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Money matters:
Graham Macdonald
MBMG International Ltd.
Nominated for the Lorenzo Natali Prize
The New East or the Old West?
GRAPH 1
Some readers have asked me for my thoughts on equities for
next year and how things will pan out. Without reverting to my usual realism of
caution, caution, caution, it is an interesting question. To use the dictum of
Scott Campbell and Martin Gray at Miton Asset Management, the most important
thing is the allocation of assets is a lot more important than the fund you have
selected (see graph 1).
However, where to start? Emerging Markets or Developed Markets? Naturally, I am
not just talking about Asia here but also South America and elsewhere. Likewise,
Japan is with the old, developed countries when doing any comparison like this.
Which will do better than the other and when will we start to see the
difference?
Let’s look at the recent history of both. Over the last ten years the Emerging
Markets have done well. This is especially true if you compare 2008 and 2009
until the end of October. If you had invested in the Emerging Markets then you
would be in profit. If you had invested in the S&P 500 you would be still
carrying a double digit loss.
As one UBS strategist, Jon Andersen, put it recently, “Not even the worst
economic crisis in the postwar era has been able to derail [the emerging
markets].”
As anyone who wants to cover their backside will tell you, past performance does
not mean future gain. However, it does at least give an indication of how funds
should perform and what the fund manager is looking for when it comes to
selecting what he wants. As well as the very practical ideas of Miton, the first
thing a good manager will do is look at a company balance sheet. Speaking
basically, this will immediately show what is owned and what is owed. It gives a
good indication of what the finances of a company look like.
GRAPH 2
Obviously, if a company has a lot of assets and does not owe
much then it should be able to withstand any economic downturns better than one
that does not own much and carries much debt. Most of all if a company needs to
borrow then it should be avoided if at all possible. As Martin Whitman has said,
“Even the strongest, best-quality issuers can be brought down, or almost brought
down, if they continually have to refinance.” Many people came croppers last
year having invested in companies who were in exactly this position. What has
all of this to do with developed and developing markets? Well, a balance sheet
is also important when it comes to looking at a country’s finances.
 GRAPH
3
Believe it or not, the health of a nation’s balance sheet is more than a tad
important too. If a country is in the pooh with regards to debt then it usually
does not grow as much or as reliably as one with a healthy balance sheet.
Anderson has actually designed a graph that shows this. If a country has high
debt levels and deficits then it will earn a high ‘stress’ index score. Having
done this he then plotted the index (inverted) against GDP growth which is a
rough measure of economic growth.
Unsurprisingly, there is a close connection between the two (see graph 2):
What this implies is that if the emerging market countries have good, strong
balance sheets then they grow at a better rate than when they have weak ones.
The last time the emerging market sector had such a good, steady long run was
way back in the sixties and seventies when they all grew at over 5% per annum.
It is not a coincidence that their balance sheets were also in good nick.
Because of this the emerging markets were reasonably healthy enough to survive
the oil crisis of the mid-seventies without too much trouble and investors in
this sector did rather well whereas those who had anything in the developed
world were hit with the deep depression of the time.
According to Anderson, “Between 1965-1980 the dollar-adjusted return on nascent
equity markets in Mexico, Hong Kong, Taiwan, Brazil, South Africa and other
lower-income nations ran into the hundreds of percent - while indexes in the US
and Europe were essentially flat over the same 15-year period.”
It must be emphasized though, like all cyclical events, all of these things go
up and down like a lift. Just look what happened to the emerging markets after
the recession of the early 1980’s. Many countries had inflation over one hundred
percent and some of the currencies had their value cut in half. Also, as you can
see from the graph, the balance sheets did not do too well either.
Investing into many of the Emerging Markets did not bring in massive returns in
the last decade either. Obviously some countries did better than others.
However, if you had invested USD100 in a general emerging market fund in 1990
then you would have got USD100 back at the turn of the century. It is only since
then that the Emerging Markets have got their act together, cleared the massive
debts and have been on an upward swing ever since. Needless to say, this will
not last but, for the moment, Emerging Markets are doing well and should
continue to do so for the foreseeable future.
