HEADLINES [click on headline to view story]:

Family Money

Personal Directions

The Doctor's Consultation by Dr. Iain Corness

Agony Column

Camera Class by Snapshot

Recipes from Rattana

Family Money: Exchange Traded Funds

By Leslie Wright,
Managing director of Westminster Portfolio Services (Thailand) Ltd.

Although I wrote about exchange-traded funds (ETFs) some months ago, it seems few amateur investors have ever heard of them, and fewer understand what they are or how to acquire them.

So what are ETFs? ETFs are quoted companies structured as open-ended funds, so an ETF is a collective investment instrument that looks, behaves and acts like a share, but for ease of use it is just like a fund.

ETFs combine the best attributes of mutual funds, investment trusts and index trackers, offering low-cost exposure to stock markets and sector indices, and, like investment trusts, individual ETF shares can be bought and sold on stock markets. Like a share, they have continual pricing; but being structured like mutual funds, their share price reflects the value of their underlying assets.

Essentially then, they are easily traded, diversified, low-cost, low-risk investments that deal like a share but perform like a fund. Until comparatively recently, they could be traded only on the US market, but now are available through London also. In fact, their success and popularity with investors worldwide has been phenomenal. According to Morgan Stanley, more than €123bn is currently invested in ETFs compared with less than €10bn as recently as 1997.

But in what ways are investors using ETFs? Because of their inherent transparency and cost-efficiency, ETFs are ideal tools for a wide array of investment strategies, be they long- or short-term.

Long Term

One of the catch phrases in the world of portfolio building these days is “core-satellite” investing. This is where the bulk of one’s portfolio is invested in a stable, lower risk “core” vehicle, whilst the remainder is allocated across a number of riskier “satellite” investments, which aim to make the overall portfolio outperform.

ETFs can provide an ideal vehicle for the “core” component of this strategy. They provide broad, diversified exposure to a wide variety of industry benchmarks, sectors, countries, and regions. This is a relatively simple way of using ETFs, but one that growing numbers of retail investors are adopting as a cost-efficient, “buy and hold” portfolio strategy.

Similarly, ETFs have emerged as ideal products for tactical asset allocation, and are increasingly being used by investors to implement specific strategies including risk diversification and sector/style plays.

Short Term

It is in relation to short-term investment strategies that ETFs really come into their own.

ETFs are listed on stock exchanges and their prices follow the indices they track throughout the day. This allows investors to profit from short-term movements, buying into a market as it starts to rise or selling out when it starts to fall. Compare this to open-ended funds that are only re-priced once a day.

Also, because ETFs can be sold ‘short’, they can be used to hedge a portfolio of stocks or funds, and to make specific bets on market direction.

For example, the highly volatile NASDAQ 100 Index offers frequent moneymaking opportunities if one can pick the market swings correctly. ETFs tracking this index can be sold short, cheaply and simply, and quick gains can be made. As a hedging vehicle, ETFs have also proven an effective alternative to futures. Depending upon the availability of the futures contract for a given benchmark, the anticipated holding period, and the overall expense ratio of a given fund, ETFs can enable investors to avoid the quarterly rolling costs of futures.

The ease with which ETFs can be bought and sold, combined with their very high liquidity, has seen growing numbers of fund managers turn to ETFs as a means of maintaining equity market exposure easily and cheaply, prior to making specific stock or sector asset allocation decisions. In technical parlance, this is called equitising short-term cash balances.

This stratagem is increasingly being used in portfolio transition management. If an investor wants to move his assets from one manager to another, this transition can often be time consuming, with market exposure being difficult to maintain at reasonable cost. ETFs provide the perfect way of maintaining cheap market exposure while this often lengthy transfer process is taking place.

Again, the overall liquidity of ETFs has seen the most successful of them benefit as a result of index arbitraging. Despite their closeness to respective indices (which is a key attraction with ETFs), arbitrage opportunities do present themselves when the value of the ETF slips from its tracked index.

