfortunately, the need for reading glasses is a natural progression of aging. The first signs are the fact that you have to hold this newspaper further away to be able to read it, and you also find that you need a good light to be able to see the words clearly. Eventually you run out of arms, and you succumb and buy reading glasses. This means that you have become a slave to your spectacles! Eventually your nose gets funny indentations either side of the bridge, where the spectacles settle.

It is important that you understand just why this happens. As you get older, all the ‘elastic’ tissues in your body become less pliable. Knees, lower back, fingers, neck, the list is endless. However, you have to add to that list, the lens in your eye.

The fiddly little lens, supplied at birth as a standard feature, does not have a fixed focus, but you can make it focus close up (to read) and then also focus at a distance, such as when you are following your golf ball. The way you do this is by ‘bending’ the lens to be able to focus on near objects. Unfortunately, as the lens becomes less pliable, the muscles in your eye become unable to bend the stiffening lens enough to produce the near point focus. The near point moves further away, until you have run out of arms. We medico’s call this condition ‘Presbyopia’.

Unfortunately there is yet another result of aging that occurs in the lens of the eye. This is a gradual cloudiness which lowers the visual acuity, and eventually brings on blindness. Welcome to the wonderful world of white sticks and Labradors. According to the World Health Organization, currently between 12 and 15 million people are estimated to be blind from cataracts, and by the year 2020, this will be 54 million people.

The initial treatment was by removal of the now optically inefficient natural lens, and attempting to return some usable vision through the introduction of very thick and heavy spectacles placed before the eyes. These glasses looked as if they were made from the bottom of Coca-Cola bottles (registered trade mark and all), and were just as heavy. The patient could see again, but reading required even thicker lenses.

However, in 1949, a Dr. Harold Ridley noticed that pieces of shattered Perspex after a penetrating eye injury in aircraft crashes did not produce a reaction within the eye. This was the first step towards production of the Intra-Ocular lenses (now referred to as IOL’s as we medico’s love acronyms). It became possible for us to replace the cloudy hard lens with a clear lens. The patients could see again, but did need reading glasses, as the lens had a fixed focus.

So we come to the latest development in IOL’s. The focusable lens, under the control of the patient’s own intra-ocular muscles. With these lenses you can read your golf scorecard with your near vision, focus on the ball on the tee with your intermediate vision and then using your distance vision watch it gently arcing into the water hazard. (These new IOL’s can improve your sight, but not your golf, I am afraid.)

We also have Dr. Somchai Trakoolshokesatian who practices at the Bangkok Hospital Pattaya, who is one of the world leaders in inserting these new lenses. The results have been so outstanding that medical ‘tours’ are coming to this country to have this operation. Word of mouth has been bringing people to Thailand for the operation that can return their sight to what it was when they were 20 years old.

SuperSight Surgery works best in what are technically known as hyeropic presbyopes, meaning those individuals who are farsighted and have lost the optimal close up focusing ability of their eye’s natural lens. Presbyopes typically wear glasses for close-up work or reading; however, because each individual’s situation is different, a consultation with Dr. Somchai is the only way to definitely determine if you are a good candidate for the procedure.

So what does it cost? The current fees for the procedure are around 200,000 baht, which include surgery fees, the special lenses, implantation for both eyes and medicines on the day of surgery and one night stay in hospital.

Dr. Somchai can be contacted through his website www.doctorsomchai.com

Learn to Live to Learn: with Andrew Watson

The quest for the elusive

What kind of knowledge, skills and attitudes are required for effective leadership in international schools for the 21st century? In today’s world, where visible advances in communications and technology happen daily, yet where half the world’s population is without basic amenities, in a world where industrialized countries and regions grow increasingly wealthy (at the cost, in many cases, of polluting the planet), whilst ‘developing’ countries struggle under the combined weight of debt burdens, political upheaval and natural disasters, international schools have a crucial role in shaping a future that can be safer, cleaner and more healthy, politically, economically, socially and spiritually.

As the single most important figure in a school, the leader of an international school has a pivotal role in translating vision into reality, turning pedagogy into practice. “The importance of the Head teacher’s leadership is one of the clearest of messages from school effectiveness research.” (Gray, 1990 in Hayden & Thompson, 2000)

Jameson (1991, in Morrison, 1998) characterises today’s global society as “postmodernism in partnership with late capitalism”. The boundaries between schools and business and industry are blurred. Morrison (1998) maintains that there is a traditional antipathy between education and business. Shaw (1996) alludes to the lack of research between the two. Nonetheless, it can be forcibly argued that best organisational practice is equally applicable and relevant to both business and education. What Morrison (1998) refers to as a “celebration of disparateness and chaos” in postmodernism, can be compared with the awareness and celebration of diversity in education. In both, change and uncertainty are omnipresent. I suggest that knowledge and recognition of local, regional and global reality is central to the capacity of an international school leader to be effective in the 21st century.