Anderson has figured out that, “All the preconditions are in place for a
protracted period of strong economic growth.” He believes this will be at least
5%+ which knock the growth rates of the western world into a cocked hat.
Actually, the growth rates of the Emerging Markets are already there for
everyone to see. This graph shows the industrial production of emerging Asia
compared to the United States (see graph 3).
Despite what happened last year it looks as though Asia is doing well. From a
production point of view, it dispels any theories about Asia not being able to
de-couple from the western power-houses.
The chief economist at Nomura Research, Richard Koo, has it right when he says
that the western world economies are suffering from a “balance sheet recession”.
Basically, they have too much debt which means that they have to concentrate on
paying this off rather than make an actual profit. This repayment is going to
take years, if not decades, to pay off and, in a domino type effect, will
inhibit growth and production.
Therefore, if I had to look at one point of the compass, I would counter the
words of Horace Greeley and John Soule and say, “Go East, young man”
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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
Did you retire at the end of 2009?
Did you retire at the end of 2009 and find you are bored already? And
this is just the second week in 2010! It’s going to be a long year as
one of the quickest ways to get old is to retire and have nothing to do.
There is a limit to how many times you can sit on the beach, or play
golf. No matter how much of a beach fanatic you are, or an avid golfer,
there can certainly be too much of a good thing. This is why I ask you
to consider photography.
As one gets older, physical activity is important - just getting out of
the house or condo is an enjoyment in itself. This is where photography
is so good. Give yourself a small photo project and out you go and
illustrate it.
Photography is also an ideal pastime for our seniors, because it is
something that can be picked up and put down at will, it is not too
physically demanding, and modern cameras can assist in the areas where
age has taken some toll. And the end result is something that can give
you great joy, be that award winning sunsets or just pictures of the
grandchildren.
To play golf you need golf clubs. To play photography you need a camera.
Get one with autofocus (AF). There are many reasons for this, but since
sharp focus is necessary for a good final print, let the camera do it
for you, when sharpness in vision is something that becomes very
problematical as you get older. Provided you can point the camera in the
right direction, the camera will do the rest.
Most AF ones are a little more expensive, and work by moving the lens in
and out electronically to focus on the subject in the middle of the
viewfinder, just as if you were doing it yourself. They do this quickly
and accurately and will usually give an audible ‘beep’, or a green light
in the viewfinder to let you know the focus has been set. Do not be
afraid to try the new advanced cameras, they make life easier, so just
use them to your advantage.
Another problem often associated with aging is stiffening of the
fingers. This would make it difficult to thread the film into the
take-up spool. Forget that old technology! A digital camera does away
with film and any of the problems associated with it. Nothing could be
simpler or more fool proof.
Zoom lenses also save you having to go the distance. Is it just too much
of a hassle these days to walk up to distant objects to get close-up
details? Then a zoom lens will do it for you. With a zoom lens it is no
problem at all to get a close-up, a wide angle and a distant shot from
the same camera position. Maybe an autofocus digital compact camera with
an inbuilt zoom lens is just the camera for you. Just push a button to
make the zoom bring the subject closer or farther away.
As we get older, we are also more prone to the shakes. Today’s digital
cameras can even compensate for the tremor, with anti-shake technology.
This makes photography for seniors even easier.
Today’s camera manufacturers have taken the fears out of flash too. Most
new cameras have their own in-built flash which comes on when the light
levels are too low, will set their own flash power and give you
perfectly lit indoor night shots every time.
So there you have it, retirees. There are cameras available now which
can get you into photography! If you once had the ‘photographic eye’,
then that ability is still there. All you have to do is get the
equipment to let you use and enjoy it again. Look for suitable AF
digital compacts with built in zoom, anti-shake technology and auto
flash.
Pricewise you are looking at spending something around B. 10,000. There
are plenty of choices in the marketplace. Something from the major
brands such as Nikon, Canon, Olympus. A hint to the family around
birthday should suffice.
Modern Medicine:
by Dr. Iain Corness, Consultant
Coronary Conclusion in 2010?
Those who are avid health (or sickness) watchers will know I
really mean “Coronary Occlusion”, but it was too much temptation to use Mrs.
Malaprop and end up with “Coronary Conclusion”. Because quite simply, that
is what it can turn out to be - your conclusion.
