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Money matters
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Snap Shots
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Modern Medicine
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Heart to Heart with Hillary
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Let’s go to the movies
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Money matters:
Graham Macdonald
MBMG International Ltd.
Nominated for the Lorenzo Natali Prize
Is this really a sustained bull market? Think again
1929-1930 vs. Today
Sentiment is improving and people are feeling better about
the state of the economy. Although who knows how long the bounce, I mean rally,
will last. The actual indicators in the economy point to a real risk of a
double-dip recession. In an economy with extreme divergence between stock market
trends (up) and economic trends (down), it is smart to remember that stocks do
not normally rally while the economy is stumbling. Just take a look at the
simple chart here and you will see which market fundamentals are up and which
are down.
By looking at this, it is difficult to understand how the stock market could
actually make a sustained bull run - there are just no legitimate market
fundamentals worthy of driving a long-term market rally. Critical key factors
necessary to fuel a bull market are missing - high employment, low debt, high
lending, strong retail sales, etc. Sure there is improved sentiment (Consumer
Confidence, Stock Markets, etc.), but what does it really mean if unemployment,
debt and mortgage foreclosures are at staggeringly high levels?
Again, what has actually changed to drive a bull market? Much of what has been
seen so far is the direct result of stimulus, but can the economy sustain the
recent growth spurt without the stimulus?
From March 2009 to August 2009, the market jumped 48%. This is almost identical
to the ‘dead-cat bounce’ experienced before the bottom fell out of the market
during The Great Depression.
What’s up and what’s down
Another interesting historical comparison is the S&P 500
Price/Earnings ratio. Today it’s over 140, versus its historical average of 14.
The last time the P/E ratio was this high was in the bottom of The Great
Depression. Normally referring to P/E ratios is not really relevant because
companies generally overstate earnings, but in this case it means that the
correct ratio is probably even higher.
It is also interesting to look at a comparison of quotes from then and now:
“Stock prices have reached what looks like a permanently high plateau. I do not
feel there will be soon, if ever, a 50 or 60 point break from present levels,
such as (bears) have predicted. I expect to see the stock market a good deal
higher within a few months.” - Irving Fisher, Ph.D. in Economics, 17 October
1929.
“The world has been through the most severe financial crisis since the Great
Depression. The crisis in turn sparked a deep global recession, from which we
are only now beginning to emerge.” - Ben Bernanke, Federal Reserve Chairman, 21
August 2009.
Let’s not let the sentiment get ahead of the market now. As clearly pointed out
in this article, the market fundamentals are definitely not in place to move us
out of this economic calamity and we have not even touched on what is probably
the biggest hurdle to keeping the markets moving forward.
The biggest problem to sustaining this bull market is debt. Consumers have too
much of it and it has been built-up over the past 25 years to unprecedented
rates - American consumer debt rose to 370% of US GDP in 2007! This debt is not
going to dissipate in 6 months, 12 months or even 24 months. How does it get
paid back and where does the money come from? This is a fundamental element of
the problem.
The US government is basically borrowing the money from the private economy
which, by the way, has recently been reported that the White House is predicting
a 10-year federal deficit of $9 trillion - more than the sum of all previous
deficits since America’s founding in 1776, but that is another story. Now the
money the government is taking from the public is put back into the banks that
got us into this problem in the first place. Not only do the banks stay in
business, but their managers are getting even larger bonuses.
So, instead of putting money into new business growth, it goes into the banks,
which are basically not giving loans to consumers, but pressuring consumers to
pay back their debts. This is not what jump-starts a Bull Market and this is a
fundamental reason that there is a big risk of a quick-return recession.
The reality is that the future is very uncertain and nobody has developed a
‘crystal ball’ yet. It seems that most of the people who predicted the crisis of
2007-9 are wary of a long-term Bear Market and generally the people who got it
totally wrong last time are the ones with the highest expectations now.
Bull or Bear, We Don’t Care…
It is a very interesting time for investors. As we have seen, the
dramatic fall in markets since 2007 and now a bit of a rally. The big question
is what will happen next and everyone is asking, will stocks crash again? As
detailed above, nobody knows what is going to happen, so the best action at the
moment is diversification. Some readers might think we are prophets of doom and
gloom, but our responsibility is to manage risk based and that means
understanding what this is along with all the potential scenarios as indicated
by market intelligence.
