Why? Part 2

Why are so many commentators so positive about the global outlook when there are so many reasons to be negative?

Many can’t afford to slow slightly without being strangled by the debt burden. The rosy scenario is less than a 1% probability but is universally seized upon as what must happen. Realists are aware that this is extremely unlikely and of what the grim alternatives are. Another example from Mr. Toogoodtobetrue is, "The sub prime mortgage collapse, if contained as expected, will have only a fairly minimal impact on the macro-economy."

If contained as expected? As expected by the Panglossian analysts, yes. However, there have been a myriad of detailed papers published about the sub prime problems that tend towards the ‘tip of the iceberg’ view point. Optimism might hope that there will be containment; logic tells us that this is unlikely. The likely impact on the macro-economy will be significant, especially with the ‘tsunami’ of impending increases in the cost of adjustable rate mortgages in the US. Finally, the same commentator writes, "Elsewhere, above trend growth is forecast for Europe and Japan, while Asian growth, particularly in China and India, should continue to be highly supportive of the global economy."

Assuming that the sub prime contagion is miraculously prevented from spreading, assuming that the US soft lands, assuming that the carry trade continues providing huge liquidity injections and assuming the absence of any other major structural economic crises that might be true. However, we have no reason to assume any of these things. Rather we should be assuming the opposite.

5) Limited understanding - CNBC and the likes tend to focus on the relative prospects for individual stocks. Rarely do they look at the bigger picture. For that reason the carry trade and its associated issues are largely marginalised. In simple terms the main reasons for the period of prosperity over the last 5 years, the artificial delaying of the recession that appeared inevitable in 2002 have been the loose monetary and fiscal policies adopted by the Western economies supported in no small part by the carry trade.

Inflation in the west and reflation in the East are taking away both of these. When Paul Volcker was head of the Fed he spoke about the need for the Fed to take away the punch bowl before the guests got too drunk. In the Western world now everyone is legless and the markets, both eastern and Western are starting to say, "It’s my punchbowl and I’m leaving now."

Depressions, we are told, are cyclical in the nature of economics. Since last year there have been increasingly urgent warnings of an economic disaster by a growing number of Wall Street denizens. Everyone involved in the current speculative stock and equity boom knows that eventually stocks and properties will drop, but right now, who cares though? At the moment, we are in the business of making money. When the bulls are stampeding, it raises a cloud of dust that makes it hard to see danger.

Technology continues to provide higher standards of living for everyone and to disseminate information to the masses in a way that was unimaginable a few short years ago. Consumerism is rampant like never before and a record number of people are participating in the stock and property markets creating wealth at a rate that was previously inconceivable.

In the last 5 years it’s almost become a craze to play the market - the little guy can speculate with the seasoned pros. The current administration in the US adheres firmly to a government policy of non-intervention. Policy is supportive of further borrowing, even though levels are currently unprecedented, but no-one wants to take the blame if the market crashes because of measures taken to prevent further excesses.

The Federal Reserve Board has been holding increasing regularly meetings behind closed doors - there has no doubt been heavy discussion about the market and the national economy. March is proving to be a difficult month though and we’ve seen the first reversal in the seemingly ever upward trend of the last few years.

What is stated above could have been written 78 years ago. In fact, it was on Tuesday March 26th 1929 that an unexpected ‘mini’ crash began. For the next six months, the stock markets were a massive roller coaster that ultimately derailed in October. That summer of 1929 was not too bad. It hearkened somewhat of the good old days of optimism. Even though there still was an air of nervousness, the market appeared to be stable. It was on September 3, right after the holiday, that a bear market became firmly established. The roller coaster was on its final descent. It began on Thursday, October 24, 1929 when 12,894,650 shares changed hands on the New York Stock Exchange - a record. On Black Tuesday, October 29, 1929, the reckoning of several years of boom, which was based in large part on credit, came due. 16,410,030 shares traded on that day. The market well & truly crashed. You didn’t want to be anywhere near at the time. You probably don’t this time either. Who says history does not repeat itself?

