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Money matters

Snap Shots

Modern Medicine

Heart to Heart with Hillary

Let’s go to the movies


Money matters:   Graham Macdonald MBMG International Ltd. Nominated for the Lorenzo Natali Prize

Oh, for a crystal ball

Some people say this column is too negative. I say it is realistic. All I look for when discussing finances is for common sense to be applied. Therefore, let’s look at the state of things at the moment and see how things may pan out in the near future.
As I write this, the demand for high risk assets has returned with people buying left, right and centre as they think low valuations are over and done with. At the moment, if there is a small downturn then it will probably sucker in yet more buyers who think they may miss out on what Martin Gray of Miton Asset Management calls, “This risk-will-be-rewarded rally”.
Unfortunately though, it is a bubble sponsored by governments and central banks. However, as Martin also says, “Reality may have to be faced later in the year, as deflation takes a grip and unemployment continues to rise,” even though it will probably do this at a slower rate than we have at the moment.
The western world has enjoyed over twenty years of falling inflation, falling bond yields and falling interest rates and as the availability of credit increased and the cost of servicing debt decreased, consumers and governments went on a spending binge. The debt bubble has not burst or lessened in the last eighteen months; it has just been taken from the private sector (banks) and nationalized.
Most of the economic growth seen so far in this recovery is on the supply side; the result of government spending and cash injections which have built inventory levels from incredibly low levels.
The de-coupling threat has come around again after falling flat on its face towards the end of last year. The recent rally in a lot of the commodity prices has set this off and there is now an awful amount of money being invested into emerging markets. The problems will come when restocking slows down later on in the year. Therefore, unless Western demand can pick itself up from the floor, the sudden faith in this asset category is very likely to unwind again.
Without doubt, higher inflation will come but the expectations for 2010 do seem to be way over the top given the huge shocks given to the financial system. Although it is true that the bounce in the price of oil may keep the number a wee bit higher in the short term, the fact is that with unemployment still on the rise and household debt not getting any less there will be little demand for goods or services. This, if anything, should make prices go down.
The West is still in a deflationary mode for the moment but, as implied above, the central banks will have to react accordingly as deflation could well be worse than inflation. Where the problem lies is the fact that there is little room for error and if people get it wrong then the present situation will look like a walk in the park to what will come if they get it wrong.
Many analysts have stated that governments have been quick to tackle the banking crisis by providing cash as and when it has been needed. They have also come to the rescue of many companies by either providing money directly or nationalizing them. This was the easy part. The real problem is going to be what will happen when this money runs out.
With the incurred budget deficits we have now (they have only been more in wartime), the only way they can be re-paid is via higher taxation and cutting benefit programmes for many years to come. What does not make this any easier is that this comes at a time when the people of the Western world are getting close to retiring just when the pension funds are struggling for survival and the household balance sheets have not been weaker for decades. As Martin Gray says, “Demand could remain sickly for a lot longer than is being priced into many assets.”
Concerns over the lack of demand also apply to the rally in stock prices as it appears that much of the recent recovery in earnings is the result of cost-cutting rather than a rise in growth through increased demand for goods.
The reality is that we are just putting off the inevitable. The debt we have built up over the years has to be confronted and dealt with. The real question is what will happen when the quantitative easing is withdrawn.
Without doubt, this rally is being driven because of the liquidity being poured into the markets. It has nothing to do with fundamentals. This is proven by the fact that bonds, equities and gold are all going up at the same time.
However, I believe the former two will both suffer over the next year or so at least as the supply in both will increase dramatically. This is because a lot of companies have a present line of credit that will be called in for renewal over the next twelve months. The lending houses (banks) will not give the same terms as before due to their margins having expanded. There is also the unspoken problem of banks being required to reduce their balance sheets.
The only way to solve this lack of finance is for the companies to either issue bonds or shares/stocks. Markets are not the place to be at the moment. The danger is to invest in them just before the next downturn which, when it comes, will be massive.
Another fund manager at Miton, Nick Greenwood, heard a good analogy the other day, it “likened the financial system to two baths, one in the East and one in the West. In both regions, the authorities have turned the liquidity taps fully on. In the West, the plug is absent despite the vast sums being injected in, even GBP175 billion of quantitative easing is small beer relative to the shrinkage needed in bloated balance sheets. Therefore, the bath is far from overflowing as the cash is draining into bank vaults and not escaping into the markets. Conversely in the Far East, the Chinese have their own taps just as firmly on full flow; however, as the local sector is not afflicted by the excesses of the bubble in that local banks are sound, the plug is firmly in and the water is flooding everywhere.”
What this means is that these actions by the Chinese government are driving the short term direction of the markets. The problem for fund managers is that it is almost impossible to predict what the next actions of Beijing will be.
Management of the global economy represents an enormous experiment and the conclusion cannot be forecast with any degree of confidence. Life will remain far from relaxing for the foreseeable future. The solution? Diversify, diversify, diversify and have no loyalty to any one asset.