The best thing we can do now is to diversify. A diversified asset allocation
strategy is, without question, the best protection for your wealth going
forward. For those who have made nice gains in the market recently, they will
especially want to protect the downside in the event that there is another
crash, but also be positioned to benefit from any upside as the volatility in
the markets will continue.
Research shows that 90% of all investment returns result principally from
selecting the correct balance of asset classes, rather than picking individual
stocks. This means good macro-economic research, a knowledge of geographical
exposure, i.e. which are the favoured financial markets, sectorial and market
cap bias. Once this has been done then the funds can be chosen.
As a result of this, we have focused on selecting successful fund managers with
proven expertise and active management across key asset classes, rather than
selecting individual companies. We are lucky in the fact that Miton Asset
Management look after our clients. Scott Campbell, Martin Gray and Sam Liddle
are just about the best there is and if you look at the awards Miton has won
over the last few years it would seem that those who are also in the financial
field agree with us.
In a rising market, almost anyone can manage portfolios, but when the markets
are under pressure is when the experts are separated from the pretenders. Miton
has strong opinions on the direction of the economy, which falls directly in
line with our strategic investment focus. We still think we can achieve our
objective of LIBOR +4% but it is only with Miton guiding us. I believe it was
Mark Twain who said, “I am more concerned about the return OF my money than the
return ON my money.” We heartily endorse this but also see that there are still
opportunities to be able to beat the bank as well.
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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]
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Snap Shots: by Harry Flashman
Filters - for fun without fuss
Left side polarized, right side is not.
I spied a photo catalogue and there was a page for filters. 62 mm UV
protection filter for B. 650, for example. Great! However, filters are
one of the most misunderstood photographic items in the camera bag.
Before you even start considering filters, you should invest in a
stepping ring or two. The reason for this is that you need to have a
filter diameter larger than the diameter of the end of your lens. For
example, my new camera has a 55 mm lens diameter, and I wanted 62 mm.
That is where the stepping rings come into play to get 55 mm up to 62
mm.
There are a few reasons for selecting a larger diameter, and the first
is to make sure the filters do not cause vignetting (the edge of the
filter coming into the field of view, especially with wide angle
lenses). The second reason is to give yourself a good filter diameter to
standardize all your filters on.
The first filter you should buy is often called a Skylight 1A. This
filter does make the sky a little deeper, but the main reason to have it
is as a sacrificial piece of glass, so that your good, expensive lens
does not get scratched. Once you screw on the Skylight 1A, never take it
off. Of course, make sure the glass on the end of the lens is
scrupulously clean and the filter likewise before screwing it on.
The next filter you should purchase is a Polarizer. I have written about
these filters previously, but you will be amazed at the depth of color
you will get from this filter. Now to use this filter. If you have an
SLR (single lens reflex) camera, you actually look through the lens when
you are focussing and What You See Is What You Get (this is called the
WYSIWYG principle). Looking carefully through the viewfinder or at the
LCD screen, just note the changes in the colors as the polarizing filter
is rotated.
These filters are different from most others in the fact that they are
made up of two distinct elements. There is an outer ring that rotates
the outer “glass” relative to the inner element. This increases or
reduces the degree of polarization to allow the photographer an endless
range of polarized effects from one filter.
The principal behind these filters is to remove reflections, and funnily
enough it is reflections that take the color out of color photography.
Look at the surface of a swimming pool, for example - a shiny white,
non-transparent surface. Now look through a polarizing filter and you
can see right down to the tiles on the bottom of the pool. And the
people frolicking in the pool!
What you have to understand now is that these filters remove reflections
from any surface, not just water. The reason you cannot see through some
normally transparent windows is because of reflected images on the
surface of the glass. The reason some tree leaves appear to lose their
color is through reflected light from the sky above.
One of the traps for young photographers is that because you know the
grass is green, you see it as green when you look through the camera
lens - even though it is not truly green, caused by the reflections.
