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Money matters:
Graham Macdonald MBMG International Ltd.
Not all funds let you down, part 2
“Looking at the macro issues in more detail
there are probably three ways in which the current problems could be resolved
without intervention. Oil prices could fall, allowing central banks to increase
support for financial markets and reducing pressure on growth (notably in
Emerging Markets). Oil prices could stay high but stabilize, without inflation
becoming broadly embedded, again allowing more flexibility to protect the rest
of the economy. Finally, an improvement in credit market sentiment and liquidity
could emerge, mitigating the negative effect of higher commodity prices. Of
these, clearly the first is the one that is most likely to happen quickly enough
to change things in the short-term.
As to the likelihood of any such moves we are fairly pessimistic. Taking the
chance of a meaningful oil price fall first we should begin by noting that we
are far from clear as to why it risen so sharply in the last year so being too
dogmatic about its prospects feels uncomfortable. Neither the bulls nor bears’
explanations of this move seem persuasive. Bulls argue that a genuine resource
constraint is finally being acknowledged in market prices (Peak Oil). Such a
view may well be ultimately right but it is difficult to see why its effect
should have been so pronounced recently, given that the production shortfall it
assumes will not be evident for several years.”
[Please note that all quotes in this article are from Lansdowne UK Equity Fund,
the largest holding in the Turnstone European fund, which along with Orbis,
Berkshire Hathaway and GAA makes up the majority of our equity exposure right
now…]
Our fears on this are threefold: firstly, that the contagion of higher commodity
prices seems to us one that continues to expand, especially through reduction,
in capacity, of other industries. In food, for example, high feed prices are
causing meat producers to reduce unprofitable stock, temporarily increasing
supply but ultimately leading to materially reduced supply and higher prices.
This trend is being exacerbated by the credit crisis which is again militating
against capacity additions. Secondly, our sense is that most of the industries
facing such pressures are increasing prices (often at the expense of volume)
rather than cutting gross margins, and transport being obvious areas where the
pass-through has been pretty linear.
Finally, while developed market labour may not yet have responded to the cost of
basic goods, one would expect such a move to take some time and there are
increasing indications that wage demands and industrial action are rising.
Moreover, the effect on goods prices may well be more driven by developing
market labour costs given current manufacturing bias, costs that are clearly
rising substantially in response to higher prices. As an example, we suspect
that goods out of China are now facing 15% labour cost inflation on top of an
appreciating currency, a sharp contrast to conditions seen in recent years.
Thus, again, we see the chance of inflation not responding to cost pressures
being far less certain than presumed by the bulls and would note that, even were
they right, evidence from this is not likely to be conclusive until oil prices
stabilize on an annual basis - i.e. not until a year from now unless prices
start to fall.
Looking at the final aspect of potential organic improvement to the situation,
basically an endogenous improvement in credit markets, we are also unconvinced.
With treasury yields around 4%, even elevated spreads struggle to offer nominal
returns near any levels that feel compelling enough to attract untarnished
capital given headline inflation. Meanwhile, as described above, capital
positions, if anything, appear to be worsening given increased doubts about the
availability of capital.
Indeed, we would be far from surprised to see the situation for credit markets
deteriorate rapidly. Credit spreads, generally being below March levels, look to
be a risky position given the deteriorating economic outlook. While the threat
that rebuilding capital through equity-raises becomes more difficult which
suggests that management’s willingness to expand their gross loan-books will be
very limited (and could turn negative).
Finally, one has to take on board the point that the asset most obviously
riskily mispriced by ‘speculators’, if interpreted as non-natural owners, is the
US bond yield (and consequently fixed income instruments in general) given the
reserve holdings of exporters. One can quite easily imagine a situation in which
such ‘speculation’ is reversed as oil importing creditors seek either to buy oil
or improve their buying power through revaluation of currencies. Meanwhile, the
oil-exporting creditors are also faced with a dilemma of whether their currency
linkage with the US dollar is as appropriate given the relative strength of
their economic prospects and those of the US.
