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Money matters:
Graham Macdonald MBMG International Ltd.
To cut or not to cut? Now that is a question - part 2
So should investors who’ve seen equity
holdings fall by 50% or more this year now act, making changes to their
portfolios or should they sit tight and wait for recovery?
We continue to believe that the two key factors remain diversification and
active asset allocation.
Diversification means not betting the ranch on any single outcome. Investors
need to understand that a range of outcomes are possible and these all need to
be allowed for. One obvious example of this is the use of gold as portfolio
insurance. A serious financial meltdown in 2009 will cause further weakness in
financial assets and a dramatic recovery in gold. Gold therefore serves the
purpose of acting as portfolio insurance allowing us to take market exposure on
the grounds that the risks of this are offset by gold’s defensive properties.
Active management means adapting asset holdings to the risks and rewards of the
markets. Typically a holding might be the best way to exploit a market situation
for a 3-5 year period but rarely longer than that. Occasionally shorter term
opportunities may arise and while day trading is not a serious investment
methodology for us; investors shouldn’t be blind to short term opportunities
either.
In short, our thoughts on this debate:
Most of those recommending making no portfolio changes are doing so because they
have a strong conviction that there’ll be recovery in 2009. Isn’t this just
betting the farm on a single outcome? What if they’re wrong?
Recovery in 2009 seems to be based on the take that many of these advisors have
of the current market.
But not one of these advisors saw the downturn coming. If they missed something
as serious as this, what’s chance that they will be right now? Those analysts
who saw the crash and the crunch coming are much more diffident about the
prospects for next year.
Much of their confidence stems from their view that markets are now cheap.
They’re obviously cheaper than they were but we know that the credit bubble
created an asset bubble - if an overpriced asset falls by 40% that doesn’t
automatically make it cheap.
The ‘do nothing’ brigade seem to be trotting out well-worn mantras in support of
their position.
To us it’s almost a conspiracy of self-interest. If an advisor got you into this
mess following a strategy, is he likely to turn around and admit this now?
Luckily, there is a ready supply of platitudes.
They frighten investors with the fear that if investors act now, somehow they
will miss out.
Miss out on what? Leaving portfolios the way that they were in 2007 is leaving
them with an asset allocation predicated on assumptions that have long since
been torn up. Even if market recovery is imminent, the chances are that the 2007
portfolio is not ideally placed to exploit that anyway. Look at your holding of
corporate bonds - how significant is it? Corporate bonds are current priced for
a 1929 scenario - if this unfolds, it’s already factored in. If it doesn’t then
don’t be surprised to see corporate bonds rally more than equities as it becomes
apparent that they are mispriced.
Equities look relatively unattractive in a falling or rising market. Whatever
happens, your portfolio should not stagnate holding out of date holdings, simply
because those holdings have fallen in value. It should be managed according to
the best rewards and opportunities available in 2009, not cryogenically frozen
at some point 2 years ago.
To us, freezing your portfolio because you don’t want to admit that you made
mistakes 2 years ago is a bigger error than the original mistakes. The relief
rallies in the markets and the USD are giving investors an opportunity to
salvage some hope. Ignoring that would be the worst mistake of all.
But one final thought to those investors who pursued strategies that have
suffered during the downturn - who would you trust to get you out of a mess like
this - someone who has no loyalty to any asset class but only to performance or
those who can only trade one asset class such as equities? In days like these it
has to be the former.
Let’s expand on this. There are opportunities at the moment but, first of all,
where NOT to put your money. Despite what Warren Buffett said, one place not to
put your money is US equities. Why?
For a start, Chinese manufacturing recently suffered its worst recorded
contraction. That may just be the single most important fact to emerge so far
during the current crisis. It reflects the fact that US consumer demand has
collapsed totally. This is further proved by the fact that:
- US Auto sales haven’t been lower since the end of the 1980s
- Circuit City will close 155 stores
- National retail chains have already gone out of business and disappointing
December sales could see Chapter XI lawyers enjoy a record start to 2009.
- US oil consumption will likely end the year around 10% down on 2007.
And there is so much more. Even Polaroid has filed for Chapter XI. And the real
significance of all this will play out next year.
