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Money matters:
Graham Macdonald MBMG International Ltd.
Not all funds let you down, part 3
Several caveats are needed to the fairly
negative conclusion that there is no obvious way out of current difficulties,
either from a policy or a market-driven perspective.
Firstly, valuations are very reasonable in equity markets. It is worth recalling
that if the FTSE 100 finished next year at current levels, this would equate to
a 30% loss over the decade as a whole. This is a performance which must give
some protection to current investors from the poor news flow.
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Exposure levels for the Fund
are set out below: |
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Gross Long
|
Gross Short
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Net Exposure
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Net Exposure |
|
Strategy
|
Positions |
Positions |
Cash |
Beta-adjusted |
|
|
(% of NAV)
|
(% of NAV)
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(% of NAV)
|
(% of NAV) |
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TOTAL FUND
|
87% |
- 66% |
21% |
7% |
Moreover, we are strong believers in the view
that asset class cycles tend to move in a cycle from bull market to bear market
to indifference to bull market again. Critical to this insight is the fact that
it is the indifference period (and consequent lack of new supply) that precedes
bull markets, not the dramatic falls in price of the bear market. Commodities
are illustrating this point at present, with the multi-year indifference of
investors to the asset class now leading to the supply constraints and price
momentum being seen. Interpreting this to the current period would suggest that
as and when conditions do improve it will be equity-oriented assets that
generate the disproportionate upside, rather than the fixed-income areas often
seen as ‘recovery plays’.
But the key note remains uncertainty. “Our assessment is not one we feel immense
confidence behind. It is perfectly possible that a solution we (and
policy-makers) are yet to discover is found or that the equilibrium price is
closer to levels than we think (most probably because demand destruction in oil
is greater than we see). We obviously have to remain vigilant to each of these
possibilities…
“Even if we are right that policy will ultimately struggle to solve the broad
problem this does not stop it having a material impact on the environment for
capital markets. Most obviously, should policy-makers seek to aggressively cut
economic demand the outlook for commodity shares will be very different than if
they are willing to risk inflation in the interests of the banking system. With
policy at something of an inflection point it is critical we understand this
influence in forming portfolio structure in the near-term.”
[Reminder: All quotes in this article are from Lansdowne UK Equity Fund, 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…]
So what is their portfolio approach?
1. “Overall fund structure needs to be simple and flexible. The low and stable
net exposure we have run for the last few months still feels an appropriate
reflection of current conditions and, critically, has worked well.”
2. “Compared to 2007, it is pretty clear both that overall economic growth
levels are open to question and that the challenges for the world are global
rather than concentrated into Anglo-Saxon consumption. To reflect this in the
portfolio, we have added hedging positions exposed to global growth to balance
our long position in the Mining sector.”
3. “On the short positions, we have continued to size positions with reference
to valuation rather than momentum. While this risks some opportunity cost in the
current market it should protect us during the inevitable squeezes that occur.”
4. “In terms of thematic bets we feel very uncomfortable taking a view on the
oil price.”
But it remains a difficult environment.
“We are somewhat nervous in the very short-term as we suspect we are approaching
a period in which investors seek to positions of outlook, a period that often
yields dislocation for the portfolio. Nonetheless we feel that such risk is
worth bearing given the strength of both the overall structure and individual
views expressed.”
All sounds very re-assuring; what could go wrong?
“As noted above we have tried hard to construct a portfolio where thematic risks
are limited given the uncertainty in the situation. The main exception to this
is in our view that credit costs will remain elevated to a degree not reflected
in several areas. As such the most difficult scenario for the Fund would
probably be one in which falling oil prices were deemed to lessen the pressure
on inflation and therefore yields. How bad such a scenario would hinge on the
interpretation of the market of such a move on our key long positions in Mining
and the Post Offices. If they were viewed as negatively correlated to oil prices
in the manner seen last month then losses should be containable to around 2% of
NAV. In the plausible scenario that such a view was not immediately formed,
losses could be higher at around 4% of NAV (albeit we would hope that the
incremental loss would be recovered in subsequent periods).
