Family Money: The Case for Equities

By Leslie Wright

Many people don’t like stocks & shares. “I always lose money on the stock market,” is the usual complaint.

The reasons for this phenomenon vary. Sometimes it was because they chose the wrong stocks. Sometimes they chose the wrong market. Sometimes they bought at the wrong time or sold at the wrong time.

The last is the most common reason people don’t make money in the stock market. They waited until the market had been going up steadily for some time before buying in, or when the market took a plunge they sold out in a panic, thereby locking in the loss.

This fear-driven investment philosophy is fraught with danger, but all too common.

Stocks beat cash

In fact, over the longer term of 5+ years, equities have consistently outperformed cash-based investments by a very wide margin. Just look at the graphs in Figure 1.

There is a high probability that this will continue to be the case. However, equities tend to be more volatile in the short term.

But even taking that volatility into consideration, there have been many more years when stocks produced a positive return than those that returned a loss. (See Figure 2.)

And even then, the average annual gain in the positive years exceeded the average annual loss in the negative years.

Conclusion: a sure way to lose money net of inflation is to keep your money in a bank deposit; a sure way to make money net of inflation is to construct a flexible, diversified stock portfolio and hold it for at least 5 years.

Spread yourself about a bit

For those readers who think that a diversified portfolio comprises a bank account in Thailand, a bank account “back home”, some shares in blue chips companies in their home country, and a few shares in bank stocks in Thailand, I would have to disillusion you. This is very far from being a diversified portfolio - indeed, it is a very narrowly focussed and unbalanced one.

A ‘standard’ balanced model portfolio would typically comprise 59% equities, 29% bonds, 9% cash & currencies, and 3% commodities futures & options.

Obviously this ‘model’ should be flexible enough to be adjusted according to changing market conditions: veering more towards bonds & cash in the ‘lean’ times, and holding a greater proportion of stocks in rising ‘bull’ markets.

The trick is to identify the market trends, and take advantage of them, rather than be swept along by them.

When the market has risen steeply, that spells a danger signal to shrewd investors, and it may well be time to sell out and lock in your profits.

But all too often the euphoria of greed will lead people to hold out in the hope of making even bigger profits - and get caught by a correction.

Similarly, when the market has dropped significantly is not the time to panic, but the time to buy.

The basic rule of business - “Buy cheap, sell dear” - is the one to follow.

Indeed, as Voltaire said: “The best time to buy is when blood is running in the streets.” But it takes a strong stomach and cool head (assuming you’re still wearing yours and haven’t lost it somewhere along the way) to follow that philosophy!

In addition, to reduce volatility and risk, each portion of the portfolio - i.e., each asset class - should itself be spread geographically & sectorally through several carefully chosen markets around the world.

The ‘standard’ model portfolio described earlier would have a risk rating of 3.2 on the standard scale where 1 = lowest risk (cash), 2 = international bonds, 3 = balanced risk, 4 = major-market equities, 5 = emerging-market equities, 6 = commodities futures & options, 7 = forex dealing, 8 = mineral exploration, 9 = venture capital, and 10 = setting up a business enterprise (although a beer bar in Pattaya is probably at least risk rating 11...)

Size does matter

Many people who have chosen to live here look for investment opportunities in Thailand, and people regularly contact me with a view to investing in the Stock Exchange of Thailand (SET). But it is worth noting that in term of size - i.e., market capitalisation - Thailand doesn’t even rank in the top 30.

It may be of interest to those readers who like analysing statistics to note that the US market - despite the drops of the past year - still holds over half of the world’s money in terms of market capitalisation.

