Graham Macdonald MBMG International Ltd.
Portfolio Construction - Part 3
Asian property should be preferred to US property. Also, in
view of the fact that the UK (as well as Australian, Spanish and Irish) property
markets are about to, at the very least, suffer a correction, a good structured
note that shorts UK residential property is probably the first asset that should
be on anyone’s portfolio radar right now.
One aspect that determines outlook is investment psychology. It’s worth taking
into account local factors. In line with national characteristics US
commentators invariably tend to be more positive about the US economy than some
more objective external analysts. Also historic factors should be considered
(the longer that a bull run endures, the more complacency slips into equity
markets which is why “maybe this time it’s different” is the mantra that has
cost the most money over the last 5 decades).
Some things do change and become different - other market forces remain
constant. We’re constantly disappointed at how many analysts and commentators
seem to have a disappointingly weak grasp of history. To us it’s clear that
we’re now in the typical calm before the storm that has marked just about every
previous major correction. Let’s just look at the views of two expert
commentators. Firstly, Roger Gray, CIO of Hermes, who answered a couple of
“Q: How likely are we to see a storm in markets?
A: Oh I think we are likely to see a storm. One of the things we know about
markets is that they go up and they go down and they are volatile. Of course,
there is some variation in the extent of that volatility. But I think it would
be naïve to assume that we won’t see a severe bout of stress and volatility in
markets. Exactly what the trigger is going to be, we could, of course, explore
that speculatively, but certainly there will be a trigger and probably every
investor has some ideas to what their favourite potential trigger might be.
Q: And your favourite trigger at the moment?
A: I would say we have got an environment where central banks have been
gradually tightening their monetary stance. Inflation has been picking up in the
last few years. It hasn’t reached maybe alarming levels, but it is also not
comfortably under control. If central banks find themselves having to continue
raising interest rates because inflation misbehaves as we move into 2008, I
don’t think that the market is really poised for that and a squeeze of liquidity
could certainly be a trigger for some re-rating of risk.”
So inflation remains a concern but the removal of the surplus liquidity that has
supported the markets for the last few years is Mr. Gray’s biggest concern.
William Rhodes, senior vice-chairman of Citigroup, and chairman, president and
chief executive of Citibank recently wrote the following: “Much of the good news
has come as a result of extraordinary levels of liquidity pouring into
opportunities around the globe. To a large extent this is due to the Federal
Reserve’s expansionary monetary policies early in the decade and the US
administration’s fiscal stimulus. The yen carry trade has also facilitated the
buoyant expansion of investments and leverage evident everywhere today. The low
spreads, the tremendous build-up of liquidity, the reach for yield and the lack
of differentiation among borrowers have stimulated both dynamic growth and some
Pockets of excess are becoming harder to ignore. Problems in the housing and
mortgage area such as the sub prime sector in the US are one such example of
excess that should come as no surprise. As lenders and investors inevitably
become more discriminating, liquidity will recede and a number of problems will
surface. Too many countries and companies with vastly different risk profiles
are still commanding similar pricing.
Usually, periods of economic expansion tend to last between five and seven
years. We are entering the sixth year of expansion in the US. Against that
background, we believe that over the next 12 months a market correction will
occur and this time it will be a real correction.
Recent market developments should be seen as a warning. What has been evident
for a number of months is that, in the US, we are seeing lagging inflation and
slower growth. Whether this means that we are going to have to fend off
recessionary tendencies is not yet clear.
During the last big adjustment that started in July 1997 in Thailand and spread
to a number of Asian economies including South Korea, followed by Russia in 1998
- and led ultimately to the bail-out of Long Term Capital Management, the US
hedge fund - a number of today’s large market operators were not yet in the mix;
therefore, they may have chosen not to remember the words of Harry S. Truman,
“The only unknown is the history that you have not yet read.”