Elsewhere the main risk in the short-term feels to us that market dislocations
are caused by investors reacting to increased uncertainty position-reduction. As
we have noted before such periods tend to be difficult for the Fund and may be
particularly so at present given the good performance in the second quarter. The
profit-taking we have done on the short side should offer some protection
against it but there is no doubt that a 3-4% loss could be sustained from this
and, indeed, that it could be higher given how difficult such conditions are to
model precisely.”
More manageable and a better risk/reward outlook than unprotected equity
exposure, “Despite this uncertainty we remain of the view that the long-term
value in the positions is very good and are therefore happy to bear some
near-term volatility.”
So, are we? Yes but our preferred method of exposure in this extremely
successful but highly specialized fund is through the Iridium portfolio and our
long-short equity partners Turnstone Asset Management.
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Historic Returns
|
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Net Return
(1/8/01-31/12/01)
|
2001 |
2002
|
2003 |
2004
|
2005 |
2006
|
2007 |
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Lansdowne UK Equity Fund
|
+5.92%
|
+6.16%
|
+18.61%
|
+26.85%
|
+27.66%
|
+23.24%
|
+31.73% |
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FT-SE All-Share Price Index GP
|
(5.26)%
|
(24.97)% |
+16.56% |
+9.21% |
+18.10% |
+13.15% |
+2.03% |
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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.comm.com.com
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Snap Shots: by Harry Flashman
Is a tripod worth it?
 The
one piece of equipment that distinguishes between the amateur
photographer and the semi-pro amateur is the tripod. But by that I mean
a good tripod. I see many photographers toting a lightweight aluminium
tripod that will blow away in the slightest breeze, and therefore quite
useless for what you bought a tripod to do. Do not buy one of these.
The use of the tripod opens up new avenues for the serious photographer,
and the least (but most obvious) is to take time exposure shots at
night. Unbolt the hot-shoe flash, disable the inbuilt flash and see what
you can get. Estimate exposure times and see what you get. With a
digital camera, you don’t have to wait long. Trying to hold the camera
still while you take shots at slower than 1/15 second just will not
work, despite all the image stabilization technology.
Twilight photography and night photography opens up a whole new range of
pictures and effects. Just the simple expedient of being able to keep
the camera steady while you shoot 30 second or longer exposures will
result in some great photographs. Try taking a shot just after sunset,
for example. Set the camera on f11 and give it 30 seconds. You will be
very pleased with the results. However, if it is too dark, give it 60
seconds - too bright then try 15 seconds. It costs you nothing to
experiment.
Use the tripod in daylight too. Did you know that the very best
landscapes during daylight hours are also best taken on a tripod? To get
the huge range of depth of field necessary for these shots, you will end
up with slow shutter speeds. The tripod ensures there’s no blurring.
Those flowing milky, misty waterfalls are also best taken with a tripod
as again a slow shutter speed is required to capture that effect.
Even nature shots are done best with this piece of equipment. You can
set up the camera and then leave it, so that the birds, etc., can get
used to its presence, and then with a cable or remote shutter release
you can get the nature photos of a lifetime.
Another type of shot that needs a tripod is the panorama. A compilation
of images which when placed together form a wide angle view of any
scene. This can only be done with the use of a tripod.
Even when shooting still life images, the use of a tripod makes these
shots a breeze. You can set up the shot and then make minute adjustments
while looking through the viewfinder. Again you can use a slow shutter
speed to be able to use very small apertures (around f22) to get the
very fine detail into the shot.
So what should you look for and what should you spend? There are several
items in the specifications that you should ensure is on any tripod you
buy. The first is that it is heavy with strong legs when extended fully.
The “locks” on the legs must also be secure.
Another item is that the actual swivel head incorporates a spirit level,
so that you can ensure the top swivels in a true horizontal arc. The
tripod head should also have calibrations, so you can swing it a
definite number of degrees. A removable “shoe” is also a good item, as
you can then position the camera on the tripod, but also remove the
camera to take other shots but then replace it in exactly the same
position.