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]



Snap Shots: by Harry Flashman

Helicopters

I was reminded about helicopters this week when I overheard a young lady saying accusingly to her male partner, “You not butterfly, you helicopter!” To which the quick-witted young man replied, “And you international airport!”

Typical aerial shot.

From the outset, I have to admit that I have no head for heights. Dizzy when standing on a chair is close to my aerial abilities, but in the life of the pro shooter, you sometimes have to face your greatest fears to get the shot that the art director wants. If you don’t do it, some other photographer will, and you have lost a client - forever!
The brief was simple. I had to shoot a vacant allotment where a hotel and resort was (hopefully) going to be built. The client had the ground and an architect’s model of the proposed resort. My job was to end up with an aerial shot showing the hotel in position, relative to all the other buildings, as if it had been there for some years. Just another example of why you should not believe everything you see.
Technically, shots like these are very difficult, as you have so many factors which have to be taken into consideration, lighting being just one of them. It is a situation that requires a notebook and pen, just as much as a camera.
Working on the principle that we would need some nice warm lighting and good shadow definition, it was decided we would do the aerial shot at 3 p.m. and a helicopter (with doors removed) was booked for 3 p.m. for one hour. Helicopters are not cheap to hire, and since the photographer is paying, I took the one hour minimum.
With all camera gear on board we reviewed the site from the air. I had to decide from what height we needed to do the shooting, and 600 feet seemed the best. We then circled the vacant allotment until the best viewpoint was reached, as we also had to show the beach and some Pacific Ocean, to show the locality of the proposed resort. At the same time we noted the focal length of the lens I would use and did a couple of test Polaroids to settle on the exposure details. The camera, by the way, was a Hasselblad as we had to shoot in medium format, which with its removable backs allowed for Polaroid test exposures.
Then came the first of the problems. It was a windy day and the pilot could not hold the position to allow me to shoot from inside the helicopter and I was going to have to go outside of my little cocoon of safety to get the shot.
This meant wearing a harness with a rope attached and getting out of the helicopter and standing on the landing struts while leaning into the wind and don’t drop the camera! For someone dizzy at one meter above ground level, this was a fearsome task. And did mean I had to trust the photographer’s assistant implicitly.
In around 10 minutes of being buffeted outside the helicopter, I had shot several rolls of film and I was pulled back in and we headed for the airport.
After processing the transparencies, the next part of the job was to shoot the architect’s model in the studio. This meant replicating the lighting direction and the warmth of the light. It also meant shooting from a height in the studio that was the equivalent of 600 feet in the helicopter. This was done by reading the architect’s plans and working out 600 feet relative to the height of the proposed building and then using that formula with the height of the architect’s model. There is several hours involved in just doing that and then more hours in setting up the lights and the camera position.
The following day we began shooting Polaroids, looking at the relativity to the helicopter shots. These were the days long before Photoshop and everything had to be in the correct scale before we would send background and resort model shots to the retouchers.
Only after everything was right did we shoot the transparencies of the architect’s model. In total three days of intense shooting. I earned my money with that shoot.


