|
Money matters:
Graham Macdonald MBMG International Ltd.
Not all funds let you down, part 1
Everyone (who reads this column) knows that
Midas Capital is the fund advisor for MBMG International. However, we do also
listen to other people. The Lansdowne UK Equity Fund is the largest holding in
the Turnstone European fund, which along with Orbis, Berkshire Hathaway and GAA
makes up the majority of our equity exposure right now. Lansdowne is a
long/short equity fund - it takes exposure to equities that it will believe will
appreciate and short sells those that it thinks will depreciate. Theoretically,
therefore, it has the capacity to yield returns in all conditions. That, at
least, is the theory. Just look at the practice in June 2008, it gained 3.5%
whereas the FTSE lost 7.35%. So far this year it is up by 14.8% and FTSE is down
by 13.11%. Since launch, in August 2001, it has made a gross return of 378.12%
(FTSE has made 7.2%).
We have long been impressed by the fund, but in June we were staggered! How do
they manage that? Exposure levels continue to be reduced in response to the lack
of judicious use of short and index options is the easy answer.
What do they expect to happen in the future?
“Looking forward there is no doubt that the near-term outlook is as difficult as
we can recall. We would accept that there is a lack of certainty to analysis at
a macro level. As such, a good deal of our recent moves in portfolio structure
has been designed to seek to limit thematic risk while retaining what we feel
are strong stock and industry views.” [Please note that all quotes in this
article are from Lansdowne]
Like us, they think anything could happen and, like us, they have a structure
for any near-term market moves that are driven by a desire from investors to
reduce risk. As we have learned, such periods can provide very indiscriminate
share-price movements.
As ever, our goal in such an environment will be to manage the portfolio risk
appropriately, through such dislocations, while retaining flexibility to take
advantage of the mispricing created to driven medium-term returns. Markets had a
dreadful month as investors reacted to a range of negative news. To our minds
the underlying connection between these concerns was a sense that policy-markers
had run out of responses to recent problems. Such a feeling inevitably led to a
fear that the current downturn would be deeper and more elongated than
previously imagined.
From an Anglo-Saxon perspective this had two main elements. First, the attempt
by monetary authorities to keep policy loose in response to declining property
prices appeared to have been trumped by rising commodity prices. This worked in
two ways. First, it placed a limit on future policy-moves in the need to avoid
cost pressures translating to broader inflation. Secondly, it actually has ended
up rendering the attempt to loosen conditions void, as consumer discretionary
spending was impacted by rising basic goods prices and financing cost rose in
line with higher bond yields.
So the extra cash than Central bankers put into the system was converted almost
directly into inflation and ended up ‘eating’ itself. Not what ‘Helicopter Ben’
had intended at all.
Lansdowne also make the point that, “The other, less appreciated, aspect of
policy was the attempt by regulators to provide a period of grace for credit
markets to allow the banking system to recapitalize. In underwriting credit
market liquidity and encouraging financial equity-raising post Bear Stearns, it
was hoped that the system could stabilize, limiting the degree to which
debt-financed asset prices would fall. This move also ran into problems during
June as losses sustained by equity investors on such capital-raising began to
materially impact their willingness to provide incremental funds. Such a move
would, if sustained, prove particularly worrisome as it would force financial
institutions into another round of deleveraging, with obvious economic and
financial market consequences.”
So the plan to buy the time needed during a possible recession so as to shore up
the system was working but now it has to be said, it is time for a new tack.
“With it becoming increasingly clear that initial policy reaction to the credit
had failed, attempts to change tack were made. More hawkish noises emerged from
the US to limit inflationary fears and attempts were made to directly influence
problem markets through supply expansion in oil and disclosure changes in equity
markets. The lack of any immediate benefit from such moves, however, led to
fears actually being reinforced as the market effectively said that not only had
Plan A ran out of steam but Plan B was not going to work either.”
So, how on earth did Lansdowne do so well? They increased short exposure to
infrastructure, life assurance and UK consumer-related areas, and long exposure
to Inmarsat and QinetiQ, while existing mining positions retained gains made
earlier in the quarter.