Look again at the scene in the viewfinder. The green grass is really a
mixture of green and silvery reflections, dark shadows and pale green
shoots. Put the polarizing filter on the lens and slowly rotate the
outer ring. Suddenly the silvery reflections disappear and become a
deep, solid green color. The grass is now made up of green, dark green
and pale green. This green will really leap out at you and smack you
fair between the eyes!
At your next beach scene slowly rotate the outer ring on the polarizer.
Look critically through the viewfinder and you will see the sky take on
a much deeper color to highlight the white clouds. Keep turning that
outer ring and the sea will change to a deep blue to green luminescent
hue. Experiment and find the result you like best.
Modern Medicine:
by Dr. Iain Corness, Consultant
H1N1 (Swine Flu) update
This week’s column comes from Dr Michael Moreton, my opposite
number in the Bangkok Medical Center, who presents a very well thought out
synopsis of the H1N1 situation. Dr. Michael has very kindly allowed me to
use his report.
The H1N1 flu continues to spread. It is now present in every country in the
world. It is impossible to say how many people have been infected. This is
particularly true of this virus because for most people the illness is a
very minor one. The relative number of patients needing hospital care
remains very small. Many people who have just felt tired and achy for a day
or two have had a mild attack of this flu.
In any flu epidemic lasting this long there is a fear that the virus will
mutate and change its character becoming a more virulent virus that will
cause a more serious illness. So far this has not occurred and the
likelihood of it doing so is very small. Normally in the Northern hemisphere
a seasonal flu virus appears in the late fall. It will be interesting to see
if this happens. If it does we could have two different viruses functioning
simultaneously.
Unlike seasonal flu which strikes the elderly and patients with weak immune
systems, this virus has infected healthy young adults. With the universities
all reconvening there is concern that the number of cases will increase
dramatically. Eventually, and we may be approaching that point, everybody
who is going to get infected has been infected and the pandemic will die
out.
There have been a little over 1800 deaths worldwide from the flu or
complications from it. In the USA, the country with the second highest
number of deaths, after Brazil, there have been 556 deaths. In order to keep
the US figures in perspective, approx 30,000 patients die as the result of
the seasonal flu each winter and in the five months that the flu has been
circulating 16,000 Americans have died in road traffic accidents and 6,500
from falls, mostly in the home. Canada has had 72 deaths, a slightly higher
number of deaths per head of population than the US.
Enormous efforts have been made to produce a vaccine and the five
manufacturers claim that they will be releasing the vaccine in about six
weeks time. The first group to receive the vaccine will be those at the
highest risk of suffering from a severe illness if they should contract it -
those with cardiac or respiratory diseases, diabetics, patients with
neuromuscular diseases and pregnant mothers. Whether they will be tested to
see if they already have immunity before receiving the shot or not is being
debated. Things will be complicated as there will also be the 2009 version
of the normal flu shot available.
Anti-viral drugs continue to be used particularly by patients in high risk
groups. It is difficult to assess the efficaciousness of preventative
medications. How do you assess how many people would have got a disease and
as a result of taking a medication did not get it?
The report in the USA from the President’s advisors sure grabbed the
headlines. It laid out a frightening scenario which most authorities
consider to be very unlikely. They forecast that half the US population
could be infected, that 1.8 million would need hospitalization and that up
to 90,000 may die. There are two statements in the report that should be
emphasized - “This is a planning scenario, not a prediction” - this means
that this is their worst-case scenario. The other statement of note is that
this virus does NOT show the virulence of the 1919 virus, the worst one of
all time. This statement is rather superfluous; nobody has suggested that it
was.
In the mean time I would repeat the advice of washing your hands regularly.
Cover your mouth if you cough or sneeze, then wash them. Stay home if you
are sick. Finally, follow the example of your Thai friends - a ‘wai’ is a
much more civilized greeting than shaking hands!
(Thank you Dr. Michael, I concur with everything you have written here. We
are not in imminent danger of dying from Swine Flu!)
Heart to Heart with Hillary
Dear Hillary,
It’s largely thanks to reading your column over the years that’s put me right
off the bar scene here in Pattaya; no one likes to be thought of as a real mug;
I’m allergic to bar girls now.