So, in aggregate, we are doubtful that anything material will occur quickly
enough to solve the market’s current concerns organically. The question then
moves to whether policy-makers shift of focus towards oil prices can in any way
change the situation. Instinctively one has to be a bit sceptical: it is not as
though previous policy was framed to higher oil prices rather than support the
housing market while if there were an obvious way out one suspects the people
involved would probably have considered it by now.
The key point here is that the “economy can’t heal itself; we should feel that
policy makers will try to fix it and generally that’s not good news.
Effectively the options open are threefold in type, obviously each has multiple
nuances - not least as to whether implemented through monetary or fiscal policy.
One could aim to restrict overall growth in an attempt to stabilize commodity
prices, ignore commodity prices as not being inflationary in the long-term (see
argument above) and stimulate the rest of the economy or find specific policies
designed to influence the oil market.”
Lansdowne shares our reservations about the effectiveness of intervention: “We
are left with a view that there is no obvious way out of current difficulties,
either from a policy or a market-driven perspective.”
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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
Electric powered photography
While the automotive world is flirting with battery power, the
photographic world has been wedded to batteries for decades. There is
hardly one ‘mechanical’ camera left, other than perhaps some of the
Russian copies of formerly western cameras. Cameras such as the FM2 and
F3A are mechanical, but have a battery to run the inbuilt auto-exposure
light meters. Some of the medium format cameras such as Hasselblad and
Mamiya are mechanical, but these are not in the popular 35 mm format.
Pure mechanical cameras are out, and batteries are in.
 Look
at the white crystals.
That brings problems unique to battery power. All but the most
delinquent photographers know to look after their cameras. Lens caps are
there to be used. The camera gets wiped dry after being in the rain.
Most cameras these days turn themselves off after a period of time to
conserve their batteries. However, it is those same batteries that can
do untold damage to the electronic innards of today’s cameras.
When using a camera with motor drive, it suddenly stopped. Nothing
worked! Now, the motor drive on the older Nikons is separate from the
body and can get condensation between them and you’ll end up getting
nothing. The answer is to unship one from the other, wipe and wriggle as
you reattach and bingo! But not this time. Repeating the procedure did
not work, so I disconnected the drive and was forced to wind on
manually, but the light meter was now working.
What had not occurred to me at the time was the fact that when I was
attached to the motor drive, there was no power, yet disconnecting the
motor and its eight batteries, I once again had power for the LED’s,
light meter and such.
It was the next day before I looked again at the problem, and then
remembered that when the motor drive is disconnected, the camera uses
its own small cadmium battery, but when hooked up to the motor drive,
the camera draws its power from the motor drive battery pack. So this
was why I had light meter facilities, but none when I attached the motor
drive.
I then began to think how long it was since I had checked the eight
batteries in the driver. Possibly a year! Opening up the battery pack
case, I was greeted with a shower of white crystals and a group of
sweating, leaking AA batteries. Six out of the eight were leaking. Hence
no power.
Mentally castigating myself for such errant carelessness I pulled the
motor drive battery compartment apart to see the extent of the damage. I
was very lucky - no corrosion was evident. However, I did remove the
batteries and then immersed the battery pack case in very hot water.
This removes the crystalline substances that leech out of the batteries
themselves. A gentle blow dry and very careful inspection showed there
had been no lasting damage. The phrase, “Just in time” kept going
through my head!
Also interestingly, the six batteries that had begun to leak were the
least expensive of the two types of battery in the drive. There is a
lesson here, isn’t there?
In fact, there are two lessons to be learned. The first is to check
batteries every three months, I would suggest, rather than just waiting
for the batteries to fail or become erratic. And secondly, you get what
you pay for - so buy the best you can. It will serve you well in the
end.
This little scenario would have been much worse if the battery pack had
been internal with the camera works themselves. The discharging
batteries also give off fumes that attack and corrode the complex
electronic circuitry. That little problem can destroy the camera totally
- and that is no joke!