If the US stops buying Asian consumer goods and OPEC oil in meaningful
quantities why should China, Taiwan, Hong Kong, Japan and OPEC continue to
provide funding to America and support to the dollar?
A plunging Greenback in 2009, ongoing liquidity problems for the #1 global
economy and no more tricks up the Fed’s sleeve? It all sounds eminently
plausible and it sounds ugly for US and global equity markets, western property
markets and the US dollar. The US financial sector could come under such stress
that a Chinese bailout on Chinese terms might be the only option and our oft
stated target for the Dow of 3500-5000 could easily come into play.
The opportunity would be to hold gold, hold yen (remember Japan is still running
a current account surplus), look at opportunities arising from the lack of
liquidity and at this stage really keep powder dry for the right moment.
Going back to the question that we started with - should investors who’ve seen
equity holdings fall by 50% or more this year still act or should they just sit
tight and wait for recovery?
The right answer is always that investors should hold the assets most suitable
for the prevailing investment environment and their own personal situation. This
should constantly be re-examined and questioned.
Our portfolios have held up this year but we’re still asking those same
questions. Any portfolio that’s down this year, especially ones that have fallen
heavily should have even more reason to ask that question shouldn’t they?
Even if you believe Warren Buffett about buying equities, Warren has undertaken
a flurry of buying and selling that is almost unprecedented and is expected to
continue. The only reason for doing nothing now is that either the investor or
their manager is in complete denial about what has happened in the last year or
so and by not dealing with the problem can pretend it hasn’t happened. That’s
not a good reason and won’t lead to a good outcome.
Every investor needs to review their portfolio RIGHT NOW in light of what could
happen this coming year. Anything else is just rank bad advice! Unfortunately
there seems to be a lot of that going around right now. Just as there was this
time last year!
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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]@mbmg-international.com.com
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Snap Shots: by Harry Flashman
Digital photography - the cure for anxiety
 I
bumped into a fellow photographer the other day. This was a chap who had
done four years of study in college and had then gone down the darkroom
and the dip and dunk routine. We compared notes and reminisced about
those pre-digital days.
One of the most important factors was to see if the shot had a sharp
image. With a portrait, focusing on the eyes was the standard way, but
until you got the negatives back and could check with the enlarger,
there were many hours of anxiety. Had you really got the image that was
required, because with professional photography, if you goofed, you
re-shot at your own expense. And if that shoot included professional
model fees, you were going to be considerably out of pocket.
Those were the days when film was king, and B&W revered for the
creativity it could encourage. In the darkroom, with the magical red
light, you became accustomed to the gloom and would spend time working
out the correct exposure for the exposed photographic paper. This was
done by successive exposures, sliding a cover paper back by two seconds
at a time. You then dipped and dunked and reviewed the exposed and
developed sheet and chose the best time under the enlarger head giving
the best exposure.
However, it wasn’t over then. Next you exposed one sheet for the
suggested time, dipped and dunked and reviewed again. This time you
looked critically at the whole print (usually a 10x8) and noted areas
that needed ‘burning in’ and other areas that needed ‘holding back’ (or
‘dodging’) and the process would go on again until the final, definitive
print was made. This process could take several hours, but your B&W
creation was part of your artistic persona.
I was lucky in that I was using a newspaper’s darkroom for my B&W work
in those days, and this had an auto-processor which would take your
exposed sheets and finish printing them in one minute. Sixty seconds of
anxiety time was not so bad, compared to dipping, dunking and fixing,
which could easily take 15 minutes.
That was for B&W, but the situation for color negatives was somewhat
different - and, incidentally, the photographic technique was also
somewhat different. Where you looked at light and shadow in B&W, with
color you began to look at contrasting colors and hues. Blues pitched
against yellows, reds against whites.
It was also the situation that very few people had access to a color
printer that could produce a roll proof, and this was the province of
the professional shooter. You dropped off your exposed roll of color
film and you received back the analyzer report as to the exposure
saturation of the negatives, as well as a roll proof taken from the
negatives. This was the way you checked your expertise with the flash
meter and the exposure meter. The alterations to a print were done in
the camera beforehand, not afterwards as with the B&W photography. As
you became more experienced you could guesstimate the settings needed to
visually change the end result. It was a completely new ball game.
