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Money matters:
Graham Macdonald
MBMG International Ltd.
Nominated for the Lorenzo Natali Prize
How can we get out of this one?
Ludwig von Mises, an Austrian economist, said it all when it
comes to the credit crunch. He stated, “There is no means of avoiding the final
collapse of a boom brought about by credit expansion. The alternative is only
whether the crisis should come sooner as the result of a voluntary abandonment
of further credit expansion, or later as a final and total catastrophe of the
currency system involved.” When did he say this? Fifty years ago in 1949. So it
does not take modern day finance ‘speak’ to see that what John Cleese would call
the “bleeding obvious”, has been around for many decades for us all to look at,
sit up and take notice of.
However, this is exactly what the brilliant leaders of the west chose not to do.
They have ignored all the warnings so as to save their own respective skins and
so now their currencies are going to be really hit for six. It is an irony that
von Mises lived in a post-war country that almost became a communist one when
the Allies were dividing up Europe. Why is this? Because the western governments
now have interfered so much with the markets that it makes them look like the
Reds on the other side of the Berlin Wall before it collapsed twenty years ago.
Indeed, it seems to be the ultimate paradox that the Eastern bloc and China are
now more free thinking than the west.
Russell Napier, who works for CLSA (Credit Lyonnaise) highlights the problems
brilliantly in one of his more recent research papers. He acknowledges that it
will be very difficult, if not impossible, for the people who got us into this
mess to get us out of it without causing severe damage to the economy.
To go back to what we said above, what these little geniuses have done is
nothing more than nationalize anything that looked as though it could cause the
governments any embarrassment. What was really needed was for nature to take its
course, if the likes of General Motors had to go then “Hasta la vista, baby.”
Cruel? Yes. However, a short, sharp pain is better than the long, protracted
agony we will now have to endure. Napier calls the former “creative destruction”
and shows a good argument that from the ashes will grow a meaner, leaner and
fitter economy that will knock everything else into touch.
What we will now get is fiscal spending gone mad and governments directing what
goes on as opposed to the natural cycle. The ultimate irony is that ‘creative
destruction’ will still come but in the shape of government debt markets. This
will happen because the governments of the western world will, in the end, have
bailed out so much rubbish that should have been allowed to go to the wall that
those countries will no longer hold the credit quality they once had.
Some people ask how this can be. It is very simple. For the sake of ease, let us
just look at the US bailouts. What has happened is that when things started to
go wrong the US government charged in and saved Fannie Mae and Freddie Mac. This
then grew more and more until, practically, the whole banking system had to be
saved. As we all know, the automotive industry was not exactly immune either.
So, what does this mean? Basically corporate and commercial credit risk has,
almost overnight, been turned into sovereign credit risk. In turn, this is being
passed on by the government backed banking sector to the property market and
elsewhere.
What has happened in the past, i.e. the natural cycle of depression and
deflation, was considered to be politically beyond the Pale. It was deemed that
if ‘creative destruction’ was allowed to act its own course then the government
in power would not stand a cat in Hell’s chance of getting re-elected. Well,
look what happened to the Republicans. Due to the foreign policy of George W
Bush, the Republicans had no chance of getting back in.
However, if they had bitten the bullet and gone for creative destruction then
America would not have to suffer as much as it is going to now. Government debt
could spiral out of control if these people are not careful. What this, in turn
entails is not now how ‘creative destruction’ will work on private enterprise
but how the markets will cause it to happen via government debt markets.
What makes this is even worse is that the people that caused this mess in the
first place, i.e. the banks, could be the people who really benefit from it the
most. Despite the fact the banks refuse to take any of the blame for the chaos
we are now in, it is they who will get more from various forms of government
stimulus than anyone else. So we will then have the banks, which have been
robbing us blind for decades, being bailed out and underwritten by the tax
payers yet again.
Obviously, the above does not bode well for those people who hold western market
government bonds. However, the real poser is when will the bomb drop? Napier
believes that equity markets could continue to do well until inflation gets to
around about the four percent mark and the yields on ten year treasury bonds
start to offer five percent plus. The USD64,000 question is when will this
happen. If anyone knew for sure then they would be sitting on a beach in Bermuda
so the real answer is using diversification as protection of assets.
Things do not get better as can be seen by report by Sprott and Franklin in June
of this year. In this, they show that owners of US government debt as of
September 2008 would have to purchase three times the debt they bought then by
this time in 2009. And this is just to balance the accounts.
As they said, given how poor the economy really is, “It seems frighteningly
apparent that a threefold increase in debt purchases by [current bondholders] is
a mathematical impossibility.”