As of Jan 31st 2001	$bn	Rank	% of world
Total:	19,411.5		100%
US Japan UK France Germany Switzerland Italy Netherlands Netherlands/UK Canada Hong Kong Spain Finland Sweden Australia South Korea Belgium Brazil Singapore Taiwan Mexico Belgium/Netherlands UK/Australia Ireland Denmark Saudi Arabia India Norway South Africa Portugal	10,866.4 1,785.8 1,637.0 960.8 739.0 584.6 426.0 305.7 282.9 282.6 271.7 220.7 211.6 180.8 167.8 74.4 51.1 50.1 48.9 47.6 40.6 39.4 26.0 24.8 24.6 15.0 13.0 11.1 11.0 10.5	1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30	56.0% 9.2% 8.4% 4.9% 3.8% 3.0% 2.2% 1.6% 1.5% 1.5% 1.4% 1.1% 1.1% 0.9% 0.9% 0.4% 0.3% 0.3% 0.3% 0.2% 0.2% 0.2% 0.1% 0.1% 0.1% 0.1% 0.1% 0.1% 0.1% 0.1%

It might also interest you analytical folk out there to note that the US plus Canada comprises 57.4% of the world’s stock capitalisation, while Europe including UK - itself the world’s 3rd largest stock market - comprises only 29.6%.

In fact, the second largest stock market - Japan - is only one-sixth the size of the US market, and constitutes less than 10% of the world’s value in equities.

The Asia-Pacific region including Japan constitutes 12.5% - but exclude Japan and the figure drops to only 3.3% of the world’s capitalisation. Much smaller than you might have thought, living in the region.

South America’s stock markets - of which the largest are Brazil and Mexico - comprise only 0.5% of the world’s wealth in stocks.

Puts rather a different light on the proportion of their accumulated wealth that many locally-resident investors are so keen to invest into Thailand, doesn’t it?

In fact, if you were looking to invest $100,000 capital and took our ‘model’ portfolio as a guide, and diversified your investments purely according to the relative capitalisation of each market (which admittedly is not necessarily the best investment strategy - but there are worse), you would be investing less than $100 on the Stock Exchange of Thailand.

Erratum: In last week’s article, Chonburi province was mentioned as being a centre for gemstone trading. This should of course have read ‘Chantaburi’. We apologise for any confusion caused.

Leslie Wright is managing director of Westminster Portfolio Services (Thailand) Ltd., a firm of independent financial advisors providing advice to expatriate residents of the Eastern Seaboard on personal financial planning and international investments. If you have any comments or queries on this article, or about other topics concerning investment matters, contact Leslie directly by fax on (038) 232522 or e-mail [email protected] Further details and back articles can be accessed on his firm’s website on www.westminsterthailand.com

by Mirin MacCarthy

Neighbourhood Project

The residents of my little moo ban have been co-ordinating an effort to feed stray dogs and to aid in simple medical care when needed. Like everywhere else in Thailand, we have our fair share of ‘Soi dogs’ which don’t really have families and homes, but have what might be referred to as ‘territory’. These are the dogs (and cats) who exist on scraps and whatever they can scrounge through begging or scavenging. We all see these pitiful, mangy creatures, whose lives are full of suffering. The past few months, an informal discussion has been taking place during our evening strolls around the housing estate, as to who is already doing what, and who wants to contribute to the effort in some way. If we wait for the political will of the authorities to address this overwhelming problem, we will all know that we will wait a long time.

Those of us who have no house pets of our own usually feed the stray dogs, but those who have their own dogs needed to figure out how they could participate without eventually provoking nightly outbreaks of snapping and snarling over territory and food, thus promoting more harm than good. Since we are all coming and going at different times to different places, this well-meaning charity is revealing some hilarious patterns of logistics. As with most things in Thailand, it is taking on the proportions of what my Mum used to call a “Chinese fire drill”, meaning everyone running in different directions at once”.

One woman had to leave her beloved dog back in the USA when she returned to Pattaya to work in the family business. Living alone in a large house at the front entrance to the housing estate, she delighted in feeding all the dogs which gather all day on that corner. Since she is a single wage earner, and has little disposable income, the cost of feeding a dozen dogs presents a hardship. Most of the houses near her are owned by Bangkokians who come down only on the weekends. So they are not there everyday to contribute food.