After this period came the scanned print directly into the computer,
where color balance, brightness and contrast could be manipulated,
followed by the ability to take the color negative and scan that into
the computer, cutting out the negative to print step, which came with
its resultant lowering of sharpness.
But now we have the fully digital phase of photography, available to
everyone, not just the professionals. Your digital SLR even gives you a
choice of resolution and file types such as RAW or JPEG. And on top of
all this, there is that magical ability to review your photographs while
they are still just electronic images on your memory card.
However, you should not just take the image for granted. You should
still critically review your images and work out what should be done or
changed. Just because you have a DSLR does not mean that you will never
get another picture with trees growing out of people’s heads. The
photographer has the “eye”, not the camera!
Modern Medicine:
by Dr. Iain Corness, Consultant
Living with cancer
I prefer to look at the situation of ‘living’ with a terminal
cancer, rather than ‘dying’ from a terminal cancer. There is a significant
difference, and much more than looking at life through my rose-colored
glasses.
So you have just found out you have terminal cancer. What can you do? The
first thing is to sit down and take stock of your circumstances. All of us
know that eventually the piece of string called “life” eventually comes to
an end - but we don’t know when. The only difference with you is that your
doctor has actually told you when your piece of “life” string is due to run
out.
Now whilst the immediate thought is “How do I beat this?” there are many
factors you have to consider in the time ahead, and one of the main ones is
called ‘The Quality of Life’.
It is natural for a person with advanced cancer to feel many emotions
including anger, fear, and sadness. Just as you may need time to adjust to
this new phase of your life, your family and friends may also need time.
Round table, frank discussions with your family and doctor are worthwhile.
This talking phase should also include your getting to understand your
cancer. This you do by talking with your treating doctors, and also from
information from reliable internet sites. Note I say “reliable” sites. There
are always plenty of sites ready to sell you snake oil. However, I do
suggest you read everything and become the world expert on your own
condition. But don’t buy snake oil.
Now is the time to manage your symptoms. Your quality of life is better if
your symptoms are under control. Talk to your health care team about the
best way for you to manage your symptoms. Analgesics (pain killers) are
important, and there are many with different capabilities. There’s a lot
more than paracetamol.
Do not be afraid to ask your doctors to fully explain any proposed
modalities of treatment. Getting an extra two months of life, but at the
cost of the quality of life, may not be worth having. Always keep that in
mind. Quality of (the remaining) life is everything.
Be as active as you can. When an illness progresses, it may be harder to do
the things you have always done. If your physical health allows, continue to
exercise in some enjoyable way. Or, if you find it is too much for you, take
up a new hobby or find things that you can still do and enjoy, such as
reading, writing, creating a photo album, or making a video for family and
friends.
Make your wishes known. Making the decision to stop active cancer treatments
can be a hard choice for a person with cancer and their family. These are
personal choices. If you are faced with making these decisions, talk with
your family and doctors about your wishes and explore all of your options.
You are still able to make decisions about your life to the extent that you
desire.
Maybe you want to give someone else some of the responsibilities or share
decisions about what to do. You may want to create a health care proxy
and/or power of attorney. This allows someone who you choose to make health
care or other decisions for you. Whatever you choose, you are in control of
your life and you know what will work best for you.
You may also consider creating a ‘Living Will’ or giving specific
instructions on what your wishes are if your cancer progresses. This process
helps make your end-of-life wishes and desires known to family, friends, and
your health care team and can help ensure that your wishes are honored.
These wishes may include funeral arrangements or decisions about hospice
care. Discuss with your family, friends, and health care team your wishes
regarding resuscitation.
Sorry if the column this week sounds a little deep and dark, but it can give
assistance to those who feel as if all their options have gone. There are
always options. Even deciding not to continue with various therapies is an
option.
 Heart to Heart with Hillary
Dear Hillary,
Bona 2009, the year of the Waggerboy! Say no more, wink, wink, nudge, nudge!
Hope you manage to avoid the legionnaires disease in Tropical Gert’s!
