Archive for March, 2011|Monthly archive page

Bricks and slaughter

In Uncategorized on March 30, 2011 at 11:14 pm

Property is widely seen as a safe asset. It is arguably the most dangerous of all, says Andrew Palmer


THERE are plenty of candidates, from the ghost estates of Ireland to the foreclosure signs on American homes. But as a symbol of the property cycle that still distorts the world economy, the Burj Khalifa in Dubai (pictured above) takes some beating. The world’s tallest building is literally built on sand. Its height, at half a mile (838 metres), violates a basic rule of commercial property: when land is plentiful, build outward to use up as much of it as possible. The building opened in January 2010, just weeks after the emirate announced a standstill on debts largely incurred on glitzy property projects. Its name was hastily changed from Burj Dubai to Burj Khalifa to honour the ruler of Abu Dhabi for sending bail-out funds to its fellow emirate. A year on, tourists cluster at its base to take photos or to visit the observation deck; inside, many of the flats lie empty.

Dubai’s record-breaker is also a powerful emblem of forgetfulness. According to Andrew Lawrence of Barclays Capital, the construction of exceptionally tall buildings is a reliable indicator of economic crises in the making. From the time the first skyscraper went up—the Equitable Life Building in New York, in 1870—to the completion of the Empire State Building (1931) and the World Trade Centre (1972) in the same city and the Petronas Towers in Kuala Lumpur (1998), great height has usually coincided with big trouble.

Mr Lawrence’s theory is not perfect, but it feels right. Property moves in cycles, and the more ambitious the scale of construction on the way up, the steeper the drop on the way down. A sharp turn in the property cycle is a serious matter. The five big banking blow-ups in the rich world before the latest crisis (Spain in the 1970s, Norway in the 1980s and Sweden, Finland and Japan in the 1990s) had property at their heart. Banking crises in the developing world have also tended to happen at the peak of housing booms or just after a bust in prices.

Not all booms are alike. There were many reasons for the housing bubble that has now burst, from huge amounts of global liquidity seeking high returns to the rise of private-label securitisation. But it is striking how often property causes financial trouble. “We do not want to fight the last war,” says one European banking regulator, referring to property busts, “but the fact is that we keep fighting the same war over and over.”

Markets remain horribly fragile. Dud commercial-property assets clog banks’ balance-sheets. House prices in America and several European markets are still falling. This special report will argue that the effects of property booms and busts can be made less damaging, but that the asset itself is inherently unsafe. Another rich-world bubble may be unlikely in the near term, but things feel very different in emerging markets. In China in particular, the worry is about another bubble that could shake the world economy. And even in developed markets, property, which many people regard as stable, will always be prone to volatility.

Why is property so dangerous? One obvious answer is the sheer size of the asset class. The aggregate value of property held by American households in the peak year of 2006 was $22.7 trillion, their biggest single asset by a wide margin (pension-fund reserves were next, at $12.8 trillion). Working out the figures in other countries involves much more guesswork. Back in 2002 this newspaper reckoned that residential property in the rich world as a whole was worth about $48 trillion and the commercial sort $15 trillion: if you allow for property-price changes in the intervening period, the current values, even after the bust, would be $52 trillion and $28 trillion (see chart 1), or 126% and 67% respectively of the rich countries’ combined GDP in 2010. Whatever the precise number, property is so big that when credit conditions loosen it is likely to absorb a lot of the extra liquidity; and when something goes wrong the effects will be serious.

An even bigger reason to beware of property is the amount of debt it involves. Most people do not borrow to buy shares and bonds, and if they do, the degree of leverage usually hovers around half the value of the investment. Moreover, when stock prices fall, borrowers can usually get their loan-to-value ratios back into balance by selling some of the shares. By contrast, in many pre-crisis housing markets buyers routinely took on loans worth 90% or more of the value of the property. Most had no way of bringing down their debt short of selling the whole house. Gearing in commercial property was lower but in the boom years it still regularly touched 80-85% (it is now back to 60-65% for new borrowing in the rich world).

With only a small sliver of their own capital to protect them, many owners were quickly pushed into negative equity when property prices fell. As borrowers defaulted, the banks’ losses started to erode their own thin layers of capital. “Banks are leveraged and property is leveraged, so there is double leverage,” says Brian Robertson, who runs HSBC’s British and European operations and used to be the bank’s chief risk officer. “That is why a property crash is a problem for the banks.”