It’s getting harder for the market to ignore the evidence of its own eyes - the US Commerce Department issued its monthly housing report this week which shows that sales of new homes unexpectedly fell again in February, by 3.9% to a seasonally adjusted annual rate of 848,000. This is the lowest since June 2000 and came when the market had expected an increase to about 1 million units. Sales were down 18.3% compared with February 2006.

Inventories of unsold homes rose 1.5% to 546,000, which now equates to an 8.1 month supply (the largest inventory in relation to sales since January 1991). Also, inventory is up 26.6% in the past 12 months. The median price of a new home is now $250,000, down by 0.3% compared with February 2006.

Somehow the market will convince itself that this surprise is exactly what a soft-landing would look like. The only thing that’s soft around here are the heads on Wall Street!

We’re not saying that we know all of the answers - but we know when something doesn’t add up and the positive outlook does not add up at all!

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]@mbmg-international.com.com

Snap Shots: by Harry Flashman

Is it time that my Nik died?

Another obituary! In the photographic field, obituaries for cameras are commonplace. In the past five years, for example, Nikon have launched four professional cameras, three high speed cameras, two ‘prosumer’ cameras, three consumer and three entry level models. That’s 15 new cameras, no wonder it is difficult to stay ahead of the new technology.

However, regular readers of this column will know that I have been persevering with my old FM2N outfit for over 20 years, with the hammer-head Metz 45CT1 flash unit permanently fixed to it. However, I have been a little disappointed of late with the results. The flash which could at one time light up the other side of the moon appears to have run out of power, and the viewfinder is giving me a five degree incorrect horizon. But what do I replace them with?

I was at a function a couple of weeks ago and one of my colleagues came in dragging one of those aircraft-style bags on wheels, with the extending handle. Wondering to myself why he had brought his change of clothes with him, I was blown away when he opened the case and it was full of camera and equipment. This was his D2X system.

Now I always thought that I would like a D2X, but it was always out of my price range, but here was my opportunity to play with one. An old proverb goes "expectation is always better than realization" and that certainly was true with the D2X. For starters, it was incredibly heavy (1,252 gm with batteries, and lenses extra). You needed a back-pack to carry it, three months at the Charles Atlas gymnasium, or a permanent porter. D2X was obviously designed with fit young men in mind. D2X could never be mine. The weight penalty was ridiculous, even though the 12 megapixel capacity was very attractive.

Another of my compatriots was using a Panasonic Lumix FZ-50, which he was very happy with. 10 megapixels and could be run fully auto, and all other modes in between fully manual. Now this is an interesting camera, being neither the usual compact, or an SLR, but something in between called a "Mega-Zoom". Looks like an SLR, and to be honest, when I was using it I did not know it wasn’t an SLR, but the FZ-50 has a fixed lens like a compact. However, this lens is a real doozy, a 12 times optical zoom going from 35 mm to 420 mm, and made by Leica. And what is even better, you can manually focus and manually zoom. For an old "film camera" buff, this represents the best of both worlds.

One of the more recent advances in electronics has been image stabilization. The camera technology is making it hard for you to end up with blurred shots, and the Panasonic Lumix answer is called MEGA O.I.S. (optical image stabilization). With this system, you can do hand-held photography when working at a 250 mm range at 1/60 second shutter speed. Normally you would have to use at least 1/250 sec.

Looking further at the camera we have to delve into the minefield called electronics, which in this case is called the Venus Engine III processor. This new processor aims at significantly reducing the digital noise, as well as improving the overall image quality. Panasonic are now offering both ISO 800 and 1600 in full resolution. So poor light photography is possible, without flash. However, the results will not be as good as shooting at the equivalent of 100 ASA, with flash.

Another new addition is the Intelligent ISO Control. When the camera detects movement of the subject, the ISO and shutter speed are adjusted in a way that ensures the movement of the subject will be frozen. All good applications of electronic technology to make it even less likely that you will end up with a blurred picture.

This camera has simple rotary knobs on the top to change modes and you can have both AF or manual focus. I did like this camera, and am seriously looking at getting one as a replacement for my dying Nikon!

Modern Medicine: by Dr. Iain Corness, Consultant

Pills and amateur psychologists

Psychology is a known and accepted profession. It is taught at, and degrees can be earned at, many well accepted universities in the world. However, one of the biggest problems, from the doctor’s viewpoint, is the current surfeit of what I call "amateur psychologists." Everybody, these days, feels as if they are entitled to voice their opinion as to the psychological "wholeness" of everyone else.