Attributes are characteristic traits (COD, 1995). Characteristics traits can be seen as a combined and evolving result of education and experience, which in turn are composed of knowledge, skills and attitudes. Knowledge, skills and attitudes are treatable as an interdependent group of attributes with ever changing emphasis. Categorising their characteristics should not diminish their essentially interdependent nature. ‘Effective’ is understood to mean, ‘having a definite of desired effect’ (COD, 1995).

Whilst there exist unifying groups of schools such as United World Colleges who seek to maintain standards and educational philosophy across their member schools, and authorisation and accreditation bodies (such as the IBO and CIS respectively), the endorsement of whom represents a kite mark for quality, the extraordinary diversity of international schools preclude a universal definition. However, research has suggested defining characteristics which, depending on the host country, culture and environment, one might expect to find to a greater or lesser degree in an international school.

Hayden, (1998) and Richards (1998, in Ezra, 2003) produce criteria which include: promotion of international understanding, a balanced multi-national student body and faculty, preparation for global destinations for higher education and standards aligned with American or European schools. In my view, diversity and Diaspora are central to the idea of an international school. The celebration of diversity, through the ‘planned interaction’ (Walker, 2000 in Hayden & Thompson, 2000) of students from different backgrounds, Diaspora, (Willis et al, 1994 in Shaw, 2001) where a significant number of the school community is displaced from their original surroundings and are internationally mobile. (Ezra, 2003) The Diaspora might also be expected to include ‘third culture kids’ (Pollock and Ven Reken, 1999) or global nomads (Useem, 1976 in Ezra 2003).

Whilst acknowledging that the celebration of diversity is by no means limited to international schools (multi-cultural inner city schools often enjoy the same diversity), in suggesting that the idea of celebrating and valuing diversity is central to what defines an international school, it follows that effective leadership should keep the central tenet of diversity at the centre of school practice. It should be pervasive, from mission statement to classroom practice. Hayden & Thompson (2000) speak of an ‘international attitude’ arising from the natural diversity of nationalities, language, cultures and religious beliefs.

I am confining the idea of “leadership” in this column, to Principal, also referred to as Superintendent, Director, Head teacher and Headmaster, depending on the culture. Welton, (2001) in recognizing that international schools are heterogeneous in type and origin, makes a crucial point regarding the link between international schools and their choice of leader: “Their approach to planning and management reflects the origins of their founders and the professional socialisation of their current managers.”

It is the nature of a school which determines the kind of leader. In many senses, you get what you pay for, or what you deserve. Research shows (Hawley, 1995) that leadership in international schools is something that does not last very long. For a wide variety of reasons, longevity of Headships is an average of 2.8 years. Whilst acknowledging that this research is almost ten years old and based on a particular type of international school (American), this figure serves to illustrate how precarious the leader’s position can be.

In identifying the attributes required for effective leadership, it is important to consider that it is by no means certain that a person will have arrived at the position of leader by demonstrating the required knowledge, skills and attitudes. “I fear that most heads who have been deputies arrive at their first board meeting with no relevant experience at all” (Walker, 2004).

In the ‘Wild West’ of international schools, where prevailing uncertainty, complexity and chaos reflect global reality, there are many reasons for Head teachers arriving at the top of the pile. Some seem to resemble the educational equivalent of gun slingers who have ‘faced down’ their rivals. You don’t have to look very far into history to see classic examples of ‘Gatekeepers’ as annotated by Blandford & Shaw (2000), where a farcical situation ensued of the board claiming total ignorance that the position of ‘Deputy Principal’ even existed! Then, when a newly appointed Principal withdrew his candidacy, the Deputy was made Principal in his place! Also a Gatekeeper, she mirrored her predecessor’s capacity for not so benign dictatorship, with perhaps predictable results. “Heads who control all the decisions, who obstruct initiative, who choose blame before praise, who see only problems where others see possibilities, are heads who create discouraged and dispirited teachers.” (Fullan & Hargreaves, 1992)

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Next week: Heroes & Genius