The sad part of coronary conclusions (otherwise known as heart attacks) is
that nine times out of ten you can actually avoid it.
Before launching into the real life factors in the situation, a little
understanding of what constitutes a heart attack is in order. I think
everyone understands that you have both red blood cells and white blood
cells. The function of the red ones is simply to carry oxygen to the
tissues, so that the tissues can survive. The heart muscle is no exception
to this rule. This hollow muscular pump needs oxygen just like all the other
organs you keep inside you - spleen, kidneys, lungs, bowel and so forth.
Take my tip - keep them inside you if you possibly can!
However, the inside lining of the heart (muscle) is smooth and impermeable
to the oxygen tied to the red cells. You see, the heart does not get its
nutrition from the blood it pumps through it. In fact, the oxygenated blood
supply to the heart is through some specialized arteries called the
“Coronary” arteries. These run along the outer surface of the heart muscle
and then split up into smaller tributaries which dip into the heart muscle
to supply it with oxygen.
Now if we are to consider that the heart muscle is probably the most
important muscle in the human body (well, physiologically it outranks the
other much more highly publicized muscle in males!) then it become important
that this heart muscle gets a good supply of blood. And the quickest way
that the supply can get altered is by blocking off the coronary arteries.
This is most usually done via a slow process by which a small obstruction in
the artery slowly gets bigger and bigger until eventually it totally blocks
off the blood supply and the heart muscle “starves” of oxygen and that
section of the heart muscle, supplied by that artery, just dies. We have a
name for that death of heart muscle too, and it is called a “myocardial
infarction”.
This event of blocking is called a Coronary Occlusion, which may end up as a
coronary ‘conclusion’ if the section of dead muscle is large enough! The
actual death of the muscle resulting in this myocardial infarction is often
shortened to the simple M.I. (The heart muscle is called the myocardium.)
But of course, the simpler name is ‘Heart Attack’.
In short, cardiac health is mainly involved in keeping the coronary arteries
clean and clear. This is where our old friend Cholesterol comes in. You see,
the deposits inside the artery are generally made up of this chemical and
other blood fats. This makes a “sticky” patch in the artery and some blood
cells get stuck there. This causes a clot to form and you have all the
precursors needed to block the artery, with the occlusion leading to the
infarction, and leading to your family claiming early on your life insurance
policy.
To be able to keep your arteries clear you need to have a nice low
cholesterol, which can be done by diet plus medication if required. But
first you need to know what your cholesterol level is. This requires a blood
test, which can be done at my favorite hospital.
The most likely candidates for a heart attack are overweight, hypertensive
smokers, with high cholesterol. If this is you, do something about it today.
Well, perhaps that’s being a little bit too melodramatic, but you are
certainly one of the cardiac high risk people in the population.
As I wrote at the start of this article, whether or not you have a coronary
conclusion can be under your control. Stop smoking, lose weight, keep your
blood pressure in the normal range and keep the cholesterol low.
You can drive your own destiny. Start today. Don’t let 2010 be your last
year on the planet!
Heart to Heart with Hillary
Dear Hillary,
Hope you got enough champers over Xmas and New Year so you won’t be trying to
get people to bring you some each week! The same goes for the chocolates. I
think you should just stick to looking after the poor people who write in each
week with problems that they bring on themselves. They don’t deserve sympathy,
old girl. The need a damn good kick up the posterior, so why don’t you start the
New Year by telling them how the real world works?
Joey
Dear Joey,
Aren’t you the bringer of peace and joy to the neighborhood, my Petal. First you
try and cut off my bubbly at the source, then throw out the chocs, and tell
everyone with a problem they brought it on themselves, so bad luck, old chum.
I’m sorry to deflate your self-opinionated balloon, Joey, but there are many
genuine people in the world who, through no real fault of their own, find
themselves in a problem situation. Human emotions do not quite follow the laws
of simple physics or mathematics. One and one can often make three, if you can
follow my gist, and it’s not outside your narrow viewpoint. The ‘real world’ as
you call it, Joey, is the world in which we find ourselves. It may not be the
ideal world, especially your ideals, but it is the one we live in. Mine needs
champagne to uncork my bubbles and chocolates to sweeten me up. You, on the
other hand, are a miserable lost cause. And that’s how the “real world works.”
