|
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.
|