Property bubbles almost always start because fundamentals such as population growth, interest rates and economic expansion are benign. A shrinking population weighs on Germany’s housing market, for example, and a rising one underpins long-term confidence in America’s. These fundamentals explain why many market participants are able to persuade themselves that huge price rises are justified and sustainable. Chastened regulators now talk about a presumption of guilt, not innocence, when prices look frothy. That is because property markets are inefficient in several ways which make it more likely that they will overshoot.

Cycle paths

For the lenders, property is attractive in part because it attracts lower capital charges than most other assets. That makes sense—the loan is secured by a tangible asset that will retain some value if the borrower defaults—but it can also lead to overlending. Indeed, one of the bigger ironies of the property bubble was that lenders and investors probably thought they were being relatively prudent. Capital charges are higher for commercial property than for homes but banks can still be seduced by the apparent stability of a real asset producing predictable cash flows. “Commercial real estate is often a borrower of last resort,” says Bart Gysens, an analyst at Morgan Stanley. “It tends to be willing to absorb a bit more debt if and when banks and debt markets want to provide it.”

Collateralised lending offers a degree of protection to the individual lender, but it has some unfortunate systemic effects. One is the feedback loop between asset prices and the availability of credit. In a boom, rising property prices increase the value of the collateral held by banks, which makes them more willing to extend credit. Easier credit means that property can sell for more, driving up house prices further. The loop operates in reverse, too. As prices fall, lenders tighten their standards, forcing struggling borrowers to sell and speeding up the decline in prices. Since property accounts for so much of the financial system’s aggregate balance-sheet, losses from real-estate busts are likely to be synchronised across banks.

Borrowers, too, contribute to the inefficiency of property markets, particularly on the residential side. Some people think that renting will enjoy a renaissance as a result of the crisis (see article), but few expect a wholesale, permanent shift in attitudes. Unlike other assets, housing is seen both as an investment and something to consume. In its latest survey of consumer attitudes in July 2010, Fannie Mae, one of America’s two housing-finance giants, found that Americans wanted to buy houses for a range of reasons, from providing a safe environment for their children and having more control over their living space to making a financial return. In China there is another item to put on the list: for many young men owning a property is a prerequisite for attracting a wife.

This mixture of motives can be toxic for financial stability. If housing were like any other consumer good, rising prices should eventually dampen demand. But since it is also seen as a financial asset, higher values are a signal to buy.

And if housing were simply a financial investment, buyers might be clearer-eyed in their decision-making. People generally do not fall in love with government bonds, and Treasuries have no other use to compensate for a fall in value. Housing is different. Greg Davies, a behavioural-finance expert at Barclays Wealth, says the experience of buying a home is a largely emotional one, similar to that of buying art. That makes it likelier that people will pay over the odds. Commercial property is a more rational affair, although hubris can play a part: there is nothing like a picture of a trophy property to adorn a fund manager’s annual report.

Once house prices start to rise, the momentum can build up quickly. No single individual (except, perhaps, Warren Buffett) can push up a company’s share price by buying its stock at an inflated price, but the price of residential property is set locally by the latest transactions. The value of any particular home, and the amount that can be borrowed against it, is largely determined by whatever a similar house nearby sells for. One absurd bid can push up prices for lots of people.

As prices rise, property is arguably more likely than many other asset classes to encourage speculation. One reason is that property is so much part of everyday life. People do not gossip about the value of copper and tin, but they like to talk about how much the neighbour’s house went for. They watch endless TV shows about houses and fancy themselves as interior designers, able to raise the price of their home with a new sofa and artful lighting. Eventually the temptation to take a punt on property becomes overwhelming. “Speculation is a bit like sex,” says Robert Shiller of Yale University, a long-standing observer of speculative bubbles. “People who have lots of sex are not approved of but they are thought to live life with gusto. People eventually decided to try for themselves.”

Even the risk-averse may well respond to rising prices by entering the market. Everyone needs somewhere to live, and many want to own their own homes. The amount of space that people need increases predictably over time as they find partners and have children. James Banks, Richard Blundell and Zoë Oldfield of Britain’s Institute for Fiscal Studies and James Smith of RAND, an American think-tank, find that this gives people an incentive to buy early in order to protect themselves against the risk of future price increases that would make houses unaffordable.