Over the last quarter a significant proportion of returns have come from the
long positions in mining and short positions in financials, at both a sectoral
and stock-specific level.
Within mining, BHP Billion, their largest holding by some way, delivered returns
of nearly 30% in the quarter, more than double its immediate peers. Meanwhile,
in financials, their balance-sheet analysis proved helpful in identifying
vulnerabilities in companies across several sub-sectors (notably UK banks, life
assurance, investment banks and infrastructure funds).
Amongst the shorts, the negative view on UK-related shares worked well,
particularly in the house building sector.
Equally importantly, the fund managed to avoid any material losses in the
quarter, despite the volatile environment.
Attribution by long, shorts and option
positions for June is show below:
Gross Return Long Positions
Short Positions Options
June 2008 -5.8%
10.7%
0.2%
Next week: And what do they expect to happen and plan to do about it?
|
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
There is so much more to photography than record shots
 What’s
a ‘record shot’? That is easy to explain - it is any photograph where
you are merely recording some event, and neither technique, nor art, nor
equipment matters. Record shots are those you take of your wife at the
beach with her sister and your brother-in-law. You know what I mean, and
you have taken lots of them in your lifetime. Line ‘em up, “Big smile”
and click it’s done.
Here’s a simple (and cheap) way to put some art into your photography by
using filters, without having to buy expensive filter kits. Filters can
be used with any camera, film, digital, compact or SLR, but digital will
certainly give you an instant result. I also believe in not spending too
much on filters, and when I say cheap, the first one costs 1 baht (and
is recoverable) and gives you a center-spot soft focus filter. It will
enhance portraits, particularly of women, giving a soft dreamy look to
the photo. Using this filter this just means the center is in focus and
the edges are nicely soft and blurred. This effect is used by portrait
and wedding photographers all over the world to produce that wonderful
“romantic” photograph.
You will need one can of hairspray, a one baht coin and a clear piece of
glass or plastic (perspex) around 7.5 cm square. This piece of perspex
needs to be as thin as possible to keep it optically correct. One supply
source can be hardware shops, glaziers and even picture framers.
Having cut out your square, put the coin in the center of the perspex
and then gently wave the hairspray over the lot. Let it dry and gently
flick the coin off and you have your first special effects filter - the
center spot soft focus.
Now set your camera lens on the largest aperture you can (around f5.6 or
f4 is fine). Focus on your subject, keeping the face in the center of
the screen. Bring up your magic FX filter and place it over the lens and
what do you see? The face is in focus and the edges are all blurred!
You’ve got it. Shoot! Take a few shots, especially ones with the light
behind your subject. Try altering the f stop as well, as this changes
the apparent size of the clear spot in the middle. Simple, cheap and
easy art.
Here is another, the Super Sunset Filter. This one will give you that
wonderfully warm “tropical sunset” which will make people envious that
they aren’t over here to enjoy such spectacular endings to the day. To
produce the warm glow, just take off your sunglasses and place one side
over the lens. It’s that simple! Just look at the difference yourself,
with and without the sunnies. The camera will see it the same way.
Soft romantic effects can be produced super inexpensively as well. The
first is to gently breathe on the end of the lens just before you take
the shot. Your warm breath will impart a “mist” to produce a wonderfully
misty portrait, or that early morning mist look for landscapes. Remember
that the “misting” only lasts a few seconds, so make sure you have the
camera pre-focussed and ready to shoot. If you have control over the
aperture, try around f4 as well.
Here’s another. Use a piece of stocking (pantyhose) material. Stretch it
over the lens and tie it on with a rubber band. Cut a small hole in the
middle and go ahead and shoot romantic portraits.
There are also other ways of bending, refracting or just generally
fooling the camera’s lens system. This you do by holding transparent
materials in front of the lens when taking your photographs. I suggest
you get small pieces of glass or perspex (around 10 cm by 10 cm) and use
these as the final filter. You can even use semi-transparent material
like shower screen glass. The concept is just to produce a “different”
effect, one that the camera will pick up. It is very difficult to
predict the outcomes in these situations, but you can be pleasantly
amazed at some of the results. The main idea is to give it a try!