Up at the top of my Soi, all of the houses, including my own, have dogs and cats as house pets. If we feed the stray animals outside our gate, our own pets raise a rumpus. After a few months of chaos, dogfights, bruised humans and animals alike, we needed to formulate a way so we could all help in some way, each according to our space, time and ability. Many of the neighbours with pets decided to drop off cash and supplies of food and rice at the single woman’s house so she alone could feed the pack which parks at her gate. She loves doing this each night when she returns from work, and now it doesn’t present a financial hardship.

We all co-operate with money and time to get injured animals to a veterinarian, and rotate our time to nurse them until they have recuperated. One Bangkokian who owns a small hotel brings huge bags of meat from their restaurant when the family comes on the weekend. Those of us who have favorite veterinarians will eventually see that each dog and bitch will be spayed and nurtured and we will all share the cost of boarding the dog if needed. Lots of our neighbours have no pets, but have lots of friends. So when litters appear, they are the ones who spread the news so the puppies and kittens can be adopted.

A few of us take the animals for injections, and a couple of residents have vets who actually make house calls, since the strays are unwilling to enter our cars and trucks. This service is a true blessing for our group. I have had some experience coaxing stray dogs into the back of my family car so I could take them for simple medical treatment and it is not as easy as it sounds. Thai dogs are like children! They don’t get into cars with strangers.

Now, this all reads good in print; well-meaning and good-hearted. But in practice, it is actually disorganised, and although it does some good to some animals, it does not truly do more than get these poor critters the most basic assistance. Last month, unbeknownst to me, one family on another street took one dog to be neutered. A good deed well done. Last week I took the same dog to be neutered. No wonder he gave me such a bad time. He fought, he cried, he howled all the way to the pet clinic; right up to the moment 4 strong assistants had him pinned on the operating table. That’s when they noticed the surgical scar.

by Lesley Warner

by Marion

The ultimate spirit house?

Sarah Winchester spent thirty-eight years as the project manager for the building of a 160-room mansion in San Jose California. A rambling structure with sections that were torn down and then rebuilt, according to the directives of the "architects" - the spectres of those who had died by the gun!

Sarah Winchester was the widow of the son of the manufacturer of the Winchester repeating rifle. This rifle changed the face of America, mainly by blowing away countless thousands of Americans. But it was a profitable (if not a "good") business and the Winchester fortune, which Sarah inherited, was immense.

Despite the family money, Sarah's life was not one of light and laughter. Their only daughter died aged one month and then her husband died of TB shortly afterwards. For Sarah, this was ominous tidings, reinforced by a mystic she consulted in Boston during her time of grief. The psychic savant advised the grieving widow that she was receiving retribution from the spirits of those who had died from being on the wrong end of a Winchester rifle. And in 1884, there were several thousands of those. The only way to appease the spirits, said the psychic, was to build them a house. As long as the house was being built, the spirits would not haunt Sarah, but apparently would happily stand in line awaiting being checked in to their spiritual residences!

Winchester House

So in 1884, Sarah moved to California and purchased an 8 room farmhouse from the local doctor. She then began to build the wackiest building probably ever constructed. With a dozen or so carpenters, who worked in rotating shifts to cover 24 hours every day, the spirit house began to take form.

There was a master plan, which was given to Sarah in the specially constructed s?ance room. However, unlike the everlasting Ten Commandments that Moses got given on a stone tablet, Sarah's master plan was changed nightly after two hours of instruction from the spirit world.

At midnight every night, the bell in the bell tower was rung to summon the spirits. At 2 a.m., it was rung again as a signal for the spirits to depart. The tower was only approachable from the outside by climbing onto the roof of the mansion using a ladder. The bell was hung at the top of the tower, with a long rope hanging down a sheer, un-climbable wall. The rope was reached through underground tunnels, the precise layout of which was known only to the bell ringer and his assistant.