Another reason for momentum in property markets is the fact that there are no short-sellers. If you think property is overpriced, it is difficult to profit from that view. As Adam Levitin of Georgetown University Law Centre and Susan Wachter of the University of Pennsylvania pointed out in a recent paper on the causes of the housing bubble in America, it is impossible to borrow the Empire State Building in order to sell New York real estate short. HSBC probably came closest by selling its Canary Wharf tower in London for £1.1 billion ($2.18 billion) in 2007 and buying it back from its debt-laden Spanish owners for £250m less in late 2008—the greatest short sale in the history of property, says one observer. Some investors infamously did make money from betting against American subprime mortgages, but their real achievement was to find a way of doing so, by buying up credit-default swaps that paid out when mortgage-backed securities soured.

There have been attempts to create instruments that allow property to be hedged or shorted. Mr Shiller himself has been involved in launching derivatives linked to home-price indices for both large and small investors, but with limited success to date. Commercial-property derivatives, however, are gaining ground.

Such products are conceptually appealing but face several obstacles. Some are common to all financial innovations: new products lack enough liquidity to lure buyers in, for example. Others are more specific to property. Individual properties and neighbourhoods differ, which makes it hard to construct accurate hedges. Government interventions to shore up the housing market add an extra element of unpredictability. And since house-price cycles tend to last for a long time, says Mike Poulos of Oliver Wyman, a consultancy, it can be expensive to sustain a short position.

Up, up and away with the fairies

The effects of buying a home when prices are rising are insidious. A 2008 paper by Hugo Benitez-Silva, Selcuk Eren, Frank Heiland and Sergi Jiménez-Martín used the Health and Retirement Study, a biennial survey of Americans over the age of 50, to compare people’s estimates of the value of their homes with actual values when a sale took place. The authors found that homeowners overestimate the value of their homes by an average of 5-10%. Those who had bought during good times tended to be more optimistic in their valuations, whereas those who had bought during a downturn were more realistic. Expectations of higher prices explain why bubble-era buyers were more willing to buy risky mortgage products and take on ever greater quantities of debt. The amount of mortgage debt in America almost doubled between 2001 and 2007, to $10.5 trillion.

The rich-world buyers of today ought to be more realistic about the future value of their homes, but attitudes are deeply entrenched. When asked to rate the safety of various investments, two-thirds of the respondents in the Fannie Mae survey classed homeownership as a safe investment, compared with just 15% for buying shares. Only savings accounts and money-market funds, both of which enjoyed an explicit government guarantee during the financial crisis, scored higher than homes. Homeowners who were “under water” on their mortgages (ie, they owed more than their properties were worth) were just as sure as everyone else that housing was a safe investment.

If the Burj Khalifa shows that memories of property cycles are short, the Fannie Mae survey suggests that some of the lessons are never taken on board at all. Given the state of residential property around the rich world, perhaps the victims are suffering from post-traumatic amnesia.


5 Characteristics of Successful People

In Uncategorized on March 22, 2011 at 6:53 pm

By Steve Tobak | March 15, 2011

If you’ve been around long enough, you’re probably aware that most important things in life come about seemingly by accident, chance, or coincidence. Discovering what you were meant to do, meeting your spouse, finding an incredibly unique opportunity or a great job, that sort of thing.

Well, those events are not as random as you might think. Certain behavioral attributes increase the probability of these “happy accidents” occurring. And not only are these characteristics of successful people, they are, I believe, learnable or teachable.

First, here are some examples of what I’m talking about – how important things happen seemingly by accident – followed by five enabling characteristics of successful people:

  • Steve Jobs returned to Apple as part of its acquisition of NeXT. A year later, Jobs was once again running the company he co-founded and cleaning house. Eventually, the stars aligned for the greatest turnaround in business history. But Jobs returning to Apple was nobody’s grand design. It just sort of happened that way.
  • The way Bill Gates and Microsoft came to develop and own the rights to IBM’s PC operating system is so far-fetched you couldn’t make it up. Gates had been working on a programming language for IBM. When IBM mentioned needing an operating system, Gates referred them to Digital Research, but CEO Gary Kindall left negotiations to his wife, who wouldn’t sign IBM’s non-disclosure agreement. So IBM went back to Gates, who bought QDOS from a Seattle company and sold it to IBM while retaining exclusive licensing rights. You know the rest.
  • Yesterday I watched an interview with Rivers Cuomo, founder of alternative rock band Weezer. Cuomo described an 18-month stint working as a clerk for Tower Records as the transformative event that completely changed the way he thought about music. After that, he formed Weezer and the rest is history.
  • In Unusual Origins of 15 Innovative Companies, we saw that lots of great companies started out making products that had nothing to do with what they eventually became known for. American Express was an express mail company, 3M mined a mineral, Nokia was a paper mill, and Toyota made looms. Somehow, leaders of these companies found a way to achieve greatness.
  • As for me, everything that’s ever mattered in my life happened pretty much by accident. Meeting my wife, discovering the high-tech industry, a whole bunch of great job opportunities, even blogging for CNET and then BNET, were all chance events that essentially fell in my lap. Or did they?