Modern Medicine:
by Dr. Iain Corness, Consultant
Cheap drugs - are they safe?
I have written about cheap brand medications before, but the
topic is recurring. Cheap (generic) drugs are always a topic for discussion
in medical forums. Most people here know that you can buy “brand name”
medications, which tend to be expensive, or you can buy “copy” drugs that
tend to be cheap.
Let’s just clear up what ‘generics’ is all about. What you have to first
realize is that all medications are chemicals, and somebody in some research
lab somewhere ‘invented’ it - these days, medical drugs are not naturally
occurring substances. The ‘trade name’ for the chemical compounds is then
owned by the manufacturing company, for example, the trade name ‘Valium’ is
the compound diazepam, or ‘Viagra’ which is ‘sildenafil’. ‘Valium’ and
‘Viagra’ are the trade names, while diazepam and sildenafil are generics.
When you buy ‘Valium’, you are getting the diazepam chemical as invented by
that manufacturer, with all the purity and quality controls that a major
manufacturer has to abide by. However, when you buy diazepam tablets, these
can come from a little factory on a back street in Bangladesh or Pakistan,
with none of the hygiene standards being applied that you would expect!
Likewise, your cheap blue diamonds, gentlemen, before you start laughing!
The large pharmaceutical companies legitimately say that if they do not have
patent protection, they cannot recoup the cost of the development of the
drug - in some cases, multi millions of dollars, and then develop even newer
ones. However, if after it has been invented, Pakkypharm Pills produce the
drug cheaply after zero costs have been outlaid for its research, this is
unfair.
In some ways it is worse than ‘copy CDs’ where the artist is not getting
paid for his work from the royalties coming from the sale of the CD. Sure
you get a cheap CD, but the artist has been ‘robbed’.
Through this minefield walks the medical profession. In the developed world,
on one side are the large pharmaceutical companies saying that they need the
sales to cover and sponsor future research, but on the other side stands the
government, saying that the public purse cannot afford these expensive
medications, when cheaper, but chemically the same, alternatives are
available. These two opposing sides have arguments that are quite
understandable.
In the developing world it is a little different. The end point consumer
does not have the money to buy the expensive original research
manufacturer’s tablets, and neither do the governments (who in most cases do
not have an all-encompassing health care system).
To make it even more contentious, there are medications that could be called
‘essential’ for life. The ones that come immediately to mind are the AIDS
treatment drugs. Can you justify withholding treatment from the poor (people
or countries) just on price protectionism policies? Figures that have been
published in Thailand recently claim that the same medication is available
at costs to the consumers between 300,000 baht and 12,000 baht per year. For
the poor, one is affordable, the other is not. For government or charity
purses, ditto.
My stance on generics falls between the two extremes. For non-essential
drugs I believe the original manufacturer deserves a patent period and
generics should not be sold within that time frame. During that time frame I
would prescribe by trade name only and not generic. This covers medications
such as yet another BP reducing tablet, of which there are scores, or
another non-earth shattering antibiotic. These are not essential as there
are many alternatives.
However, for essential medications, generics should be allowed and offered
to developing nations, and to the poor, even though this may be within the
patent time frame. In other words, let those who can afford it pay, and
those who cannot should be assisted by the manufacturer, who can make their
own generic equivalent, as well as licensing other manufacturers to make
their drug.
So where do you fit into all this? First make sure that the ‘copy’ drug does
contain what it is supposed to and that the drug is released from the
tablet/capsule in the strength indicated. Or let your doctor prescribe -
it’s much safer!
 Heart to Heart with Hillary
Dear Hillary,
With your extensive knowledge and wisdom I would like to hear how you would deal
with my problem. On 28th January, I must board the klm flight back to the UK and
I am developing “klmitis”. Surely you can find a way for me to prolong my stay
here in fun city. I mean for all the moans about Pattaya, it is not till you
need to return to the UK that you realize this. The UK is cold and wet, the beer
is less enjoyable, the ladies less enchanting and my job as an Edinburgh taxi
driver is tedious and pays only enough for me to venture here four times a year,
so please, please give me the remedy to my klm illness. I see lots of other
sprightly chappies darting around here so obviously they have been drinking from
your fountain of wisdom; please enlighten me so that I don’t have to return to
Edinburgh and my taxi on the 28th. - please, please.