Today, hedge funds, private equity and those involved in credit derivatives play
important, and as yet largely untested, roles. The primary worry of many who
make or regulate the market is not inflation or growth or interest rates, but
instead the coming adjustment and the possible destabilising effect these new
players could have on the functioning of international markets as liquidity
recedes. It is also possible that they could provide relief for markets that
face shortages of liquidity.
Either way, this clearly is the time to exercise greater prudence in lending and
in investing and to resist any temptation to relax standards.
I think that everyone should heed this - prudent diversified 5 asset class
diversification is more important now than ever. Don’t say that you haven’t been
To be continued…
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
Snap Shots: by Harry Flashman
As this is the 14th anniversary of the Pattaya Mail as the leader in the
English language publications on the Eastern Seaboard, I struggled to
find some connection between 14 and photography. There is an f11 and an
f16, but no f14 I am afraid. There is a 1/15th shutter speed, but no
1/4th either. Then I remembered Norman Parkinson, and the famous tale of
his apprenticeship and the reference to a fortnight, which is after all,
14 days. There is a 14 connection for photography after all.
of the greats, in any discussions on fashion photography, is the late
Norman Parkinson who died a little over 14 years ago, aged seventy
seven. Primarily a fashion photographer, he produced many original
concepts during his lifetime, and always was one to go his own way, even
from the outset.
He was indentured to Speaight of Bond Street, the ‘Court’ photographer
in 1931 when he was eighteen years old. Those were the days when you
paid to be allowed to work under such important people, and Parkinson’s
fee was three hundred pounds to able to learn from the ‘great man’.
Speaight had once photographed Kaiser Wilhelm in the trenches and would
regale his students with the tale, and how he used a bed sheet to
reflect the light into the face of his famous subject. “What do you
think the exposure was?” he thundered at Parkinson. “About a fortnight
at f8,” was his cheeky reply. That quick-witted response epitomizes
Norman Parkinson’s approach to photography as well. Quick to adapt and
an underlying sense of humour.
After leaving Speaight, Parkinson set up his own studio in London. He
was twenty one and willing to experiment with lighting and was soon in
demand from the young debutantes of the day. However, Parkinson soon
felt hemmed in by the confines of his studio, but when Harper’s Bazaar
magazine commissioned him to photograph hats out of doors, Parkinson was
a hiatus for the war years where he worked in aerial reconnaissance,
Parkinson came back with a rush and worked for the international Conde
Nast group, with the bulk of his work going into the British and
American Vogue magazines. He is credited as having had an enormous
influence on post war American fashion photography, setting the trend in
that country also in using the outdoors as the backdrop.
His favorite way of shooting outdoors was “contre jour” (against the
light) and to use a fill-in flash to light the foreground. Parkinson did
this because when you take a shot with the sun behind you, there is no
way you can control or modify the light source, but by using fill-in
flash he would retain total control, balancing the foreground
illumination against the light from behind the model, as supplied by the
great celestial lighting technician.
Like all true professionals, Parkinson carried more than one camera on a
shoot and would have two sets of medium format cameras (Hasselblads) and
another two sets of 35 mm cameras (Nikons). Before committing the final
scene to film, he would check all his exposure settings by taking some
Polaroid instant films. He even said in 1981 that he had not used an
exposure meter for over twenty years. Mind you, with seasoned pro’s such
as Parkinson, he would have been able to guess the settings and be spot
on over 90 percent of the time.
Whilst he is best remembered for his fashion work, Parkinson was also a
very skilled portrait photographer. With regards to this type of work he
said, “I try to make people look as good as they’d like to look, and
with luck a shade better. If I photograph a woman then my job is to make
her as beautiful as it is possible for her to be. If I photograph a
gnarled old man, then I must make him as interesting as a gnarled old
man can be.” Norman Parkinson, a true professional, and the author of “a
fortnight at f8!”
by Dr. Iain Corness, Consultant
The 14 year old problem!