Of course, none of this stuff happened purely by chance. Everyone involved in the above events had certain characteristics that ultimately weighed heavily on their actions and ultimate success. To me, it boils down to five attributes:

5 Characteristics That Enable Accidental Success

  1. Being opportunistic. That means taking advantage of opportunities as they arise, including a willingness to act boldly and decisively and to take risks without overanalyzing possible outcomes. Successful invention requires a lot of trial and error. That’s the mindset of an entrepreneur.
  2. Ability to network, schmooze, persuade. Not social networking, but old school networking. In fact, the actual definition of schmooze is “to converse informally, to chat, or to chat in a friendly and persuasive manner especially so as to gain favor, business, or connections.” That’s what opens doors.
  3. Having a can-do attitude. You can be presented with all the opportunities in the world, but if you’re a negatron – always seeing the glass half empty, the fly in the ointment, why it can’t or shouldn’t be done – you’ll never capitalize on any of it. You’ll be the guy who’s always saying, “I almost [fill in the blank]; I don’t know what went wrong.”
  4. Being genuine and open. Some people think BSers and those who sugarcoat the truth or tell people what they want to hear get ahead. Now that’s BS. Smart, successful people are attracted to those who are genuine and open. Being genuine entices others to open up and share their thoughts and feelings.
  5. Being inquisitive or searching for answers, how things work, a place in the world. This characteristic is difficult to explain or quantify, but I think it comes down to a genuine need to figure things out, understand how things work, or do something important. It drives certain people and, one thing’s for sure: we don’t stop until we find what we’re looking for.

The Best Productivity Tool You’re Not Using

In Uncategorized on March 7, 2011 at 3:33 pm

By Laura Vanderkam | March 1, 2011

It’s not just you — most knowledge workers seem to have a low-level case of ADD these days. You come in ready to work, only to spend hours responding to emails and phone calls, and drifting between meetings where people check their Blackberries to respond to emails from people in other meetings. According to a late 2010 Workplace Options report, 42% of  workers say they come in early or stay late in order to avoid distractions (a practice which makes people think they’re working more hours than they are). After all, you have to do your actual job at some point.

Unfortunately, spending the whole day reacting, and staying late just to catch up with your job description, doesn’t leave much time for pondering the future. What projects would you like to tackle? What challenges will your organization face three years from now? Thinking about these questions is the difference between treading water and zooming ahead. So how do you create the time to focus?

One approach is to emulate Trista Harris, the executive director of the Headwaters Foundation for Justice in Minneapolis, Minnesota. When I interviewed Harris for 168 Hours, she told me that she carved out a few hours on Mondays, Wednesdays and Fridays for “strategic thinking time.” This is time with the phone and email off, the door closed (or some other physical separation from distractions), spent pondering long-term important questions.

Sound impossible? Don’t be so sure. Here’s how to try it.

  1. Figure out what you’d like to think about. On your commute or during a quiet patch at night or on weekends, think through what are the big questions related to your career or organization. Choose one to start with.
  2. Gather any material you’ll need in advance. You do not want to search through your email to find a report… and then answer 10 other emails and follow a link to an interesting article your colleague sent and then, hey! Is it noon already?
  3. Seize the time. No one is going to say “Hey, here’s an hour where nothing else will happen!” You’re going to have to take the lead on this one. If you can leave your office during the day, go somewhere nearby and quiet. Do a work-from-home day or morning if that’s possible for you. If you have an office, shut the door. If you’re in a cube, reserve an empty conference room. Don’t bring your phone to be “available” if someone needs you. The point is to be unavailable.
  4. Start small. The hardest part about strategic thinking time is actually maintaining your focus. So you may need to take baby steps. For your first session, aim for 30 minutes truly focused on the question at hand. Set your watch. If your mind wanders, bring it back.
  5. Make it a habit. If you make it through 30 minutes, congratulate yourself. Then try again later in the week. If you manage to do three 30-minute sessions a week for several weeks in a row, aim bigger.