So I escaped this time around. After 200 baht for new batteries, the
motor drive and camera are functioning just perfectly. Till the next
time - unless I make a note in my yearly planner to check every three
months. It will be good insurance. Think about it too. Now with 2009 on
us, make a battery check a good resolution.
Modern Medicine:
by Dr. Iain Corness, Consultant
Grierson-Gopalan Syndrome
Medical people are egotists. We all love to have our names
perpetuated by having some syndrome, disease or condition named after us.
Drs. Grierson and Gopalan are examples of this, having been jointly named as
having described the ‘hot foot’ syndrome. I have a personal interest in Drs
Grierson and Gopalan, because I’ve got it. Hot feet have been with me all my
life.
Researchers who have by now gone through many feet of data (sorry about the
pun) have found that it was first described in 1826 by a doctor called
Grierson. Gopalan, by comparison, was a real Johnny Come Lately having only
written down his description of my nocturnal hot feet in 1946.
So be it, this week I would like to introduce you to the Grierson-Gopalan
Syndrome, otherwise known as the Burning Foot Syndrome, which we medico’s
happily shorten to BFS. It is a fine example of how much we know about the
human body, and conversely, how little we really do know! Sort of like the
“More you know, the less you understand” concept often applied to expats
living in Thailand.
Not only have I got it, but so have many of you who are reading this. Is
this you? For almost all my life I have been unable to have my feet under
the bed sheets, needing to hang them out in the cool breeze, because they
feel so hot. My father also had this complaint and I was heartened to see
that the pundits examining this medical mystery call mine an Autosomal
dominant familial disorder, when one’s forebears also have/had it.
But back to medical examination of the feet. It may also be of interest to
know that the researchers have found an increased incidence of BFS in Asia
and the Far East during a hot summer. (Now there’s some earth shattering
news!) It also seems more prevalent in people over the age of 50, and is
worse at night. Ah, the medical dragnet is tightening.
Further investigation has turned up all sorts of conditions of interest to
the hot foot sufferer. These range from Vitamin B deficiency, malabsorption
syndrome, chronic alcoholism, diabetes, kidney failure, inactive thyroid
gland, compression of the tarsal nerve at the ankle, trauma to the nerve,
erythromelalgia, chronic mountain sickness, Gitelman syndrome,
Leishmaniasis, multiple sclerosis, psychosomatic disorders and the last,
“idiopathic”. Let me tell you, that most of those you don’t want. Stick with
idiopathic.
Taking the last first, “idiopathic” is a wonderful medical moniker. This is
translated as a disease or condition of unknown cause. “Yes, Mrs. Smith, we
know what you’ve got. It is called BFS, but since it is ‘idiopathic’ we
don’t really know what causes it, or what to do about it!” What wonderfully
comforting people we medico’s are.
However, we can do some tests. Have we ever got some tests for you! We can
begin with a complete blood count, red cell indices, biochemistry, check
your serum levels of Vitamin B, check for diabetes, check your stool for
malabsorption, bung in a thyroid check, do a bone marrow aspiration, check
your serum and urine electrolytes, do some nerve conduction studies (include
a nerve biopsy in that), do some molecular genetic studies and then perhaps
some MRI screening of the ankles.
My medical research colleagues do have some general words of advice,
however. It is suggested that first off we should reassure the patient - see
the response to Mrs. Smith and “idiopathic”. Then you should wear open and
comfortable shoes and cotton socks. Soaking your feet in cold water for 15
minutes is also suggested and avoid the heat! No problems with that in
Thailand. Apart from that, if you’ve found something wrong, correct it, but
you usually don’t find anything. Amazing what you can learn in a six year
degree course!
When all that fails, you can just try hanging your feet out from the end of
the bed and making sure the sheet only reaches your ankles. It works for me.
I’m sure it will for you too!
 Heart to Heart with Hillary
Dear Hillary,
My reply to concerned parties as to why I don’t get a job, have a girlfriend, or
have any friends may help people to realize what true peace is and how to have
it. What makes my life of less value if I don’t work? My life in this world is
of much more value for being out of it. Holiness is not a concept, it’s a fact.