We’ve all been there and done that. Squeezed the zit that
came up just hours before that big date, and turned it into a weeping
beacon. The cause? Acne vulgaris – a vulgar name for a common condition
There is only a handful of people who go through their teenage years without
suffering from acne vulgaris, otherwise known as “Zits”. The official
figures are that it affects 90 percent of boys and 80 percent of girls in
the 14-17 year age bracket. Now while we always think of it as a condition
of adolescence, the bad news is that it appears to be starting to spread
into middle age as well. Zits for ever! Perish the thought.
There is a tendency to trivialize acne just because everyone goes through
it, but when you take into consideration that acne scarring can be
permanent, and that for the adolescent sufferer this can produce depression,
social isolation and even suicide, then the condition takes a much higher
The actual cause of acne is still not fully understood, though we do
understand the disease process. What happens is that there is an increase in
sebum production by the oil producing glands in the skin. This is most
likely hormonally regulated. (Around that age, the hormones do tend to run a
little amok!) This results in blockage of the oil producing gland itself
(the follicle) which then becomes invaded and infected by a bug called
Proprionibacterium acnes. This results in the pustular Mt. Vesuvius on the
face which is the scourge of the teenage years.
Unfortunately, there is much myth surrounding the causation of the zits. The
first is that it is caused by eating too much chocolate and fatty foods. Not
so, say the dermatology researchers. While I believe there is a connection,
the sugary and fatty foods are apparently not the cause. I believe it
accelerates the condition, though.
There is also an underlying thought that acne is the result of poor hygiene.
Let me assure you that this is not the case. “Blackheads” are not dirt and
the dark colour is a combination of melanin and the skin cells and the plug
of sebum in the oil producing glands in the skin.
Another problem comes from the fact that teenagers get told that acne is
just a “normal” part of growing up and don’t worry about it. While most kids
will get the condition, it is not really “normal” and should never be
thought of that way.
Another of the great myths is that prescription treatments do not work. This
is not correct, the earlier the treatment is instituted, the less likelihood
there is of permanent scarring. I am sorry, but I have never been a fan of
the proprietary preparations which are heavily advertised on TV. If they can
spend that much money on advertising, the expensive tube of wonder goo must
have a huge profit margin in it.
So what treatments are available? Basically there are two types – rub it on
(which we call topical) or swallow it (which we call oral therapies). The
problems that occur are the fact that there is no “instant” cure and
treatment may have to be maintained for up to six months, or even longer.
There is now an oral form of a group of drugs called retinoids as well, and
while these have really produced a small “break through” in the treatment of
acne, they are also a very hazardous form of treatment which has to be done
under the close supervision of a skin specialist. So don’t go buying them
over the counter at your local ‘shady’ pharmacy.
That’s the 14 year old acne story. Don’t just accept it as inevitable – but
get treatment early!
Heart to Heart with Hillary
Where should I take my girlfriend for a romantic night? I intend to propose
to her then, so want to make it an evening to remember.
You didn’t say in your letter what it was that you wanted to propose.
Marriage, ménage a trois or a dirty weekend at Hua Hin? Since you are so
indecisive and wishy washy, I hope she says No! to all three of your
My doctor has told me I have to give up drinking. I work in the
entertainment industry, so this is a bit hard. What do you suggest I do?
It’s easy. Change your doctor. The definition of an alcoholic is someone who
drinks more than their medical advisor.
I think your advice is daft. What right have you got to tell people what to
do? Why don’t you go back to your dog-house?
I have as much right as you have, my Petal. Since you are the one with a
bone to pick, perhaps it is you that should be living in the kennel? Woof!
The wife of one of my husband’s friends will be coming to visit. She said
she wanted to see a “sex show” while she is here. What do you recommend,
Everybody knows we don’t have sex shows here. The nice policeman told me so.
If you’re really worried, get your husband to take her.
Some days when I read your column you really can be terribly bitchy. Why are
you like this? These people are only asking for help.
I do get bitchy when I have to answer ridiculous obvious questions like
yours. I agree though, you certainly do need help, like the rubber room and
the funny sleeveless tight jacket. Best to steer clear of me till next week.