Modern Medicine: by Dr. Iain Corness, Consultant

Travel insurance? Who needs it?

Many people have a somewhat cavalier attitude to insurance and I’m just as guilty! A few months ago I did mention medical insurance in this column and it was amazing the response that this brought. When people began to see just how much they were financially “at risk” by not having insurance, the better brokers were inundated. Let’s see what the response to this week’s column will be when I look at travel insurance. By the way, this is not travel insurance to cover your lost baggage, but to cover medical emergencies.
Unfortunately many people travel under the misconception that the travel insurance they took out with the travel agent is going to cover them for all eventualities. Sadly it is not. The following is a true story, taken from one of my medical journals from Australia. A gentleman with a leaking heart valve, which was under investigation and examination by a cardiologist, has to make a business trip to America. He takes out travel insurance from the travel agent, but says nothing about the on-going cardiologist’s review. Two days after getting to San Francisco he gets very short of breath and is admitted to hospital. The insurance company was contacted which then gets a report from the American hospital, and a report from the patient’s usual doctor in Australia.
The history of the cardiac condition now comes to light, and the insurance company state (justifiably) that if they had known of this situation, they would not have accepted the man as a reasonable risk and would have refused cover. Meanwhile, the man deteriorates rapidly and has to have an emergency heart valve replacement. All was not plain sailing and he ended up having 42 days in intensive care. Total cost came to USD 576,500, for which the businessman was totally liable. To raise the sum of over half a million dollars he had to liquidate his company and sell his house at “fire sale” prices.
Like another horror story? A young woman is going to the UK for a working holiday. Like many people, she has asthma, but it is reasonably well controlled. Since she was flying directly to the UK and there is a reciprocal medical agreement between the UK and Australia, she decides she “logically” doesn’t need travel insurance. Six hours into the flight she gets an acute attack of asthma and has to be off-loaded in Singapore. Complications occur and she ends up being in Singapore for six weeks and then has to be medically evacuated back to Australia with a doctor and nurse escort team. Her stay in Singapore and the medivac came to AUD 390,000 and her parents have to sell their farm to raise the money.
So you can see, just because you are covered at the other end of your flight doesn’t mean to say you are not “at risk”. The moral of these two tales is simple - take out good travel (medical) insurance and make sure you declare any pre-existing conditions. Insurance companies are in the business of “risk” assessment. Forgetting to declare your medical history is not thought of as being an acceptable risk. This omission could prove deleterious to both your health and your wealth.
But there are even more snags for the overseas travelers, and one is personal transport. Those big bikes for hire at the side of the road just look so tempting for the average young adventurer and the hiring process is so simple. Leave your passport as security and ride away.
Ignoring the stupidity of leaving your passport with anyone, do you have a license to ride a big bike in your own country, for example? And is that license valid in Thailand? I have seen the same young chap who hired from the side of the road brought into the hospital by ambulance with broken legs. The intrepid rider then finds out that his travel insurance has refused to accept the claim as he did not have a license issued from anywhere to ride a 1,000 cc motorcycle.
Think about ensuring you have appropriate travel insurance before your next trip!


Heart to Heart with Hillary

Dear Hillary,
This one’s a bit different from the usual letters you get. I’m quite happy in my relationships, but I wonder just why Thai people seem to have no civic pride. In major tourist cities like Chiang Mai and Pattaya, the buildings are dirty, with peeling paint and mold growing on the outside of them. Compared to Greece or even Spain, the local buildings look downright uninviting. A coat of paint every year would brighten up your tourist resort cities no end. Do you agree with me, or don’t you see how run-down the place looks, like all the other people I speak to?
Civic Pride

Dear Civic Pride,
I do agree with you, Petal. An annual painting spree would be very beneficial, and I believe it would be a very worthwhile project for the city fathers. Now, who knows someone’s uncle with a paint shop?