The legs should be able to be spread out widely so that you can get the
camera very close to the ground, and finally if you can get one, see if
the tripod shaft can be removed and turned upside down, as this can get
your camera completely at ground level and also immediately above an
object placed on the ground.
How much will this cost? Expect to spend a minimum of 6000 baht. My own
Manfrotto cost a lot more than that, let me assure you, but with now
almost 20 years of faithful service, it has been a bargain!
Modern Medicine:
by Dr. Iain Corness, Consultant
Counterfeit drugs
Dr Michael Moreton from Bangkok Hospital read an article I
wrote a couple of weeks ago explaining ‘generic’ and ‘brand name’ drugs, and
suggested I should expand into counterfeit drugs. Thanks, Mike. Happy to
oblige a colleague.
Every day I receive spam, offering me the opportunity to keep a battalion of
beauties satisfied. These are the internet email offers of cut-price drugs
that will keep me in a state of perpetual priapism, a continuing (and
painful) male erection and the term was coined after the Greek god Priapus
who is shown in paintings to have a central member like a third leg.
Offers like these which are too good to be true, are usually just that - too
good to be true! These cut-price drugs are not the real deal. The chances
are very high that they are counterfeit.
One of the patients showed me a box purporting to be genuine brand name
Cialis tablets, which were not having the desired effect. I was immediately
suspicious as the box was not all that well printed. I was quite sure they
were counterfeit when I read the Patient Information slip. The English
grammar was incorrect, and there were spelling mistakes. Eli Lilly, the
‘real’ manufacturer does not send out mis-spelled literature with their
product.
Eli Lilly’s website on Cialis confirms that some web sites sell fake Cialis.
The website suggests you ask yourself these questions; any “yes” answers
could mean that the Cialis being sold may be fake:
Is the price so much lower than the price at the local pharmacy that it
seems too good to be true?
Is the web site located outside of the United States, or does it not list an
address or contact information?
Does the site offer to sell medicine without a doctor’s prescription?
Were you referred to the web site by an e-mail that you did not ask for?
(Eli Lilly and Company, the maker of Cialis, does not send e-mails unless
you ask for them.)
Does the site offer “soft tab” or “fast dissolve” Cialis? (Cialis only comes
in tablets. There is no such thing as “soft tab” or “fast dissolve” Cialis.)
Does the site offer “generic Cialis” or a drug with a name that is similar
to Cialis? (Such products have not have been evaluated by the FDA for safety
and effectiveness - they could be harmful.)
The World Health Organization puts the annual amount of counterfeit drugs
sales at something like $35-40 billion per year. No wonder I (and you) get
so many offers of drugs through the internet. That’s a very large pie.
The World Health Organization also estimates that one in three drugs on the
worldwide market today is counterfeit. Sometimes the fake drugs contain
toxic substances from which you can die.
Pfizer’s laboratories analyze the fakes and a representative stated, “We’ve
seen boric acid, we’ve seen heavy metals, we’ve seen road paint, we’ve also
seen floor wax to coat the pills and give them a shine. Obviously, they are
detrimental to anyone’s health.”
It is not just Eli Lilly that is targeted. Pharmaceutical giant Pfizer (yes
chaps, the makers of the blue diamonds) estimates its annual losses to
counterfeit drug sales at $2 billion.
However, this is actually a serious situation. If specific drugs are only
available through pharmacies, on the prescription of a doctor, is it safe to
just buy over the internet, without any doctor’s advice?
The American Food and Drug Administration (FDA) says, “Patients who buy
prescription drugs from websites operating outside the law are at increased
risk of suffering life-threatening adverse events, such as side effects from
inappropriately prescribed medications, dangerous drug interactions,
contaminated drugs, and impure or unknown ingredients found in unapproved
drugs.”
According to WHO, drugs commonly counterfeited include antibiotics,
antimalarials, hormones and steroids. Increasingly, anticancer and antiviral
drugs are also faked. And you can add to that, the ‘blue diamonds’. Never
forget the phrase “Caveat emptor” (Let the buyer beware).