Because of their efficiency, these arbitrage opportunities are usually only very brief windows of opportunity for large investors, but their high liquidity enables the alert speculative investor to capture these incremental differences between the ETF and the market.

But ETFs have their disadvantages. Index tracking can be a safe, low-risk and cost-effective way to invest in markets, but only when they are rising. Market turmoil this year has shown index tracking to be highly restrictive. ETFs perform only as well as the index they are tracking, so investors must still make a judgement about which index or which sector to track.

Nonetheless, it could almost be claimed that ETFs are the “investment for all seasons”. They offer simplicity, diversification and ease of access - key selling points for risk-averse retail investors.

Some portfolio managers claim that they are simplistic and unsuited to more complex trading strategies or portfolio building - but this attitude does ETFs a disservice. ETFs can be used as key tools for securing or enhancing one’s portfolio - very useful in a time of continued volatility and uncertainty about equity markets.

Some ETFs are distributor funds and pay out all dividends from the underlying markets as income, which could potentially create a tax liability. Other ETFs are accumulator funds, which roll-up dividends and pay them out as capital gains. So before buying an ETF, consider the index or sector you want to track, the type, and how this will affect your tax position.

Personal Directions: Switched-on and hands-on

By Christina Dodd,
founder and managing director of Incorp Trining Associates

I had the opportunity to meet a business owner recently who added a refreshing dimension to managing a business. I have known this gentleman for many years and have always accepted the fact that his success has come through sheer hard work - and that’s that! But to my surprise I discovered that this person is a very switched-on and hands-on “partner” of people - his people.

His success has led him to build new and large offices with an enormous amount of floor space dedicated to training rooms and staff facilities. This is not how I had perceived this man’s way of operating at all, and I was very pleased indeed. When shown the offices and particularly the executive offices, I asked where his office was. His reply was, “I don’t need too big an office as I’m usually down on the shop floor - that’s my real office.”

The interesting thing here is that this man’s success has in part been driven by the fact that he never forgot his people - his workers - his staff - all through the years. He lives with them up front with the customer. He is accessible to them all and visible every day. His finger is on the pulse not only of his customers, but also of his employees.

So many companies lose sight of the fact that they exist because of the abilities of their people. Certainly companies exist because of other factors, but at the end of the day it all comes down to people, the quality of people and the way a company manages its people.

Some managers look for the conventional methods and study all the current texts to hone their skills and to become good managers. Sure there are lots of things you can learn from books and from management programs, and some managers do very well this way. But there is also the fact that to manage people, you have to be “people savvy”, you have to be out there with your people - and not just the figure that sits in the big office at the end of the hall who comes out occasionally to bark!

A real eye-opener for any manager is to spend time on the “shop floor” with staff and to work in various positions to see how it’s all done. It’s a rewarding exercise in many aspects and can have enormous benefit at all levels. Become part of the team, roll up the shirtsleeves, and be prepared to get dirt on your hands. Take on various jobs for a day at a time; handle customer complaints at the counter where most of them happen; see how you cope with ringing up the register, the task of taking a customer’s order or how you cope with working on the process line operating machinery.

This is where my friend at the beginning of this story shines in terms of his management style. His people love him. They also respect him for his acknowledgement of their role in the business. He understands only too well that his success is the result of his people and in a recent move he offered them the opportunity to invest in the company and to share financially in its success.

Today companies are rethinking the roles their managers play. This is not the world it used to be and people are changing rapidly as technology becomes a major part of the equation. The traditional concept of management is undergoing a revolution and there are many who believe that the days of the bureaucratic managers will soon be over. They will really be entrepreneurs even in a large organizational setting.

Emphasis will be on individuals and teams with guides and coaches, so to speak, as opposed to managers. The hands-on approach and situational focus with involve maximizing every individual’s and team’s potential and capabilities to contribute to the overall performance. This will require that “managers” re-align themselves with the needs of the people who do the real work in a company - the work that brings in the revenue.

Interesting thoughts and I’m sure there are a lot of conventional managers shuddering in their boots at the prospect of such change. But to me this seems like a natural approach and I’m sure that there are companies that operate this way, and very successfully as well.