When I interviewed her, Harris was regularly up to 5 or more hours a week of focused time. That may sound like a lot, but in the grand scheme of things, spending one-eighth of a workweek thinking about the future isn’t radical.

It’s smart.

How do you carve out time to think?

Secrets About Women Husbands Should Know Learn

In Uncategorized on March 7, 2011 at 3:22 pm

Learn the secrets that every husband should know for a great marriage

By Beth Levine

Dave Zedik of Fort Worth, Texas, is utterly mystified by the amount of talking his wife, Michelle, does with her women friends. Sometimes, when she is on the phone, Dave will run an errand and upon his return find her on the same call. "When I talk to my buddies, we stick to the specifics," he says. "But women take forever to get to the point. It’s a total waste of time."

Michelle, a busy mother of five, is unapologetic: "My connection to other women makes me a better wife and mother. Let’s face it: my husband might not be concerned about a weird rash on one of our kids. But my friends will tell me if I need to worry."

According to Geraldine Piorkowski, director of the Counseling Center at the University of Illinois at Chicago, women touch base with other women as a way of understanding and coping with their experiences. "They look to other women as role models," she says.

Women friends validate each other. "Watch two women talk," says Cathleen Gray, associate professor of social work at the Catholic University of America. "Listen to how often they use the word exactly and nod their heads in agreement."

But Dave still doesn’t get it: "She says there’s no time to get everything done, but she’d have a lot more time if she wasn’t on the phone so long!"

Let me state the obvious: men and women are different. Some of it is biological, some of it is how we are socialized, but the result is the same. Like the Zediks, we often misunderstand each other. Recognizing these differences can alleviate confusion and hurt feelings. Here are some of the main issues that separate the sexes:

She wants to be her husband’s No. 1 priority.

Men and women get jealous over different things. "A man tends to be jealous of potential sexual partners, while a woman tends to be jealous of time her husband spends away from her, whether it’s with drinking buddies or just golfing," explains Charles T. Hill, professor of psychology at Whittier College in California. She wants to feel she is No. 1 in her partner’s life. But she knows she’s my top priority,a husband may think. Yet if he often works late or spends a lot of time at the gym, she doesn’t know it.

One 33-year-old homemaker from Lexington, Ky., says she has to nag her husband to come home from his job as a hotel manager before 8 or 9 p.m. "It makes me feel the kids and I aren’t important." Even when he is home, she feels at times as if he is there only physically. One breathtaking fall day, she was outside playing with the children and dog while her husband stayed inside watching TV. "I felt rejected," she recalls.

"Most married couples only spend about 20 minutes a week interacting face to face, particularly once there are children," notes Georgia Witkin, director of the Stress Program at Mount Sinai School of Medicine in Manhattan. "Meanwhile, happy couples who’ve been married 25 years find it’s not just quality time that does the trick, it’s quantity."

She wants a husband who does household chores without waiting to be asked.

Meredith Prue of Plymouth, Mass., is the envy of all her friends. Is it because her husband, Stephen, is handsome or successful? No, it’s because he shares the household chores fifty-fifty. "If I cook, he cleans up. If I put the laundry into the washer, he puts it in the dryer," she boasts. Best of all, he never acts as if he is doing her a favor. "We’re a team," she says.

"A wife needs a sense that her marriage is a partnership," says Piorkowski. "Men often take the attitude that they are helping her out when they pitch in–like the dirty dishes are just hers and not his as well."

Who clears out the dust bunnies or bathes the kids may sound like small problems, but in 1996, when University of Denver psychologists Scott Stanley and Howard Markman surveyed 950 people who were either married or in relationships, they found that household chores were among the top three things that couples reported fighting about most. (The first was money.)

As added incentive for husbands, John Gottman, co-director of the Gottman Institute in Seattle, points out that men who share household chores and child-rearing have better marital and sexual satisfaction.

She needs emotional intimacy in order to feel aroused.