A fickle lot, the spirits who caused Sarah and her carpenters to build over 600 rooms during the 38 year build fest, but then tear them down again leaving only 160 rooms when she died in 1922.

Even with the frenzy of building, Sarah had problems with the spirit world supervisors. After being trapped in one of the many bedrooms in the earthquake of 1906, Sarah took this as another sign from the spirits that they were discontented with the way the construction was going. To appease the spirits, she had the front 30 rooms boarded up, and they were never used again during her lifetime.

Not only did the spirit architects condemn some rooms, but they also dictated the building of some very strange structures such as doors that open out onto walls, stairs that go nowhere but into an impenetrable ceiling, a cupboard that has only 1 cm of storage space, and tiny doorways and hallways just big enough for Sarah (who was only 4'10" and of slight build) to fit through. Some other interesting features of the house include its 10,000 windows (including some priceless Tiffany stained glass), 47 fireplaces, and a beautiful garden.

There was also a predilection for the number 13. Whether this was a number favoured by the "architects" or by project manager Sarah is not known, but many features in the house were built in sets of 13 or multiples of 13. For instance, in the 13th bathroom (the only one with a shower), there are 13 windows. One of the sinks has 13 drainage holes. There are 52 skylights, and the grand staircase has 13 steps. Thirteen palm trees line the driveway, and as a final gesture, Sarah's will was divided into 13 parts and signed 13 times.

In 1922 when she died, the carpenters and construction workers literally walked off the job, and there are still spots visible where the workers stopped hammering and left the nails halfway in. After her death, all the furniture in the house was auctioned off, as per the details in the will. Reputedly, it took 8 weeks to remove it all.

The mansion has been restored and is now open to the public. If you are ever in San Jose, it would be worth a visit! The Winchester Mystery House, 525 South Winchester Blvd, San Jose, CA 95128-2588.

by Anchalee Kaewmanee

Others respect this Sun-Moon sign simply because individuals born into this combination respect themselves. Quiet and unpretentious, they never have to say very much because that strong, self-assured presence speaks for itself. A born skeptic, this person never takes anything for granted; but there is one thing which is never doubted - their capability. Patience, confidence, and determination combine to make great success in the world. If people of this group seem a little slow, perhaps even a trifle awkward, it is a mistaken perception. There are few signs which can match the powers of concentration of a Taurus-Taurus. This combination may never be the life of the party, since the basic nature is that of an observer, and possess a natural dislike for superficiality and artifice. When this person finally speaks, he will not mince words, and the comments will invariably be well thought out. Honest and straightforward, this Sun Moon duo has amazingly accurate insight and perception.

Like all people who value themselves and have confidence in their abilities, the Taurus-Taurus person will be ambitious, therefore, once a goal has been set it will be reached. A task at hand will be mastered, slowly, steadily. Difficulties and setbacks do not discourage those with such dedication and determination. Approaching all problems with a mind to solving them eventually, this sign remains calm and self-assured. Taurus is an earth sign, so this double earth element in the personality and emotional make up stirs a strong rapport with nature. Although a certain stoicism might allow this sign to live anywhere, a person in this group will have a rustic soul. Occasional jaunts to the countryside are necessary to balance the senses and maintain emotional health.

Basically mild-mannered and steady, this Sun-Moon sign will rarely fly into a temper. But all Taureans have a habit of suppressing anger and frustration, which can lead to a variety of psychological disorders. It is wise to acquire positive outlets for releasing some of these pent-up tensions. Sports and hobbies can provide ways to channel dissatisfaction. Keeping lines of communication open with friends and associates will serve to bring differences out into the open, rather than keeping them bottled up inside. Taureans often over-indulge in eating or alcohol as a way of consoling themselves in times of stress. Self-control is fine, but occasionally it is beneficial to let go of inhibitions and just talk about the things which provoke irritation or misunderstandings.