What decreases my value as a human being if I don’t play a role in society?
Society is a load of crap. It’s just people doing whatever they can to get money
in order to satisfy their desires which can’t be satisfied. I have no desires,
live alone on one small meal a day, meditate 5 hours every day, am very healthy,
sleep well, and live in peace and bliss. All the money in the world cannot buy
the peace I am in, so why would I seek to be a part of any system when I am
living the unrealized dream of society, free of things, free of thoughts, free
of cares. No one tells me what to do and I tell no one what to do. When you go
beyond authority you become an authority, but that just means people look to you
as a model of freedom. It’s been said that if you want peace, then prepare for
war, and that’s what conflict on earth has only ever been about; people fighting
to control others, or people fighting to be free of the control of others.
Peace, or freedom which is the same thing, is to be unconditioned, free of the
influence of anything or anyone. And what would be the purpose of clinging to a
woman when I have happiness? How could a man in peace be driven to seek out what
would destroy his peace? Where is the need for friends when you have no need? If
you realized ‘at-onement’ with the infinite universal intelligence that you
exist in and that you are, you would truly know what peace and happiness is.
It’s not about things or people, it’s about you.
Blissed
Dear Blissed,
Thank you for your (rather lengthy) letter, and I am glad for you that you are
happy on your one meal a day and living the somewhat monastic existence you
describe in your missive. I note that you have decided that “society is a load
of crap.” However, you are still happy to use the trappings of our society, such
as the internet and emails, while claiming to have no part in that society. You
have eschewed money, but how do you get your food? Or do you grow it yourself,
becoming a slave to the vagaries of the weather and passing pigeons? There is a
phrase you should mull over and that is “no man is an island” and that includes
you too. The fact that you have come out with your protestations of not needing
anyone for your inner peace, without being asked, shows that you needed an
audience to listen to your assertions. I really do hope you remain “blissed” and
trust that this has been a blessed experience for you as well. However, you are
quite correct when you say that happiness is not about things or people, “it’s
about you.” (By the way, this talking point is now closed, to leave space for
people with questions, rather than people with assertions.)
Dear Hillary,
I have been reading your column on dating and have enjoyed it very much. As I am
going to be there in March for the first time I am writing. It seems that
everyone I ask (single men like myself) talk about being at the bars as the way
to meet the working women of Thailand. While I realize this is not the only way
I do have a question. If one is not a big drinker will I offend if I do not
drink a lot or wish to leave to go see music, movies or see the country?
Bob
Dear Bob,
I can assure you that the ladies from the bars have not the slightest interest
in how much ‘you’ drink, only in how much ‘they’ drink, while you are paying of
course! This is because they receive a percentage of the cost of the ‘lady
drinks’ which you will find are about twice the price of yours, while they get
nothing from the price of your drinks. This is how they make money, as they are
‘working’ women as you rightly pointed out, getting their monthly salaries in
many ways. It works like this, since you have not been here before, Petal. They
generally receive a small wage (or retainer), and then their lady drinks
percentage plus a percentage of the so-called ‘bar fine’ which is what the
punters (like you) pay for the honor and glory of taking one of the blushing
young ladies away from the bar to see music, movies or the country. Anything
else is a private arrangement between the lady and the customer, as you have to
realize that there is no prostitution in Thailand, because the statute books has
said so since about 1966. While you are paying for things, you will not offend;
however, when the money bin gets dry, you can expect to be left for someone with
a fuller wallet.
Let’s go to the movies:
by Mark Gernpy
Now playing in Pattaya
The Curious Case of Benjamin Button – US Drama/ Fantasy/
Mystery/ Romance – with Brad Pitt, Cate Blanchett, Tilda Swinton.