Natalie and Brent Thomas of Cannon Falls, Minn., are on the go all day. He’s a photographer; she writes mystery novels and cares for their two young children. A few years ago, their busy lives were interfering with the closeness they once shared, and they’d fall into bed at night virtual strangers. If Brent tried to initiate sex, Natalie became resentful: "I wanted to talk about my day, hear about his, and just snuggle. Without time to discover one another, sex became another item on my list." Together they brainstormed ways to find more time.

Keeping in touch during the day has made a difference, Natalie says. "We talk on the phone. Even if it’s for just a few moments, I feel we’ve spent some time together. The sound of his voice is just what I need."

Hearing her partner’s voice can help a woman become aroused, according to Witkin. "The No. 1 sexual cue for men is visual," she explains, "while a comparable cue for women is the sound of the male voice."

So when a husband jumps to the main event without having first initiated some conversation, the wife may feel pressured and alienated, and then he feels rejected. "What a man needs to understand is that the ideal foreplay for a woman isn’t just touching her body in a slow, gentle way. It first starts by touching her mind and her heart," says John Gray, author of Men Are From Mars, Women Are From Venus.

She doesn’t want sexy lingerie or kitchen appliances as gifts.

Why do gifts, which seem so trivial, sometimes cause such major problems for couples? "Women consider a gift’s meaning," says Albert Watson, associate professor of counseling at the University of Cincinnati. "When a husband gets his wife the latest book by her favorite author, the message is, ‘When you talk, I listen. I want to please you.’" But a toaster oven, or lingerie that makes her feel like a cow, says, "I don’t know or care what you would like, so I’m going to please myself."

According to Cathleen Gray, "Men complain, If she wants me to get something in particular for her birthday, why doesn’t she tell me? Meanwhile, she’s thinking, If I have to tell you, I feel diminished as a woman because it means you haven’t thought about me at all."

Christine Schrodt of Mason City, Iowa, suffered for years while her husband, David, gave her gifts such as steak knives. But he’s learned the hard way how important gifts are to her. "Now if he sees me admiring something, he makes a mental note," says Christine. "Six months later, on my birthday, he’ll surprise me with it. It makes me feel so loved."

Yes, there really is a correct answer to "Do these jeans make me look fat?"

Paul Sabbah of Stamford, Conn., gets that question "at least three times a week" from his wife, Jennifer. "It strikes terror into my soul," he says. "If I say yes, I’m a dead man. If I say no, she tells me I’m lying. There’s clearly no right answer."

How does Jennifer want Paul to respond? "I want him to tell me I don’t look fat, of course, but half the time, he isn’t even looking at me when he answers. I guess I’m just looking for reassurance that he still finds me attractive."

"Do I look the same as when you first met me?" "Do you wish I had larger breasts?" Questions like these generally send panicked husbands ducking for cover. Even wives think there is no right answer. Or is there?

When women ask for feedback on their appearance, they are really saying, I feel vulnerable. "You have to do whatever it takes to make a connection, make her feel loved and secure," says Dr. Samuel Shem, a psychiatrist at Harvard Medical School. "The right response is not yes or no, it’s to make contact."

Paul Sabbah says he and his wife have turned the question into a private joke. "When Jennifer asks if she looks fat, I answer, ‘No, but do I look bald?’ Then she’ll laugh and say no. We both know the truth: I’m balding, and she’s not a size four. But we also know it doesn’t matter, because we love each other like crazy."

In the end, adds Watson, "If a wife feels appreciated and valued, it’s not necessary that her waist be smaller or her breasts larger. She knows she is loved just the way she is."

Organic food: Cheaper in the long run

In Uncategorized on March 7, 2011 at 2:45 pm


Natural or organic food may seem expensive, but in the long run, it works out to be cheaper.

IT IS true that commercial food appears to be cheaper than organic food.

“It looks cheap but that’s just a bait. We may pay less in the beginning but we get shortchanged in the end,” explains Wong Kai Yuen who runs the EcoGreen organic shop ( in Kuala Lumpur.

What he means is that when you factor in the long-term costs of poorer health and medical care from eating what he calls “chemically-produced food”, the debit and credit balance shifts to the red.

“And what about the lack of vitality we experience? People nowadays dismiss it as work stress or ageing. But maybe it’s also because of the food they eat. It’s not just medical bills,” says Kai Yuen, who switched to organic as a natural cure for his hypertension.