If you receive a spam email from someone who you don’t know, offering you
specific pharmaceuticals at a cheap price, that should be enough for you to
go no further. Get your medications on a doctor’s prescription from a
pharmacy you can trust. Or suffer the consequences.
 Heart to Heart with Hillary
DDear Hillary,
Bonjour, pour tu, chocolate de Suisse! Formidable, oui/non? Au revoir et bon
nuit.
Mistersingha
Dear Mistersingha,
I just gotta love you! A couple of letters complaining about you and you respond
with protestations of love, and all in French, with the Swiss chocolates
enclosed. Yes, mon petit chou, vous est formidable aussi. Bon nuit.
Dear Hillary
With reference to a paragraph I read in your reply to a reader in the column
early February: “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.
But then again, so do we all.”
From Mistersingha
I had read previously, either in your own esteemed newspaper or from another
source, that in an effort to promote tourism to Thailand during this economic
downturn that Thai Airways International had made a decision to discount its
flight prices by up to 50 percent in an effort to help boost the declining Thai
tourist trade. This news, not only had been announced by Thai Airways but also
by the TAT I believe.
Very good news one would think, cuts in prices, will help both Thai Airways to
attract more customers both to the airline and to Thailand, to help in these
difficult times of declining tourism.
I have been considering returning to Thailand during Songkran and checked flight
prices for 4th April and returning either on Saturday the 25th of April or the
early hours of Sunday the 26th of April.
I set about checking my usual flight sites and airlines and returned with an
excellent price of 486 sterling (even better now as my currency is the euro and
the exchange rate is very favourable to me at present) with Emirate Airlines.
Having remembered the article about the Thai Airways discount, I checked the
flight prices on Thai Airways site. This site returned a staggering price for
the same dates of 3,663.30 sterling or at today’s Bangkok Bank exchange rate
184,520 Thai baht.
I fear that your wish above “fly THAI instead. They need the money,” will not be
fulfilled by farangs travelling to Thailand and Thai Airways will continue to
“need the money”.
My query is, when Thai officials announce these news items (for this and other
things), do they ever actually carry through on the announcements? Is it the
case that Thai Airways first double the prices, before then giving the 50
percent discount, which still leaves the airlines charging their exorbitant
rates, even at half price?
P.S: I like reading your article each week, I prefer your answers to the
letters, rather than the letters themselves, as many of your writers seem to be
endlessly complaining about everything. In that light, I hope I don’t come
across as yet another whingeing windbag. I have also attached the flight details
from Thai Airways website in case you find the rates I have quoted difficult to
believe. I selected economy class, but for some reason Thai Airways have only
quoted business class?
Joe the Irishman
Dear Joe the Irishman,
Thank you for the nice words, Petal. Now, your problem. I checked with my
friendly travel agent (Massic Travel - free plug) and the THAI deal is two fly
for the price of one, worked out on the full fare price, which is 185,000 THB
(or then 92,500 THB each). However, nobody buys tickets at that price, as you
can get it cheaper by shopping around for the “market fare”. You would be able
to get a THAI flight much cheaper shopping around in the UK, but currently the
Middle East airlines are offering the best rates. Does that explain it all for
you? It seems that there are lies, damned lies, statistics and air fares!
Dear Hillary,
I have heard about golfing widows, but at least golf is played in the daytime,
so the golfing husbands are home in the evenings. My problem is that I am
turning into a football widow. Football matches seem to be played at any time of
the day (or night) and he is always off to some pub or other to watch the game.
I am not interested in football, or else I’d go with him, but I am getting
lonely left at home. What should I do? Tell him it is football or me? (I’m
afraid he might go for the football.)
Footy Widow
Dear Footy Widow,
If you make life difficult for your football mad mate, then he will go for the
football and it will be an ‘away’ game every night. Men will always take the
easy way out, when pushed into a corner. They have no real goals in life, you
see. Before you get right cross and relegated to Left Right Out, I would ask
around to see if any of his football watching mate’s wives would like to come
over for a hen session. Even if you are not interested, a night out at the pub
might also be fun. Let him watch while you gossip with the other women there.