The other evening my husband of 20 years called me a bitch. I slept in the
spare room that night and now I am thinking of leaving him. He just laughs
when I ask him about it.
Perhaps if you bark at him again you will get the answer.
You can’t get all these silly letters. Surely they are made up. Tell us, you
can unload on us – we won’t tell anyone!
You don’t know all the troubles we lonely hearts counselors have to take
home. Some nights I just sob myself to sleep. Of course on other nights I
almost wet the bed laughing at letters like yours, my Petal.
I am a model husband, good looking, never play up, drink in moderation, in
perfect health, a witty intelligent companion, and considered by everyone as
a “good catch”. This week my wife announced that she wants a divorce. Why,
It’s probably because she has found out that she is married to a smug, self
satisfied, arrogant, pompous twit.
My wife went out the other night and came home at 2 a.m. well under the
weather. What do you think I should do about it?
Get her an umbrella and a rain coat.
I wrote to my girlfriend and told her to expect me at Xmas and she wrote
back and said it was not really suitable and she could be away up country.
Am I getting the cold shoulder?
This may come as a shock, Jason my petal, but Thai girls can have more than
one boyfriend. She may be pining for her Jack, Jacques, and Jorgen as well
as her Jason. You have to remember you are here for four weeks. She is here
We want to start a Hillary Fan Club. Will you be the patron?
I will be patron provided you charge a decent annual subscription (keeps the
riff-raff out) and the money is donated to my favorite charity, the
Champagne Fund for Aging Agony Aunts.
My wife discovered some “glitter” in my underpants. Should I tell her I am a
cross dresser, or admit to secretly wearing glitter makeup which I rub off
before I get home in the evenings?
You certainly are a mixed up man, aren’t you, Petal. You have got even me
confused. If you are wearing glitter makeup, what are you wiping it off
with? Your underpants? The mind boggles.
There is a young woman who cannot stay in her unit because they are
repairing it, so she comes over. So far I have put her in the second
bedroom, but I can see this will not last. What do I do?
I think she has an interest in hydrodynamics and wants to inspect your
plumbing. Since you are worried that your second bedroom “will not last”
Platform shoes seem to abound in Thailand. Do you know why?
What height are Thai girls? What height are farang men? If they are ever to
see eye to eye with this week’s sucker for “I love you to mutt, Teerak” they
need six inches of platform soul, sorry, “sole.
Learn to Live to Learn: with Andrew Watson
Some educational conversations…
I took the opportunity recently to transcribe
some conversations with international school Heads which go into
some detail concerning quite a few topics of current currency. I
won’t mention their names, because it’s not really important who
they are, except to say that they gave their blessing to the
column. I don’t think their opinions can be regarded as
contentious, but I do think they are interesting. This
conversation relates to “Faith Schools” (schools whose identity
is grounded in religious belief; i.e., Christian schools, Jewish
schools, Muslim schools, etc.) Nom de plumes courtesy of
Mr. Orange: “If we accept that globally, faith schools
are inevitable, shouldn’t they be seen as essential partners in
developing educational models? Would not the celebration of
cultural diversity be a logical result of such a partnership?
(This was not intended to promote a debate on the pros and cons
of faith schools, so much as one on the acknowledgement of
different aspects of human sociological experience.)
Mr. Blue: “If we reject outright the notion of faith
schools, it seems to me we are putting religion outside the
sociologically valid arena for learning. Such a position would
also presume that religious education ceases to be a genuine
form of education when it becomes “Religious Knowledge or
Instruction”. In my view, such a position betrays some ignorance
of the common messages of the three monotheistic religions in
particular, which actually preach the celebration of diversity
(The Dignity of Difference, Jonathan Sacks, 1994) and are
at their heart, extremely close to the central tenets of a body
such as the International Baccalaureate Organization (IBO). For
example, the part of IBO mission statement which reads: “The IBO
aims to develop inquiring, knowledgeable and caring young people
who help to create a better and more peaceful world through
intercultural understanding and respect.”