The most important thing management can do is to stay in touch with the people who do the real work in the company.

It seems to me that the time is here for a huge “wake-up” call for those involved in management at any level of a company. The boys or girls at the top, right through the middle sanctuaries, down to the factory floor. The time has come to take the emphasis away from compiling copious reports and holding endless time-wasting meetings. Focus is paramount and for it to bring rewards it has to be on the key elements of a company - its people - and on their own territory.

A lot of senior executives forget the realities of hard work that got them to where they are today. Only a few can remember and through staying in touch with this part of their lives, they are able to really succeed in business.

There are so many barriers built by management that prevent interaction with the people of the company. I remember when open planning became all the rage in offices and individual booths were knocked down to welcome a new era in management. It had a tremendous impact and was a much needed step, despite the opposition to such a dramatic change!

Changes are happening all the time and need to be. If we continue to manage people by remote then it is not really managing. It is simply pressing a button and expecting everything to work - just like a machine. The people who form the majority of a company’s workforce are generally in tune with what good and effective management should be. Indeed they can recognize outstanding managers a mile away and would no doubt welcome them on the shop floor any day of the week.

For further information I can be contacted at cme [email protected]

Until next time, have a great week!

The Doctor's Consultation by Dr. Iain Corness: “Natural” contraception (AKA Vatican Roulette!)

Getting pregnant, or not getting pregnant, is a major item in most young couple’s lives and unfortunately there still exists vast chasms of ignorance, in the minds of both the men and women of this country (and all over the world, I hasten to add).

Let’s get back to basics and deal with the egg and chicken thing. In its simplest terms, the lady lays the egg, and the man fertilizes it. But just the same as your local neighbourhood chickens lay eggs every day, which you eat for breakfast easy over, these eggs do not contain baby chickens. This is because they have not been fertilized by the local rooster and cock-a-doodle-do to you too.

Moving up the food chain several steps, human females do “lay” an egg (the ovum), which also does not contain babies, unless it is fertilized. Human females do not drop eggs on a daily basis, but generally only once a month.

Now the male of the species (the human rooster) produces the sperm (tadpole like things) which can penetrate an egg and fertilize it - and then, and only then, do you have the start of another human being. A growing mess of microscopic cells that eventually turns into a baby.

So, to get pregnant, you need one egg and one sperm to meet each other on a dark night and fall in love. Well, not quite, sperms and eggs are not capable of human emotions, but they do need to meet.

Since this system seems a bit “hit or miss”, nature has tried to make it a little bit easier to get pregnant by allowing the male to produce millions of sperm to join the race to claim the prize egg. Sperm are not particularly strong or long lived (sorry if that dents your egos guys), and this is why we need the several battalions of them to catch one egg! Mind you, the egg only lasts a couple of days too.

Now then, how do we get the sperm and the egg to meet? Here is where nature has again made it a little bit easier - the female of the human species produces one egg a month, and this is how we get the ‘monthly’ cycle (periods) that women have to endure for around 30 plus years of their lives. Time it right, so that the egg release and the sperm release occur at the same time and you have a high possibility of scoring the jackpot!

Again, nature has made it (relatively) simple. The release of the ovum is followed two weeks later by the woman’s next period (if the egg has not been fertilized). So if you know when a period is expected, the egg release is two weeks before then.

Now this is what the “Rhythm Method” is based on. Predict the ovum release date and avoid intercourse for four days either side and you will not win a prize. The so-called “fertile” time of the month is avoided. Simple! Or is it?

Well if the lady has completely regular cycles then it is easy (around 28 to 30 days is the norm) to predict the onset of the next period, but if she does not, then it is not really possible to use this method for reliable contraception. Vatican Roulette failures stem from irregular cycles more than anything else. You have been warned!