Mistersingha
Dear Mistersingha,
I am starting to think seriously that you are suffering from some disease,
possibly brought on by over-consumption of your eponymous quaffing potion. What
are you on about, man? And the reference to Legionnaire’s disease? To my
knowledge, I have never met a legionnaire, nor have I ever been in Tropical
Gert’s. That being the case, I probably am not high in the risk factor tables to
get this complaint. And what, pray tell, is a nudge, nudge, wink, wink
Waggerboy? I don’t know if you are already receiving treatment for your
problems, as you are certainly too far gone for Hillary to make any difference.
Perhaps if you double the dose it may assist, but please seek help urgently.
Dear Hillary,
Happy New Year and all that and I’m wondering if all the poor souls from 2008
will ever find their true girlfriends, and will 2009 bring on another steady
stream of broken hearts asking what to do and where to go. You would imagine by
this time at least some of them would see the light. Anyway, Hills, old bean,
all the best and keep smiling.
Pete
Dear Pete,
What’s with the “Hills, old bean”, Pete my Petal? Just refer to me as Hillary,
thank you, “old bean” indeed! Now as far as the army of the broken hearts is
concerned, of course there will be a new wave coming. It happens every year and
is something to do with the lemming leap year. Your “poor souls” as you call
them, leave their cold and wintry countries and come here to waving palm trees,
warmth and even warmer ladies. No wonder they all do the lemming leap off the
cliff together when they find that the lovely Lek from Legs Bar Beer was just
doing her job, and they have been replaced by the second wave of Scandinavians,
to be followed by the third wave of Belgians. With the dearth of female company
for the older (and younger, I am led to believe) males from the UK, Scandinavia,
Belgium and all points West in their own countries, the happy little bunny who
will sit on their knees and say, “I lub you too mut, buy me drink,” is beyond
their wildest dreams. No wonder they fall for some of the oldest bargirl lines
in the world. But they do, and they break their hearts. And they come back next
year and do it all again.
Dear Hillary,
Hope you had a good New Years, and I just thought I’d let you and the readers
know that you can have a good long relationship with Thai women, in my case, two
Thai women. The first was only 18 when I met her and we had a great time here in
the UK and on holidays back in the Land of Smiles. We had a couple of kids
together and life was great until six years ago when she died in a road
accident. That was a tough time. I met number 2 a couple of years later and we
just sorta clicked. She was divorced and had a couple of kids of her own which
were near the same age as mine, and we moved the whole shebang in together three
years ago, and let me tell you, it works. We have a great relationship and the
kids even get along with each other. I couldn’t ask for more. So for all those
guys who reckon they get nothing but ripped off, they should look at themselves
a bit. They might find the reason.
Jacko
Dear Jacko,
Thank you for your lovely letter, Petal. I do know there are many, many success
stories out there, but most don’t have that need to write in, like the lovelorns
do. Obviously Jacko, your relationships have been built on mutual respect and
understanding, which is the true basis for lasting relationships, not just rolls
in the hay and “I lub you too mut!” as I mentioned to Pete in the letter before
yours. I agree that many of the people with problems should look at themselves
sometimes, but also where they are looking for that soul mate of theirs. As I
have said many times, you won’t find cheese in a hardware shop (though I must
admit that one of my readers wrote in to say that you could, many years ago, in
America)!
Dear Hillary,
Did you get any chocolates and champagne over the break? I was going to try and
bring some champers in for you, but had a little problem with customs, so I hope
they enjoyed it, even if you and I didn’t! All the best and I hope that one day
that stupid Mister Singha does actually come good with his promises, but I
wouldn’t hold your breath, Hillary!
Jimmy
Dear Jimmy,
Sorry to hear your champagne didn’t make it past customs, if that is the real
reason I didn’t get a bottle of bubbles from you, Jimmy. I remember you had some
sort of similar excuse a couple of years back. I may be getting older, but the
memory is intact.