And it doesn’t stop there. Never mind all the amateur psych’s, there are bookshelves now crammed with paperbacks full of psychological advice for every problem the world could ever have. Unfortunately, most of them should only be used for holding doors open or throwing at predatory puppy dogs.

You see, what many forget is that the whole range of human emotions is part of our "normal" selves (well, I think I’m normal, even if you are doubtful)! Anger, hurt, elation, depression, sadness, grief, despair, dejection, rejection, joy, excitement or desolation are all very normal human emotions. It is our range of emotional feelings that distinguishes us from those creatures lower down the food chain. If you take these emotional feelings away, you are left with a "zombie" - an unfeeling being that is unable to express real emotion. Happy, sad or otherwise.

Now why is this a problem to us doctors? It becomes a problem because people begin to believe that somehow it is "wrong" to feel sad when, for example, one of life’s calamities strikes. Instead of working through the "normal" grief or despair, the patient is encouraged by the amateur psychologists in the family and friends to go and see the doctor and ask for some Prozac, or other "wonder drug." In this country, with powerful medications being available over the counter without prescription, this poses an even greater threat to normal reactions and normal recoveries. Note that "diagnosis" is never touched on in this process. It’s straight to the ju-jube jollies!

There is nothing wrong with showing normal emotions. Goodness me, even my cat lets me know when it is displeased (generally given some cat food it doesn’t particularly like) and it expresses true emotion. It does not need a magic tablet. It will get over it.

And so it is with people too. The reason for the depression, or elation, eventually becomes accepted by your emotional self and the middle of the road "normalcy" returns. You don’t need a magic tablet either.

Now of course there can be pathological forms of emotional disturbance too. Deep, dark lingering depression, without any real basis for it, is a pathological condition, but depression over financial woes, personal loss or the passing of a loved one is "normal". This type of emotional problem only requires treatment (and I didn’t say "tablets") when the person involved finds they are unable to come out over the top of it after a reasonable period of time. Many times the only treatment necessary is a friendly ear to allow the person to talk through their emotional responses.

No, sadness and happiness are part of our make-up and indeed part of our life. Accept it and move on to the next day. No magic tablets.

Finally, remember this song, sung by Mick Jagger of the Rolling Stones in 1967. Called Mother’s Little Helper, are two of the verses:

What a drag it is getting old
Kids are different today,
I hear ev’ry mother say
Mother needs something today to calm her down
And though she’s not really ill
There’s a little yellow pill
She goes running for the shelter of a mother’s little helper
And it helps her on her way, gets her through her busy day
Life’s just much too hard today,
I hear ev’ry mother say
The pursuit of happiness just seems a bore
And if you take more of those, you will get an overdose
No more running for the shelter of a mother’s little helper
They just helped you on your way, through your busy dying day.
And that, gentle reader was 40 years ago. We haven’t really progressed, have we!

Learn to Live to Learn: with Andrew Watson

Heroes & Genius

Morrison (1998) suggests that leaders need not be heroes or geniuses but leadership, I would argue, requires the capacity for heroic work and the potential for genius. Leaders must first know what is necessary in order that they can do the ‘right thing’. In education, there are many such defining moments. Mandela (1993) maintains that, "The terms of the struggle are dictated by the oppressor, not the oppressed", a view which combines knowledge of the reality of people’s condition with their civil and human rights and legitimate aspirations. The following are two examples from personal experience of contrasting approaches to similar situations in education.

During the Al-Asqua Intifada in Jerusalem in 2001, our school became a haven for reconciliation and a model for the indigenous populations to follow. Fearless but compassionate, the leader of the school brought the community together. This required the capacity for understanding a situation with intuition, initiative, intelligence, courage and a sense of shared humanity and the same kind of genius as leaders like Mandela and Ghandi.

Consistent with Morrison (1998), the leader demonstrated panoramic vision and was regarded as a visionary himself. He was able to "identify and maintain the special character, symbolize to the outside world exactly what the company is, set challenging but manageable standards of performance, motivate all employees, be a positive role model" and in so doing, he epitomised the characteristics of hero-leadership identified by Clarke (1994, in Morrison, 1998). His choice of appropriate response was what Redin (1991, in Law & Glover, 2000) refers to as "style flexibility".