Agony Column

Dear Hillary,

When you read my letter (email) you will probably just discount it as being another of “those” letters from milked and bilked foreigners, but please read it through as this one is genuine. Despite not wishing to have anything to do with women from the ‘wrong side of the tracks’ six months ago I found that I was getting very fond of a young lady who worked in a bar here. I come over three times a year for a week and in between times we began to keep in touch via email, and I thought I was beginning to understand something about the Thai culture. It got that she would wait for me at the airport and see me off afterwards, and in all ways looked after me very nicely (and not like the women back at home). Never once did she ask me for money, and I began to think that all those letters I read before showed just what mugs they are. This time it is different. I had given her a gold chain last time I came over and this time she wasn’t wearing it, so I asked why and she told me she had to pawn it to help pay the mortgage for her father’s land. Then she said she didn’t have a job anymore and couldn’t go back to the bar she worked in before because she would lose face because she didn’t have the chain, and asked me to buy her another one. I blew my top, I’m afraid, and I know it’s a no-no in Thailand and walked out leaving her in tears. Now I don’t know if I’ve done the right thing. What do you think, Hillary?


Dear Gregory,

Why can’t I meet people like you? You are here for a grand total of two weeks and you start throwing gold chains about like you are fishing for mackerel - except you are the fish on the end of the chain, coming in hook, line and sinker! Let me assure you that you have done the right thing - there’s a lot of land out there, and it’s all under finance! Every last rai of it.

Dear Hillary,

Today I just made $23 million, and all it will cost me is a fax or two. Three separate emails in one day from people all over the world who have ‘over-invoiced’ accounts and have the surplus ready to be disbursed, or have been left the money after their father was unfortunately murdered, or finally they were given money to use for a secret arms shipment and they ran off with the cash. Grand total of $92 million and they will give me 25%. The senders of the good news were an accountant, a senior minister and an African princess. Hillary, do people actually fall for this? Surely if enough people bring this to everybody’s attention we can stop the nonsense? Or do you believe these emails too?


Dear Multi-millionaire,

The emails are real, it’s just the subject matter that is phoney. Unfortunately there are still people who get suckered in by the thought of all that lovely money. It’s a very basic human emotion called Greed, my Petal. The more zero’s you put after the number, the greater the greed and the bigger the sucker. Hillary doesn’t know what to do about the unwanted emails, my in-box is stuffed with unforgettable offers, millions of dollars and do I want to see women doing contortionist activities with free access for three days? Like you, I have managed to pass all these opportunities by.

Dear Hillary,

I am over here on a retirement visa, living off a small pension I get from the old country. This is enough for me and my lady friend as we don’t have expensive tastes and eat at the local markets and such, so it’s been good for the last year or suchlike. Only now her grownup kids have come to stay with us from their village. It was going to be for a week, and then it was two and then it was a month. She has let them stay for three months now and they just sit around and drink Thai whisky, don’t work and live off me. At first I didn’t mind, but it’s costing me more than my pension and I don’t like dipping into the bank account that’s supposed to be for emergencies. I feel I have to do something. She tells me it is the Thai way. You know these things, what should I do?


Dear Ernest,

You certainly have to do something Ernest, and that’s a little wood work - you have to show them the door! And ask them to close it on the way out! You are just being used. Forget all this nonsense about Thai ways and the family, the way the system works is that as soon as they are old enough the kids support the old folks, not the other way round. Put your foot down and tell them they either have to contribute and keep you in Thai whisky, or return to their village.

Camera Class: Is now the time to go digital?

by Snapshot

A couple of years ago, I posed this same question, and came up with the final words, “Digital cameras are tomorrow. While the doomsayers have been spelling the end of normal film and photographic processes for ten years, the days of the 35 mm SLR are numbered. Harry here believes that digital will surpass conventional photography within two years. Just remember Mr. Kodak doesn’t sell digital cameras because he thinks it is a passing phase!”

Two years later, Mr. Kodak is producing and selling one of the finest digital cameras on the market, and the top digital cameras are now every bit as good as the current SLR’s. In fact, many digitals and SLR’s now share the same optics. Digital cameras do have optical components, just like normal cameras. They have lenses that zoom and do all the usual optical tricks as regards depth of field and suchlike. The main difference is that the image is not recorded on film, but recorded electronically inside the camera itself. Some cameras record this on ‘memory sticks’ or even on the universal floppy disks.