Let’s go to the movies:
by Mark Gernpy
Now playing in Pattaya
The Elephant King: US/ Thai Drama/ Romance – Filmed for
the most part in Chiang Mai. A domineering mother (Ellen Burstyn)
dispatches her young, introverted son Oliver off to Chiang Mai to do
everything he can to lure his reckless, older brother back home to the
U.S. to face pending fraud charges. Oliver finds the intoxication of
Chiang Mai hard to resist – as he falls deeply in love for the first
time, his older brother Jake slips deeply into despair, and the seams of
their relationship begin to come undone. When the true extent of Jake’s
decadence and self-destruction is revealed to Oliver, he is forced to
decide whether he will save his brother’s life or his own. Rated R in
the US for sexual content, drug use, language and some violence. Mixed
or average reviews.
Bal Ganesh: India Animation/ Fantasy – An animated feature about
the childhood of India’s Hindu god, Lord Ganesh, covering some of the
highlights of his life. (Thai dubbed only with no English subtitles)
Yes Man: US Comedy – Jim Carrey as a man who signs up for a self-help
program based on one simple principle: say “yes” to everything for an
entire year. Mixed or average reviews.
Quarantine: US Horror/ Mystery/ Thriller – A television reporter
and her cameraman are trapped inside a building quarantined by the US
government after the outbreak of a mysterious virus which turns humans
into bloodthirsty killers. It has the single hand-held camera style of
such recent movies as Cloverfield. Some people find the “one actual
camera” trick leads to heightened reality; others find that the constant
jiggling of the picture and rough-shod editing gives them a headache. If
you think you can put up with it, you will find this to be a quite
frightening movie, as I did, after the introductory first 20 boring
minutes. Rated R in the US for bloody violent and disturbing content,
terror, and language. Mixed or average reviews.
The Happiness of Kati: Thai Family/ Drama – Based on the
best-selling novel by Ngarmpan Vejjajiva, winner of the 2006 S.E.A Write
Award, and one of the most beloved and well-known contemporary
children’s books in Thailand. The mother of nine-year-old Kati is
suffering from an incurable illness, and Kati must go through steps of
happiness and sorrow to learn the lessons of life. Not enough believable
conflict in the script to make it a compelling drama, but it is
well-acted, and beautifully and lovingly photographed. Best described as
a loving tone poem of a film to a certain Thai way of life and living.
Australia: Australia Drama/ Adventure – Baz Luhrmann directs his
first feature film since 2001’s Moulin Rouge, and I think he does so in
grand style. Set against the backdrop of World War II, it’s the epic,
sweeping tale of an English woman (Nicole Kidman) who inherits a sizable
cattle ranch “down under.” With the bombing of the city of Darwin on the
horizon, she teams with a cattle driver (Hugh Jackman) to save the
ranch. It’s nearly three hours long, so make yourself comfortable. Mixed
or average reviews.
Madagascar: US Animation/ Family – A delightful animated film,
which I thought quite cute.
Deep in the Jungle: Thai Horror/ Action/ Fantasy/ Romance – A
soldier falls in love with a woman who is actually a snake. Pretty
incomprehensible, too jumpy, with too much gratuitous bone-crunching
violence. Seems to be a retelling of “The Snake King’s Child”, an old
and still popular Cambodian legend that was last depicted in the
Cambodian film of that name in 2001.
Bedtime Stories – US Comedy/ Family/ Fantasy – Adam Sandler in a
family comedy about a hotel handyman whose life changes when the lavish
bedtime stories he tells his niece and nephew start to magically come
true. Generally negative reviews.
Super Hap: Thai Comedy/ Musical – An enjoyable Thai teen-oriented
musical comedy, in which two guys try to break into the music industry
by forming a Korean-style boy band. But the one who looks cute and can
dance, can’t sing, and the other can sing, but doesn’t look the part.
Some quite entertaining bits and though it seems to lose its way in
sentimentality toward the end, it’s still one of the better Thai
comedies.
4 Romances: Thai Romance – Four love stories directed by four
Thai filmmakers. Pretty uninteresting and not nearly as entertaining as
Super Hap. I thought the most enjoyable section was the last, featuring
the band “August” and singer “Pitch” Witwisit Hiranyawongkul of Love of
Siam fame – that one had a few nice surprises, and the kids are great.
Transporter 3: France Action/ Crime – It’s an action movie – a
lot of explosions, car crashes, and men being violent and assertive. All
quite brilliantly done, and seasoned with just the slightest bit of plot
and humor. If that’s what you like, this is for you. Mixed or average
reviews.
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