I am, however, approaching UK pension retirement age (the big 65!), and because
living out here is good for my health I’ll happily enter into a contract of
marriage with a suitable Thai lady in order to free up the 800,000 baht I’d
otherwise have to leave in a Thai bank account to convince the Thai authorities
that I won’t become a burden to them. Herein lies the rub, I don’t want to have
to use these god-awful internet dating agencies to look for a mate; when it
comes to being photogenic, my face and a battered crab have a lot in common. I
would like to meet a lady through a traditional introduction agency providing it
wouldn’t cost the earth; are there any such establishments in Pattaya? And can
you do a ‘pre nup’ here whereby the chosen candidate signs an agreement that you
are marrying her and not her extended family. I’m not a ‘rich farang’ and short
of a miracle I never will be.
Mr. Floppy
Dear Mr. Floppy,
They say that the blue diamonds work well for those who are walking around with
a limp… but let’s be serious here, “a contract of marriage with a suitable Thai
lady to free up your 800,000 baht.” Here I am my Petal. I can think of lots of
things I could do with that liberated 800,000 baht.
Now back to reality. Any woman you meet through a dating/introduction agency has
a problem of some type, or they wouldn’t be in the meat market, would they.
These are women looking for a (well heeled) mate, so will be happy to sign
anything to get you. Sure you can have a ‘pre-nup’ drawn up, but this is
Thailand, Mr. Floppy. To be legal, it has to be in Thai, and who do you know
that will exactly translate for you what is in the document. Going into a form
of matrimony like that will cost you a lot more than the 800,000 you are trying
to save.
Frankly, Floppy, you would do better just arranging for your pension to be paid
into a UK bank account, which you can then draw on from Thailand (ask Graham
Macdonald, our money man, how you do that) and get some tips on how to maximize
your 800,000 without seeing it eaten up by the extended family. You see, Petal,
the extended family is the way things work in Thailand, and no end of bits of
paper will change that. Perhaps you should just marry an English girl, or find a
Thai orphan with no siblings.
Dear Hillary,
How difficult/easy is it to meet your “nice girls” that you always talk about? I
never hear anything but problems from the bar girls, and nothing about the “nice
girls”. There must be problems there too, or don’t the guys want to admit that
the grass wasn’t greener on that side of the fence?
Still Looking
Dear Still Looking,
In all relationships there is the potential for disaster, it is just that in the
bar girl arena, the potential is even greater, as the relationship is built on
false promises. With marriage failures around 50 percent of first time marriages
in the US, why should it be any different here? As far as how easy or difficult?
It depends upon how hard you look. Standing outside a beer bar isn’t going to
attract non-bar girls. You have to go where they go, and that is to professional
organizations such as chambers of commerce, service clubs and recreational
groups. And at those gatherings, it isn’t a case of coming back with you on the
first meeting. Just as in your own country, softly, softly catchee monkey!
Dear Hillary,
I have been trying to teach my Thai girlfriend to drive, but there are many
problems. The first is that my Thai is minimal and her English not much better,
so technical terms like “let the clutch out slowly” are impossible to get
across. The second problem is that my car is very large and she has problems
estimating the sheer size of the vehicle. The third snag is that she seems to
have very little of what I’d call “road sense”. Do you know of any places I
could send her to learn to drive, Hillary?
John
Dear John,
Ooh, Hillary loves writing “Dear John” letters, but you certainly have a pile up
of problems, don’t you. Or I suppose it’s the “pile up” you’re trying to avoid,
isn’t it, my Petal. The first problem is the communication thing - please, don’t
let her learn to drive by Braille, even if that’s how you basically communicate.
Secondly, you have to realize too, that many people here get their license first
and learn to drive second, and that includes some “teachers” in the noble art of
self driving. So where should you send her? Have you thought of the wide open
stretches of terrain around hamlets like Korat - a lot less dangerous! And maybe
buy her a jeep.
Let’s go to the movies:
by Mark Gernpy
Now playing in
Pattaya
Phobia 2 / Haa Phrang: Thai, Horror – Literally “five
crossroads,” this is a five-part horror anthology by some of Thailand’s
best-known directors of horror films, including segments by the two
directors of the classic Shutter, and Songyos Sugmakanan, who
created the poignant coming-of-age and sort of horror film Dorm.
I rather enjoyed Phobia 1, and am looking forward to this one.
