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Money matters:
Graham Macdonald MBMG International Ltd.
To cut or not to cut?
Now that is a question - part 1
A big debate right now amongst certain
financial circles is whether investors, who have seen equity holdings fall by
50% or more this year, should now act, cutting and running at a huge loss or
whether they should sit tight and wait for recovery.
In December, we saw an email from an advisor quoting verbatim Warren Buffett’s
New York Times article of October 17 “Buy American. I Am”. Anyone wanting
to read the full article should follow this link - http://www.nytimes.
com/2008/10/17/opinion/17buffett.html? partner=rssuserland&emc
=rss&pagewanted=all© Copyright 2008 The New York Times Company.
At the time, i.e. October, we wrote that anyone wanting to hear the latest
financial thinking of one of the most successful US strategic equity investors
should probably just ignore it … and wait for the next annual general meeting of
Buffett’s listed investment company, Berkshire Hathaway. Because we really do
not believe that the article is anything like an accurate state of Buffett’s
current take on the market and find the article totally disingenuous other than
the opening line, “The financial world is a mess, both in the United States
and abroad. Its problems, moreover, have been leaking into the general economy,
and the leaks are now turning into a gusher. In the near term, unemployment will
rise, business activity will falter and headlines will continue to be scary.”
Buffett wrote the article to tell the world that he’s been buying American
stocks but quickly adds: “This is my personal account I’m talking about, in
which I previously owned nothing but United States government bonds. (This
description leaves aside my Berkshire Hathaway holdings, which are all committed
to philanthropy.) If prices keep looking attractive, my non-Berkshire net worth
will soon be 100 percent in United States equities.”
Buffett then gives us a reason for this: “A simple rule dictates my
buying: Be fearful when others are greedy, and be greedy when others are
fearful. And most certainly, fear is now widespread, gripping even seasoned
investors. To be sure, investors are right to be wary of highly leveraged
entities or businesses in weak competitive positions. But fears regarding the
long-term prosperity of the nation’s many sound companies make no sense. These
businesses will indeed suffer earnings hiccups, as they always have. But most
major companies will be setting new profit records 5, 10 and 20 years from now.”
Hmmm, so a man who just turned 78 years old on the eve of the September
market meltdown is buying with a 20 year time horizon. I am sorry, but I just do
not buy that.
Buffett likes to mythologize - Buffett rails against hedge funds and positions
himself as a long term buy and holder whereas his investment management style
owes more to the activism and trading activities of hedge and private equity
funds than it does to mainstream long term value equity funds which is why none
of the guys in that sector can get anything like his results - whereas the
Private Equity and Hedge managers can. And why is Buffett buying on his private
account when Berkshire is stuffed with cash?
Admittedly Berkshire is doing deals too but that’s not the drift of Buffett’s
article and there is no mention that Berkshire is also selling financials. If
Buffett were taking the best deals for his personal account and leaving
Berkshire with the rest of the pickings, how would that look?
It just doesn’t make sense to us. What’s more, we think that the Sage of Omaha
doth protest too much: “A little history here: During the Depression, the Dow
hit its low, 41, on July 8, 1932. Economic conditions, though, kept
deteriorating until Franklin D. Roosevelt took office in March 1933. By that
time, the market had already advanced 30 percent. Or think back to the early
days of World War II, when things were going badly for the United States in
Europe and the Pacific. The market hit bottom in April 1942, well before Allied
fortunes turned. Again, in the early 1980s, the time to buy stocks was when
inflation raged and the economy was in the tank. In short, bad news is an
investor’s best friend. It lets you buy a slice of America’s future at a
marked-down price. Over the long term, the stock market news will be good. In
the 20th century, the United States endured two world wars and other traumatic
and expensive military conflicts; the Depression; a dozen or so recessions and
financial panics; oil shocks; a flu epidemic; and the resignation of a disgraced
president. Yet the Dow rose from 66 to 11,497. You might think it would have
been impossible for an investor to lose money during a century marked by such an
extraordinary gain. But some investors did. The hapless ones bought stocks only
when they felt comfort in doing so and then proceeded to sell when the headlines
made them queasy.”
Now that’s going too far - if an
investment is a good investment, you don’t have to scare people into buying it.
Typical Buffett that he wraps it all up in compelling, folksy wisdom to follow
Wayne Gretzky’s advice to skate to where the puck is going as opposed to where
it has been.
