Well now that I've gotten your attention, let's get to the point.
There is a definite problem in the financial system and it has crept into the investing world. This is stemming from the problems off shore. In a quaint place called the global village, every single Joe, Juan, Jane and Maria will feel the ills of financial excesses caused by developed nations.
Even though our dependence on exports to the US have declined through the years through diversification of export markets, our main economic buoy remains to be OFW remittances. Our domestic economy cannot exist nor subsist just on people who get meager minimum wages. Our economy would tank if that was so.
With the peso appreciating to the Php 40 range already, we can expect a further appreciation as the months go on into 2008. I'd expect some consolidation phases near term for the peso, both in terms of technical and sparse fundamental data that I have. But in the long run, the peso could still appreciate to as high as 35 to a greenback.
The Philippine government has to increase spending to keep the economy growing at the high single digits. I've read somewhere that the government needs to prioritize spending and de-prioritize the balancing of the budget deficit. I agree. Last year, a big reason why we grew by 7.3% in GDP is due to this factor.
The government also needs to shore up its revenue stream as we continue to have anemic tax collection. I don't know why this is so given that our economy expanded by 7.3%. Where'd the income go to? There is a whole other problem as to why tax collections continue to underperform. But soon, the generation after us will pay for our generation's costly mistakes. Or the rich can always migrate and just pass along the problem to the hapless middle class.
So what then?
At this point in time, it is difficult to project what will happen in the next 12 months. February should be an interesting month as most of the major financial institutions in the US have already declared their subprime losses. For as long as there are no more surprises that come out, the stock market should recover.
The enemy now is not the stock market, but the overall sentiment. It's like talking to a depressed person. More often than not, you'll be swayed to his disposition rather than maintain your positive outlook.
Some financial marketers out there will tell you that this is the best time to buy, because of the "buying low, selling high" strategy. That is probably one of the most stupid and irresponsible use of that phrase I've ever heard. Don't take that crap from them.
If I were in your shoes, I would rather place my money with someone who would rather tell me, in all sincerity, honesty and wisdom, that there is a problem in the financial markets today. That although this is a major problem, time and time again, once it has been fixed, markets will always normalize and will actually go to higher ground (i.e. yields). Not some crazy crap that you should buy low and sell high.
What happens when by March, the investments crash through the floor? How will these financial marketers face their clients?
Moreover, investments aren't some form of gambling. You don't always have to cash in on the spread between the bid and the offer. Investments have, and will always be, for the long term. It's just that investors tend to be greedy and they forget that simple rule.
In this time of chaos, what you need is less of panic and more of wisdom and patience.
****** From the Crossfire *******
I have realigned some personal priorities and I will be updating this particular blog of mine 3x - 4x a week.
Please continue to support my blog and I will return the favor by writing choice cut articles that will help and guide you in making tough financial decisions.
Just remember that the best way to withstand the volatility, at least mentally, is to go back to the reason why you invested in the first place. This also means that the money you invest, in whatever instrument, should always be after you have set aside your emergency fund.
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