The Final Destination 4: US, Horror/ Thriller – After a teen’s
premonition of a deadly race-car crash helps save the lives of some of
his peers, Death sets out to collect those who evaded his plans. But I
have to tell you that even if you go to see it in 3D, the movie is in
only one dimension in terms of story and character. Nevertheless, you
sort of get your money’s worth with this one, should you enjoy watching
deaths: It contains 11 death scenes, the most of any film in the
series. They brag about it! Rated R in the US for strong violent/
gruesome accidents, language, and a scene of sexuality; “18+” in
Thailand, under the new ratings system. “18+” is an advisory rating
that suggests viewers should be 18 or older to see the movie. Generally
unfavorable reviews. In Digital 3D only at SFX Cinema Pattaya Beach; in
2D elsewhere.
Far be it from me to discourage you if you slaver over this sort of
thing, but I thought it truly repulsive and offensive. You have various
human organs flying at you right through the cinema, and if you’re
seeing it in 3D, yes your reflexes make you actually duck!
Gamer: US, Action/ Sci-Fi/ Thriller – By the writers and directors
of the two recent Crank movies, this continues their quest for
ever bigger explosions, and action which is even more “non-stop.” Set
in a near future when gaming and entertainment have evolved into a
terrifying new hybrid, allowing millions to act out their most savage
fantasies online in front of a global audience, using real prisoners as
avatars with whom they fight to the death. Rated R in the US for
frenetic sequences of strong brutal violence throughout, sexual content,
nudity, and language; “18+” in Thailand. Generally unfavorable reviews.
Inglourious Basterds: US/ Germany/ France, Drama/ War – Quentin
Tarantino’s exceptionally bloody tale of Jewish-American troops on the
hunt for Nazi scalps in World War II France, starring Brad Pitt and an
amazing Christoph Waltz in a truly fine performance. A must-see movie,
though I’m uncomfortable with the idea I’m recommending a film that
carries violence to such extremes. It’s just that I find the filmmaking
skill so mind-blowing. Never have I felt such a deliciously slow and
inexorable building of tension in a scene, and such studied control over
all the aspects of movie-making. Will forever change how war movies are
filmed, and not only because of its extensive use of German and French
(it’s basically a foreign-language movie).
Rated R in the US for strong graphic violence, language, and brief
sexuality. In Thailand it’s rated “18+” under the new ratings system.
“18+” is an advisory rating that suggests viewers should be 18 or older
to see the movie. Generally favorable reviews.
Solstice: US, Drama/ Horror/ Thriller – Directed by Daniel Myrick (The
Blair Witch Project), this horror film follows a group of high
school friends on their summer vacation at a lake house as a young girl
uncovers a disturbing secret about her twin sister, who committed
suicide just a few months before.
My Ex / Fan Kao: Thai Horror/ Romance – Ken is a heartthrob of an
actor with a bad-boy reputation of loving beautiful girls and then
dumping them. After his marriage, one of his ex-girlfriends comes back
from the grave to exact revenge. Unaccountably bloody, dreadful, and
confusing, even for a Thai flick. Some interesting cinematography.
Buppha Rahtree 3.2: Rahtree’s Revenge: Thai, Horror/ Romance –
Continues the romantic-horror story of the revengeful ghost of Buppha
and her love struck cartoonist, played by Mario Maurer of Love of
Siam fame. An exceptionally bloody and confusing horror flick, and
one of those where most of the work of scaring the audience is done by
the soundtrack’s spooky music and sound effects. Rated “18+” in
Thailand.
17 Again: US, Comedy/ Drama/ Romance – Has just enough Zac Efron
charm to result in a harmless, pleasurable teen comedy. Mixed or average
reviews.
Jija - Raging Phoenix: Thai, Action/ Romance – Starring the amazing
girl from the film Chocolate, Jija Yanin, a true female action
icon, in a rather odd mix of a film – martial arts plus love story plus
break dancing – but it should please Jija fans. Watch it when
you’re in the mood for seeing startling martial arts images in a
disconnected pattern.
G.I. Joe: The Rise of Cobra: US, Action/ Thriller – Nonsensical
mayhem, and very loud, but stylish. Generally negative reviews, but
very popular nonetheless.
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