That is much better for everyone, rather than sitting fuming at home, while
plotting how to give your man a red card.
Let’s go to the movies:
by Mark Gernpy
Now playing in Pattaya
Valkyrie: US/ Germany Drama/ History/ Thriller/ War – The
near-miss assassination of Adolf Hitler by a ring of rebel German army
officers on July 20, 1944, starring Tom Cruise. Given the subject
matter, it could have been an outstanding historical thriller, but it
settles for being an entertaining but disposable yarn. Directed by
Bryan Singer. Mixed or average reviews.
Based on a the true
story of cadre of Nazi officers who grew to oppose Hitler and made
several attempts to kill him in the late stages of WWII. In 1943 Count
Claus von Stauffenberg (Tom Cruise) has risen to the level of lieutenant
colonel in the German army. Convinced that Hitler must die, Von
Stauffenberg falls in with a group of similarly disillusioned officers,
played by Kenneth Branagh, Bill Nighy, Tom Wilkinson, and Terence
Stamp. Stauffenberg is at the center of several attempts on Hitler’s
life, culminating in a bombing that kills a handful of his officers and
leaves Hitler only slightly injured. Basically a well-crafted,
thinking-person’s action movie.
Seven Pounds: US
Drama/ Romance – Will Smith is an IRS agent who is depressed and
guilt-ridden about mistakes from his past. He sets out to make amends
by helping seven strangers. Woody Harrelson also appears as a blind
pianist who befriends Ben. Grim and morose, it’s also undone by an
illogical plot. Generally negative reviews.
Luang Pee Kub Phee Ka
Noon: Thai Comedy – With Mum Jokmok (Petchtai Wongkamlhau) and
other Thai comedians in the usual fare.
The Curious Case of
Benjamin Button – US Drama/ Fantasy/ Mystery/ Romance – with Brad
Pitt, Cate Blanchett, Tilda Swinton. Nominated for Oscar best picture
and best director. The extraordinary tale of a man, born elderly in
1918, who ages backwards through the 20th century. I don’t see how
anyone can really like this, but I seem to be in the minority. It’s
utterly nonsensical, so I couldn’t get involved, even at 166 mins.
Great makeup – worth seeing for that alone! The screenplay is by Eric
Roth, who wrote Forrest Gump, which this reminds me of.
Generally favorable reviews.
A Moment in June
– Thai Drama/ Romance – Well-received Thai drama set partly in Chiang
Mai and Lampang. Directed by O. Nathapon, who is also active in theater
and draws on his theater experience to devise an impressive crossover of
cinema and stage through a play-within-a-film. Three couples – gay,
elderly, and fictive – engage in a melancholy dance of indecision and
regret
Push: US Action/
Thriller. The deadly world of “psychic espionage” where artificially
enhanced paranormal operatives have the ability to move objects with
their minds, see the future, create new realities, and kill without ever
touching their victims.
Confessions of a
Shopaholic – US Comedy. Nonsense wherein Isla Fisher plays a
fun-loving girl who is really good at shopping.
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 exciting prequel to the
horror-action hybrid. Directed by Patrick Tatopoulos.
Before Valentine:
Thai Romance/ Drama. Four takes on love, made by three Thai directors.
Defiance: US
Drama/ Action – I thought this a superb war drama and thriller with a
lot of thought in it – a must-see. Based on a true story, this is a
sweeping tale of family, honor, and vengeance in World War II. 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.
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. An excellent cast.
Based on the Inkworld series of children’s novels by the German
author Cornelia Funke, 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. You may have noticed that there are
two endings! It seems preview audiences disliked intensely that Farid
and Dustfinger went off together in the end without either of them
getting a girl. So they fixed that by adding a second ending. Mixed or
average reviews.
The Elephant King:
US/ Thai Drama/ Romance – Filmed for the most part in Chiang Mai. A
domineering mother (Ellen Burstyn) dispatches her young son off to
Chiang Mai to do everything he can to lure his 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.
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