This is a high quality propaganda exercise. It just doesn’t make sense ...
Re-read all the Berkshire Hathaway reports since the turn of the millennium -
Buffett and Charlie Munger saw this crash coming ... and forecasted that it
could be far more catastrophic than it has ... and that it will take many years
to fix ... and that America has sold off the family silver and may never recover
... and that the kinds of derivatives embedded in the balance sheets of Goldman
Sachs are impossible to quantify and Wall Street firms should be avoided at all
costs.
Our conclusion is that Buffett believes the opposite of what he’s saying and
doing right now. So why would he do it? There are 3 possible explanations:
• The market is likely to rally over the next few months - by buying now and
talking it up, Buffett could exit with a nice trading profit. We don’t really
buy that though. That’s what we did last in the last week of October buying US
stocks for the first time in 9 years but we’ve already sold them again to
realize a decent immediate profit on these.
• Buffett has simply changed his mind - we don’t buy that either; these aren’t
simply one-time opinions that Buffett’s words and actions now contradict; they
fly in the face of long held, maybe even lifelong beliefs.
• Maybe at 78 years of age, the world’s richest man wants to leave a legacy
other than his reputation for building up Berkshire Hathaway and his subsequent
philanthropic interests - maybe he wants to be the J. Pierpont Morgan of the
21st century. Perhaps he wants to save America from itself. This scenario is
more believable. We think that Buffett is on a white charger trying to save
America and its markets. What aging billionaire wouldn’t be prepared to throw
away a few billion dollars over the remaining years of his life to buy a place
in the history books; an enduring kudos long after he’s gone?
So when Buffett concludes his article with, “Today my money and my mouth both
say equities” our response would be, with respect, we think both his
mouth and his money are talking with forked tongues. We remain great fans of
Berkshire Hathaway but not of Buffett’s personal investment strategy.
Sadly all the vested interest equity fund managers, so called private bankers
and general Wall St equity-philes whose advice in all conditions amounts to a
perpetual allocation to stocks have not changed their habitual tune. We are
disappointed that the current situation hasn’t woken them up, even if we never
really expected it to.
To be continued…
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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]@mbmg-international.com.com
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Snap Shots: by Harry Flashman
10 Tips to start
the New Year
 There
will be many new photographers out there, both young and old(er) ones,
who have received a camera from Santa’s sack. This week’s column is for
you, which will hopefully stop you acquiring the knowledge on this page
the painful way, so take advantage of my (years of) experience!
Over the years, I have been asked many times to give out the “secrets”
you learn in the professional photography arena. There are really no
secrets; they are all here, just keep reading. I should add that all
these tips come from real life experiences which have happened to myself
and other pro shooters. None of it is made up.
Tip number 1. Read the manual. Read the manual again. In the case of
digital cameras, read the manual again. You cannot do it too often. With
digitals, you can see the effect immediately. Now read the manual again.
Tip number 2. Frequently check the exposure controls on your camera,
that they really are set on Auto, or Shutter priority or what have you.
It is very easy to knock the controls and settings when taking the
camera in and out of the bag, or even when it has been hanging round
your neck.
Tip number 3. When you get the book of prints back, and the envelope
with the negatives from the photo shop, or the CD with the images,
immediately write on them the subject material of the shots and the
date. Do this with black texta pen so it doesn’t rub off and you will
have saved yourself hours of work, flicking through books of prints and
CDs, while looking for “Solomon Islands 1998”.
Tip number 4. When going on holidays with your camera, take spare
batteries with you - always. No matter how new the batteries, if there
is a failure while you are trekking in Nepal, or just lazing on the
beaches in Koh Chang you will not be able to get the correct
replacement. Remember that your camera may also use more than one type
of battery, another trap for young players.
Tip number 5. Always carry one more memory stick or roll of film than
you think you’ll need when on holidays. The shot of a lifetime will
appear and you will have already used all your film. Likewise, when you
are digital, you haven’t got the time to sit there going
‘review-delete-review-delete’ with your digital.
Tip number 6. Always check that the camera neck strap is indeed tight
and secure on both ends. If one end lets go, the camera will hit the
ground before you have time enough to react. Cameras do not bounce well,
if at all.
Tip number 7. Never keep your camera in the glove box of your car.
Temperatures that can be reached in the cubby hole reach as high as 50
plus degrees Celsius in our blazing summers. The newer “plastic” bodied
cameras and camera backs can actually warp with the high temperature.