“If we fall seriously ill, it will affect our loved ones, too. And what about personal suffering?”

One with nature: On Terra Organic Farm, Ng Tien Khuan’s cows provide the cowdung that goes into his organic compost.

Loke Siew Foong, the founder of Radiant Whole Foods (, quips: “As Hippocrates, the founder of modern medicine said, ‘Let food be your medicine.’ I’ve put his saying on the boxes of my products.”

Too often, the power of marketing has made us “prefer” commercial over natural food.

Wong Hock Seng, the founder of “chemical-free” DQ Clean Chicken ( gives the example where big multinationals pack breakfast cereals with sugar and then sell it to children by using fancy packaging.

Indeed, a report in The Guardian newspaper of Britian in April 2009 warns that 92 of 100 popular supermarket brands of breakfast cereal – including those targeted at children – are laden with sugar.

The Consumers Association of Penang (CAP) notes that Malaysians consume an average of 26 teaspoons of sugar per day. We had 800,000 recorded diabetics in 2007 (the fourth highest in Asia) and with 54% of adults who are overweight, compared to only 24% 10 years ago, we are the “fattest nation” in Asia.

“It may be hard to believe that we are consuming 26 teaspoons of sugar a day,” says Hatijah Hashim, a research officer at CAP.

“Some soft drinks contain an average of seven teaspoons of sugar per can. It’s not just the visible white sugar we see, we don’t see that a lot of sugar is consumed by the public through industrially-prepared drinks and food.”

Hock Seng adds: “And don’t forget that with so much sugar, children become hyper-active and hard to control.”

“The marketing experts are changing consumers’ perceptions that processed foods are tasty by using flavouring and advertising.”

He compares sugar to MSG in instant noodles – it stimulates the tongue, but how healthy is it?

“Whereas natural food would involve boiling meat and bones to create a solid soup,” he says.

“Nowadays consumers want the chicken to have soft, smooth meat and yellowish skin. So farmers grow broiler chickens via the express way with a high-calorie diet of corn and even oil.”

Similarly, anyone watching the movie Food Inc (it’s on YouTube) can see how American cattle are raised in intensive feed lots, stand ankle deep in their own faeces and need antibiotics to stay alive.

“But American grain-fed beef is marketed as a superior product,” says Hock Seng. “It’s said to be soft, juicy and tender even though it is less healthy and has lots of Omega 6 (bad cholesterol). That is the power of marketing for you.”

Fuller for less

Kai Yuen says it’s not fair to compare the cost of organic versus normal food kg for kg.

“Because for the same weight, organic food will have more nutrients, minerals, vitamins and antioxidants. And there are no toxins. It’s like when we buy a car. Would we pay less for a Mercedes?”

Loke says that organic food may even help weight loss.

“I always encourage people to take quality over quantity. When you take one slice of wholemeal bread, it’s as filling as eating two slices of white bread. That’s because of the nutrients and fibre in wholemeal. So you eat less, but you are still full.”

Kai Yuen adds: “Industrially produced food may fill our stomachs. But because the micro-nutrients are missing, our body’s cells are still in a state of hunger. So to make up for that, you end up eating more carbohydrates, proteins and fats.”

Gan Koon Chai, the founder of GK Organic Farm near Bangi, Selangor, was a UPM agro-science graduate who used to sell chemical fertilisers and pesticides. After he realised that he had to use more and more poison to control the pests (which were developing resistance through mutations), he switched to organic.

“I make organic compost for my vegetables,” he explains during a farm tour. “When the soil is good, my vegetables are strong, healthy and able to resist pests on their own without any pesticides. Similarly with humans, when our food is good, we are strong and able to resist diseases.”

As we walk through his farm, it seems like a living, green pharmacy. He turns special mint-basil leaves into a natural cough remedy, while roselle fruits help with hypertension.

“Take five lemongrass leaves and tie them in a knot,” recommends Gan. “And make tea with them. Drink it day and night and nothing else. Make sure there’s lemongrass taste or else add more leaves. After one month, check your cholesterol and blood pressure and see what happens.”

And besides health benefits, what price tag do you put on taste?

Terra Organic Farm in Lojing Highlands (next to Camerons) practises bio-dynamic farming.

“That is even more stringent than organic,” explains founder Ng Tien Khuan.