Tormented Tam
Dear Tormented Tam,
Oh, I do feel so sorry for you, my Petal, and I am sorry I couldn’t get you an
answer before January 28, but letters not attached to French fizzwater or
Belgian chocolates do not go to the top of the pile. I’m sure you would
understand these things. You don’t take the customers from the rear of the rank,
do you. But I do feel for you. Trundling up and down Princess Street, up to see
Mons Meg with frozen tourists. No wonder you miss Pattaya and the weather, never
mind the beer and the ladies.
Now one of the things you have to do to get over “klmitis” is to give up on your
current carrier and fly THAI instead. They need the money, Tam (O’Shanter?). But
then again, so do we all. (That reminds me, I must have a chat to the editor
about my salary. I can’t even afford that awful sugary Spy stuff after it went
up 25 satang. You won’t get much of a hangover from the old Spy fountain of
wisdom, I tell you!)
However, in the meantime, I do have a better job for you in Edinburgh. Apply as
the guide for the Camera Obscura. You know all the landmarks from your cabbie
experience, and you would stay warm and dry indoors, up there on the Royal Mile.
I look forward to hearing from you next time you are in town, but do you speak
English? I had to correct a lot of spelling mistakes from your written
communication, Tam. Or were you writing in Gaelic, or even Doric?
Dear Hillary,
I was one of the people who had to stay another week in Thailand when the
airport was closed because of the takeover. Hillary, I was just so disappointed
when they opened the place up again and I had to go home. The people who live in
Thailand don’t know how lucky they are, getting to live there all the time,
while we had to go back to freezing temperatures and freezing women. I will be
coming again at the end of the year, can you arrange another sit-in at the
airport as soon as we have landed?
Mark
Dear Mark,
Hillary can do lots of things, my Petal, but arranging airport sit-ins are way
out of my league. However, I am pleased that you enjoyed yourself so much you
are coming back again. If your plane touches down in France on the way over, you
might pick me up a bottle of bubbles, there’s a good chap.
Dear Hillary,
I’ve read all the books you recommended for visitors to Thailand, but it made no
difference, I still fell into all the traps, including the motorcycle and gold
necklace. I was so sure that she was different from all the ones in the books,
and for a while that seemed to be right. I’d been back in the US for three
months now and gotten regular reports from one of my buddies stationed over
there, and it lasted two weeks exactly before she was back in the bar. The gold
had gone and so had the motorcycle. I’ve got nobody to blame but myself, but by
heck those girls know how to push a man’s buttons. Isn’t there some way you can
warn us new guys?
Tex
Dear Tex,
As you so correctly write, “Those girls know how to push a man’s buttons” and
I’m afraid they also know how to spend your buttons, Petal, as you have found
out. However, it was better to find this out at an early stage than later. The
ladies of the night are great short term company, but it should never be
forgotten that they are just doing a job. Doing that job very well, having been
through the bargirl apprenticeship scheme, with a major in Wallet Opening and
complete with a minor in Begging Letter Writing to Sweethearts.
Warn you new guys? What more can I do, Petal? I recommend the textbooks, but you
all fail at the final exams when you meet the “girl of your dreams, who just
happens to work in a go-go bar, but she’s different from all the others.” She’s
not! Is she?
Let’s go to the movies:
by Mark Gernpy
Now playing in Pattaya
Revolutionary Road: Kate Winslet won two Golden Globes
this year, and one was as best actress for her role in this film. I
thought this a brilliant 2-character drama, set in the 1950’s, based on
a novel by Richard Yates, with brilliant performances by Leonardo
DeCaprio as well as Kate Winslet, and brilliantly directed by Sam
Mendes. I loved it. A young, thriving suburban American couple plan to
escape from the creeping frustration of their lives and their inability
to feel fulfilled in either their relationships or their careers.