Tip number 8. When you decide that you want an enlargement made of one
particular shot, arrange for it straight away, while you still have the
negative or CD handy, and before it gets covered in dust and scratched,
making it impossible to get a decent enlargement. And before it gets
lost, even though you have written on it what the CD is about (see Tip
number 3).
Tip number 9. Always put spare memory sticks or cards back in their
plastic containers, and keep them in the camera bag. I even suggest you
tie them in place, so they don’t get lost. When you need it in a hurry,
it has to be accessible. It will happen, believe me.
Tip number 10. When shooting kids or animals for doting parents/owners,
try and duck the job! However, if you have to, get down to their level.
You’ll get a better shot! Kids or animals.
Modern Medicine:
by Dr. Iain Corness, Consultant
Cancer research - the never-ending story
“Cancer” is a word - not a sentence, which really is very
correct. “Cancer” is also a word that everyone has heard, but is not a
condition that everyone understands. And that includes the medical
profession.
There are many reasons for this, including the fact that your reaction to
‘carcinogens’ (cancer producing substances) is not necessarily the same as
the reaction of the person sitting next to you. Individual differences do
exist, and may even be inherited (genetic) influences.
Cancer is caused by abnormalities in a cell’s DNA (its genetic blueprint).
Abnormalities may be inherited from your parents, or they may be caused by
outside exposures such as chemicals, radiation, or even infectious agents
including viruses. Some of these conditions do not act on DNA directly, but
cause cancer in other ways, such as causing cells to divide at a faster
rate. All of these substances that can cause changes that can lead to cancer
are called ‘carcinogens’.
The difficulties in studying them come from the fact that known carcinogens
do not cause cancer in every case, every time. Substances classified as
carcinogens may have different levels of cancer-causing potential. Some may
cause cancer only after prolonged, high levels of exposure (remember the
words of Paracelsus: “Dosage alone determines poisoning”). And for any
particular person, the risk of developing cancer will depend on many
factors, including the length and intensity of exposure to the carcinogen
and the person’s genetic makeup.
So just how do we classify any compound as being a carcinogen? With
difficulty, is the simple answer. The research chappies get much of their
data about whether or not something might be carcinogenic from laboratory
(cell culture and animal) studies. However, you have also to remember that
Man is not a Large Rat (even though certain divorced ladies might attest
differently). It is not possible, on animal studies alone, to pin the
carcinogen rap on any particular compound. It does, however, give us an
indication. Although it isn’t possible to predict with absolute certainty
which substances will be carcinogenic to humans based on animal studies
alone, virtually all known human carcinogens that have been adequately
tested in lab animals produce cancer in these animals.
Another problem comes from the fact that most studies of potential
carcinogens in lab animals expose the animals to doses that are far higher
than common human exposures. For most carcinogens, it is assumed that those
that cause cancer at larger doses in animals will also cause cancer in
people. This produces the concept, in some quarters, that it is reasonable
for public health purposes, to assume that lowering human exposure will
reduce risk. Understandable logic, but far from absolute.
Another way to identify carcinogens is through epidemiologic studies, which
look at the factors that might affect the occurrence of cancer in human
populations. While these studies also provide useful information, they also
have their limitations. Humans do not live in a controlled environment.
People are exposed to numerous substances at any one time, including those
they encounter at work, school, or home; in the food they eat; and the air
they breathe (including secondhand cigarette smoke). It is usually many
years (often decades) between exposure to a carcinogen and the development
of a cancer. Therefore, it can be very difficult to single out any
particular exposure as having a definite link to cancer.
The most widely used system for classifying carcinogens comes from the
International Agency for Research on Cancer (IARC), which is part of the
World Health Organization (WHO). The IARC has evaluated the cancer-causing
potential of about 900 likely candidates in the last 30 years, placing them
into one of the following groups:
Group 1: Carcinogenic to humans
Group 2A: Probably carcinogenic to humans
Group 2B: Possibly carcinogenic to humans
Group 3: Unclassifiable as to carcinogenicity in humans
Group 4: Probably not carcinogenic to humans
There are around 90 carcinogens in Group 1, with most being referred to by
long chemical names such as
1-(2-Chloroethyl)-3-(4-methylcyclohexyl)-1-nitrosourea (Methyl-CCNU;
Semustine); however, there are ones you will recognize like solar radiation,
alcoholic beverages, analgesic mixtures containing phenacetin, salted fish
(Chinese-style) and tobacco smoke.