The problem is made even worse by the fact that over half of the US Treasuries
out there are not owned by Americans. This means that foreign governments can
use this debt to manage their own FX reserves so as to keep their own currencies
in line with whatever the in-house political requirements are. This does not
bode well as politics may be used as an excuse for default. Whilst it would
damage the reputation of the US and cause problems with the overseas investors
the people who will be really hurt is Joe Public.
What are the chances of this happening? Well US debt to GDP ratios have not
exactly been healthy and default may well happen as inferred by the chart on
this page.
So, what can be done? As stated above, the problem is in the timing and this
will not be helped by any political curveballs the overseas investors may want
to throw up.
Last October, we saw the perfect storm when every single asset class
depreciated. This did not happen in 1929 and not even when the South Sea Bubble
blew up. In fact it has never happened in economic history before. Therefore,
the chances of it occurring again in the foreseeable future are extremely small.
Without doubt, we will get out of this mire, it is just a question of when. Thus
the question is, what to hold? Equities? Property? Bonds? Cash? Commodities?
Alternative Investments? If you are not sure about this then diversification is
the only solution and have a bit of something in every pie or, as we said in an
earlier article, put all your eggs in as many baskets as possible.
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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
Intensive Care for Cameras
 Cameras
are expensive - even small point and shooters will set you back a few
thousand baht. A digital SLR will have cost you anything between 20-40
thousand baht. I can’t afford to throw away that kind of money, even if
you can.
A camera is a highly sophisticated instrument, encompassing both physics
and electronic technology. It does not like disuse and it certainly does
not take kindly to physical abuse.
The first, and often the most common, is dropping the camera. Cameras
are very complex devices. The shutter on even the cheapest camera can
open and close in 1/500th of a second. You can imagine that it doesn’t
take much to knock the delicate shutter around.
The camera is also a lightproof box, dropping it and distorting the case
will soon let light in. And that goes for both film and digital cameras.
So what should be done beforehand? First is to have a decent padded
camera bag. It has to keep the camera safe in the situation of it
falling out of the car or slipping from the shoulder. Throw the silly
leather case, that many cameras come with, as far as you can, or feed it
to a goat.
OK, so you have the camera hanging on the strap around your neck, ready
for action. What can go wrong here? Well the strap can slip or the
eyelet rings can break, and the whole lot hits the floor unless you have
lightning reflexes. Answer? Check and make sure that everything is
correctly attached and not worn, especially the eyelet rings. When did
you check last? Replace regularly.
So it did hit the floor, what now? Turn it on. Is it still electrically
OK? If no power, take the batteries out and then put them back in - they
may just be jolted out of position. Unscrew the lens and put it back on.
Look through the viewfinder - if it looks normal, then try to take
several shots at different shutter speeds and apertures and rush to the
closest 1 hour processor or to the computer if it was a digital. Pray a
lot. You may be lucky.
After dropping, the next disaster is water. Cameras are not like
children, you cannot “drown proof” them. They stay drowned. If you are
going out to photograph in wet (or Songkran) weather, then you must take
precautions. A plastic bag wrapped around the camera with just the end
of the lens poking through, and held on with rubber bands is one way to
“safe photography”. Even then, as soon as possible you should take the
camera inside and dry the outside of the case thoroughly. Take the lens
off and dry carefully around the lens mount too, making sure you do not
touch the mirror. Take the batteries out and thoroughly dry the battery
compartment and the contacts. Batteries and moisture do not go well
together.
Now we should think about the great shots you can get on board the
speedboat and similar situations. Resist the temptation to take your
good camera - you can buy a waterproof disposable Kodak or Fuji for very
little money and you can relax with peace of mind. Do not take your good
one!
So what do you do when you have ignored the above advice and drop the
whole camera in the drink? If it is a modern electronic camera you have
probably just lost your investment - especially if it is salt water you
drop it into. One camera technician’s advice under that circumstance
was, “Leave it there!” However, you can try flushing the camera in
running tap water for at least an hour, then drying it and taking it to
the repair shop. An audience with the Pope would be a good move as well.
Drowning the camera in fresh water is not quite so bad, but you have to
pull it apart as much as you can and then dry it out as thoroughly as
you can - a hair dryer set on “No Heat” can help, but again your chances
are slim. This time it’s three Hail Mary’s and hope a lot.
First Aid is possible, but preventive maintenance is much better!
Modern Medicine:
by Dr. Iain Corness, Consultant
Exercise - keeps you fit or wears you out?
One of the doctors at work asked me the other day if I do
regular exercise. I said “No,” but I then qualified that by saying that I
walk all over the hospital, all day and every day, and while not structured
exercise, I am still very active (and what’s more, I am older than he was).