Nominated for Oscar best picture and best director. The extraordinary
tale of a man, born elderly in 1918, who ages backwards through the 20th
century. I don’t see how anyone can really like this, but I seem to be
in the minority. It’s utterly nonsensical, so I couldn’t get involved,
even at 166 mins. Great makeup! – worth seeing for that alone! But
thirteen Academy Award nominations? The screenplay is by Eric Roth,
who wrote Forrest Gump, which this reminds me of. Generally
favorable reviews.
A Moment in June – Thai Drama/ Romance – Well-received Thai drama
set partly in Chiang Mai and Lampang. Directed by O. Nathapon, who is
also active in theater and draws on his theater experience to devise an
impressive crossover of cinema and stage through a play-within-a-film.
Three couples – gay, elderly, and fictive – engage in a melancholy dance
of indecision and regret.
Push: US Action/ Thriller. The deadly world of “psychic espionage”
where artificially enhanced paranormal operatives have the ability to
move objects with their minds, see the future, create new realities, and
kill without ever touching their victims.
Confessions of a Shopaholic – US Comedy. Nonsense wherein Isla
Fisher plays a fun-loving girl who is really good at shopping.
Underworld: Rise of the Lycans: Traces the origins of the
centuries-old blood feud between the aristocratic vampires known as
Death Dealers and their onetime slaves, the Lycans. Michael Sheen and
Bill Nighy revisit their roles from Underworld in this exciting
prequel to the horror-action hybrid. Directed by Patrick Tatopoulos.
Before Valentine: Thai Romance/ Drama. Four takes on love, made by
three Thai directors.
Defiance: US Drama/ Action – I thought this a superb war drama and
thriller with a lot of thought in it – a must-see. Based on a true
story, this is a sweeping tale of family, honor, and vengeance in World
War II. The year is 1941 and the Jews of Eastern Europe are being
massacred by the thousands. Managing to escape certain death, three
brothers take refuge in the dense surrounding woods they have known
since childhood. There they begin a desperate battle against the
Nazis. Starring Daniel Craig, Liev Schreiber, and Jamie Bell. Directed
by Edward Zwick (Blood Diamond). Rated R in the US for violence
and language. Only mixed or average reviews, but I thought it riveting,
and I highly recommend it for anyone who wants to see something
substantial and provocative as well as exciting.
Pride and Glory: US Crime/ Drama – Edward Norton and Colin Farrell
star in an authentic, gritty, and emotional portrait of the New York
City Police Department following a multi-generational police family
whose moral code is tested when one of two sons on the force
investigates an incendiary case involving his older brother and brother
in law. Rated R in the US for strong violence, pervasive language, and
brief drug content. Mixed or average reviews.
Inkheart: Germany/ UK Adventure/ Family/ Fantasy – Fantasy fans
should love this. It’s a vast undertaking with a lot of thought and
artistry going into the creation of an entire fantasy world with its own
very unique rules, and I found the attention to detail enjoyable. An
excellent cast. Based on the Inkworld series of children’s
novels by the German author Cornelia Funke, detailing the adventures of
bookbinder and his 12-year-old daughter, who is a voracious reader. He
is a Silvertongue, a person with the rare ability to bring the
characters in a book to life simply by reading the text aloud. You may
notice something strange about the film – there are two endings! Next
week I’ll tell you how that came about. Mixed or average reviews.
Soi Cowboy: Thai/ UK Drama – Slow as molasses in the Arctic, the
film has enthralled some and exasperated many. A long leisurely look at
a farang and his girlfriend picked up from Soi Cowboy, with some
surprises toward the end. The couple’s relationship, related in
exhaustive detail, will be instantly recognizable, and many farangs of
whatever sexual persuasion will thoroughly identify with the dynamics
involved. Directed by the English Thomas Clay.
Fireball / Tar Chon: Thai Action/ Martial Arts – The world of
underground barbaric fighting in Thailand.
Red Cliff Part 2: Hong Kong War/ Action – The second and final half
to John Woo’s magnum opus Red Cliff, and an epic on a grand scale
as only the Chinese can do. Thai-dubbed only.
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. Rated R in the
US for sexual content, drug use, language, and some violence. Mixed or
average reviews.
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