Yes, tobacco smoke - yours or the person next door! Stop now!
 Heart to Heart with Hillary
Dear Hillary,
Against my better judgment, I have come over here on a holiday from the UK. What
with all the problems with the airport and political rallies, there is something
even more shocking. I can put up with the endless beer bars with young women
trying to get people to sit down and drink. I can put up with the fact there are
go-go bars with women displaying their bodies as some sort of tourist
attraction, but I cannot put up with the way old foreign men walk around with
young Thai girls hanging on to their hand. We call this getting a ‘trophy’ wife.
“See how clever I am.” “See what I won on my holidays.” What is your take on all
this, or do you consider it to be part of the norm in Thailand?
Disgusted from Dagenham
Dear Disgusted from Dagenham,
I think you should sit down and analyze just why you are disgusted by older
foreigners consorting with younger Thai people, my Petal. You mention old men
and young females, but you will also see old men and young males, and even
(shock-horror) older women and young Thai people. The only danger that I can see
in these types of relationships (and I am talking here of holiday arrangements,
not long-term associations) comes when either partner forgets that it is a union
of convenience. Where in Dagenham is an older man going to find a young person
who is willing to be his guide, dinner partner and bed-mate for a two week
holiday fling? However, the dangers that are just under the surface can be real.
Dad from Dagenham gets back to his flat in the UK and his happy memories can
make him do all kinds of silliness, such as sending money back to Thailand in
large lumps, when he should be getting the large lumps from being hit on the
head with a large stick to make him wake up to reality. So, in answer to your
question, I do not find it “shocking” and in fact I hope that the people all
benefit from the associations, without being ripped off afterwards.
Dear Hillary,
Can you help me please? I have found that Thai people all seem very direct and
ask you personal questions all the time. Things like “How much money you make?
You married yet? Why not? You got wife Thai? You want girlfriend? You want me to
go with you? How much money you got?” Apart from the fact that this is
considered a very rude way of starting a relationship in the US, I also find it
very embarrassing when I am over here. How do I get these people to stop doing
this? You seem to have the answers for everyone else, so I hope you have some
for me too.
Jim
Dear Jim,
It is very easy to stop people asking you these direct, personal and
embarrassing questions - stop frequenting the beer bars, Petal. These are stock
bar stool questions that every new bar girl learns from a book, during her one
week apprenticeship at Lucky Legs a Go-Go. (If there is a Lucky Legs somewhere,
nothing personal, OK?) Yes, there is a book that they learn from, and the same
book also shows the begging letters to be sent after the customer goes back
home. “I lub you too mut, teerak.” I’m afraid that if you want the company and
attention, you are going to have to learn to put up with the stock questions.
Did this never occur to you when you found you were asked the same questions in
every different venue?
Dear Hillary,
I am trying to avoid the well documented pitfalls that you highlight in this
column - and thank you for some good advice over the years. I will be coming
over again this year, but I read somewhere that all Thai girls want is to get
their hands in your pockets, and once they have cleaned you out, that’s it. “No
Money, No Honey” as the T shirt says, but is this really true? I have met a few
nice girls every time I’ve come over, and although I pay for everything when
we’re out together, I think that’s natural. I pay for everything here at home
when I take out a woman, so what’s the difference?
Confused Charlie
Dear Confused Charlie (as opposed to Cheap Charlie),
There will always be some payment down the line, Charlie. In the hard light of
day, after the commerce of the previous evening, you have to remember that your
young woman has been working. That is her job, and that is how she pays for her
room, buys food and sends money back to the village so that her mother can look
after her baby. Now, would you continue to work for a company that doesn’t pay
you? You might even wear a T shirt which says “No Salary, No Slavery” or
something similar, would you not? In reply to your questioning whether all Thai
girls want to get their hands in your pockets, the answer is an emphatic No! But
that is when you are talking about all Thai girls, and not just the Thai ladies
of the night. The answer would be somewhat different then. Enjoy your time here,
you sound like a gentleman.
Let’s go to the movies:
by Mark Gernpy
Now playing in Pattaya
Yes Man: US Comedy – Jim Carrey as a man who signs up for
a self-help program based on one simple principle: say “yes” to
everything … and anything for an entire year. At first, unleashing the
power of “yes” transforms Carl’s life in amazing and unexpected ways,
but he soon discovers that opening up his life to endless possibilities
can have its drawbacks. Mixed or average reviews.