Dear Hillary,
Is it usual to get ripped off in the bars round here? I have gone to spend a night with some mates at a bar and find that when the bill comes it is more than all three of us reckon it should be. By the end of the night, it’s just too difficult to go adding up all the bar chits, but we’re all sure there’s drinks in there that we didn’t order, maybe even a few lady drinks that have been slipped in as well. Does this happen regularly? How do we stop it?
The Three Lads

Dear Three Lads,
I’m not going to say that it doesn’t happen, The Three Lads, but at the better bars they will get you to sign for your drinks, and the lady drinks. But if you are all legless after a night out, then you are making yourselves targets ready to be fleeced. Why don’t you make one of you the ‘accountant’ for the evening, counting all the beers and the lady drinks. I think you might be surprised at just how much three lads can consume in one evening.


Dear Hillary,
I am a professional man, working here, and OK, I have found a “good” woman I would like to take out, she’s from the glasses shop, not the bar. I believe it is going to be more difficult, but I’m up for it. So how do I go about it? It better work. I want guarantees. I don’t want any knock-backs.
Valentine

Dear Valentine,
What sort of wimps are the hallowed halls of academia sending out into the world these days? I presume you have actually been into the glasses shop and spoken to this woman upon whom you have designs? Sure it is going to be “more difficult” as you say, but all you do, my panting little Petal, is go in and start talking to her and ask her out. It’s not difficult and it isn’t rocket science either. I can’t give you any guarantees, but she will either say yes, or she will say no thanks. That’s a one in two chance of success. Or if you are a pessimist, that’s a 50 percent chance of failure. But just give it a go, there’s a good chap, it’s not the end of the world if she says no. Is it?.


Dear Hillary,
I was told many years ago that you shouldn’t let your wife’s family come to stay with you, even just for a few days, as it always ends up for weeks or months. I thought I was lucky because it never happened to me. Relatives might stay one or two nights, but that was it. Recently things have changed a lot now with her brother and her cousin and her mother all staying in the house with us. They all stay in the one room which I think is a bit unhealthy, and they’ve been here for three months and there’s no sign of them leaving. They are quiet and do help around the house and garden, but this wasn’t what I really expected. I asked my wife about it but she just says it’s OK and they’ll be going soon after the brother and cousin have got jobs and mother is just having a holiday. Well I wish I could have three month holidays. What’s the next move, Hillary? Enough’s enough, surely. I have a close family in the UK, but they wouldn’t come and stay forever.
Horace the House Husband

Dear Horace the House Husband,
You are now starting to see a little of what Thai society is all about, my Petal. Family reigns supreme, and it is usual for them all to sleep in the same room. It’s not unhealthy. It is Thai. When you got married, you joined a Thai family, much more than your wife joining your UK family. After all, you married a Thai lady and chose to live in Thailand. You would have to expect that Thai culture will be dominant. You can try voicing your reluctance to have them there, but be prepared for difficulties. This is your wife’s immediate family. You can always try to find them jobs - in a far away city. Lots of luck!