We medicos are good at handing out advice, but not too many of us follow our
own wise words. Of course, we have an excuse - we are so busy telling people
what to do, that we haven’t got the time to do it ourselves. Exercise is a
classic example of this. I tell everyone that they should build in an
exercise component into their lifestyle, but not too many of my mates
actually do it. For many of us, the excuse is that we don’t know how much.
My next door neighbours had a concession on Jomtien Beach. You know, the
usual beach chairs and tables, umbrellas and drinks. They also had what was
probably Thailand’s oldest truck. It was around 50 years old and crawls down
the street every morning and evening, laden down with ice, bottles and deck
chairs. Many times I have had to help the old girl into the driveway as it
has wheezed to a halt half way in. But it continues to stagger on. Good
enough for the job it has to do. After all, it is 50 years old.
Every morning I also see the 50 year old joggers along Jomtien Beach as I go
to the office. They appear to be held together anatomically by leotard and
lycra, or even older men doing what I call the “cardiac shuffle” having been
advised by their doctors to get some exercise following their heart attack.
I also ponder in the mornings as to whether these people are really going
(jogging) down the right track?
The question, “How much exercise should I do, Doc?” is one that I have had
to parry all my medical life. When I was a young buck it was easy. “You
can’t get too much of it,” was my usual reply (and that just about covered
everything in life!). However, now being ten years older than my neighbour’s
truck I tend to be a little more conservative. More and more I have learned
to look at the animal kingdom for a pointer.
What is the difference between your new puppy and the old dog it replaced?
Or the kitten and the 14 year old tabby? Or the lion cub and the lord of the
pride? One thing is for certain, the older animal is less active than the
younger, exercises less and sleeps more. If we accept that the older members
of the animal kingdom have not been advised by their vets to take up
training for the Octogenarian Animal Olympics, whose advice are they
following? Nature, that’s who. Mother Nature has told the old lion to lie
under the tree.
Now with regard to the human animal, is Mother Nature wrong, or are the
doctors on the wrong track? Actually neither is “wrong” - the correctness
comes in the sensible application of advice, be that coming from within
yourself or given to you. Your body, by the time it is as old as my
neighbour’s truck has already told you to slow down somewhat. Even in the
“what you used to do all night now takes you all night to do” department.
This is all very natural.
However, we do also know that activity is good for you, and even protective
against some of the more terminal conditions that we can get, like the
aforementioned heart attacks. So, sounds like plenty of jogging is good for
you at any age. Not necessarily so! The secret is in the balance.
As we get older, we must stay “active” both physically and mentally. Staying
“active” does not mean pushing your 50+ year old joints beyond the limits
that Mother Nature intended. It really is all things in moderation. Think
about it before you buy those expensive jogging shoes.
Heart to Heart with Hillary
Dear Hillary,
Great to see you are still around. You’re what keeps some of us blokes in the
desert from going insane, reading about people who are insane already. Me? I’ve
been away from civilization, freezing my cashew nuts off-shore and so far out of
touch it isn’t funny. I’m back for the next three months and would like a little
of your expert advice. Can I buy a condo in that time? Would it be advisable to
put someone (small, brown from the Esarn region - there’s lots available in the
bar area) in the place to keep it while I’m away for the next two months after
that? If I’m going to be buying a place, I want it to be safe while I’m away.
Neil
Dear Neil,
Sometimes I don’t believe what I read, Petal. Here you are proposing to spend
your money on a condominium (furnished I presume) and then employ a “caretaker”
whose only training has been taking the tops off beer bottles. If you’re worried
about having enough time to buy this condominium, do you think it’s also enough
time to check out the caretaker? Be real! You don’t actually need a caretaker in
a condominium block with full security, and your suggestion is just inviting
trouble. Talk to your realtors, they can advise. And if all else fails, fill the
fridge with French champagne and I’ll stay there until the fridge is empty.
Dear Hillary,
As I’m getting too old for the chase and capture thing, I’ve been talking to a
few local women through one of these online chatting programs. I’ve got friendly
with two or three, but when I get to meet them face to face, it’s a different
matter. Sometimes they just don’t look like their photo at all, and I’ve had
troubles recognizing them. Sometimes they don’t show up at all. I’m serious
about finding someone to spend my remaining years with, but some of them have
got less years left in them than I have. Any suggestions, Hillary?
Josh
Dear Josh,
You are kidding me, aren’t you, Josh? You are sitting banging away on the
keyboard and fully expect Miss Right to pop up on your screen. She’s going to be
so right that when you meet, lightning will flash, stars will spin and after
sweeping her into your arms, you will be instantly the finest couple that
Thailand has ever seen. What sort of funny tobacco have you been smoking, Petal?