Quarantine: US Horror/ Mystery/ Thriller – A television reporter and
her cameraman are trapped inside a building quarantined by the US
government after the outbreak of a mysterious virus which turns humans
into bloodthirsty killers. It has the single hand-held camera style of
such recent movies as Cloverfield and The Blair Witch Project.
Some people find the “one actual camera” trick leads to heightened
reality; others find that the constant jiggling of the picture and
rough-shod editing gives them a headache. If you think you can put up
with it, you will find this to be a quite frightening movie, as I did,
once the introductory first 20 boring minutes are over. Rated R in the
US for bloody violent and disturbing content, terror, and language.
Mixed or average reviews.
The Happiness of Kati: Thai Family/ Drama – Based on a novel by
Ngarmpun “Jane” Jejjajiva and the winner of the 2006 S.E.A Write Award,
and a bestseller with two hundred thousand copies sold. It’s one of the
most beloved and well-known contemporary children’s books in Thailand,
and has been translated into nine languages. The mother of
nine-year-old Kati is suffering from an incurable illness, and Kati must
go through steps of happiness and sorrow, bonding and separation, having
her hopes fulfilled and losing something she loves in order to learn the
lessons of life and grow up with confidence and the courage to live on.
Deep in the Jungle: Thai Horror/ Action/ Fantasy/ Romance – A
soldier falls in love with a woman who is actually a snake. Pretty
incomprehensible, too jumpy, with too much gratuitous bone-crunching
violence. Consists of a lot of people brutally killing one another and
jabbing each other in the neck with hypodermic needles. Seems to be a
retelling of “The Snake King’s Child”, an old and still popular
Cambodian legend that was last depicted in the Cambodian film of that
name in 2001.
Bedtime Stories – US Comedy/ Family/ Fantasy – Adam Sandler in a
family comedy about a hotel handyman whose life changes when the lavish
bedtime stories he tells his niece and nephew start to magically come
true. Generally negative reviews.
Australia: Australia Drama/ Adventure – Baz Luhrmann returns
to the screen to direct his first feature film since 2001’s Moulin
Rouge, and I think he does so in grand style. Set against the
backdrop of World War II, it’s the epic, sweeping tale of an English
woman (Nicole Kidman) who inherits a sizable cattle ranch “down under.”
With the bombing of the city of Darwin on the horizon, she teams with a
cattle driver (Hugh Jackman) to save the ranch. Brandon Walters, the
half-caste Aborigine child who narrates the film and whose story forms
the spine of the plot, is a delight to watch, and is everything a child
actor should be. It’s nearly three hours long, so make yourself
comfortable. Mixed or average reviews.
Madagascar: US Animation/ Family – A delightful animated film, which
I thought quite cute.
Super Hap: Thai Comedy/ Musical – An enjoyable Thai teen-oriented
musical comedy, in which two guys try to break into the music industry
by forming a Korean-style boy band. But the one who looks cute and can
dance, can’t sing, and the other can sing, but doesn’t look the part.
So one lip-syncs the other. Some quite entertaining bits and though it
seems to lose its way in sentimentality toward the end, it’s still one
of the better Thai comedies.
4 Romances: Thai Romance – Four love stories directed by four Thai
filmmakers. Pretty much of a bore and not nearly as entertaining as
Super Hap. The most enjoyable section was the last, featuring the
band “August” and singer “Pitch” Witwisit Hiranyawongkul of Love of
Siam fame – that one had a few nice surprises, and the kids are
great.
Happy Birthday: Thai Drama/ Romance – Starring Ananda Everingham. A
weepy love story, and almost incomprehensible to anyone without a deep
understanding of Thai social behavior. Ananda is a travel photographer
who travels around Thailand with his guide/girlfriend, until she has a
car accident and ends up in a hospital in a coma, while Ananda waits
endlessly at her bedside for her to wake up. Maddeningly tedious to
most farangs, I’m afraid. Beautiful location photography.
Transporter 3: France Action/ Crime – It’s an action movie – a lot
of explosions, car crashes, and men being violent and assertive. All
quite brilliantly done, and seasoned with just the slightest bit of plot
and humor. If that’s what you like, this is for you. Mixed or average
reviews.
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