“For organic, as long as you don’t have chemical pesticides and fertilisers, you are OK. For bio-dynamic certification, they also test the soil, taste of the vegetables and see how resilient they are on the shelves.”

This writer can testify that the organic vegetables at Terra, and also at GK farm and Ecogreen, are full of fresh, zesty flavour making for delicious, wholesome meals.

Jiri Anderle, a Czech who is working with Ng at Terra, adds:

“The best vineyards of Europe practise bio-dynamic organic farming to ensure their grapes can produce the best taste for premium wines.”

Yes, organic food may cost more, but what price tag do we put on taste?

Environmental, social costs

Beyond personal benefits, commercial food is cheaper because it dumps the costs onto the environment.

“Modern agriculture depends on fertilisers and pesticides,” says Kai Yuen. “But what happens when these are washed into rivers and the sea. It reduces fish populations and gets into the fish, too. Which we end up eating!”

Chin Yew Wah, the founder of Long Life organic farm at Tanjung Tualang near Kampar, Perak, grew up around there in the 1960s and 70s.

“As a child, I remember it was so easy to catch ikan haruan and udang galah in the rivers. Now, with all the oil palm estates around us, it’s much harder to find fish and prawns in the rivers.”

Kai Yuen adds that modern agriculture – to become “efficient” – focuses on a few varieties of rice and fruits in huge fields with only one species, a practice called mono-cropping.

“These have low resistance to pests and depend on pesticides and fertilisers to survive. If there is an outbreak of new forms of pests or plant diseases, huge chunks of our food base will be wiped out.”

Part of Terra farm’s bio-dynamic standards is that the farm must have internal eco-balance.

“For instance, the cowdung for my compost comes from my own cows, which must have bushes for them to eat,” says Ng, whose cows are affectionate, almost like pets – a far cry from the sad beasts of factory farms seen in Food Inc.

It made me want to give up beef. As a little bumper sticker I once saw in an organic cafe said: “Be kind to animals. Don’t eat them.”

Loke adds that eating more veggies is not only good for health but also part of our global social responsibility: “It takes 16 pounds of grain to feed a cow to produce just one pound of meat. All that grain should be used to reduce human starvation.”

Kai Yuen looks at social costs in another way.

“If we insist that organic food must be cheap, qualified people with skills and expertise will not go into it. As it is, many children of farmers no longer want to produce food. What we have instead is industrial agriculture in oil palm and rubber. How many people still want to plant rice and vegetables? In the next generation, who will produce our food? In the long term, this will threaten our food security.”

Gan says that organic farming in Malaysia is still labour-intensive and has not yet achieved the economies of scale.

“We have to do everything by hand, planting, weeding, harvesting – compared to organic farms overseas which are mechanised.”

Despite being one of the most established organic farms in Malaysia (since 1994), Gan says they are still struggling to make ends meet.

“GK farm cannot survive just by selling vegetables. We have to get other income from making fruit enzymes and organising farm visits. We don’t get any support or subsidies from the Government whereas other farmers get subsidies for chemical fertilisers.

Universities also give support by researching chemical agriculture. But we have to use our own money to experiment on how to make the best organic compost.”

He adds that even to get the Sijil Organik Malaysia (Malaysian Organic Certificate from the Department of Agriculture), they have to do lots of extra paper work.

Indeed, the tax-payer’s ringgit subsidises unhealthy agriculture.

It was reported in January 2010 that Universiti Sains Malaysia’s (USM) researcher Assoc Prof Hasnah Md Jais, from the School of Biological Sciences, lamented that despite the huge potential for organic farming in Malaysia, local farmers are not interested in it because they can get government subsidies for chemical fertilisers.

“Some farmers even sell the surplus chemical fertiliser for cash,” she said, adding that agricultural soil is so poor that they contain only 5% of organic matter.

A change in government policy would result in lower prices for healthy, locally-grown organic food. Why, Malaysia could even be turned into a hub for healthy organic food, in line with our push to become a halal hub.

One organic trader says that the Goverment’s halal standard has been written down as MS1500:2004.

“Beyond being halal, it also includes elements of toyyib, which means that, by right, it should not have harmful ingredients (such as pesticides, illegal antibiotics, etc),” says the trader.

“If they strictly follow that standard, as already written down, then I, as a non-Muslim, would also prefer food certified as halal.”

In the meantime, even though organic food does cost a little more, it seems clear that the health, environmental and even social benefits, are more than worth it.