Let’s go to the movies: by Mark Gernpy

Now playing in Pattaya
2012:
US/ Canada, Action/ Drama/ Sci-Fi/ Thriller – Director Roland Emmerich has given movie watchers several apocalyptic films (Independence Day, The Day After Tomorrow), but they were only warm-ups to the big one, the real end of the world.  I guess you’d have to call it a special effects film with a lot of action.  Basically it’s just an excuse to see things get blown up.  Mixed or average reviews.
Surrogates:
US, Action/ Sci-Fi/ Thriller – I really enjoyed this, and I think you will too.  Set in a futuristic world where humans live in isolation and interact through surrogate robots, a cop (Bruce Willis) investigates the murder of the college student whose father invented the surrogates.  As the case grows more complicated, the withdrawn detective discovers that in order to actually catch the killer he will have to venture outside the safety of his own home for the first time in many years, and enlists the aid of another agent (Radha Mitchell) in tracking his target down.  Mixed or average reviews.  Nevertheless, I recommend it highly.
Bad Lieutenant: Port of Call New Orleans:
US, Crime/ Drama – Directed by Werner Herzog.  A demented cop on the brink of insanity – that’s Nicolas Cage.  He plays a rogue detective who is as devoted to his job as he is at scoring drugs — while playing fast and loose with the law.  He wields his badge as often as he wields his gun in order to get his way.  In the aftermath of Hurricane Katrina he becomes a high-functioning addict who is an intuitive, fearless detective reigning over the beautiful ruins of New Orleans with authority and abandon.  Complicating his tumultuous life is the prostitute he loves (played by Eva Mendes).  Together they descend into their own world marked by desire, compulsion, and conscience.  The result is a singular masterpiece of filmmaking, equally sad and manically humorous.  Generally favorable reviews, but a wide divergence of opinion.  At Pattaya Beach only.
Law Abiding Citizen:
US, Drama/ Thriller – Terrific! I found this film quite entertaining and thought-provoking.  Clyde Shelton (Gerard Butler) decides to take justice into his own hands, getting revenge on the murderers of his family as well as those in the justice system responsible for setting one murderer free.  The District Attorney (Jamie Foxx), one of those who helped set the murderer free, tries to stop him.  Rated R in the US for strong bloody brutal violence and torture, a scene of rape, and pervasive language.  In Thailand, 18+.  Generally unfavorable reviews, but I highly recommend it anyway.
9:
US, Animation/ Adventure/ Fantasy/ Sci-Fi – A post-apocalyptic nightmare in which all of humanity is threatened.  I loved it, but then I love good animation and nightmares in which all of humanity is threatened!  Starring the voices of Elijah Wood, Jennifer Connelly, Martin Landau, Christopher Plummer, and Crispin Glover.  A distinctively original and thrilling tale directed by Shane Acker and produced by visionary filmmakers Tim Burton (The Corpse Bride) and Timur Bekmambetov (Wanted, Nightwatch).  Mixed or average reviews.  At Major Cineplex only.
Haunted University / Mahalai Sayongkwan:
Thai, Horror/ Thriller – Based on various horror and ghost tales current in universities.  I am not enthusiastic about this film; I found it generally a run-of-the-mill exercise in Thai horror, with nothing to distinguish itself. It’s more illogical than most such films.  I must admit there were a lot of giggles in the audience during the most comic of the four stories, about a hapless dental student afraid of corpses who has to stand duty in a morgue.  But mostly I thought the acting amateurish, the direction nonsensical, and the whole more silly and childish than scary. (18+)
Vanquisher / Suay ... Samurai:
Thai, Action/ Thriller – Cleavage-baring female swordfighters, clad in cat suits.  That’s all you need to know.  (18+)
Bangkok Traffic Love Story / Rodfaifah-Maha-Na-Ther:
Thai, Romance/ Comedy – A romantic comedy shrewdly crafted to give single girls everything they want in a movie.  The top Thai film for the past four weeks.
The Rebound:
US, Comedy/ Romance – Scheduled to open in the US maybe sometime next year.  In New York City, a single mom (Catherine Zeta-Jones) captivates her new neighbor, a much younger man.  About the trials of dating when you have kids.  Rated R in the US for language, some sexual content, and brief drug use.
 Fame: US, Comedy/ Drama/ Family/ Musical/ Romance – An updated version of the 1980 musical, which centered on the students of the New York Academy of Performing Arts.  Starring Kelsey Grammer, Bebe Neuwirth.  Critics say the film is undone by its choppy editing, its incomplete characterizations, and its apparent desire to appeal to the High School Musical generation.  It’s almost laughably bland and watered-down in its desire to appeal to the widest possible audience.  The original was so good, this one is simply not needed.  Generally unfavorable reviews.