People in close association with the Taurus-Taurus combination will often describe this individual as someone with great common sense. This group of people always seems to have the most practical and efficient solution to any dilemma. Therefore, it is difficult for them to see how others around them get so tangled up in life’s problems. Although a fortress of patience, there are times when those who are born into this sign are more than a little intolerant of their friends’ faults. An effort to be more understanding of other’s shortcomings will eliminate some of the tendency to be judgmental and pedantic. Most people appreciate a shoulder to cry on without having to endure a terse lecture in the process.

Professionally, there are few fields in which this sign cannot excel. But there is an instinctive feel for money and management which might be best to cultivate. Banking, business and economics will be areas where the double Taurean will do best. This group needs to be careful that money doesn’t become the only concern, for they do have a penchant for measuring everything in dollars and cents, while disregarding the spiritual sides of life. Extremely sensual and earthy, they need to have a romantic partner. The Taurean Sun-Moon duo, however, tends to be slightly conservative in love.

A little more imagination and experimental approach to a lover can add a new dimension which will expand the relationship into a much more exciting alliance.

by Richard Brunch

From Ken Osborne, Pattaya: I ask this question not only for my own benefit but also for the many of us who are not sure what happens to us when we enrol with a file-sharing scheme. When I decided to put a toe in the water I started to fill in Napster’s registration form. At the prompt: “on which drive do you store this type of file” I backed out and closed contact. The question is: does this type of scheme permit another to read one or more of my drives? If not, why do they ask me to specify which drive? If it is so, is it good to allow any outsiders to scan my files? Please note I have not mentioned the morality of dot.coms such as Napster.

Computer Doctor replies: Most of the programs you are referring to such as Napster, iMesh, etc., rely on individuals to share files they have with others. When you search for a file, the results that are returned are to individuals’ PC’s, hence the variance in download speed. If nobody shared any files then this type of service would be extinct very quickly. And yes you are giving another access to certain areas of your PC. This in itself need not present a problem, but one thing to bear in mind is that should someone search and find one or more files they want on your PC then and decide to upload them then your available bandwidth is going to be greatly reduced. This is not a problem where connections are, for example, with DSL, Cable, T1, T3, etc., but here in sunny Thailand where we break open the champagne if our dial up connection approaches anything like 50Kbps it most definitely is a problem. The solution is that although the software you may be using forces you to share at least one folder, once you have completed a download, move it to a non-shared folder so that it is not available to others.

From Jason Wilde, Bangkok: I have a problem that has only recently materialised. I have acquired an Epson Scanner that connects to my computer by USB. The problem is that if the scanner is turned on when the PC boots it works but if I subsequently turn it on after the PC has booted it doesn’t work. I am confused, can you help?

Computer Doctor replies: This sort of problem is frequently caused by an incorrectly setup BIOS. The methods for entering the BIOS and the wording vary from motherboard manufacturer to motherboard manufacturer. However once you determine the sequence to enter the BIOS look for a line to do with USB, although it is clearly functioning, if it is set to Auto, change this to Enabled or similar for your BIOS such that is enabled always. That should solve your problem.

Send your questions or comments to the Pattaya Mail at 370/7-8 Pattaya Second Road, Pattaya City, 20260 or Fax to 038 427 596 or E-mail to [email protected]  The views and comments expressed within this column are not necessarily those of the writer or Pattaya Mail Publishing.

by Duncan Stearn

Extraterritoriality is defined as a system whereby the jurisdiction and laws of one sovereign nation extend to its citizens who may be living or travelling in another country. For example, British subjects who were alleged to have committed a crime in Thailand could not be judged under the laws of Thailand. They could only be judged under British law and by British courts. Basically, it was a form of legal Imperialism, imposed with the threat, and sometimes use, of force.

For Thailand (known then as Siam), the 19th Century was a difficult period of growth, especially in the latter half of the 1800’s with external threats posed by France and Britain as well as border conflicts with Burma, Laos and Cambodia.