This is reality time now. The women you chat to on these online programs are
just as desperate as you are, Petal. These are not the cream of the crop’s first
picking. These are the ones left behind in the bottom of the basket. They’ve all
got a history - just like you will have. And they’re not telling you the whole
history, just like you do. I can tell you that you don’t find “someone to spend
your remaining years with” in this way. For that to happen, and it’s a very slim
chance that it might happen, there has to be some chemistry between you, and
online chats are so far from reality (as you have already found out), that the
chances of a successful meeting are virtually zero. Go online if you must, but
be real in your expectations. Right now you are only fooling yourself (and the
girls if the truth be known).
Dear Hillary,
The story I am writing you is true and I think everyone needs to know there is
good and bad everywhere in the world. Not just bad here. I get sick of all the
moans and groans that come from all your writers and how they have been ripped
off or left in the lurch by some Thai girl. Perhaps they should be more careful.
I met a Thai lady when I was on holidays a couple of years back and she asked me
for a loan of several thousand baht. I looked into her background and why she
was in debt and how she was going to pay me back. She promised that she would
give me all the money when I returned to Thailand six months later. I came back
and guess what? She repaid me, plus interest that I didn’t ask for. I think a
lot of the people who get ripped off ask for it.
Financial Freddie
Dear Financial Freddie,
First off, I do appreciate letters that show the other side of the coin. As you
correctly point out, there is good and bad everywhere and Thailand is no
different from anywhere else as far as that is concerned. The difference here
seems to be that the foreigners come here, leave their brains in the locker at
Suvarnabhumi and then forget all good business sense, such as a few checks as to
how the girl in question is going to repay the loan just for starters. Perhaps
they are all blinded by the bevy of beauty that surrounds them? Checking one’s
brain in at the immigration counter in Bangkok seems to be a very real
situation. I often wonder if they remember to pick it up again when they leave.
Let’s go to the movies:
by Mark Gernpy
Now playing in
Pattaya
District 9: South Africa/ New Zealand, Drama/ Sci-Fi/
Thriller – Technically brilliant and emotionally wrenching, with all the
elements of a thoroughly entertaining science-fiction classic. 28 years
ago, aliens made first contact with Earth. Humans waited for the hostile
attack, or the giant advances in technology. Neither came. Instead,
the aliens were refugees, the last survivors of their home world. Rated
R in the US for bloody violence and pervasive language. Reviews:
Universal acclaim.
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, and also by Visute Poolvoralaks, who is not a
best-known director but is instead a best-known producer of horror
films, here making his directorial debut. The whole is a mixed bag as
it would have to be, but well worth checking out if you like Thai horror
films.
Actually, I can’t imagine anyone not having a lot of fun with the last
of the five stories – very enjoyable – a segment poking gentle fun at
the horror-movie genre. It’s called In the End,
directed by half of the pair responsible for the classic Thai horror
films Shutter and Alone, Banjong Pisanthanakun, and it’s a
laugh-filled horror parody. It’s a Thai belief that there are ghosts on
horror-movie sets, and this segment plays around with that idea. For my
money, the stars of the show are the four guys from the first Phobia
who went on a camping trip and told ghost stories in their tent at
night. Here they are the crew trying to make the ghost movie. Pretty
funny stuff.
Another of the segments, Backpackers, features the fourth
collaboration of actor Charlie Trairat and director Songyos Sugmakanan,
beginning with the legendary Fan Chan when Charlie was a very
young boy, continuing with the marvelous coming of age story Dorm,
and the more recent Hormones. Now 16, Charlie is here getting
away from his sweet roles and exploring the darker side of his
personality.
The Proposal: US, Comedy/ Drama/ Romance – With Sandra Bullock, Ryan
Reynolds. A pushy boss forces her young assistant to marry her in order
to keep her Visa status in the U.S. and avoid deportation to Canada.
Mixed or average reviews
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. “18+” suggests viewers should be 18 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 – I found this an absolutely
repellent and repugnant film, and I would have no problem with its being
banned and all copies burned. I think it’s just too brutalizing to
exist. By the writers and directors of the two recent Crank movies, as
they continue their quest for ever bigger explosions, action which is
even more “non-stop,” and plots and stories which explore the outer
limits of the vile and sick. 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, Action/ War – Quentin Tarantino’s
exceptionally bloody tale of Jewish-American troops on the hunt for Nazi
scalps in World War II France. A must-see movie, though I’m
uncomfortable recommending a film that carries violence to such
extremes. But the filmmaking skill is mind-blowing. Rated R in the US
for strong graphic violence, language, and brief sexuality; “18+” in
Thailand. Generally favorable reviews.
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.
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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