Dear Hillary,
You won’t remember me, but you did give me such good advice last year. I was the
guy with the GF here, but I was only here on holidays, for one month a year. I
took your advice and looked a bit more realistically at the relationship and
realized I didn’t have a relationship. I was just sending money to some bar girl
who most likely had others doing the same. I had asked you how would I find out
if she was back working at the bar or not, and you made me see sense. I stopped
sending money, and the loving emails stopped as well. I just want to tell other
guys in the same situation that if your GF speaks in broken English, and her
emails are perfect, then she’s not writing them, is she?
(ex)Doubting Thomas
Dear (ex)Doubting Thomas,
So nice to know that our little column here has been of great help. When I get
letters like the one at the top of the page from people like Joey (hand
delivered with no return address), it makes me quite sad, but then when I got
your email, it really helped sparkle up my day, and I was very happy to reply,
as well as print it in the column. Now that you are an “ex” Doubting Thomas, you
will find you can make lots of lasting, good relationships from now on.
Congratulations on ‘coming of age’.
Dear Hillary,
Thank you for your nice reply to my letter. I thought I should tell you I think
I have got to the bottom of the deteriorating toilet roll saga.
Yesterday I bought a packet of my favorite envelopes, I have purchased the same
ones for the last four years. Guess what? They were half the thickness of the
previous packs I had bought!
So putting two and two together I presume it’s the companies helping save the
world by using less and less paper. Or could it be giving us less but charging
the same? No, that’s not a nice thing to say at this festive time of year is it?
Hillary on a more sober note, Linda, an English lady living in the same Mansion
as myself decided she would not send Christmas cards or send her family gifts
this Christmas. Instead she wanted to visit the local blind school here in
Chiang Mai. We went together and both came away in tears, promising to get the
school two 56 kilo bags of rice which they needed. Those of us who can see are
so lucky, this is not a pedestrian friendly city Hillary and for blind people as
you would know, impossible to walk anywhere.
I wished I could speak perfect Thai to speak with the children, as I’m sure some
would love to learn English. If there’s any foreigners here in Chiang Mai who
can speak Thai they would be so welcome at the blind school, please feel free to
contact me at [email protected]. Thanks again for your column, Hillary.
PS. I liken that new toilet tissue to be on a par with what is called ‘Ultra
Fine’ in sandpaper terms.
Love and Good Wishes to You All.
Delboy
Dear Delboy,
Aren’t you the sweetest thing, but it is so heartening to hear of people
actually ‘giving’ of themselves and their time during the festive season, which
is supposed to be the time of goodwill. Having corresponded with Delboy for many
years, I can vouch for his good intentions, and blind children anywhere deserve
the best we can give them, to compensate for the loss of their sight.
Let’s go to the movies:
by Mark Gernpy
Now playing in
Pattaya
October Sonata: Thai, Drama/ Romance – Set against a backdrop
of the October 1973 democracy demonstrations and the student uprising of
1976. Sangchan is a girl working in a factory who falls in love with a
young student named Rawee, a leader of student activists whom she meets
on October 8th of 1970 at the cremation of the famous Thai film star
Mitr Chaibancha. Rawee then goes to study abroad, but keeps a promise
to come back to see Sangchan in two years on October 8th, and on that
date each following year. But in October 1973, Rawee fails to show
after being rounded up for his involvement in the October 14 uprising.
They meet again on the same October date in 1974 and 1975, but in 1976
Rawee flees into the jungle with other political activists and their
love story ends abruptly. A well-done recreation of the turbulent
period of the 1970s. It’s been called an uneven film, but with a
nuanced understanding of how historical events can profoundly damage
people who simply live through them. At SF Pattaya Beach only.
Cirque du Freak: The Vampire’s
Assistant: US, Action/ Fantasy/ Horror – Darren meets a mysterious
man at a freak show who turns out to be a Vampire. Chris Massoglia
stars as Darren, the young man who mistakenly and unknowingly breaks a
200-year-old truce between two warring factions of vampires, and thus is
forced to leave his normal life and go on the road with the Cirque Du
Freak. Pulled into the fantastic life of misunderstood sideshow freaks
and grotesque creatures of the night, he appears to be on the path of
becoming a vampire himself, but the book series on which the film is
based runs to 12 volumes, so events will move slowly. Mixed or average
reviews.