A couple of years back, there was a question mark over the image quality of the digital cameras. Now in “conventional” photography the image quality depends largely on how many “grains” make up a picture. It is like the grains of silver halides in normal Black and White print film. Big grains a fair way apart give a “grainy” soft image. With digital cameras, these grains are called “pixels”, and obviously the more pixels the better. The better cameras have millions of pixels, with Mr. Kodak’s wonder digital camera having 14 mega-pixels - sharper than normal print film.

Comparing the two types of results can be difficult, or even confusing. When you want to view pictures from a digital camera, you will generally be looking at a computer screen, not known for razor sharp images itself. You can print out the picture from the screen if you want to be able to hold the picture in your hand, and if you have a high enough quality printer and use the special “photographic” quality paper in the printer you will get a very clear and sharp image from the digital camera.

An immediate plus when going digital is the saving on photographic film and processing, since the electronics do that without film. But there is always a downside. To get the picture in your hand, you do need that special photographic paper in the printer - and it’s not cheap. Another problem - digital cameras eat a gross of batteries for breakfast. Their appetite for normal alkaline batteries is truly prodigious. Even NiCad batteries do not last long in a digital camera. Rechargeable Lithium batteries are the answer, but they are expensive.

Another plus for the digital photographers is what I call instant gratification! No longer do you have to wait till the film is finished and then another hour at the photo shop. You can see what you’ve got a few seconds after firing the shutter. Yes, you’ve got it, or no, you haven’t and take it again.

You win some and you lose some, though. With the digital cameras, there is a pause between pushing the button and the electronic storing of the image. To take action photography is difficult, because the moving subject tends to be out of the frame by the time the electronic saving is completed - but at least you do have the instant (lack of) gratification and can see that you’ve missed the action!

One drawback to the giant step of going digital was the cost. A good quality digital camera would set you back 30,000 baht and upwards, but the cost is falling daily. There is another drawback. Digitals have “computer-like” menu driven controls. To take pictures with a digital camera requires a reasonable degree of computer literacy as well as photographic competency.

The decision is now yours. Me? I’m still conventional, but a lot closer to making the change!

Recipes from Rattana: Lettuce Wrappings (Sangchoi bau)

This is a traditional Chinese dish. Originally made with minced pigeon meat in the lettuce wrapping, but as a Chinese friend told me, pigeons are more of a public nuisance than edible these days, so pork is used instead. Remember to wash the lettuce leaves well.

Ingredients Serves 6

Cooking oil 6 tbspns

Sesame oil 1 tspn

Minced pork 500 gms

Oyster sauce 1 tbspn

Soy sauce 3 tbspns

Green ginger wine 1/2 cup

Onions 3 large

Champignon pieces canned 250 gm

Water chestnuts canned 250 gm

Bamboo shoots canned 250 gm

Ginger minced 3 tspns

Garlic minced 2 cloves

Corn flour 1 tbspn

Lettuce 2 (separate into large whole leaves)

Cooking method

Chop onions, mushrooms, water chestnuts and bamboo shoots. Heat 3 tablespoons of cooking oil and one teaspoon sesame oil in pan, add chopped onions, minced garlic and minced ginger. Stir on medium heat until cooked 3 minutes. Add pork mince, stir and break up with fork. Remove pork from pan as soon as it is cooked.

Heat 3 more tablespoons cooking oil, add chopped mushrooms, chestnuts and bamboo mix. Stir until cooked on medium heat 5 - 6 minutes.

In a cup, mix corn flour with a little cold water until smooth, add ginger wine (or sweet sherry at a pinch), oyster sauce, soy sauce. Add mince and onion mix to mushroom mix in pan, stir well. Add corn flour sauce mixture. Cook on low heat - 6 minutes. Remove from heat. Serve warm.

Everyone places their own mince mixture in individual lettuce leaves, wrap it up and eat.