Mrs. Green: “From an ideological stance, yes, I think it
would be great to see faith schools as partners in developing
educational models, but the point critics of faith schools make
is that the very purpose of these schools is to promote their
religion, not encourage debate about it. They are imposing
beliefs as absolute “truths” and therefore undermining
democracy. If so, how do they encourage students “to understand
that other people, with their differences, can also be right?”
(another part of the IBO mission statement).
Mr. Blue: “I wonder if rejection of faith schools relates
to a concern that “faith” may not always be something
individuals experience for themselves. Rather in the schooling
process it is a cultural belief system that is taught as an
absolute truth and therefore could be considered
Mrs. Violet: “I don’t think it is possible to deny that
religion is a part of the sociological fabric of mankind. I
think that religious education can only be seen as genuine
education when it takes the form of introducing young people to
the important part that religion has played in human
development. Objections lie in the imposition of the religious
values on young people when the imposition is sought as a means
of control. Such a “return to rationalism” allows the dominant
social group (read “dictator”) to impose their definition of an
Mrs. Green (taking control slightly): “I still take issue
on the following grounds; firstly, that students do not need to
experience faith in order to attend faith schools. Secondly, if
the faith school is delivering education consistent with the
message of its religion, then it should not be taught as an
absolute truth. There may be aspects of ethical absolutism,
which I propose are prevalent in cultural belief systems,
whether religious or not. Thirdly (from personal experience),
delivering a cultural belief system as an absolute truth is (in
my view) inconsistent with the criteria for authorization and
the mission statement of the IBO. However, there are many faith
schools delivering the IBO’s culturally embracing curricula,
which leads me to logically conclude that either some (but not
all) faith schools share common ideology with the IBO or that
the IBO are being hoodwinked by self-serving religious groups
who want to use the ‘branding’ of the IBO as a method for
student recruitment. I prefer the former idea. Fourthly, I think
it is a mistake to consider faith schools in isolation. In my
view, in being identifiably different by espousing a cultural
belief system, they are in essence no different from a school
which proclaims above all else (for instance) its “Britishness”.
After all, “Britishness” I submit, could be viewed as just as
incompatible with the concept of “International Education” as
faith schools. Fifthly, it is in the IBO’s interests to be as
inclusive as possible. The last thing they want is to be seen as
elitist. This may seem an unsustainable ambition (and is in many
regards being borne out as such by their patterns of growth) but
is a laudable ideology nonetheless. So they encourage faith
school representation as well as representation from “culturally
dominant groups” like American schools, British schools and
“international” schools. Sixthly, show me an education system
which cannot be considered “indoctrination”. Consider the
Western Humanist Imperialist Orientated IGCSE or GCE History
syllabus. Where, for instance, is “Britain in Ireland?” Could
not the IBO’s mission statement be described as politically left
of centre or ideologically “politically correct”?
Mr. Blue (finally cutting in): “I think it’s a valid
point about faith being an aspect of human sociological
experience. I wonder what happens when schools use faith as its
main vehicle of cultural transmission through its curriculum and
whether it includes moral, political, literary, cultural
contributions also made to society. Does the curriculum of faith
schools value and represent particular cultural phenomena over
others because those align more with its ideological motives?
Does it only choose to transmit the virtues of that particular
cultural belief? Do faith schools always give students the
option to construct their own knowledge? For example, are they
allowed to choose between the Biblical or the Darwinian account
of the universe for themselves or does one account become the
absolute truth? Or is knowledge construction allowed only in
certain subjects where the message of the religion does not
conflict with the educational content?”
Food for thought, I hope.
Andrew Watson is a Management Consultant for Garden
International Schools in Thailand. andreww @gardenrayong.com
All proceeds from this column are donated to the Esther
Benjamins Trust. www.ebtrust.org.uk email: [email protected]
Next week: Education or indoctrination?