Bodyguards and Assassins:
China, Action/ Drama/ History – A group of martial artists attempt to
protect Dr. Sun Yat-sen, popularly referred to as the Father of Modern
China, from an assassination attempt at the beginning of the 20th
century. Directed by Teddy Chan, this is an action/drama film
featuring an all-star Chinese cast including Donnie Yen, Leon Lai, and
Nicholas Tse.
The Treasure Hunter / Ci Ling:
Taiwan, Romance/ Sci-Fi – A story about time-traveling lovers who end up
in Genghis Khan’s Mongolia to search for an ancient treasure. In a role
that is tailored to showcase to the maximum the aura of ‘coolness’
attributed to Korean pop-star-turned-actor Jay Chou, it shows instead
what a poor actor he really is, according to the devastating reviews
this movie has received, such as, “An immensely dreary affair.” Thai
dubbed only, with no English subtitles.
Did You Hear About the Morgans?:
US, Comedy/ Drama/ Romance – Starring Hugh Grant, Sarah Jessica Parker,
Sam Elliott, Mary Steenburgen. Grant and Parker play an estranged New
York couple who have the great misfortune to witness a murder. Becoming
the immediate targets of a hit man, they’re whisked into the witness
protection program and sent to Wyoming, a place populated by rodeo
cowboys and bears. Nothing much happens for the next 90 minutes.
Generally unfavorable reviews, such as “Painful to watch.”
32 Tan-Wah: Thai, Comedy/
Romance – Yet another Thai “rom/com” with precious little information
available about it. This one takes place on the 32nd of December.
Sherlock Holmes: US/ UK/
Australia, Action/ Crime/ Thriller – A new take on the Holmes canon.
I’d say, once you get over the shock of seeing Sherlock played as an
action figure, it isn’t all that bad. A bit of the old Holmes shows
through. Robert Downey Jr. plays Holmes and Jude Law his stalwart
partner Watson. There are a lot of chases through London, the dirt and
squalor of which is beautifully recreated, and a lot of fighting, and
just a bit of ratiocination. I found some of the music – country jigs
and such - terribly irritating. All in all, an enjoyable action flick.
Mixed or average reviews.
The Storm Warriors: Hong
Kong, Action/ Fantasy – A martial arts film by the twins Oxide Pang Chun
and Danny Pang. It’s the first Chinese film to extensively use
bluescreen, and do they make the most of it! Shot entirely in three
studios in Bangkok, and really a special effects movie. Such as an army
of flying creatures that reminded me of the flying monkeys in The Wizard
of Oz; they’re defeated by being first changed into what looks like
obsidian, and then smashed into slivers. Very effective. As is the
terrific makeup. So, yes, the style is truly great; the substance
questionable. Presented in a Thai-dubbed version only, with no English
subtitles. But I loved the visuals, and the fantasy.
Avatar: US, Action/
Adventure/ Sci-Fi/ Thriller – From director James Cameron, a major
achievement in storytelling, and a technological breakthrough. It’s
about a band of humans pitted in battle against a distant planet’s
indigenous population, and weaves many myths into the story’s fabric.
This is a film of universal appeal that just about everyone who ever
goes to the movies will see. At all locations in Pattaya there’s a 2D
version, which is in English and Na’vi dialog, with English and Thai
subtitles as needed. Big C also has a Thai-dubbed 2D version, no English
subtitles. The only cineplex to show it in 3D is Pattaya Beach, and
unaccountably the 3D version does not have English subtitles for the
Na’vi language, only Thai, while the 2D version has English subtitles in
a special font and style.
Reviews: Universal acclaim. The
film delivers on all counts. Highly recommended; not to be missed.
Yam Yasothon 2 / Hello Yasothorn
2: Thai, Comedy – Thai down-country comedy with popular comedian Mum
Jokmok and the usual TV comedians, engaged in rustic humor. In Isan
dialect, with Central Thai and English subtitles. At Major Cineplex
only.
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