In May 1856, Thailand signed the Harris Treaty with the United States, agreeing to extraterritoriality as well as trade concessions.

In 1874, Thailand and Britain signed an agreement that established a system of bi-national courts that would handle legal matters between the subjects of the two nations.

During the 1890’s, a series of crises developed between France and Thailand over the issue of sovereignty in Laos and Cambodia. The French used force to obtain concessions from Thailand, including extraterritorial rights.

An Anglo-French convention in April 1907 led to France reducing her extraterritorial rights while in March 1909 Thailand ceded four Malay provinces to Britain in return for a railway loan and a compromise on extraterritoriality.

The chance to redress the balance even further came about in an unexpected way. In August 1914, the First World War commenced in Europe and on July 22, 1917, Thailand pulled the right rein by declaring war on Germany and Austria-Hungary and sending a small expeditionary force to serve with the British, French and American forces on the Western Front.

The war ended in November 1918 and on January 10 1920, Thailand became one of the original members of the ill-fated League of Nations.

On September 1, 1920, acknowledging Thai support against Germany and Austria-Hungary during the First World War, the United States gave up its extraterritorial rights.

In March 1924, Japan followed suit while in February 1925, France, after five years of extensive negotiations, also relinquished its rights. Britain signed a treaty to the same effect in July 1925.

The status quo remained until November 1936 when Japan signed a new extraterritoriality treaty with Thailand, as did Britain. However, the British treaty abandoned all restrictions on Thai jurisdiction and similar treaties were later signed with the United States, Belgium, Switzerland, Denmark and Sweden.

by C. Schloemer

Good points: beautiful appearance, home-loving, intelligent, adaptable to different climates, excellent with children, gets on well with other animals, sound temperament.

Take heed: definitely not suitable for confined quarters.

The Old English Sheepdog, or Bobtail, is a very popular breed. It is a devoted friend and guardian of children, with a trustworthy temperament; sound and sensible. This is an affectionate dog which makes a loyal companion and it has a beautiful appearance. If the owner has other pets, this breed is affable and will accept them. No need to separate the family cat, or count the hamsters every morning. If owners already have other residing dogs, the Old English will soon figure out the pecking order.

Because the Old English is intelligent, it is easy to train. It has an obedient nature and is eager to please. If the owner has the show ring in mind, this breed will be a winner because of its extraordinary beauty. People who have a modest home with an ample garden will be able to accommodate this breed. Regular walks and free runs will keep the Old English healthy and happy. Lots of walks on the leads and romps in the local dog park are recommended. But this breed will not thrive tied up in confinement. This is a very large dog and owners with small apartments should choose another breed. But for those with sufficient room, the Old English Sheepdog makes a delightful and devoted friend for the whole family. Although this breed adapts well to different climates, Thailand’s tropical heat makes this country a poor habitat for the Old English Sheepdog. Breeders who show this dog in the ring here in the Kingdom keep these animals sheltered in air-conditioning. People who live full time in Thailand should choose a breed which can thrive in the heat.

Size: Height: dog, 56cm and upwards, bitches slightly less.

Exercise: Daily brushing and weekly combing will be needed to keep this breed’s coat from matting. The hair is brushed forward to cover the eyes. We don’t know how, but it can see perfectly well with all that hair covering its face! White parts are powdered for showing in the ring.

Origin and history: The Old English Sheepdog is often known as the Bobtail. How it came to England is a subject of conjecture, for the breed is said to have evolved through the crossing of the Briard with the large Russian Owtscharka, a dog related to the Hungarian sheep dogs. In England, it was used as a cattle dog and a guard. But nowadays, it is mainly kept as a much loved pet. Because of the breed’s reliability with children, a number have found their way into schools for handicapped youngsters. The first breed club for the Old English Sheepdog was established in Britain in 1888 and the standard has altered little in the intervening years.

Updated every Friday
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Updated by Chinnaporn Sungwanlek, assisted by Boonsiri Suansuk.
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