It would be difficult to find a more profound and dramatic contrast with the political maelstrom of Jerusalem than the idyllic peace of rural India, but are the requirements for effective leadership any different? Is it necessary to experience the horror and intensity of Jerusalem in order to demonstrate the capacity for making leadership decisions of integrity elsewhere?

Shortly after arriving in India, the September 11th attacks occurred, an event of global importance which presented an opportunity as well as the responsibility, to unify a school community and acknowledge the role of an international school. In the particular province where I was staying, I was utterly staggered by the lack of response. The Principal at the time was not intending to mention the attacks at all, until I suggested that it might be appropriate.

In an assembly, he then re-enacted planes flying into buildings, using two corn flakes boxes that he had picked up as he made his way to the assembly room. Whilst I regard this as an example from the bottom end of the competence scale, perhaps it serves to illustrate how rare the capacity to judge a mood, seize a moment and deliver an appropriate message actually is.

The ability, surely necessary for an international leader, to do what Allen (2000, in Hayden & Thompson, 2000) calls "think globally and interact locally", based on knowledge of global politics (without prejudice) and an awareness of common humanity. Hayden, Thompson & Williams (2003) call it awareness of the "widening, deepening and speeding up of worldwide interconnectedness in all aspects of contemporary social life".

Is there a difference between leadership and management? Zaleznik (1977, in Blandford & Shaw, 2001) suggests that managers define themselves by their roles in the organisation and leaders are great communicators who inspire. Zaleznik’s manager is consistent with the concept of transactional leadership as articulated by Bass (1985) through Burns (1978) and could be aligned with Morrison’s (1998) suggestion that "Leadership is less about status and position in a hierarchy than the possession of essential competencies, skills and expertise."

Similarly, Stoll & Fink (1996, in Law & Glover, 2000) distinguish between the technocrat manager and the humanist leader. There seems to be some confluence on the subtle but important differences between management and leadership and some acknowledgement that both managerial and leadership skills are essential for effective leadership. As Handy and Aitken (1986, in Law & Glover, 2000) argue, "those who are most effective are those able to combine both elements of freedom and authority".

What kinds of knowledge, skills and attitudes are required? Can something like transformational leadership be learned? Malpass (1994, in Shaw, 2000) maintains that, "Many Heads and boards, it seems, have forgotten, or indeed have never learnt, the basic principles of good school management." The UK National Education Assessment Centre (NEAC) goes to considerable lengths in breaking down leadership into a curriculum, telling us how Head teachers achieve excellence by transformational leadership; "Transformational leadership is about creating energy and involvement and setting an inspiring personal example - being an outstanding teacher and professional as well as the ‘lead learner’ (Hay McBer, 2000)".

However, there is no universal definition of what an inspiring personal example might entail, especially in the multicultural global environment of international schools. In this respect, leaders must in many ways, be "all things to all people". Many Heads, it appears, have rather limited experience of the classroom and are anything but outstanding teachers.

With no local government to answer to (although a Board may appear in the guise) leaders in international school settings can enjoy considerable organisational autonomy. This creates polarised potential for both imaginative entrepreneurialism and muddied, visionless thinking. An established and rigid national system can provide structural strength (Shaw, 2000), but rigidity translated into the international schools environment can produce false dependency on a system of limited strength and can stifle initiative. The pervading sense of leadership requiring a positive, flexible, mental attitude pervades.

Conflict management provides a further example. Conflict is often regarded as contextual instead of an everyday thing. "All life is conflict" (Davies, 2004). According to Walker (2004), "The relationship between the Board and the Head will always be tense, but it should be one of creative tension." Adopting this attitude requires refined political skills but moreover, it is a choice in the mind of the protagonists, which requires vision and bravery.

Choosing a positive mental approach to conflict resolution is consistent with Fisher & Ury’s (1981) concept of a win-win situation and reflects the notion of positive conflict (Davies, 2004) as a necessary way in which "social progress occurs and challenges are made to injustice."

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Next week: "Driving at High Speed"