Determined to identify themselves as superior to the mediocre sprawl of
suburbanites who surround them, they decide to move to France where they
will be better able to develop their true sensibilities, free of the
consumerist demands of capitalist America. Rated R in the US for
language and some sexual content/nudity. Generally favorable reviews.
Underworld: Rise of the Lycans: Traces the origins of the
centuries-old blood feud between the aristocratic vampires known as
Death Dealers and their onetime slaves, the Lycans. Michael Sheen and
Bill Nighy revisit their roles from Underworld in this prequel to
the horror-action hybrid. Directed by Patrick Tatopoulos.
Before Valentine: Thai Romance/ Drama. Four takes on love, made by
three Thai directors: Songsak Mongkoltong (The Screen at Kamchanod),
Pornchai Hongrattanaporn (Bangkok Loco), and Seri Pongnithi
(Ghost in Law, Art of the Devil 1).
Defiance: US Drama/ Action – I thought this a superb war drama and
thriller with a lot of thought in it – a must-see in my opinion. Based
on a true story, this is an epic tale of family, honor, and vengeance in
World War II. The year is 1941 and the Jews of Eastern Europe are being
massacred by the thousands. Managing to escape certain death, three
brothers take refuge in the dense surrounding woods they have known
since childhood. There they begin a desperate battle against the
Nazis. Starring Daniel Craig, Liev Schreiber, and Jamie Bell. Directed
by Edward Zwick (Blood Diamond). Rated R in the US for violence
and language. Only mixed or average reviews, but I thought it riveting,
and I highly recommend it for anyone who wants to see something
substantial and provocative as well as exciting.
Pride and Glory: US Crime/ Drama – Edward Norton and Colin Farrell
star in an authentic, gritty, and emotional portrait of the New York
City Police Department following a multi-generational police family
whose moral code is tested when one of two sons on the force
investigates an incendiary case involving his older brother and brother
in law. The case forces the family to choose between their loyalties to
one another and their loyalties to the department. Rated R in the US
for strong violence, pervasive language, and brief drug content. Mixed
or average reviews. At the new SFX Pattaya Beach only.
Inkheart: Germany/ UK Adventure/ Family/ Fantasy – Fantasy fans
should love this. It’s a vast undertaking with a lot of thought and
artistry going into the creation of an entire fantasy world with its own
very unique rules, and I found the attention to detail enjoyable. Plus
it has an excellent cast. Based on Inkheart, a children’s novel
by the prolific German author Cornelia Funke (who has been likened to
J.K. Rowling), and the first part of her Inkworld series,
detailing the adventures of bookbinder and his 12-year-old daughter, who
is a voracious reader. He is a Silvertongue, a person with the rare
ability to bring the characters in a book to life simply by reading the
text aloud. Mixed or average reviews.
Soi Cowboy: Thai/ UK Drama – Slow as molasses in the Arctic, the
film has enthralled some and exasperated many. A long leisurely look at
a farang and his girlfriend picked up from Soi Cowboy, with some
surprises toward the end. The couple’s relationship, related in
exhaustive detail, will be instantly recognizable, and many farangs of
whatever sexual persuasion will thoroughly identify with the dynamics
involved. Directed by the English Thomas Clay.
Fireball / Tar Chon: Thai Action/ Martial Arts – The world of
underground barbaric fighting in Thailand.
Red Cliff Part 2: Hong Kong War/ Action – The second and final half
to John Woo’s magnum opus Red Cliff, and an epic on a grand scale
as only the Chinese can do.
The Elephant King: US/ Thai Drama/ Romance – Filmed for the most
part in Chiang Mai. A domineering mother (Ellen Burstyn) dispatches her
young, introverted son Oliver off to Chiang Mai to do everything he can
to lure his reckless, older brother back home to the U.S. Rated R in
the US for sexual content, drug use, language and some violence. Mixed
or average reviews.
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
for an entire year. Mixed or average reviews.
|
